Nelson on Pharma Price Hikes

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Senator asks for probe of drug-industry price hikes made in advance of expected health care changes

November 18, 2009 -- WASHINGTON, D.C. - U.S. Senator Bill Nelson today asked the inspector general at the Department of Health and Human Services to look into reports that drug makers are jacking up the prices on widely used brand-name prescriptions and taking windfall profits in advance of possible health care reforms. And the Florida Democrat will offer an amendment to the health care bill that would make the pharmaceutical giants pay more of the tab.

A study released earlier this week by AARP found that drug-manufacturer prices for widely used brand-name drugs have climbed dramatically, despite a negative general inflation rate. Over the last year, for instance, wholesale prices of many brand-name prescriptions reportedly increased by about 9 percent while overall inflation was absent – which contrasts with the industry’s promise to President Obama to trim $8 billion a year in drug costs for health care reform. And it’s the highest such price jump since at least 2004 and maybe since 1992, according to one major daily newspaper.

“You know something – usually where there’s smoke there’s fire,” Nelson said today, in releasing the letter he’s written asking for an investigation. “I want to know if there’s a back-door move underway by the drug makers to recover some of the concessions they’ve promised for health care reform.”

Nelson is a member of the Senate Finance Committee that recently passed one of the key health care bills. But Nelson’s attempt to amend it to force drug makers to give up excessive charges on some Medicare beneficiaries was narrowly defeated by 13-10. Nelson said today he now intends to offer that amendment when the health care reform bill comes before the full Senate.

His action came Wednesday just as Senate leaders are poised to outline a new health care bill.

Meantime, Nelson wants authorities to launch an investigation into why the prices are rising, as found by AARP. Drug makers reportedly say they have valid business reasons for the price increases. Critics reportedly say the industry is trying to establish a higher price base before Congress passes legislation that tries to curb drug spending in coming years.

Over the summer, the White House struck a deal with the drug makers to garner the industry’s support for health-care reform.

But in September, during the Finance Committee hearings, Nelson offered his amendment to end a government windfall to the drug makers by changing the way it pays for those who qualify for benefits under both Medicaid and Medicare. When Congress first enacted a partial Medicare drug benefit in 2003, about six million elderly Americans who had been receiving drug benefits under Medicaid, the government insurance program for the poor, were instead shifted into the new Medicare drug program, resulting in the government paying far higher prices for drugs.

Nelson argued that the savings from changing the so-called “dual eligibles” back to Medicaid prices – an estimated $106 billion - should instead be used to completely close the so-called “doughnut hole” gap in existing Medicare drug coverage for millions of seniors giving them a full prescription drug benefit for the first time ever.

When Finance was considering amendments to the health care bill in September, lobbyists for the drug industry said the Nelson amendment was its number one target for defeat.

Following is the text of Nelson’s letter:

Nov. 18, 2009

Daniel R. Levinson

Inspector General

U.S. Department of Health and Human Services

200 Independence Avenue SW

Washington, DC 20201

Dear Inspector General Levinson:

I am writing to request an immediate review of pharmaceutical drug pricing as it affects the Medicare and Medicaid programs. A recent report released by the AARP finds that the price of brand-name prescription drugs used by Medicare beneficiaries increased by 9.3 percent from October 2008 to September 2009 - a significantly higher increase than observed in the previous seven years. AARP estimates that 96 percent of brand name drugs saw an increase in price, at a time when overall inflation was at -0.3 percent.

This sharp increase in drug prices is troubling. As you know, President Obama reached an agreement with the Pharmaceutical Research and Manufacturers of America (PhRMA), which pledged $80 billion in support of health reform efforts. A significant portion of this support was in the form of rebates to the Medicaid program and discounts offered to seniors in the Medicare Part D coverage gap.

This increase in drug prices, as a New York Times headline suggests, contrasts with the industry’s agreement with the administration.

I respectfully request that you undertake an immediate and thorough investigation into drug industry pricing and recent increases, and the extent to which these increases may affect the Medicare and Medicaid programs.

Sincerely,

Bill Nelson

Source: Senator Bill Nelson