Senators vote down plan to cut drug costs

The Senate Finance Committee rejected a Democratic amendment to its healthcare bill that would have expanded prescription-drug coverage to people on Medicare.

During the third day of the committee’s markup of the legislation, the vote on the Medicare amendment introduced by Sen. Bill Nelson (D-Fla.) provided the most awkward political moment yet for committee Chairman Max Baucus (D-Mont.) — not to mention the White House, which made a deal with drug makers to limit their exposure.

Baucus and Democratic Sens. Tom Carper (Del.) and Robert Menendez (N.J.) joined the panel’s Republicans in beating back the amendment on a 10-13 vote.

Despite Nelson’s failure to attach the language to the committee’s bill, the argument among Democrats is far from over. Senate Majority Leader Harry Reid (D-Nev.) promised to support the amendment when the bill reaches the Senate floor, Nelson said. The House’s healthcare reform bill includes similar provisions.

“We have to find some other way at some other time to close the donut hole,” Baucus said.

Nelson sought to fill the so-called donut hole, a gap in Medicare’s Part D drug benefit during which beneficiaries must pay the full cost for their medicines. To pay for it, the legislation would have reestablished annual rebates drug makers used to pay the government based on their sales to Medicaid beneficiaries.

“This is an amendment that will provide $106 billion in savings [and] it will allow us to fill the donut hole,” Nelson said, helping the 7.5 million Medicare beneficiaries who fall into the donut hole each year and offering security to all 17.5 million Part D members.

Moreover, the rebate program would raise about $50 billion more than needed to pay for the higher prescription spending, according to the Congressional Budget Office. “You could lower the cost of the entire bill,” Nelson said.

Nelson separately wants to preserve the benefits seniors currently receive from private Medicare Advantage plans, which are slated for $113 billion in cuts under Baucus’s bill. Nelson said the other amendment would cost $26 billion.

But Nelson’s amendment also would rebuke an agreement made this summer between Baucus, the White House and the Pharmaceutical Research and Manufacturers of America (PhRMA).

Nelson told reporters Wednesday night that he and other committee Democrats were getting leaned on by the White House and pharmaceutical industry lobbyists to back off.

“Everybody’s asking me to withdraw it except the senior citizens,” Nelson said. Nelson first raised his amendment Tuesday night but committee action was postponed until Thursday.

“Why wouldn’t we want to save the dollars?” said Sen. Debbie Stabenow (D-Mich.). “This is not about a deal or an agreement made by the White House. This is a separate issue.”

Republicans also opposed Nelson’s amendment, saying that drug companies would pass the additional costs down to private-sector consumers. “There’s $106 billion of cost-shifting to small businesses and middle-class people,” said Finance Committee ranking member Chuck Grassley (R-Iowa). All of the committee’s Republicans voted against the amendment, including Sen. Olympia Snowe (Maine), whom Nelson courted.

In exchange for PhRMA’s support of Democratic healthcare reform efforts, Baucus and the White House vowed to an $80 billion limit in cuts that would affect the industry. Exactly how PhRMA would offer up those budgetary savings has never been specified, though the industry did promise to sell medicines at half-price to Medicare beneficiaries during the donut hole. That program would cost them about $30 billion.

The $80 billion pledge is fair but should not be expanded, Sen. Tom Carper (D-Del.) said. “I don’t think we’re far off the mark” asking the drug industry to contribute that much.

Many Democrats, especially committee chairmen and liberal lawmakers, were chaffed at the backroom deal Baucus and the White House struck with the drug industry, a perennial boogeyman for the political left.

“We don't represent their stockholders, we represent our stockholders, which are the taxpayers,” said Sen. Charles Schumer (D-N.Y.).

After President Barack Obama himself made a formal announcement of the deal in July, Democratic leaders in the House and Senate were quick to distance themselves from it, asserting they are not bound by deals made between the White House and interest groups.

To the White House, however, the PhRMA deal — as well as similar agreements struck with hospitals and other sectors — is vital to the prospects of getting healthcare reform accomplished. By neutralizing potential antagonists, or at least muting their opposition, Baucus and the White House believe they can ease the path to legislative success.

Requiring the drug company rebates, Menendez said, could “very well put us in a position that makes it very difficult for us to move forward.”

The rebates issue dates back to 2003, when the Republican Congress and President George W. Bush, along with Baucus and then-Sen. John Breaux (D-La.), created Part D.

Before the program took effect, senior citizens and disabled people who were enrolled in both Medicare and Medicaid received their drug coverage under Medicaid, which requires such rebates.

After 2003, these so-called dual-eligible beneficiaries were moved into Medicare Part D, which does not require drug companies to pay rebates to the government. The effect, Democrats assert, was to raise the federal government’s spending on medicines for these people.

The low-income beneficiaries who fall into their category have full coverage for their prescription drug costs, are not subject to the donut hole and pay just $1 for generic drugs or $3 for brand-name medicines.

The drug industry strongly opposes reintroducing these rebates. The industry also opposes Baucus’s proposal to impose $17.2 billion in fees on the industry and Reid’s plan to hold a floor vote on legislation that would permit prescription drugs to be imported from abroad.