Print reports portrayed Medicare drug price reform as problematic for Democrats, ignoring internal drug memo laying out industry concerns

››› ››› ROB MORLINO

The Washington Post, the Los Angeles Times, and The Wall Street Journal all asserted that it may be difficult for congressional Democrats to deliver on their pledge to reform the Medicare drug plan over the opposition of the Bush administration, congressional Republicans, and the pharmaceutical industry, but did not report an internal drug company memo that warned of bills that would allow imported drugs and force price competition.

On November 26, The Washington Post and the Los Angeles Times, as well as the November 24 edition of The Wall Street Journal, asserted in articles that congressional Democrats would face significant obstacles to delivering on their campaign pledge to reform the Medicare drug plan, with the Post taking the argument a step further in asserting that the Democrats' challenge was particularly great because of the purported popularity of the program; but they all left out any mention of concerns in turn of the pharmaceutical industry that Democratic-led reforms will reduce its profit margins by allowing Medicare to negotiate prices and allowing imports from Canada. A November 23 article in the Post itself revealed that an internal email distributed at the drug company GlaxoSmithKline warned of "greater risk over the next two years that bad amendments will be offered to pending legislation" in the new Democratic-controlled Congress. It further reported that the memo showed that the company's "primary concerns are bills that would allow more imported drugs and would force price competition for drugs bought under Medicare."

In that November 23 Post article, staff writer Jeffrey H. Birnbaum reported that, in the wake of the midterm elections, drug manufacturers are "particularly hungry for Democratic help," anticipating legislation that will affect Medicare's drug benefit. Birnbaum then quoted from GlaxoSmithKline's internal memo:

"We now have fewer allies in the Senate," says the internal memo, obtained by The Washington Post. "Thus, there is greater risk over the next two years that bad amendments will be offered to pending legislation." The company's primary concerns are bills that would allow more imported drugs and would force price competition for drugs bought under Medicare.

Notwithstanding the concerns articulated in the memo -- ignored by the Post, Journal, and Los Angeles Times -- that Democrats seeking change might be successful, those papers focused on what they said were obstacles Democrats will face in their efforts to allow Medicare to negotiate the price of prescription drugs, as well as import more drugs, to lower prices for beneficiaries.

In the November 24 Wall Street Journal article (subscription required), reporter Jane Zhang asserted that "Democrats may find it difficult to deliver on their campaign promise to save taxpayers' money by giving Medicare the power to negotiate drug prices for seniors" and noted that "drug industry lobbyists promise a fight."

In the November 26 Los Angeles Times, staff writer Ricardo Alonso-Zaldivar reported that "policy differences among Democrats, along with the Bush administration's opposition to government price-setting, may further complicate the task of reaching a goal that Democrats have set for themselves when they take over Congress in January."

The November 26 Post article went further, with staff writers Lori Montgomery and Christopher Lee reporting that the Democrats face a particularly daunting challenge because of the purported success of the program: "[A]s Democrats prepare to take control of Congress, they are struggling to keep that promise without wrecking a program that has proven cheaper and more popular than anyone imagined."

But, as New York Times reporter Alex Berenson wrote in a November 6 article, drug companies raised prices on several top-selling drugs at double the rate of inflation after the drug benefit program, called Part D, went into effect, shifting coverage of many beneficiaries away from Medicaid, which has the power to negotiate prices with manufacturers, to Medicare. Berenson also noted that Wall Street analysts credited the Part D drug plan with helping drug manufacturers achieve "record profits." Currently, the Medicare drug plan leaves a gap in coverage that starts when annual out-of-pocket expenses reach $2,251 and stops at $5,100, leaving beneficiaries to cover 100 percent of the nearly $3,000 cost in between. Berenson reported that Democrats contend that price negotiation could save upwards of $190 billion over 10 years and could reduce the so-called "doughnut hole" in coverage, adding that "some independent analysts say those projections are probably exaggerated."

From the November 23 Washington Post article:

Drug companies are particularly hungry for Democratic help, including the industry's trade association. "We woke up the day after the election to a new world," said Ken Johnson, spokesman for the Pharmaceutical Research and Manufacturers of America. "We're going to have tough days ahead of us."

A post-election e-mail to executives at the drug company GlaxoSmithKline details just how tough. "We now have fewer allies in the Senate," says the internal memo, obtained by The Washington Post. "Thus, there is greater risk over the next two years that bad amendments will be offered to pending legislation." The company's primary concerns are bills that would allow more imported drugs and would force price competition for drugs bought under Medicare.

The defeat of Sen. Rick Santorum (R-Pa.) "creates a big hole we will need to fill," the e-mail says. Sen.-elect Jon Tester (D-Mont.) "is expected to be a problem," it says, and the elevation to the Senate of Rep. Sherrod Brown (D-Ohio) "will strengthen his ability to challenge us."

The e-mail also mentions that Sen. Robert Menendez (D-N.J.) "has worked closely" with the company and that the firm's PAC had supported six Democratic senators who faced reelection. "These relationships should help us moderate proposals offered by Senate Democrats," the e-mail says.

Explaining the memo, GlaxoSmithKline spokeswoman Patricia Seif said: "It's important that we're knowledgeable about the positions of the members of the next Congress."

From the November 24 Wall Street Journal article:

Having won the election, Democrats may find it difficult to deliver on their campaign promise to save taxpayers' money by giving Medicare the power to negotiate drug prices for seniors.

Although incoming House Speaker Nancy Pelosi promised to accomplish this in the first 100 legislative hours next year, House staffers say no firm plan is in place and predict hearings to explore options before action.

Democrats say if Medicare weren't forbidden by a 2003 law from bargaining with drug makers for lower prices, the government would spend less on the new Medicare prescription-drug benefit and could afford to improve it. The program, which took effect in January, is subsidized by the federal government and offered through private insurers.

Republicans say giving government the power to negotiate with drug makers could be tantamount to price controls, and warn that could discourage development of drugs and, ultimately, give seniors fewer drug choices.

[...]

Given a narrowly divided Senate and a Republican president with a veto pen, Democrats may be unable to pass new legislation affecting the Medicare drug benefit. And repealing the 2003 provision without mandating that HHS negotiate with drug companies would give them an opportunity to declare political victory, but wouldn't have much effect. The drug benefit would still be delivered through private insurance plans, which negotiate with drug makers. Indeed, some drug industry lobbyists promise a fight, but say stripping the "non-interference" language would have little effect -- at least for the rest of the Bush administration.

From the November 26 Los Angeles Times article:

With millions of seniors facing premium hikes for their Medicare prescription plans, Democrats say they have a solution: Use the government's massive buying power to bargain for rock-bottom drug prices. The Department of Veterans Affairs does it for 5 million patients, they point out, so why not Medicare with its 43 million?

Medicare already sets rates for hospitals, doctors and medical equipment such as power wheelchairs -- as well as drugs administered in doctors' offices. It was only the Republicans' ideological commitment to the private sector that led them to bar the government from negotiating discounts with drug companies, Democrats contend.

But the VA model may not be readily adaptable to Medicare, some independent experts say. And policy differences among Democrats, along with the Bush administration's opposition to government price-setting, may further complicate the task of reaching a goal that Democrats have set for themselves when they take over Congress in January.

In addition, newly announced discounts by drug companies could have an impact on the Democrats' effort before it gets started. At least one major manufacturer is offering help to seniors who have trouble paying for their drugs.

"From a rhetorical perspective, Democrats may feel like they gain a lot with this issue, but there are many substantive hurdles that the government faces in trying to negotiate prices," said Dan Mendelson, president of Avalere Health, a consulting firm that tracks the Medicare prescription program.

"If you look historically at the government's experience in trying to regulate prices, it's poor."

From the November 26 Washington Post article:

It sounded simple enough on the campaign trail: Free the government to negotiate lower drug prices and use the savings to plug a big gap in Medicare's new prescription-drug benefit. But as Democrats prepare to take control of Congress, they are struggling to keep that promise without wrecking a program that has proven cheaper and more popular than anyone imagined.

House Democrats have vowed to act quickly after taking power in January to lift a ban on Medicare negotiations with drugmakers, which they hope will save as much as $190 billion over a decade. But House leaders have yet to settle on a strategy and acknowledge that negotiation is, in any case, unlikely to generate sufficient savings to fill the "doughnut hole," the much-criticized gap in coverage that forces millions of seniors to pay 100 percent of drug costs for a few weeks or months each year.

Drug-company lobbyists, Bush administration officials and many congressional Republicans are preparing to block any effort to increase federal control over drug prices, saying the Medicare benefit is working well. They contend that instead of saving money, government negotiations could raise drug prices for all consumers while limiting choices for people on Medicare.

From the November 6 New York Times article:

For big drug companies, the new Medicare prescription benefit is proving to be a financial windfall larger than even the most optimistic Wall Street analysts had predicted.

But those gains may come back to haunt drug makers if Democrats take control of Congress this week.

Democrats, who have long charged that the drug industry is profiteering at taxpayers' expense, say they want to introduce legislation to revoke the law that bars Medicare from negotiating prices directly with drug makers like Pfizer for the medicines it buys.

Medicare now pays for drugs indirectly, through the private insurers that administer the prescription program -- and those insurers typically pay higher prices than government agencies, like the Veterans Administration, that buy medicines directly from drug makers.

The government is expected to spend at least $31 billion this year on the drug benefit, which provides partial drug coverage for people over age 65, according to the federal agency that runs Medicare. Next year, the program is expected to cost almost $50 billion -- almost 20 percent of overall American drug spending.

Democrats say that directly negotiating with drug makers could save taxpayers tens of billions of dollars annually, though some independent analysts say those projections are probably exaggerated.

Republicans, and the pharmaceutical industry, say that the benefit program is working and has cost less than initially projected. More than 38 million Medicare beneficiaries are enrolled in the program, and most say they are satisfied with their coverage, said Michael O. Leavitt, the secretary of health and human services.

"It's very clearly working," Mr. Leavitt said. "We now have 90 percent of seniors in this country who have prescription drug coverage."

But Wall Street analysts say they have little doubt that the benefit program, called Part D, has helped several big drug makers report record profits and exceed earnings forecasts made earlier in the year.

Companies have raised prices on many top-selling medicines by 6 percent or more this year, double the overall inflation rate. In some cases, drug makers have received price increases of as much as 20 percent for medicines that the government was already buying for people covered under the Medicaid program for the indigent. Medicare also pays more than the Veterans Administration, which runs its own benefit program.

"Part D was a good thing for almost everybody," said Les Funtleyder, an industry analyst at Miller Tabak, a research firm in New York.

Drug makers have tried to play down their gains from the program because they do not want to be seen as profiteering in an election year, Mr. Funtleyder said. "You don't want to draw too much attention to how good it's been."

Democrats claim the government could save as much as $190 billion over the next 10 years if it negotiated directly. Those savings could help shrink the "doughnut hole," the gap in Part D coverage that forces many beneficiaries to pay about $3,000 a year for drugs, said Brendan Daly, a spokesman for Nancy Pelosi, the Democratic leader in the House.

Posted In
Health Care, Medicare
Network/Outlet
Wall Street Journal, The Washington Post, Los Angeles Times
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