Could the Proposed Medicare Bill Drive Up Vets’ Drug Costs: Snake Oil January 2007

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Can you say SPIN? Spin - Spin - Spin. Wait a minute that was last week. Hmmm. Ladies and Gentleman, let me tell you about "A wonderful pain destroying compound. It is the strongest and best liniment known for the cure of all pain and lameness. It will treat rheumatism, neuralgia, sciatica, lame back, lumbago, contracted muscles, toothache, sprains, swellings, just to mention a few of what might ail you. But that's not all! It also cures frost bites, chill blains, bruises, sore throat, and bites of animals, insects and reptiles. It is, in fact, good for every thing a liniment should be good for, providing immediate relief." Not interested?!? Well then... let me tell you of a recent event with a similar bent.

Some Background First

The VA health-care plan for U.S. military veterans spent an average of $1,000 on medications for each of its 4.3 million patients last year, charging no insurance premiums and $8 for each non-service connected prescription. There is no initial deductible amount - a veteran just pays the $8 for a one month supply.

Medicare, a separate system and in no way part of the VA system, paid $1,358 on average for drugs to treat 22.6 million elderly and disabled Americans, and the average patient spent an additional $1,056 -- $1,056 is what a veteran would have paid if they had 11 monthly non-service connected prescriptions.

Why this difference? The VA is allowed by law to get price discounts directly from companies. Medicare, barred by law from haggling for price breaks, contracts out its drug coverage to private insurance providers, which then negotiate with companies.

It should be noted that the VA gets its better prices partly because it has a single, nationwide formulary, or restrictive list of covered medicines -- for the most part what is known as generics. As example, the VA won't pay the $3.40-a-day price for Pfizer's cholesterol drug Lipitor, the world's best-selling medicine. Veterans are instead prescribed Zocor, a drug sold by Whitehouse Station, New Jersey-based Merck, which costs less than Lipitor.

Yet, even with Zocor the VA does substantially better than Medicare. The cheapest Medicare price for 20 milligram Zocor tablets was $1,485.96 a year, more than 10 times the lowest VA price of $127.44.

In a nutshell, VA prices are at least 58 percent lower for half of the top 20 drugs prescribed to seniors than prices charged by the five insurers with the largest enrollments in the Medicare drug plan.

The 110th Congress introduced on January 5, 2007, H.R. 4, the Medicare Prescription Drug Price Negotiation Act of 2007. The bill would revise that section of the Social Security Act, which is commonly known as the "noninterference provision" because it prohibits negotiations with drug manufacturers, pharmacies. H.R. 4 would require negotiations with drug manufacturers over the prices charged to prescription drug plans (PDPs) for covered drugs.

Representative Steve Buyer (IN) received 2005-2006 contributions totaling $740,204. His top two industries were: 1-Health Professionals $94,599, 2-Pharmaceuticals / Health Products $84,750, and included: Eli Lilly & Co $11,500; UnitedHealth Group $10,500, and; American Health Care Assn $10,000. In total, the Health Sector provided Buyer with $220,599 -- $201,749 from PACs and $18,850 from Individuals.

What Was Said in January 2007

Former Chairman of the House Committee on Veterans' Affairs, Representative Steve Buyer (IN), in a House Committee on Veterans' Affairs press release said in part:

"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."

"Advocates of this bill claim that government price-setting would lower drug prices for part D beneficiaries, 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."

"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."

"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; I look forward to its defeat in the Senate."


Ladies and Gentleman, let me tell you about "H.R. 4, the Medicare Prescription Drug Negotiation Act of 2007, which threatens to cause increases in...

--- Regards, Walt Schmidt