Kaiser Daily Health Policy Report
House Ethics Committee To Look Into Bribery Charges Related To Medicare Vote
Report From Medicare Trustees To Estimate Earlier Insolvency Date for Medicare Hospital Trust Fund
Medicare Considers Covering More Implantable Cardiac Devices for Beneficiaries
AARP, PhRMA Spent Heavily on Lobbying for Medicare Law in 2003
Rep. Oxley Presents Plan for National Insurance Regulation
Online Purchase of Prescription Drugs Unsafe, Minnesota Lawmaker Says
Louisiana Health Department To Run Out of Funding by April Unless CMS Approves Funding Scheme
AARP Faces 'Crisis' Over Decision To Endorse New Medicare Law, Columnist Writes
Editorials Respond to Medicare Actuary's Claims Regarding Cost Estimates
Negotiating Prices on Prescription Drugs Would Create Supply Shortage, Opinion Piece States
Medicare
Bush Administration Says It Supports Investigation Into Whether Medicare Actuary Was Improperly Told To Withhold Estimates
[Mar 18, 2004]
The Bush administration on Wednesday endorsed plans for an HHS investigation into claims made by Richard Foster, CMS' chief actuary, that he was told by former CMS Administrator Tom Scully not to reveal to lawmakers his estimates for the Medicare legislation, the AP/Dallas Morning News reports (AP/Dallas Morning News, 3/18). Thompson told reporters Tuesday that he has asked the HHS Office of Inspector General to investigate two questions: whether Scully threatened Foster's job security if the actuary shared his cost estimates with lawmakers and whether the cost of the Medicare legislation was improperly withheld from Congress (Kaiser Daily Health Policy Report, 3/17). White House spokesperson Scott McClellan said Wednesday, "This is an appropriate step for the secretary to take," adding, "It's a serious allegation" (Fagan, Washington Times, 3/18). The Philadelphia Inquirer last week reported that an e-mail from Foster to colleagues at CMS indicated he believed he might lose his job if he revealed his cost estimates for the Medicare legislation. Foster confirmed the allegations in interviews published in several newspapers Monday. According to Office of Management and Budget estimates released after Congress passed the legislation, the Medicare law will cost $534 billion over the next 10 years, $134 billion more than estimated by the Congressional Budget Office. Foster has said that the higher cost projection was known before the final House and Senate votes on the legislation in November but that Scully told him, "We can't let that get out." Foster also said that he received a written note from Scully, ordering him not to respond to certain requests from lawmakers and instead to refer the responses to Scully. The message allegedly warned about the consequences of insubordination. Scully has said that he did not threaten to fire Foster if the higher estimates were released. Scully also said that he "curbed Foster on only one specific request" made by Democrats at the time of the first House vote on the Medicare bill. Scully said, "They were trying to be politically cute" and get Foster to give an estimate on the bill "and put something out publicly so they [could] walk out on the House floor and cause a political crisis, which is bogus" (Kaiser Daily Health Policy Report, 3/17). Administration Knowledge
McClellan on Wednesday said that the matter seems to be "a dispute between the former administrator of the CMS and the CMS actuary." When asked if the administration had been aware of Foster's cost estimates, McClellan "repeatedly declined to answer directly," CongressDaily reports. He did say that "the first full and precise estimate we did was" in February, when the president released his fiscal year 2005 budget proposal. McClellan added that "CBO was the official scorekeeper" for the Medicare legislation, CongressDaily reports (Rovner/Wegner, CongressDaily, 3/17). HHS spokesperson Bill Pierce said that the administration was not aware of OMB's $534 billion estimate until Dec. 24. However, Pierce said that lawmakers negotiating the legislation were "well aware" that administration officials believed that the estimate would be higher than what CBO had projected. White House spokesperson Trent Duffy said, "Everyone, including the administration, was relying on the CBO estimate" because Congress is required by law to base legislation on CBO cost estimates (Washington Times, 3/18). According to the New York Times, interviews with federal officials "make clear that the actuary's numbers were circulating within the administration, and possibly on Capitol Hill, throughout the second half of last year, as Congress voted on" the Medicare legislation (Stolberg/Pear, New York Times, 3/18). Scully and Foster's Email Correspondence
The Wall Street Journal on Thursday examined e-mail correspondence between CMS officials and Foster that was provided by Foster. According to the Journal, the June 20 e-mail correspondence is "significan[t]" because "it is the clearest written proof yet of the pressure put on Mr. Foster," and it "clarif[ies] what information was being sought at the time" by members of the House Ways and Means Committee. The Journal reports that Jeffrey Flick, Scully's top aide, sent Foster an e-mail on June 20 saying, "Work on the numbers and share them with Tom Scully only. NO ONE ELSE." In a second warning in bold-type in the same e-mail, Flick wrote, "The consequences for insubordination are extremely severe." Flick also instructed Foster to answer a request for information made by a Republican, but to withhold answers to requests made by Democrats "until Mr. Scully authorizes the release," the Journal reports (Rogers, Wall Street Journal, 3/18). In June, some Democrats protested the decision to withhold Foster's analysis about the House Medicare legislation (Kaiser Daily Health Policy Report, 3/12). Information Withheld From Democrats
According to the New York Times, Cybele Bjorklund, an aide to Rep. Pete Stark (D-Calif.), a member of the Ways and Means Committee, began to "pres[s]" Foster for his estimates in June when she learned that Republicans were drafting legislation to implement competitive bidding between private health plans and traditional, fee-for-service Medicare. She said that after sending Foster an e-mail on June 17 to request his estimates and receiving no response, she called him on June 24. In the phone conversation, Bjorklund said that Foster told her, "I cannot give it to you; I'm afraid I could be fired." After reminding Foster that he could be fired only for cause, she called Scully, who allegedly told her, "If Rick Foster gives that to you, I'll fire him so fast that his head will spin." Scully said that he recalls "a heated conversation, but says he never threatened to fire Mr. Foster," the New York Times reports. On June 25, Stark sent out a press release about the situation but did not mention Foster's name. Stark said that because the House was getting ready to vote on the legislation, the "accusations were lost in the bigger battle," the New York Times reports. Bjorklund told the New York Times that in January she received a fax revealing Foster's cost estimate for the Medicare legislation, the New York Times reports. The fax was dated June 11, 2003, and had "no hint of the sender" (New York Times, 3/18). Response From Democrats
Members of the Government Reform Committee on Wednesday said that if Thompson does not release documents relating to Foster's estimates by March 26, they would pursue legal action (CongressDaily, 3/17). Earlier this month, 18 Democrats and one independent on the committee asked that President Bush submit by March 15 all estimates prepared by the Medicare actuary's office since Jan. 1, 2003. The letter also noted that Reps. John Dingell (D-Mich.), Charles Rangel (D-N.Y.) and Henry Waxman (D-Calif.) had made a similar request in February but received no response (Kaiser Daily Health Policy Report, 3/3). In separate requests on Wednesday, Rep. Peter Deutsch (D-Fla.), ranking member of the house Energy and Commerce Committee, and Waxman, ranking member of the Government Reform Committee, asked Reps. Jim Greenwood (R-Pa.) and Tom Davis (R-Va.), the committees' chairs, respectively, to hold hearings on the allegations (CongressDaily, 3/17). Waxman also said that he would sue Thompson if he fails to allow access to Foster's estimates. According to the New York Times, Sen. Edward Kennedy (D-Mass.) "put the issue in stark, Watergate-era terms," saying, "What did the president know; when did he know it?" Republicans React
House Majority Leader Tom DeLay (R-Texas) on Wednesday said that he was not aware of the higher estimates for the legislation until January, when he attended a Republican leaders retreat. Stuart Roy, an aide to DeLay, said that when Joshua Bolten, Bush's budget director, presented the $534 billion estimate to the leaders, they "about took his head off," adding, "It was very clear that none of the leaders in that room had ever heard these numbers before" (New York Times, 3/18). However, DeLay said, "Even if we did [have the OMB estimates], they're not the numbers we can use," adding, "These bean counter numbers -- whether they be CBO numbers or OMB numbers -- are irrelevant" (CongressDaily, 3/17). DeLay said that "Democrats don't truly care about the bill being too costly, since their prescription drug proposal would have cost around $1 trillion" (Washington Times, 3/17). However, Rep. Trent Franks (R-Ariz.) said, "If anyone was truly pressured by a superior to withhold information from Congress, that is profoundly unethical and inappropriate" (New York Times, 3/18).
House Ethics Committee To Look Into Bribery Charges Related To Medicare Vote
[Mar 18, 2004]
The House Committee on Standards of Official Conduct on Wednesday voted to begin a formal investigation into allegations that unnamed Republican lawmakers last November "improperly pressured" Rep. Nick Smith (R-Mich.) to vote in favor of the Medicare legislation, Roll Call reports (Bresnahan, Roll Call, 3/18). In December, Smith, who plans to retire this year, said that unnamed Republican lawmakers promised to donate $100,000 to his son's congressional campaign in exchange for his support on the Medicare bill. However, Smith later retracted the comment and said that allegations of bribery are "technically incorrect." According to Smith, some Republican lawmakers had said that they would oppose his son's campaign if he did not vote in favor of the Medicare legislation, but they did not offer to donate funds to the campaign, as previous reports had indicated. Smith voted against the Medicare legislation. The House ethics committee has conducted an informal investigation into the case situation (Kaiser Daily Health Policy Report, 2/26). FBI and the Department of Justice also have launched investigations into the case (Roll Call, 3/18). In a statement released Wednesday, the House ethics committee said that a subcommittee will "conduct a full and complete inquiry" into the case (Kenen, Reuters/Philadelphia Inquirer, 3/18). The investigation will focus on statements made by Smith in a Nov. 28 newspaper column in his district and a Dec. 1 interview with a Michigan radio station (Ferrechio, CQ Today, 3/17). At the end of the investigation, the subcommittee will issue a report to the full committee; the committee will not release the report to the public unless members vote to take additional action. Ethics committee Chair Joel Hefley (R-Colo.) and ranking member Alan Mollohan (D-W.Va.) will select four subcommittee members "very soon," Roll Call reports (Roll Call, 3/18). Reaction
House Minority Whip Steny Hoyer (D-Md.), who has called on the House ethics committee to conduct a formal investigation into the Smith case, said in a statement, "I believe that this is an appropriate and necessary action and the only way the House can remove the cloud of suspicion that hangs over this matter to this day" (Stolberg, New York Times, 3/18). Smith said in a statement that he would "cooperate fully with the inquiry," adding that the "committee should be permitted to conduct its work without further public comment by any party" (Wegner, CongressDaily, 3/18). Smith has met with Hefley and Mollohan to discuss the case, CQ Today reports (CQ Today, 3/17). Brendan Daly, a spokesperson for House Minority Leader Nancy Pelosi (D-Calif.), said, "These are serious allegations, and this is an appropriate step for the committee to take." Mark Glaze, a spokesperson for the Campaign Legal Center, which first filed complaints about the Smith case with DOJ, said that the group is "happy that the committee has decided to do the right thing." Gary Ruskin, director of the Congressional Accountability Project, said that the committee investigation should not interfere with DOJ's investigation (Roll Call, 3/18). In an interview with The Hill, House Speaker Dennis Hastert (R-Ill.) "dismissed new questions" about the case as "partisan rancor" and said he would "take a hands-off approach" to the subcommittee's investigation (Kaplan, The Hill, 3/17).
Report From Medicare Trustees To Estimate Earlier Insolvency Date for Medicare Hospital Trust Fund
[Mar 18, 2004]
The Medicare hospital trust fund faces an "extremely bleak" future and will become insolvent "earlier than previously forecast," according to an annual report scheduled for release next week by Medicare trustees, The Hill reports. Medicare Part A, the Federal Hospital Insurance Trust Fund, covers hospital, home health, skilled nursing facility and hospice care for beneficiaries. Last year, Medicare trustees estimated that the trust fund would become insolvent in 2026, and this year, the "insolvency date will be moved up by a couple of years," The Hill reports. Medicare trustees based the new insolvency date on the White House Office of Management and Budget estimate that the new Medicare law will cost $535 billion over 10 years. According to The Hill, the new insolvency date "has little to do with the new drug benefit, which is not financed out of the trust fund," but resulted in part because of provisions in the law that increased reimbursements for rural hospitals and private health plans. In addition, in the past few years, Medicare trustees had overestimated federal revenues and underestimated entitlement payments, which forced them to revise their estimates this year, according to The Hill. The report from Medicare trustees will "debunk the notion" that the new prescription drug benefit will reduce Medicare expenditures on hospital stays, according to The Hill. In addition, the report will estimate that a separate provision in the Medicare law -- under which Medicare will begin to link premiums under Part B, which covers outpatient care, to the incomes of beneficiaries -- will not "save the government as much as some policymakers hoped because there are relatively few wealthy seniors," The Hill reports. According to The Hill, the report also will estimate the cost of the Medicare prescription drug benefit over 75 years, although the "number remains under wraps." Rep. Mike Pence (R-Ind.), who opposes the Medicare law, said that analysts told him last year that the provision would cost $7 trillion over 75 years, and others "say it could be even higher," The Hill reports (Cusack, The Hill, 3/17).
The trustee's 2003 report is available online. Note: You must have Adobe Acrobat Reader to view the report.
Medicare Considers Covering More Implantable Cardiac Devices for Beneficiaries
[Mar 18, 2004]
Medicare might expand the number of beneficiaries eligible for coverage of surgically implanted cardiac defibrillators, following a study that shows ICDs "significantly reduced" deaths in patients with mild heart disease, the AP/Minneapolis Star Tribune reports. Medicare currently covers defibrillator implants for 40,000 beneficiaries with congestive heart failure per year at a cost of about $25,000 per person. But the program is considering covering the devices for beneficiaries who have with less severe congestive heart failure (Sherman, AP/Minneapolis Star Tribune, 3/18). ICDs detect an abnormal heart rhythm and automatically restore normal rhythm in people who have had heart attacks. A medical advisory committee recommended last year that the government widen coverage in light of a March 2002 study conducted by ICD manufacturer Guidant (Kaiser Daily Health Policy Report, 6/9/03). At that time, CMS decided on a "modest expansion, saying it would await the results of the new study," the AP/Star Tribune reports. The recent study, financed by NIH, involved 2,521 patients and was directed by Dr. Gust Bardy of the University of Washington. The study showed a 23% mortality reduction among patients who received the device. Sean Tunis, Medicare's chief medical officer, on Wednesday said that he will meet this week with scientists who performed the study to discuss its results and "tease through what is spin and what's reality." Medicare should have a decision within nine months, the AP/Star Tribune reports. Medtronic, one of the three largest defibrillator manufacturers in the United States, estimates that the Medicare spending on the defibrillators would triple from $1 billion to $3 billion over five years if more old and disabled patients received coverage for the device, the AP/Star Tribune reports (AP/Star Tribune 3/18).
AARP, PhRMA Spent Heavily on Lobbying for Medicare Law in 2003
[Mar 18, 2004]
AARP and the Pharmaceutical Research and Manufacturers of America both increased their lobbying expenditures sharply in 2003, as they worked to "influence the controversial" Medicare legislation, The Hill reports. According to The Hill, while both groups lobbied Congress on many issues in 2003, "their top priority was passage" of the Medicare legislation. Last year, AARP, which endorsed the legislation, spent $20.9 million on lobbying activities, nearly $16 million more than in 2002. AARP spent $16.38 million of its total lobbying expenditures in the second half of 2003, when the momentum of negotiations over the Medicare legislation increased. PhRMA spent about $16 million in all of 2003, up from $14.3 million in 2002, with expenditures spread evenly across the year. Pharmaceutical company Pfizer spent $3.7 million on lobbying last year, and GlaxoSmithKline spent $5 million (Gerber/Cusack, The Hill, 3/17).
Health Care Marketplace
Rep. Oxley Presents Plan for National Insurance Regulation
[Mar 18, 2004]
At a meeting of the National Association of Insurance Commissioners in New York, House Committee on Financial Services Chair Michael Oxley (R-Ohio) this week presented plans for legislation to create a council of federal and state officials to regulate the insurance industry at the national level, the New York Times reports. The legislation would call for a presidential appointee to head the council. Under the legislation, which Oxley said he would introduce later this year, states would be required "to adopt uniform standards and permit the market to determine insurance prices rather than have them determined by regulators as is generally the case now," according to the Times. Oxley said that national regulation would end "the travesty of price controls" for the insurance industry, adding that insurers' profits would increase and consumers' choices would expand under national regulation. However, J. Robert Hunter, director of insurance for the Consumer Federation of America and a former Texas insurance regulator, said, "Americans are going to get ripped off," adding, "Most people can't look at an insurance policy and tell whether they have a good one." According to the Times, state regulators "are not eager to cede authority" but said they will work to lobby Congress on the issue "rather than continue fighting what they now regard as a losing battle." Ernst Csiszar, NAIC president and director of insurance for South Carolina, said, "We don't want to stand on the sidelines and be naysayers. We want to participate in the process." The insurance industry has lobbied for such regulation changes in the past. The legislation will be discussed at a congressional hearing later this month, the Times reports (Treaster, New York Times, 3/18).
Prescription Drugs
Online Purchase of Prescription Drugs Unsafe, Minnesota Lawmaker Says
[Mar 18, 2004]
Sen. Norm Coleman (R-Minn.) on Wednesday questioned the safety of a Minnesota Web site that helps state residents purchase prescription drugs from Canada and said that he would work with Minnesota Gov. Tim Pawlenty (R) to "establish safe prescription drug options for seniors," the Minneapolis Star Tribune reports (Johns, Minneapolis Star Tribune, 3/18). Last month, Minnesota launched a Web site that lists prices for 829 brand-name and generic medications and phone, mail and e-mail contact information for Total Care Pharmacy of Calgary and Granville Pharmacy of Vancouver (Kaiser Daily Health Policy Report, 3/15). Coleman made the comments after a tour of the international mail facility at John F. Kennedy International Airport in New York with former New York City Mayor Rudy Giuliani (R) and former city Police Commissioner Bernard Kerik to "assess the integrity of pharmaceutical products" that enter the United States through the airport. During the tour, they found antibiotics that had expired two years earlier, cancer treatments that require physician administration being sent directly to patients and counterfeit medications from Pakistan -- all purchased through online pharmacies. "The reality is that importing drugs over the Internet is not safe," Coleman said. He said that Pawlenty should post "a very big warning" on the Minnesota Web site to inform state residents about the safety risks of the practice. Leslie Kupchella, press secretary for Pawlenty, said that she "doesn't believe that's necessary," the Star Tribune reports. She added, "We've made clear that, while there may be some renegade operations going on, we are talking about safe and credible and reliable pharmacies that we have checked out and will continue to check out" (Minneapolis Star Tribune, 3/18). Massachusetts Joint Committee Approves Reimportation Bill
The Massachusetts Joint Committee on Health Care this week approved a bill that would establish a state Web site to help residents purchase prescription drugs from Canada, the Boston Globe reports. The legislation would require FDA to approve the Web site. Gov. Mitt Romney (R) on Wednesday said that he has not reviewed the bill and had no comment. The bill moves to the state Senate for consideration (Rowland, Boston Globe, 3/18).
Medicaid
Louisiana Health Department To Run Out of Funding by April Unless CMS Approves Funding Scheme
[Mar 18, 2004]
Louisiana Department of Health and Hospitals Secretary Fred Cerise on Monday said his agency would run out of funding by mid-April unless CMS approves the state's plan for using additional federal funds it received last year, the Baton Rouge Advocate reports. The funding is supposed to last until June 30, but next year's budget also will be left "in limbo" until CMS officials make a decision, state officials say, according to the Advocate. In the state's budget for this year, Louisiana would use the additional funds to make interagency transfers and garner additional federal matching funds. According to Cerise, the state's budget proposal follows federal regulations and has been permitted in the past. He said, "We are arguing the rules are changing in the middle of the game," adding that Louisiana is "basically asking for the deal other states got." CMS has been "cracking down" on such state interagency transfers, but the agency has approved similar arrangements for other states, the Advocate reports. Louisiana Medicaid Director Ben Bearden said, "I think we are going to prevail," but he added that state officials will probably have to go to Washington, D.C., to "work [their] case" with CMS officials (Shuler, Baton Rouge Advocate, 3/16).
Opinion
AARP Faces 'Crisis' Over Decision To Endorse New Medicare Law, Columnist Writes
[Mar 18, 2004]
The decision by AARP to endorse the new Medicare law "has provoked the greatest crisis in the recent history" of the group, and recent controversies related to the legislation have made "it very hard for AARP to do the job of selling its members -- and other seniors -- on the notion that this bill will be good for them," syndicated columnist David Broder writes in the Washington Post. In an interview with Broder, AARP CEO Bill Novelli said that although membership in the group has continued to increase, 60,000 members recently have left AARP because of the decision to endorse the Medicare law. "It's a mess. ... This is more than a spectacle. It's an embarrassment," Novelli told Broder. According to Broder, Novelli cited controversies related to the allegations of bribery during the House vote on the Medicare legislation, the different cost estimates for the bill, and allegations that the CMS chief actuary received threats on his job if he reported to lawmakers his cost estimates for the legislation before a final vote. AARP "has a lot riding on what happens when seniors actually reach for the benefits this bill is supposed to provide," and to "say that its credibility -- and that of the Bush administration -- is at stake is an understatement," Broder concludes (Broder, Washington Post, 3/18).
 A webcast of Novelli participating in a Kaiser Conversations on Health event, where he discussed Medicare and other issues, is available online at kaisernetwork.org.
Editorials Respond to Medicare Actuary's Claims Regarding Cost Estimates
[Mar 18, 2004]
Several newspapers recently published editorials reacting to allegations by Richard Foster, CMS' chief actuary, that he was told by former CMS Administrator Tom Scully not to reveal his estimates for the Medicare legislation. The Philadelphia Inquirer last week reported that an e-mail from Foster to colleagues at CMS indicated he believed he might lose his job if he revealed his estimates. Foster confirmed the allegations in interviews published in several newspapers Monday. According to Office of Management and Budget estimates released after Congress passed the legislation, the Medicare law will cost $534 billion over the next 10 years, $134 billion more than estimated by the Congressional Budget Office. Foster has said that the higher cost projection was known before the final House and Senate votes on the legislation in November but that Scully told him, "We can't let that get out." Foster also said that he received a written note from Scully, ordering him not to respond to certain requests from lawmakers and instead to refer the responses to Scully. The message allegedly warned about the consequences of insubordination. Scully has said that he did not threaten to fire Foster if the higher estimates were released. Scully also said that he "curbed Foster on only one specific request" made by Democrats at the time of the first House vote on the Medicare bill. Scully said, "They were trying to be politically cute" and get Foster to give an estimate on the bill "and put something out publicly so they [could] walk out on the House floor and cause a political crisis, which is bogus." HHS Secretary Tommy Thompson on Tuesday ordered the department's Office of Inspector General to investigate the situation (Kaiser Daily Health Policy Report, 3/17). Summaries of the editorials are provided below.
- Atlanta Journal-Constitution: It is "dismaying to learn that ... Foster, a veteran actuary trusted by both parties for his independence, may have been muzzled," the Journal-Constitution says in an editorial. The editorial concludes, "The Bush administration pushed hard, and evidently unfairly, to get Medicare reform passed so it could be a centerpiece of domestic policy accomplishments. That tarnished centerpiece now represents more questions than credit -- including a major question of credibility" (Atlanta Journal-Constitution, 3/18).
- Denver Rocky Mountain News: "It seems doubtful Thompson or the president's other advisers or the president himself knew about the actuary's calculations during the debate" on the legislation, a Rocky Mountain News editorial states, adding, "But that hardly makes the administration wholly innocent. Observers had predicted the cost could be twice as high as estimated" (Denver Rocky Mountain News, 3/18).
- Detroit Free Press: President Bush "had better make sure [the Medicare legislation] was sound and honestly brokered," a Free Press states editorial states, adding, "If not, he and congressional lawmakers best revisit it -- if not before the letters asking seniors to pick discount cards go later this month, at least before the rest [of the law] takes effect in 2006" (Detroit Free Press, 3/18).
- Los Angeles Times: Scully "is a convenient fall guy" for the Bush administration to blame, but the "administration itself has some explaining to do," a Times editorial says. The editorial adds, "First there's the question of what it will really cost to subsidize prescription drugs for the elderly; next there's the deception of a White House media campaign being used to sell it" (Los Angeles Times, 3/18).
- Rochester Democrat & Chronicle: "Americans need to know before the November election whether the Bush administration misled Congress. Already, there are too many unanswered questions about the administration's credibility," according to a Democrat & Chronicle editorial (Rochester Democrat & Chronicle, 3/18).
- Washington Post: "Whose analysis (if either) is right is not the point. Rather than straightforwardly acknowledging the difference and having an honest discussion about which analysis was more accurate, the administration preferred to stifle dissent and muscle the measure through Congress," a Post editorial says. The editorial adds, "Indeed, had the administration been more forthcoming, the bill probably would have failed" (Washington Post, 3/18).
Negotiating Prices on Prescription Drugs Would Create Supply Shortage, Opinion Piece States
[Mar 18, 2004]
Sen. Edward Kennedy (D-Mass.) and Rep. Nancy Pelosi (D-Calif.) have criticized the new Medicare law as a "bitter pill" for seniors and have submitted their own bill that would put the government "into the game of jawboning down prescription drug prices" by allowing CMS to negotiate directly with drug makers, which "all sounds innocent," James Pinkerton, a fellow at the New America Foundation, writes in a Los Angeles Times opinion piece. However, the "problem is that it won't be a real negotiation" because the federal government "is so big and powerful" that pharmaceutical companies would be obliged to accept any prices the government offers, Pinkerton writes. He adds that with such de facto price controls in place, "medicines will be affordable -- for as long as they are available." Currently, drug makers spend $30 billion a year on research and development, but if the government forces a decrease in pricing, they might not continue to invest so heavily in product development, which would limit the production of new drugs that can "improve and save lives," according to Pinkerton. Throughout history, price controls have created shortages, which "Kennedy and his crew don't like to mention," Pinkerton writes (Pinkerton, Los Angeles Times, 3/18).
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