Drug bargaining could save Medicare $30 bln

The government could save nearly $30 billion a year if it negotiates with drugmakers over prices for its Medicare prescription drug coverage, according to a report released on Wednesday.

The savings from cheaper prices could either enhance coverage or pay for other health care programs, according to the report based on information from the Center for Economic and Policy Research and released by the Campaign for America's Future, a progressive policy group.

The report comes as Democratic lawmakers prepare to make another push for legislation that would allow Medicare officials to negotiate prices directly with drug companies.

Under the current benefit, called Part D, Medicare offers voluntary prescription drug coverage through dozens of private health insurance plans but is not allowed to intervene over prices.

Dean Baker, co-director for the Center for Economic and Policy Research, said the nation's insurance program for the elderly and disabled could save another $5 billion in administrative costs if it offered its own drug plan. "We're talking about big money here," he said.

Democrats and consumer groups argue the private plans can change which drugs they cover and how much they charge. Allowing the government to negotiate would ensure they get the best deal possible, they say.

Republicans, the pharmaceutical industry and other opponents say such a move would limit patient choices. Medicare officials also say drug coverage already costs less than expected.

Ken Johnson, senior vice president for the industry group Pharmaceutical Research and Manufacturers of America, said pharmacy benefit managers already negotiate with insurers for lower prices. "That's the marketplace in action and that's how America's seniors will see true savings," he said.

Senate Finance Committee Chairman Sen. Max Baucus (news, bio, voting record) of Montana has said the panel will take up the issue as soon as possible after lawmakers return from recess next week, an aide said.

While a measure requiring negotiations easily passed the U.S. House of Representative in January, it would likely face resistance in the more closely divided Senate.

Baucus has not yet introduced his version but has said the ban on negotiating must be lifted, the aide said.

"It's going to be tougher in the Senate," said committee member Michigan Democrat Debbie Stabenow (news, bio, voting record). The committee may not have the votes to require negotiation, but changes could be made later on the Senate floor, she added.

The Senate Republican Conference said government reports show intervention would do little to push costs lower. "The facts simply aren't on their side," the group said in a statement.

Even if the measure wins full Senate approval, U.S. President George W. Bush has said he would veto legislation requiring negotiation.