Washington, D.C.   -  In a move to ensure America’s seniors can continue to enjoy the low drug costs and extensive choices provided by Medicare Part D, U.S. Rep. Phil English (R-Pa.) voted against H.R. 4, the Medicare Prescription Drug Price Negotiation Act of 2007, legislation to require the federal government to negotiate prescription drug prices for Medicare. 

 During today’s House debate, English cited concerns regarding the adverse impact the measure would have on seniors’ drug choice options as well as the negligible savings it would have on federal spending, among others.  H.R. 4 passed the House floor today by a vote of 255 to 170.

A copy of English’s floor statement follows:

FLOOR STATEMENT ON THE MEDICARE PRESCRIPTION DRUG PRICE NEGOTIATION ACT (H.R. 4)

U.S. REPRESENTATIVE PHIL ENGLISH (R-PA)

JANUARY 12, 2007

(Remarks as Prepared for Delivery)

Three years ago Congress passed a Medicare bill that for the first time created an opportunity for many seniors to have access to strong, valuable and consistent prescription drug coverage.

Although the legislation was a compromise, in places an imperfect one, this program has proven a success, working well for seniors with a range of circumstances and a particularly valuable resource for seniors, especially those of the most limited means. 

 It falls on us in this Congress to consider ways we can further strengthen this benefit.  Unfortunately, the legislation we have debated today, H.R. 4, is a huge step back and is less of a policy than a bumper sticker.

As a member of the Ways and Means Health Subcommittee, which has jurisdiction over this program, I am deeply disappointed that we had no hearings, no discussion and no opportunity for amendments to produce a pricing reform bill with teeth and nuance.  While Part D is not perfect and can be improved, it is our responsibility to put in place a policy that might build on the successes of the program.  And they are substantial. 

Independent estimates for the Medicare Part D prescription drug benefit for the FY 2008 budget cycle show that net Medicare costs are 30 percent less ($189 billion lower) than were originally predicted when the benefit was created in 2003.

In addition, based on strong, competitive bids by healthcare plans for 2007, average monthly premiums will be approximately $22 for beneficiaries (down from $23 in 2006) if enrollees remain in their current plans.  The initial estimate for 2006 premiums was $37.  CMS has indicated that beneficiaries are saving an average of $1,200 annually on their drugs.  These achievements must be preserved.

Many people in my district like the idea of the legislation in which the House Democrats put forward today. I understand how they feel. I have long felt that we need to improve on the policy. 

But what I found was that the Democrats plan is more of a political stunt then a solution. It isn’t at all a prescription for real reform.  It is at best, a placebo and could reduce the benefits and coverage for many individual seniors.

To understand why, we need to recognize how much this proposal has been criticized.  Even leading liberals like Urban Institute President Robert Reischauer and Brookings Institution senior fellow Alice Rivlin have expressed qualms about an initiative to limit choices for seniors by putting government bureaucrats in charge of setting prices for prescription drugs. 

Reischauer recently said to the Washington Post:

                   People were worried no private plans would participate. “Then too many plans came forward. Then people said it's going to cost a fortune. And the price came in  lower than anybody thought. Then people like me said they're low-balling the prices the first year and they'll jack up the rates down the line. And, lo and behold, the prices fell again. And the reaction was, 'We've got to have the government negotiate lower prices.' At some point you have to ask: What are we looking for here?"

Rivlin stated:

                   “It’s not clear that a government, particularly this government, would get a better deal from the drug companies by direct negotiations than the drug plans can get on their own.  …It might have some negative consequences."

We also ought to recognize that the new Majority has claimed that their proposal will provide significant savings, when in fact CBO has announced that H.R. 4 would have no budget savings and a negligible effect on federal spending. 

 The reasons why I felt, as an advocate and care taker for this program, obliged to oppose H.R. 4 are clear:

1.      This measure is not going to generate any savings;

2.      Government price setting will only drive drugs out of the program and reduce seniors’ access to critical drugs that may be central to their treatment;

3.      This plan could potentially limit seniors’ access to their community pharmacies.  For many seniors, advice from their pharmacist is a critical service they need to have access to to coordinate their drug uses and find the best coverage;

4.      And finally, this plan could lead to increased drug prices for America’s vets.

By putting in a new overlapping and redundant government price regulation without protecting formularies and without acknowledging the critical difference between the VA program and the Medicare program, H.R. 4 makes promises that it cannot possibly deliver.

H.R. 4 won’t work because of these differences.

Mr. Speaker, approximately two-thirds of the most commonly prescribed brand name drugs used by seniors are not covered by the VA’s national formulary, including Lipitor, the most commonly prescribed drug.

80% of VA prescriptions are dispensed via mail order while just 2% of prescriptions in the Medicare drug benefit are filled this way.  The VA contracts with 332 VA pharmacies, while seniors enrolled in Medicare drug plans can access more than 55,000 local pharmacies.  

H.R. 4 is about politics not a better policy.

H.R. 4, by being brought to the floor without a hearing, without regular order represents a slap in the face to everyone committed to the success of this program.  With today’s process, we have been deprived of a genuine opportunity to develop the right policies for improving a prescription drug program under Medicare.

While I voted against this bill today, I am strongly committed to advancing a process by which we can strengthen and improve seniors’ access prescription drugs.  And, I hope to be able to support real reform when legislation returns from the Senate, after serious deliberations.

As a member of the House Ways and Means Health Subcommittee, I am hoping that the subcommittee can be utilized in the future instead of bypassed as part of a heavy-handed approach by the leadership of the new Majority which flies in the face of their campaign rhetoric.

Seniors and especially those in my district deserve a continuum of care, where they have options, where they can seek prescription advice from their local pharmacists, and where the government does not over regulate to the point where a doctor’s recommendation comes in second to that of bureaucrats.

Thank you and I yield back the balance of my time.

 Additionally, please find a copy of the letter from the Acting Director of the Congressional Budget Office to Energy and Commerce Chairman John Dingell, the prime sponsor of H.R. 4, which states, the government can expect no savings from the legislation debated on the House floor today:

January 10, 2007

Honorable John D. Dingell

Chairman

Committee on Energy and Commerce

U.S. House of Representatives

Washington, DC 20515

Dear Mr. Chairman:

At the request of your staff, the Congressional Budget Office has reviewed H.R. 4, the Medicare Prescription Drug Price Negotiation Act of 2007, as introduced on January 5, 2007. The bill would revise section 1860D-11(i) of the Social Security Act, which is commonly known as the “noninterference provision” because it prohibits the Secretary of Health and Human Services from participating in the negotiations between drug manufacturers, pharmacies, and sponsors of prescription drug plans (PDPs) involved in Part D of Medicare, or from requiring a particular formulary or price structure for covered Part D drugs.

H.R. 4 would require the Secretary to negotiate with drug manufacturers the prices that could be charged to PDPs for covered drugs. However, the bill would prohibit the Secretary from requiring a particular formulary and would allow PDPs to negotiate prices that are lower than those obtained by the Secretary. The bill would also require the Secretary to report to the Congress every six months on the results of his negotiations with drug manufacturers.

 CBO estimates that H.R. 4 would have a negligible effect on federal spending because we anticipate that the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs under current law. Since the legislation specifically directs the Secretary to negotiate only about the prices that could be charged to PDPs, and explicitly indicates that the Secretary would not have authority to negotiate about some other factors that may influence the prescription drug market, we assume that the negotiations would be limited solely to a discussion about the prices to be charged to PDPs. In that context, the Secretary’s ability to influence the outcome of those negotiations would be limited. For example, without the authority to establish a formulary, we believe that the Secretary would not be able to encourage the use of particular drugs by Part D beneficiaries, and as a result would lack the leverage to obtain significant discounts in his negotiations with drug manufacturers.

Instead, prices for covered Part D drugs would continue to be determined through negotiations between drug manufacturers and PDPs. Under current law, PDPs are allowed to establish formularies—subject to certain limits—and thus have some ability to direct demand to drugs produced by one manufacturer rather than another. The PDPs also bear substantial financial risk and therefore have strong incentives to negotiate price discounts in order to control their costs and offer coverage that attracts enrollees through features such as low premiums and cost-sharing requirements. Therefore, the PDPs

have both the incentives and the tools to negotiate drug prices that the government, under the legislation, would not have. H.R. 4 would not alter that essential dynamic. I hope this information is helpful to you. The CBO staff contacts for further information are Eric Rollins and Shinobu Suzuki.

Sincerely,

Donald B. Marron

Acting Director

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