January Canadian Pharmacy News

Congress is certain to push legislation next year that threatens to cut into drug company profits, but industry executives are confident they can overcome challenges from incoming Democratic leaders.

"There is an assumption that the Democratic ascension will be a disaster for the industry," Eli Lilly and Company Chief Executive Officer Sidney Taurel told financial analysts at a December meeting in New York. "I believe the facts point to a more moderate direction."

A priority for the new Democratic majority is to repeal a clause in the 2003 Medicare Modernization Act that prevents the government from negotiating price discounts from drug makers on behalf of millions of elderly and disabled Americans who participate in the new Medicare Part D prescription drug program.

Democrats, and some Republicans, also are likely to move legislation to make it legal and safe for Americans to buy cheaper prescription medicine from pharmacies abroad, such as those in Canada.

But the pharmaceutical industry's armada of lobbyists will do all it can to block both efforts, or at least water them down.

"We'll continue to oppose ill-advised legislation, such as risky importation bills that threaten public health and safety," said Ken Johnson, senior vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA).

The industry spends more than any other on federal lobbying, campaign donations and congressional travel - more than $1 billion combined since 1998, according to the Center for Public Integrity.

Democrats claim that by giving Medicare negotiating power, the program could win significant discounts from drug makers, enough to save each beneficiary, about $500 more each year.

The estimated $61 billion in savings over 10 years could be used to fill part of a gap in coverage - known as "the donut hole" - facing most people participating in the Medicare Part D prescription drug program.

"I felt from the very beginning we could have had a better program that covers more things, such as eliminating the donut hole," said Rep. Frank Pallone Jr., a New Jersey Democrat expected to chair the subcommittee that will be instrumental in crafting Medicare legislation. "If we negotiate prices, it's a way to provide more."

The drug industry says government-mandated prices would threaten the industry's vital investments in researching and developing new drugs, estimated at $51.3 billion in 2005. It costs an estimated $1.2 billion to bring a new drug to market, according to industry estimates.

The industry spends approximately double its research budget on marketing each year - which includes the cost of fielding a massive sales force and advertising, which has grown steadily in recent years.

The House is expected to repeal the Medicare non-negotiation clause during its first 100 hours of business in January. In the Senate, the pace will be slower and less certain.

Senate Democrats, who hold a 51-49 majority, need 60 votes to end debate on any controversial bill. And there's the very real possibility of a veto from President Bush.

Drug industry lobbyists plan to use two additional arguments to counter lawmaker attempts to overturn the Medicare non-negotiation clause.

First, the Congressional Budget Office, the entity that produces the official cost and revenue estimates for proposed legislation, has concluded it's unlikely Medicare would see significant savings if government managers get authority to negotiate with drug makers for discounts.

Second, the year-old Medicare Part D program already is producing significant savings for consumers, said Jim Greenwood, president of the Biotechnology Industry Organization, which represents more than 1,000 biotechnology companies and organizations.

The prices beneficiaries now pay for prescription drugs through the Medicare program were determined by actual free-market negotiations, Greenwood said.

"When the federal government sets prices, it becomes a political process and not one based on real, free-market honest negotiations," said Greenwood, a former Pennsylvania Republican congressman.