September 19, 2006

Wyden, Snowe "MEND" Act Will Enhance Drug Coverage Under New Medicare Law, Confront Spiraling Costs

Bipartisan Legislation Builds on the Medicare Benefit to Improve Access

WASHINGTON, DC - U.S. Senators Olympia Snowe (R-ME) and Ron Wyden (D-OR) announced the bipartisan Medicare Enhancement for Needed Drugs Act (MEND Act) today, legislation that would strengthen the drug coverage offered to seniors under the recently enacted Medicare prescription drug benefit. The MEND Act directly addresses the crisis of skyrocketing drug costs; it grants the Secretary of the U.S. Department of Health and Human Services (HHS) the specific authority to negotiate lower prices for drug purchases through Medicare, creates incentives for participating Medicare plans to negotiate the best possible drug prices, institutes penalties on drug manufacturers that try to limit access to lower price reimported prescription drugs, and gives Congress and seniors ongoing information about the prices of prescription drugs across multiple markets. The Senators unveiled the legislation's principles at a press conference this morning. "The cost of prescription drugs places an increasingly heavy burden on the citizens of this country. In 2002 alone, drug prices increased by almost 9 percent -- that is over three times the rate of inflation," said Snowe. "For the average American, including many in my home state of Maine, these prices are simply not affordable. If costs are allowed to increase unchecked, the very drug benefit the Congress passed only three months ago could become threatened. When I voted for this legislation last fall, I understood that it was not all that it could have been or should have been, and promised to pursue legislative improvements, specifically to the crisis of prescription drug costs. The Medicare Enhancement for Needed Drugs Act, or the MEND Act, that Senator Wyden and I are introducing today builds on the framework that was established last fall to enhance and preserve its long-term value. Comprehensive in its approach, this legislation works by tracking drug costs across various markets, creating incentives for participating Medicare plans to negotiate for the most competitive drug prices, removing the ban that prohibits the Secretary of HHS from negotiating drug prices, and imposing penalties on drug firms that would limit access to low cost reimported prescription drugs. Senator Wyden and I understand that what is critical is getting our seniors affordable prescription drug coverage immediately. They simply can not afford to wait." "If the Medicare drug benefit is going to work best for seniors, we need to bring down exploding drug costs. Lower drug prices means lower premiums, less money spent out-of-pocket, and a better Medicare drug benefit," said Wyden. "The MEND Act gives seniors a powerful one-two punch to fight back against high prescription drug prices. It allows them to band together to negotiate lower drug prices with the power of the HHS Secretary, and to make informed choices about which plans are getting the most drug savings. Seniors will save money on each prescription and the new Medicare benefit will have even more buying power. The law that Senator Snowe and I voted for last year took an important step forward in providing a significant benefit to the seniors least able to afford their drugs and to those who face the highest drug costs. But I said last year that I intended to strengthen seniors' coverage under the new law, and I believe the MEND Act is a bipartisan solution seniors and the entire Congress can embrace." The MEND Act repeals Section 1860D-11(I), or the non-interference provision, of the Medicare prescription drug benefit, which prohibits the HHS Secretary from negotiating for lower-cost drugs in bulk, and grants the Secretary specific authority to bargain for better prices and improved access to medicines. As an incentive to participating plans in the Medicare program to negotiate the lowest possible prescription drug prices as well, the legislation directs $500 million from the Medicare Stabilization Fund to be used to the Secretary of HHS to offer incentive payments to Medicare prescription drug plans that are able to secure negotiated prices that on average are within ten percent of VA or DoD negotiated price, whichever is lower. The Centers for Medicare and Medicaid Services (CMS) would be required to determine the negotiated savings received from each plan by the average Medicare beneficiary. This would allow seniors to make an "apples to apples" comparison to determine which plan provides the best savings. This information would be shared with all beneficiaries during the annual fall enrollment period. The MEND Act also works to increase access to lower cost reimported prescription drug costs by opening access to these markets. The bill prohibits any company that discriminates publicly, privately or otherwise against foreign retailers or wholesalers who pass along discounts to consumers living in the United States from taking advantage of the dollar to dollar advertising deduction allowed under the United States tax code. This provision would stop drug manufacturers from limiting shipments to foreign countries expressly to prevent reimportation by American consumers. Additionally, the MEND Act codifies a request that Snowe and Wyden made last December for the Government Accounting Office (GAO) to review changes in drug prices from 2000 to 2003, focusing on the drugs most likely used through April 1, 2006. This step is essential to ensure that pharmaceutical companies do not arbitrarily increase drug prices following passage of the Medicare drug benefit. This legislation also requires GAO to compare drug prices negotiated by the Defense Department and Department of Veterans Affairs against other privately run systems. This would provide critical information on whether the government or private plans negotiate for the best prescription drug prices. Lastly, in an effort to confront concerns that the Medicare prescription drug benefit restricts Medigap coverage, this legislation directs the Secretary of HHS to work with the National Association of Insurance Commissioners to conduct a review of the changes to the Medigap policies in the new drug benefit to evaluate its impact on Medicare beneficiaries. Both Snowe and Wyden voted for the Medicare prescription drug benefit, H.R.1, that passed the Congress last fall and promised to strengthen it in this session. The Senators have a long history together promoting bipartisan, common-sense legislative solutions on health care; in 1999, they introduced the first bipartisan Medicare prescription drug bill known as the SPICE Act. That same year as members of the Senate Budget Committee they established the first reserve fund to set aside $40 billion for the creation of a drug benefit. The MEND Act is expected to be referred to the Senate Committee on Finance, of which Snowe is a member.