Transcripts

Drug Discount Deals Reach Capitol Hill

PAUL KANGAS: This week the Senate is expected to take up a bill that would let the Federal government directly negotiate what Medicare pays for drugs. The House has already passed a similar bill that requires the secretary of Health and Human Services to do just that, but as Stephanie Dhue reports, it's not a simple question of just haggling for lower prices.

STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Supporters say the Senate proposal will untie the hands of the government to negotiate Medicare prescription drug prices. Ron Pollack of the advocacy group Families USA says direct negotiations would be a better deal for seniors and taxpayers.

RON POLLACK, EXECUTIVE DIRECTOR, FAMILIES USA: If we actually had a bargaining system like the Veterans Administration does, we could get prices down. For all of the top 20 drugs prescribed for seniors, the VA gets much better prices.

DHUE: But opponents of the bill say that's not the case. While the VA does get much better prices, in some cases 58 percent lower prices, Medicare may not enjoy the same bargain. Part of the reason the VA gets the prices it does is because it restricts which drugs it will cover. Also by law, it must receive a 24 percent discount on branded drug prices. The Congressional Budget Office says allowing the Federal government to negotiate with drug companies would mean only negligible price savings. HHS Secretary Michael Leavitt calls the idea a campaign sound bite that would produce no benefit.

MICHAEL LEAVITT, SECRETARY, HEALTH AND HUMAN SERVICES: The VA is an entirely different health system than those who are currently buying health plans. The only way to negotiate drug prices is to take the pill off a plan. You say to the drug manufacturer, if you don't lower the price, we're going to take our pill off your plan and the result is that government is making the decision that consumers can make better.

DHUE: Goldman Sachs analyst Alec Phillips says as chief negotiator, Medicare is likely to be more influenced by politics than lower prices.

ALEC PHILLIPS, V.P. & ECONOMIST, GOLDMAN SACHS: If you're talking about a single drug in a class, with no competition, you can probably negotiate a better price, but it comes at the threat of not covering that drug at all. And if you're talking about a new cancer drug, something like that, can Medicare and can Congress ultimately really actually threaten not to cover that drug? I don't really think so.

DHUE: President Bush has threatened to veto the bill if it makes it out of Congress, but the issue isn't likely to go away. Analysts expect health care reform to be a key issue in the presidential election. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.