House Passes Medicare Drug Price Negotiation Bill

February 1, 2007

The new Democrat-controlled House passed a Medicare drug bill, H.R. 4, on January 12, 2007 despite threats of a presidential veto from the White House. The bill would require Health and Human Services Secretary Michael Leavitt to conduct negotiations with pharmaceutical manufacturers to obtain lower prices for Medicare beneficiaries. It is, however, widely anticipated that the bill’s journey through the Senate will not be quite so smooth.

The vote in the House was 255-170, with 24 Republicans joining the Democrats in voting for government negotiation. The measure would overturn a provision of the 2003 Medicare law, pushed through by a then Republican-controlled Congress. The provision prohibits negotiations by the government and instead leaves drug-price negotiations in the hands of private drug plans. The bill would also require the Secretary every six months to regularly report to Congress on the progress of negotiations, and prices and discounts achieved by the negotiations. Requiring the Secretary to negotiate drug prices on behalf of Medicare beneficiaries is widely seen as an important step towards making the prescription drug benefit more simple, affordable and reliable for seniors and individuals with disabilities.

If the measure becomes law, the federal government would be required to use its bargaining power against the drug companies to obtain lower prices. The Department of Veterans Affairs secures much lower prices for its beneficiaries precisely because of its ability to negotiate. Republicans argue that the current system allows for competitive market forces to drive down prices and government negotiation will only hamper the efforts of private insurers.

Source: Washington Weekly, Volume XXXIII, Issue No. 4, January 26, 2007.