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Medicare drug pricing fight

A controversial Medicare drug pricing bill will come before the US House of Representatives for a vote on Friday, Jan. 12

A controversial Medicare drug pricing bill will come before the US House of Representatives for a vote on Friday, Jan. 12. Known as HR 4 or the "Medicare Prescription Drug Price Negotiation Actî, the proposed legislation is backed by the Democrats and would allow the Medicare program to negotiate directly with pharmaceutical companies over drug pricing.

The Republican-backed legislation that established a prescription drug benefit for Medicare enrollees in 2003 prohibits Medicare from bargaining with pharmaceutical companies for lower prices, allowing only the insurance companies that administer the Medicare drug program to conduct such negotiations. Critics believe the stipulation leads to higher drug prices for Medicare recipients.

AARP, the influential group for people over the age of 50, has come out in strong support of the Drug Price Negotiation Act, urging its 38 million members to contact their Congressional representatives about the issue.

AARP has also launched a national advertising campaign, with placements in The Los Angeles Times, The New York Times and The Washington Post, among other major publications. The ads are headlined "Medicare has 43 million members. And zero bargaining power when it comes to prescription drug prices."

AARP announced this week that it would aim to hold Congress more accountable to the groupís members, recording House and Senate roll call votes on relevant issues and communicating the information to its membership. Ninety percent of AARP members, regardless of which political party they belong to, support allowing Medicare to bargain for lower drug prices, according to the association.

However, not everyone thinks the proposed law is a good idea. PhRMA, the drug industryís main trade group, said it is still reviewing the legislation and ìtrying to determine the practical implications of it.î However, the group stressed that it is ìstrongly opposed to any price control schemes which would limit the choice of medicines available to seniors and disabled Americans."

Meanwhile, David Hogberg, senior policy analyst at The National Center for Public Policy Research, a foundation focused on ìproviding free market solutions to today's public policy problemsî, has released a statement that is sharply critical of the proposal.

ìLetting Medicare set drug prices has only one short-term benefit: Lowering drug prices for seniors on Medicare right now,î according to Hogberg. ìIt also has many harmful consequences. These include higher drug prices in the private sector, higher health insurance prices in the private sector, a reduction in research and development of new drugs, fewer new drugs and shorter life-spans.î

ìDrug prices will rise in the private sector because drug companies will want to maximize the price they receive from Medicare,î Hogberg cautions. ìThe price Medicare will pay will be based on the average price in the private sector. So, the higher prices are in the private sector, the greater the average price will be.î

2nd September 2008

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