Deal with Big Pharma haunts Democrats

Democratic leaders face a major decision now on health care reform– yet another one this year that will throw into relief the interests that compete in American representative democracy. They have to choose between either closing the “doughnut hole” and offering full coverage for millions of low-income seniors on Medicare who need to buy prescription drugs or sticking to a deal they made with the nation’s major drug companies. According to the deal, the government agrees not to use its bulk buying power to lower the cost of drugs, so long as the drug companies dole out $80 billion over the next decade to subsidize health reform.

Rep. Henry Waxman, D-Calif.
Rep. Henry Waxman, D-Calif.

Needless to say, the government and tax payers and American health care consumers would save a lot more than $80 billion over the next ten years if the government turned its back on the deal and committed to reining in prices and cutting into drug company profits. So who will the lawmakers champion, the companies or the people? Republicans know where they stand. The battle is being waged between House Democratic leaders and Senate Democratic leaders. Senate Democratic leaders have shown zero willingness this year to break the agreement with Big Pharma.

Yet, Senate Democratic leaders vowed this week to close the nettlesome coverage gap in Medicare drug benefit and won praise from seniors.

“I am committed to fully closing it, once and for all,” Senate Majority Leader Harry Reid (D-Nev.) said Monday. “We will do so in our conference committee with the House, whose bill already closes the gap.”

But how will Reid and company do that without fracturing the Big Pharma deal?

Fearing the industry’s opposition to the underlying reform bill, Senate Democrats, behind Finance Committee Chairman Max Baucus (D-Mont.), have already shot down several proposals in recent weeks that would have broken the deal — including legislation making it easier for Americans to buy their prescription drugs from abroad, as well as the very provision that the House used to close the doughnut hole.

That means that Democrats, if they intend to keep that deal intact, will be forced to find additional money to close the doughnut hole — estimated by the Congressional Budget Office to cost the federal government more than $42 billion over the next decade. That’s no simple task for Democratic leaders who have already struggled to find offsets for legislation tickling $900 billion. So far, they’re giving no clues how they might do it.

“It’s something that we will have to deal with in conference,” Reid spokesman Jim Manley wrote in an email this week.

Karen Lightfoot, spokeswoman for Rep. Henry Waxman (D-Calif.), a long-time champion of the controversial offset provision, echoed that uncertainty Tuesday. With the Senate bill not yet finalized, she said, it’s too early to begin speculating about conference specifics.

The doughnut hole has been controversial since Medicare’s prescription drug benefit, called Part D, was rammed through Congress by the Republican majority in 2003. Under that benefit, the government pays 75 percent of seniors’ drug costs up to $2,700, when patients must begin paying full price. After those expenses hit $6,154, the government picks up 95 percent of the tab, meaning the doughnut hole is $3,054.

The gap has created serious health concerns. Indeed, in 2007 roughly 3.4 million Medicare beneficiaries reached the doughnut hole, of which about 15 percent stopped taking their prescriptions as a result, according to the Kaiser Family Foundation.

As part of their $80 billion deal, drug makers agreed to cover half the cost of name-brand drugs for seniors stuck in the doughnut hole, beginning in 2010. The House bill builds on that foundation, cutting the doughnut hole by an additional $500 per person in 2010, and incrementally shrinking the gap further until 2019, when it would close altogether.

The controversy is not over the proposal itself, but how it’s funded.

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