Sources: Republicans tout drug rebates as revenue raisers in debt deal

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The proposal is seen as a way to raise tens of billions of dollars at a time when both parties are eager to show they're serious about cutting the deficit. Extending rebates to the dual eligibles has long been a priority for liberal Democrats, while Republicans' traditional support for drugmakers frayed after the industry supported Democrats' healthcare reform law.

The industry lobby group, the Pharmaceutical Research and Manufacturers of America (PhRMA), is clearly worried about the possibility.

"PhRMA opposes implementing Medicaid's failed price controls in Part D," Deputy Vice President Karl Uhlendorf said in a recent statement. "Such policies would fundamentally alter the competitive nature of the program and undermine its success."

The hit on industry could vary greatly, depending on how a rebate policy is crafted.

In a recent list of policies that could reduce the deficit, the Congressional Budget Office estimated that the rebates could save $112 billion over 10 years. But a Republican lobbyist points out that the states handle their Medicaid drug programs differently, so debt-ceiling negotiators would have some leeway in deciding how to craft the policy and how quickly it would be phased in, for example.

"There's no way they're not in there," the lobbyist told The Hill. "The magnitude of the cut is the question."

Cash-strapped states, the lobbyist added, could be given some flexibility to decide whether to go beyond a standard federal rebate requirement.

And a Washington investment analyst points out that Senate Finance Committee Chairman Max BaucusMax Sieben BaucusOvernight Defense: McCain honored in Capitol ceremony | Mattis extends border deployment | Trump to embark on four-country trip after midterms Congress gives McCain the highest honor Judge boots Green Party from Montana ballot in boost to Tester MORE (D-Mont.), one of the main architects of the healthcare reform deal with industry, is no longer as prominent in the debt-ceiling talks now that they've been bumped up to the White House.

"He's still involved, but not as influential as he once was," the source said. "PhRMA is scared, and I think they have reason to be."

Other healthcare policies reportedly on the table include:

• Cuts to Medicare payments to hospitals for bad debt and physician training;

• The creation of a single "blended" rate for all beneficiaries in Medicaid and the Children's Health Insurance Program; and

• Payment cuts to nursing homes, hospitals, home health and durable medical equipment.