The House bill does the following:

·         Repeals the provision in current law that prohibits the Secretary of Health and Human Services (HHS) from negotiating with drug companies for lower prices for Medicare beneficiaries.  Instead, the bill  would require the HHS Secretary to conduct such negotiations with drug companies on behalf of  Medicare beneficiaries.

·         Provides the HHS Secretary broad discretion on how to best implement the negotiating authority and achieve the greatest price discounts for Medicare beneficiaries. 

·         Continues to prohibit the HHS Secretary from requiring a particular formulary (i.e., a list of covered drugs) to be used by Medicare prescription drug plans or limiting access to any prescription medication.

·         Clarifies that Medicare Part D drug plans are permitted to obtain discounts or lower prices for covered prescription drugs below the price negotiated by the HHS Secretary.

·         Provides that negotiated prices are for plan years starting January 2008.

Medicare Part D
Source: Campaign for America's Future

"We can and we must make the Medicare prescription drug plan fairer and more cost-effective" - Rep. Nancy Pelosi, November 2, 2006. 1

The Promise
The new Democratic majority has promised to use the bulk purchasing power of Medicare to negotiate lower drug prices for our seniors. A Medicare-offered plan with negotiated prices will ensure seniors get a prescription drug benefit that is cheap, simple and guaranteed.

The Problem
The current prescription drug plan puts pharmaceutical and insurance interests above the needs of American seniors.
Part D was written with a provision that specifically forbids the government from negotiating prices.
There is a nearly $2,800 "doughnut hole" gap in Part D coverage, forcing seniors to pay the full cost for their prescription drugs while still paying monthly premiums.
Seniors are forced to choose between a confusing array of competing private plans, and insurance companies can change these plans even after seniors sign up.
Some argue that negotiating for a lower price would amount to a price control limiting innovation and access to prescription drugs. The drug company lobbying group PhRMA is funding such lobbying and public opinion campaigns to the tune of over $100 million a year. 2 However:

The Veterans Administration and the Department of Defense have been successfully negotiating for cheaper drug prices for years. For the 20 most commonly used drugs, the VA's lowest price was 46 percent cheaper than the lowest price by any competing Part D plan. 3
Pharmaceutical companies made record profits last year. They spent approximately as much on marketing as research, and about two-thirds of their research spending went to developing copycat drugs. 4
Traditional Medicare has successfully negotiated prices with doctors and hospitals for years, saving taxpayers money while ensuring that our seniors get good care.
The People
The American people want change.

90 percent of registered voters favor reducing the cost of prescription drugs by requiring Medicare to negotiate lower prices from drug companies. 5
78 percent of registered voters favor allowing seniors the choice of a prescription drug plan directly from Medicare -- instead of a private insurance company. 6
The Down Payment
The simplest options include:

Require Medicare to use its purchasing power to negotiate lower prices.
Allow seniors to choose a plan administered directly by Medicare -- efficiently guaranteeing a simple and secure benefit that will reduce drug costs and ensure comprehensive coverage. 7
The combined savings for both seniors and taxpayers from a Medicare-offered plan with negotiated prices would likely be between $40 billion and $65 billion a year -- money that could be used to reduce the dangerous "doughnut hole" coverage gap. 8

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1. http://www.washingtonpost.com/wp-dyn/content/article/2006/11/01/AR2006110103324.html
2. Pear, Robert. "Drug Industry Is on Defensive as Power Shifts." The New York Times. 11/23/2006.
3. Mahan, Dee. Families USA. "Big Dollars, Little Sense: Rising Medicare Prescription Drug Prices" June 2006. P. 7.
4. Getting Facts Straight on the Medicare Drug Benefit, by Dean Baker, The American Prospect. Available at: http://www.prospect.org/
5. March, 2006 poll by Hart Research of 804 registered voters, including an oversample of 200 seniors age 60 and over. The margin of error is +/-4.1% for all voters, and +/-5.0% for seniors.
6. Ibid.
7. House Democratic Leader Nancy Pelosi's website. http://www.democraticleader.house.gov/issues/health_care/index.cfm
8. Baker, Dean. The Excess Cost of the Medicare Drug Benefit. CEPI and IAF. February, 2006.