On January 12th, 2007, the House passed H.R. 4, which repeals the current provision that prohibits the Secretary of Health and Human Services (HHS) from negotiating with drug companies for lower prices for those enrolled in Medicare prescription drug plans and instead requires the Secretary to conduct such negotiations. The bill also requires the HHS Secretary to submit to the relevant congressional committees a report on the negotiations conducted by the Secretary, not later than June 1st, 2007, and every six months thereafter. Under the bill, the Secretary has the discretion on how to best implement the negotiating authority and achieve the greatest discounts.
This bill provides the HHS Secretary complete discretion in how to implement his negotiating authority. The Secretary's options are many and HHS has a wealth of expertise, which it successfully used in 2001 to obtain lower prices for Cipro, the prescription drug used in response to the anthrax attacks.
Giving HHS negotiating authority is supported by 92 percent of Americans. [Newsweek poll, 11/06] It is also supported by many organizations, including the AARP, Consumers Union, and the AFL-CIO.
The current Medicare Rx drug law has failed to slow the rapid growth in drug prices; the prices charged by Medicare drug plans are rising at more than twice the rate of overall inflation. A Families USA study shows that, over a 6-month period, the median drug price increase among Medicare drug plans for the top 20 drugs prescribed for seniors was 3.7 percent - which translates into a 7.4 percent increase over a year, more than twice the rate of overall inflation. As the study concludes, 'The Medicare drug plans are not containing drug price inflation.'
The Medicare Rx drug program has resulted in a windfall for big drug companies - with drug companies now reporting record profits and seniors paying higher drug prices. In October, Pfizer, the world's biggest drug company, reported that its third-quarter earnings had more than doubled from a year earlier. Similarly, Eli Lilly, Novartis and Wyeth also reported significantly higher profits.