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REPUBLICAN PRESS RELEASE

Tuesday January 16, 2007

Veterans will pay the price for Medicare drug discounting

Washington, D.C. — H.R. 4, the Medicare Prescription Drug Negotiation Act of 2007, threatens to cause increases in the prices 7 million veterans pay for their medications and raise the price of drugs for all Americans not using the Medicare system, House Committee on Veterans’ Affairs Ranking Member Steve Buyer (R-Ind.) said after the bill’s passage Friday in the House.

“Advocates of this bill claim that government price-setting would lower drug prices for part D beneficiaries,” Buyer said of the bill, which requires the secretary of health and human services, which oversees Medicare, to negotiate drug prices. “In the short term they may be right – with a long-term cost that will hurt all Americans, raising prices across the board, hurting veterans, and potentially reducing pharmaceutical research.”

“History shows that in the real world government price-setting reduces access. This is negotiation in name only; the government has little leverage to negotiate without some mechanism to exclude drug makers who don’t discount to its satisfaction,” Buyer said. “The one mechanism that works is a set formulary, such as the one used by VA, which dramatically limits the number and types of drugs available to veterans.”

Forced to reduce prices for the 40 percent of their market represented by Medicare, drug makers will compensate, probably by raising prices across the board and also possibly by restricting research to drugs most likely to succeed and bring in large profits. This will drive up prices for private-sector employee health plans first, and then Medicare and VA, whose discounts are based on the wholesale rate. Even more alarming, it may also restrict the number of new drugs.

The Center for Medical Progress in its November 3, 2006, report, The Human Cost of Federal Price Negotiations, estimated that extending discounts to Medicare would lead to “reduced pharmaceutical innovation,” which, according to CMP would mean ten fewer new medicines each year. In human terms, that could mean 5 million life-years lost each year for lack of new medicines.

“This well-intentioned, but misguided quick fix could literally endanger the health and lives of veterans who depend on inexpensive medicines and the development of new and innovative treatments,” Buyer said. “I look forward to its defeat in the Senate.”

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Larry Scott

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