Parties vie for high ground on drug benefit

The cost of prescription drugs is fast becoming one of the hottest issues in public life – from the chambers of Congress to courtrooms across the nation.

Despite rising federal deficits, the House and Senate are gearing up for votes on drug-benefit bills that could add anywhere from $350 billion to more than $800 billion to the federal budget over the next 10 years.

Meanwhile, some 35 state attorneys general are discussing strategies to take drug companies to court to force reductions in "fraudulent" pricing. Some say that the potential windfall to state treasuries could rival the tobacco settlements of the 1990s.

It's a sign that a concern this intense, especially among the nation's seniors, can't be sidelined, even at a time of war and deficits.

In facts, as efforts in Congress heat up this week, "It's beginning to look like a spending war," says Nick Calio, assistant to the president for legislative affairs.

The nation's drug bill last year topped $147 billion. Seniors wind up picking up most of that tab because of a hole in the nation's Medicare system, which was set up before drugs became such an important part of medical treatment.

"It's a shortcoming that was always there, but it did not matter so much when drugs were not so expensive," says Henry Aaron, senior fellow in economic studies at the Brookings Institution. "But it matters a great deal now."

The price of the 50 most commonly prescribed drugs for seniors rose, on average, nearly three times the rate of inflation last year, according to a report released this week by Families USA, a consumer lobby group.

Drug companies say the numbers do not account for the discounts many seniors get, but the upward trend remains steep.

Most members of Congress ran on this issue in their last campaigns. Many even used the same slogan: No senior should have to choose between food and prescription drugs. And no one is eager to face voters this fall without at least an effort to meet that promise.

The plans shaping up on Capitol Hill represent sharply different views on how to meet the need. Republicans propose a voluntary drug benefit, including subsidies to insurance companies, to provide drug coverage to seniors. Democrats want to put a government-managed drug benefit in the Medicare system.

The plans also vary widely in coverage and overall cost. House Republicans propose premiums that offer seniors coverage for 80 percent of drug costs up to the first $1,000; then half of the next $2,000 and all out-of-pocket costs above $3,800. The bill also includes some $30 billion for Medicare providers to encourage them to stay in the system.

The House Democrats' plan – a version of which is now taking shape in the Senate – offers lower monthly payments ($25) and deductibles ($100). It would cover 80 percent of drug costs up to $2,000, and all costs over that. But the plan costs out at $800 billion over 10 years, a figure the GOP describes as "irresponsible."

Consumer groups say the Republican plan is underfunded, and leaves a coverage gap between $2,000 and $3,800 that will hit about half of seniors.

"The plan doesn't make good policy sense. Just as prescription drug costs get more expensive, coverage [in the Republican plan] drops out," says David Certner, director of federal affairs for the 35-million member American Association of Retired Persons, which has designated this issue as its No. 1 legislative concern.

Even before the House vote, expected as early as today, insiders are saying that the prospect for agreement with Democrats who control the Senate is remote.

The Senate is expected to consider several proposals in July. But the lack of bipartisan cooperation in the House could influence the tone in the Senate and make it difficult for the two sides to reach a compromise for the president to sign.

"The House is passing a bill they are quite certain will never go to the president, but there is a lot going on in the states," says John Calfee, resident scholar and health expert at the American Enterprise Institute in Washington.

States such as Vermont and Maine have already passed their own plans to control drug prices, which are now being challenged in the courts by drug companies.

But in recent months, a new front has opened in state courts to reduce drug costs for seniors. Encouraged by a $875 million settlement last October over the marketing of the drug Lupron, a consortium of attorneys general is discussing litigation on issues like drug-reimbursement rates and the marketing practices of healthcare organizations.

These suits were a major theme at last week's summer meeting of the National Association of Attorneys General in Farmington, Pa.

"This is a multistate law-enforcement action to ensure marketplace integrity and to protect the health and welfare of our citizens," says Ohio Attorney General Betty Montgomery, who is coordinating these discussions. "The states are not in this to make money. Our goal is deter marketplace manipulations that harm consumers."

Still, if the 2001 suit against TAP Pharmaceuticals is any precedent, there could be billions in refunds for consumers and state treasuries in such lawsuits. And the pharmaceutical companies are taking the threat seriously. Montana and Nevada have already taken cases on drug pricing to the courts, and many others are ramping up. "Any time you have a number of state attorneys general considering litigation, you have to sit up and take notice," says Jeff Trewitt, spokesman for the Pharmaceutical Research and Manufacturers of America.