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Senator Klobuchar Pushes for Lower Prescription Drug Prices for Seniors

Klobuchar pushes the issue on the Senate floor and speaks at press conference where Families USA report shows that drug prices skyrocketed by 9% in last year

April 18, 2007

(Washington, D.C.) U.S. Senator Amy Klobuchar today voted to move forward legislation that would empower Medicare to negotiate lower prescription drugs for America's seniors. A motion to start debate on the Medicare Prescription Drug Price Negotiation Act of 2007, (S.3), failed by a vote of 55 to 42. Democrats and a handful of Republicans voted in favor of the motion. But, under Senate rules, 60 votes were required.

"Today the Senate had the opportunity to remedy this problem and politics won out over providing affordable prescription drugs to our seniors," said Klobuchar. "The Medicare prescription drug program was a major issue in last year's Senate campaign in Minnesota.

When it created the Medicare Part D prescription drug program, which took effect last year, Congress banned Medicare from bargaining with drug companies to secure lower prices. As a result, Klobuchar said, "Congress saddled seniors with inflated prices for their medications, while handing a huge financial windfall to the pharmaceutical industry."

Klobuchar went on to say that in the first six months after Part D was implemented, the profits for the top 10 drug companies increased by over eight billion dollars - a 27 percent jump.

Klobuchar said the ban on negotiating lower prices should be lifted. "This is a matter of fairness for our seniors, who deserve affordable prices for their prescription drugs. And it is a matter of fairness for America's taxpayers, who pay 75 percent of the bill for Medicare Part D."

Senator Klobuchar also discussed the issue off the Senate floor at a press conference highlighting a Families USA report showing that the top 15 commonly-used medications have increased in price by an average of nine percent in the last year. Klobuchar said: "Banning the government from negotiating with the prescription drug companies imposes substantial and unnecessary costs on America's taxpayers and seniors, who - as Families USA clearly reveals in their report today - are paying excessive prices for prescription medications." A copy of the report can be accessed here.

Full text of Senator Klobuchar's Senate floor speech is below:

"When Congress passes a law, the American people have every right to expect that their elected representatives will do what's best for them. But the country did not get a fair deal in 2003 when Congress passed the Medicare Part D prescription drug program.

"Today the Senate had the opportunity to remedy this problem and politics won out over providing affordable prescription drugs to our seniors.

"Providing prescription drug coverage to millions of seniors is a very important benefit - and I very much support it.

"But Part D got off to a very rocky start: seniors were overwhelmed and confused. Many were not enrolled in a timely fashion. When they were enrolled, there were serious - even life-threatening - delays in getting the medications they needed. A number of states - including my own - declared public health emergencies and had to step in to fill the gap.

"At the time, my mom - a former second grade teacher - told me that Medicare Part D got the letter grade it deserved from the beginning.

"Since then, many of these early problems with implementation have been remedied.

"Even today, however, Medicare Part D remains needlessly complex and confusing - with dozens of insurance companies involved, hundreds of different plans, and countless benefit structures, pricing tiers and drug formularies - not to mention the 'doughnut hole,' which each year eats a deep hole in the wallets and pocketbooks of millions of seniors.

"But, by far, the most serious flaw in the original law is the 'non-interference' clause that expressly prohibits Medicare from negotiating lower prices from pharmaceutical companies.

"This prohibition is contrary to how Medicare handles its purchases of others goods and services.

"It is contrary to how both Medicaid and the Veterans Affairs purchase medications for their beneficiaries.

"It is contrary to good business practices and to good government.

"This prohibition has imposed substantial - and unnecessary - costs on America's taxpayers and seniors, who are paying excessive prices for prescription drugs.

"An analysis last year by Merrill Lynch found that, after Part D took effect, prices on popular brand-name drugs increased by 8.6 percent.

"And this week there is a new analysis from Families USA. It finds that the prices charged by the largest Part D plans for the 15 most commonly prescribed medications increased by an average of 9.2 percent during the past year.

"This increase is almost four times the general inflation rate. And it is nearly three times the cost-of-living adjustment that seniors received this year for their social security income.

"By banning the government from negotiating discounts, Congress saddled seniors with inflated prices for their medications, while handing a huge financial windfall to the pharmaceutical industry.

"As I travel throughout my state, Minnesotans tell me they are mystified and frustrated that the government has tied its own hands when it comes to achieving huge cost savings with prescription drugs. The people of my state repeatedly tell me that they want Medicare to use every possible tool to get the best prices.

"It is a simple principle of economics that consumers strike better deals when they band together and exercise their bargaining power, the power of the many has much more power than the power of the few.

"Congress rejected this sound, common-sense principle when it barred Medicare from negotiating lower prices. This is just plain wrong.

"When appropriate, the government should be empowered to harness the collective bargaining power of 43 million Americans on Medicare to deliver low-cost medications to seniors.

"We are now poised to give the government the power to negotiate. The House has already passed a measure to do so. Now it is our turn and it is our responsibility.

Price Fairness

"This is a matter of fairness for our seniors, who deserve affordable prices for their prescription drugs. And it is a matter of fairness for America's taxpayers, who pay 75 percent of the bill for Medicare Part D. Under current law, only individual insurance companies can negotiate Medicare drug prices.

"The pharmaceutical industry has tried to reassure Americans that this will inevitably produce the lowest prices because of competition. This explanation is unconvincing.

"Evidence and experience show us that the present system often does not produce the fairest prices. The pharmaceutical companies like to say that Part D program costs are lower than projected. But beating artificial projections has not resulted in lower prices.

"Numerous studies show that Part D prices are significantly higher than prices for drugs in programs where negotiation is permitted.

"For example, a review of drug prices in Florida last October reported that the lowest retail price - the price you get by just shopping around - is usually cheaper than the Medicare price for popular drugs.

"In January this year, a study by Families USA found that the top five Medicare Part D insurance companies (serving two out of every three Medicare enrollees) charged prices at a median rate that was 58 percent higher than the same drugs provided to veterans through the VA.

"The study compared the lowest price available under part d and the lowest VA price for the 20 most common medications prescribed to seniors.
- Celebrex - for Arthritis - was 50 percent more expensive under Medicare Part D;
- Lipitor - for cholesterol and heart disease - was 51 percent more expensive;
- Nexium - for heartburn and acid reflux disease - was 65 percent more expensive.

And if these aren't bad enough, consider these:

- Fosamax - was 205 percent more expensive under Part D and that's for osteoporosis;
- Protonix - for heartburn and acid reflux disease - was 435 percent more expensive;
- And Zocor - for cholesterol and heart disease - was over one thousand percent more expensive.

"With this tremendous disparity in drug prices, it simply defies common sense to assume that Medicare is giving our seniors a good deal. They should be negotiating for better prices.

"Maybe the discounts would not be as great as the VA gets, because of differences in how the program is run.

"But, how can anyone be satisfied when Medicare is paying prices that are, on average, 58 percent higher? Can't we at least try to get a better deal? Can't we even allow the possibility of negotiation by Medicare?

"Yet, this administration and its Secretary of Health and Human Services have shown absolutely no interest in the potential of negotiation. In fact, the Secretary has been aggressively defiant about even the idea of it. This needs to change.

Government negotiation

"There's another reason we should not trust the assurances of the pharmaceutical industry that America's seniors are already getting the lowest prices possible.

"The government can often negotiate bigger discounts than insurance companies, which represent smaller numbers of seniors. There is no good reason to arbitrarily foreclose this opportunity for gaining a price cut.

"By Medicare's own calculations, Part D private plans are negotiating prices that are 73 percent of the average wholesale prices. But Medicaid pays only 51 percent. And the VA pays only 42 percent.

"The Congressional Budget Office also agrees that the government could be more effective than private plans in negotiating prices for unique drugs that have no competition.

"Even limited savings on popular drugs could translate into billions of dollars. Consider Zocor and Lipitor, two top-selling prescription medications. If Medicare could negotiate prices in line with what the VA gets, the savings from just these two drugs would be more than $2.8 billion each year. Even a fraction of this amount would still represent substantial savings.

"That would mean cheaper drugs for seniors, a better deal for taxpayers, and less government spending.

Pharmaceutical companies

"The only real winners from a prohibition on negotiation are the pharmaceutical companies.

"They vigorously lobbied for the ban, knowing it would boost their profits while denying fair prices to seniors and taxpayers. They paid big money to make sure that they got a Medicare drug program that prohibited price negotiation. And now they're spending big money to keep that profitable ban in place.

"Since 1998, the pharmaceutical industry has spent over $650 million on lobbying. In just the past year and a half, they have spent a record $155 million.

"What are America's seniors supposed to think all that money goes for?

"The drug industry employs some 1,100 lobbyists. That is two drug lobbyists for every member of the United States Senate and House of Representatives.

"The pharmaceutical industry has fired up its lobbying machine again to oppose efforts to lift the ban.

"The industry's lobbying organization has been running a massive advertising campaign in opposition to negotiating lower prices. It includes full-page ads in newspapers across the country. They've been buying these ads in my state, too.

"The most recent full-page ad appeared earlier this week in the Minneapolis Star Tribune. It tells Minnesotans how they are supposed to think - it uses quotes from the Washington Post, USA Today and the Atlanta Journal Constitution.

"Well, with all due respect to these good newspapers, we Minnesotans know how to think for ourselves - and we know how to reach our own conclusions. When it comes to Medicare Part D, the people of Minnesota have made up their minds.

"A statewide survey earlier this year found that fully 93 percent of Minnesotans want Medicare to have the power to bargain for lower prescription drug prices.

"But the drug industry keeps using scare tactics, throwing out words like 'rationing' and 'price controls.' It ignores promising negotiation approaches that do not limit the drugs available to seniors and that do not involve price setting.

"I have dealt with this before. During my campaign last year, I was accused of trying to ration Lipitor. That simply isn't so. My mom takes Lipitor. If people think I would advance a proposal that would take my mom's drugs away, they don't know my mom.

"Allowing negotiation would not mean rationing.

"But lifting the ban on negotiations would cut into the hugely profitable windfall that the drug industry has enjoyed thanks to Medicare Part D. In just the first six months after Part D went into effect, the profits for the top 10 drug companies increased by over eight billion dollars (a 27 percent jump).

"It should be no surprise. Medicare Part D has provided the drug companies with a surge of new government-subsidized customers. And Congress has allowed the drug companies to charge excessive prices.

"This has been especially true with the more than six million Americans who were transferred from Medicaid to Medicare under the new Part D law. They are known as 'dual beneficiaries' or 'dual eligibles' because they are eligible for both Medicaid and Medicare. They now account for more than 25 percent of all Part D enrollees.

Before the Part D law took effect, Medicaid was already buying prescription drugs for these individuals under a 'best price' rule. This meant that the price a drug company offered Medicaid could not exceed the lowest price it received for that same drug in the private market.

These 'dual-eligible' individuals are now covered only under Medicare Part D, which has no 'best price' rule - and, of course, no negotiating power either.

"Two economists have analyzed last year's financial filings from the top drug companies. In a study released earlier this month, the two economists concluded that these companies have gained substantial new profits because they no longer had to provide the rebates and discounts previously demanded by Medicaid.

"That's great for the drug industry but it's not so great for the rest of us.

"You know, I grew up believing that every dollar, every quarter, every penny counts. I remember saving all my quarters from babysitting in a box in my room. But I also believe that's true for our government, for our taxpayers, and, especially, for our seniors.

"The average income for a retiree is about $15,000 - with most living on a fixed income. Seniors need medications more than any other age group. For those over age 75, they depend on an average of almost eight prescription medications.

"So, for seniors, money and medication are a very serious matter. And it must be a serious matter for us, too.

"By lifting the ban on price negotiations, we will continue to give seniors access to the medications they need and the same broad range of plans. The difference is that the federal government - representing all 43 million Medicare beneficiaries - will also be at the bargaining table.

"It is time to lift this useless ban. It is time to negotiate with the powerful drug companies. And it is time to help our seniors get the lower, fairer prices they deserve for the life-saving and life-enhancing medications that they need."

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