Down to the Wire

Medicare conferees appear to have completed work on the specifics of a prescription drug benefit for Medicare that basically follows the House structure. And now the fun begins.

Senate Democrats announced yesterday that the magic number of 41 senators ? enough to sustain a filibuster ? vowed to vote against any bill that eventually would draw Medicare into price competition with private health plans and that would enforce a $400 billion spending limit for the drug benefit.

This summer, you recall, more than 50 House Republicans said they wouldn?t vote for a bill unless it does bring traditional Medicare into the modern era by competing with private plans and unless it has a spending cap.

This is the epic battle between the forces of social control vs. the forces of individual freedom and competitive markets. Illinois Rep. Rahm Emanuel got it right: “Members of Congress can agree on a Medicare drug benefit. But we cannot agree on larger questions about the future of Medicare.”

Chairman Bill Thomas is trying to find the fine line ? some might say invisible line ? that would appease both sides. One scenario suggests that the bill would stipulate that a certain percentage of Medicare beneficiaries must be participating in private plans in a region before the competition could begin.

Democrats believe they have Republicans over a barrel: Since Republicans control the House, the Senate and the White House, it would be difficult for them to blame Democrats if they can?t get a drug bill.

“Republicans have to have a bill,” said Senator Kent Conrad, Democrat of North Dakota. “That gives us lots of leverage.”

Our colleague Tom Miller, captured the political game: ?It matters not whether you win or lose, it?s where you place the blame.?

Anything can happen, but here are two scenarios. 1. Determined to get a bill, the conferees opt to give 60 senators enough concessions that they will vote yes, then dare 218 members of the House to kill the bill (as we reported last week), or 2. Write a bill that reflects the demands of House conservatives to give seniors a choice of competing plans and controls spending on the biggest new entitlement in a generation, then dare the Senate to filibuster ? blaming Senate Democrats if it goes down.

Thrown into the mix was a New York Times survey that showed President Bush?s approval rating among seniors has dropped to 41 percent from 63 percent in May. Again, two scenarios circulate: 1. Seniors are angry because a prescription drug benefit hasn?t yet passed, or 2. Seniors have started looking at the details of the Medicare bills under consideration and don?t like what they see. (I believe that #2 is more likely: Congress has been actively working on a drug benefit for at least four years so there is an underlying level of anger. But something new has precipitated the dramatic drop.)

So the question remains: Will we get a Medicare bill or not? It looks like the forces are aligned to make it happen, with a final agreement possible as soon as this weekend and a vote before Thanksgiving. But the betting already is beginning among policy observers about how long it will take before seniors figure out they got a bad deal with the drug benefit and start pounding on someone?s car with their umbrellas.

Galen briefing: We held a very successful briefing on drug importation last Friday on Capitol Hill. Our goal was to present to Senate staffers in this emotional debate with a rational discussion of drug safety and the implications for future research. The big turnout showed the tremendous interest in this issue. Conferees have a delicate line to walk in being responsible public officials and addressing passionate feelings about this issue.

Travel notes: I was in Chicago yesterday to speak at the Heartland Institute?s National Symposium on Drug Importation. Joe and Diane Bast organized a top-notch forum ? after hosting their annual dinner a few days earlier. I?m now in Sundance, Utah, attending the annual Health Sector Assembly which this year is devoted to assessing the state of the health care safety net. Then on to Houston for a speech on Monday about tax credits for the uninsured and consumer-driven health care. Then to Stockholm, Sweden, (19 degrees and snowing last weekend?) for two more speeches, including a conference on ?Building the European Healthcare of Tomorrow? organized by the Stockholm Network. I?ll report next week on these events.

Grace-Marie Turner


? Medicare moment of truth

? U.S. prescription drug system under attack

? Speech by FDA Commissioner Mark McClellan

? Waiting your turn: hospital waiting lists in Canada

? A new direction for Medicaid


Source: The Wall Street Journal, 10/22/03

The editors of the Journal give a final pep talk to Medicare conference negotiators, urging them to use the political carrot of ?the largest new entitlement in decades? to ?purchase a real competitive alternative to Medicare.? Instead, they say it appears that the conferees are moving toward a ?blended benchmark? that is price controls by another name. In addition, they say the ?skimpy drug benefit will leave many seniors net losers after their premiums, deductible, and cost-sharing? even as companies will indeed unload retiree drug coverage once the legislation passes. They urge supporters of a competitive market approach to stand fast and get it right the first time, lest they face endless charges from Democrats that any future attempts to fix a flawed bill will be viewed as a cut in benefits.

Full text (subscription required):,,SB106677969842981600,00.html


Authors: Gilbert M. Gaul and Mary Pat Flaherty

Source: The Washington Post, 10/19/03

?For half a century Americans could boast of the world?s safest, most tightly regulated system for distributing prescription drugs,? write reporters Gilbert Gaul and Mary Pat Flaherty in a series of articles appearing this week in the Washington Post. ?But now that system is undercut by a growing illegal trade in pharmaceuticals, fed by criminal profiteers, unscrupulous wholesalers, rogue Internet sites and foreign pharmacies.? Gaul and Flaherty conducted a yearlong investigation into the shadow market for prescription drugs, citing specific examples of people who ?have become addicted, overdosed, or died.? Other articles in the series look at Internet?s role in the narcotics pipeline, the growth of the counterfeit market, and porous borders with Mexico and Canada.

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Source: Food and Drug Administration, 10/20/03

?All the evidence suggests that it is not safe to simply declare broad new classes of drugs to be ?legal? and to open up our borders,? said FDA Commissioner Dr. Mark McClellan in a recent speech at the Fifth Annual David A. Winston Lecture, warning that ?many more unsafe drugs would take advantage of wide new ?legal? import channels.? Dr. McClellan gave examples of the growth and increased sophistication of counterfeiting activities and said provisions in the importation bill passed by the House are not the right approach to the problem. ?It would create unprecedented prohibitions on FDA?s ability to inspect and test drugs, and FDA?s ability to block the distribution of drugs we think are unsafe,? said McClellan. ?In addition, the bill does nothing to stop the dangerous proliferation of uncontrolled, unlicensed, and unregulated Internet web sites selling potent drugs without proper medical oversight ? in many cases without the oversight of any kind of health professional whatsoever.?

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Authors: Nadeem Esmail and Michael Walker

Source: The Fraser Institute, 10/21/03

Vancouver’s Fraser Institute takes a comprehensive look at hospital waiting times across Canada and finds that the waiting time in 2003 is 90 percent longer than it was ten years ago. Economists have estimated the cost of this time amounts to $1,100 to $5,600 annually per patient. Canadians wait almost 18 weeks between referral from a general practitioner and treatment and “over ninety percent of waiting times are considered beyond clinically ‘reasonable’ times.” Waits for various diagnostic technologies, including MRIs, CT scans, and ultrasounds, also increased. “The standard solution – throwing more money at the problem – is just not working. The federal and provincial governments are still failing to act in the face of international evidence that increasing patient options for private care reduces waiting times,” says John R. Graham, the Institute’s director of health and pharmaceutical policy research.

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Author: Nina Owcharenko

Source: The Heritage Foundation, 10/22/03

?Congress and states should begin to look at ways to reform the Medicaid program in order to better service those in need — whether a low-income family or individuals who are physically or mentally disabled,? writes Nina Owcharenko of The Heritage Foundation. Dramatic increases in Medicaid spending have forced states to cover shortfalls by reducing provider payments, limiting prescription drugs, restricting eligibility and benefits, and imposing greater cost-sharing mechanisms. Congress must work toward fundamental reform of the Medicaid program, but states can take immediate action by adopting a premium support option to assist beneficiaries in obtaining private health insurance and implementing the ?cash and counseling? model.

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Forty Years of Neglect: The Federal Role in Caring for the Severely Mentally Ill

American Enterprise Institute Event

Friday, October 31, 2003 – 9:30 a.m. ? 12 p.m.

Washington, DC

For additional details and registration information, go to:,eventID.649,filter./event_detail.asp

Where Drugs Come from: the Facts of Life about Pharmaceutical Innovation

Hudson Institute Luncheon Event

Tuesday, November 4, 2003 ? 11:30 a.m. ? 1:30 p.m.

National Press Club, Washington, DC

Keynote speaker Irwin Stelzer, director of economic policy studies at Hudson Institute will introduce Sidney Taurel, chairman, president, and chief executive officer of Eli Lilly and Company. For additional details and registration information, go to:

Health Policy Matters is a weekly newsletter containing commentary on health policy developments, summaries of timely and informative studies and articles on free-market health reform, and notices of upcoming events. It features research and writings by participants in the Health Policy Consensus Group. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about this newsletter and our organization, please visit our website at

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The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

Elizabeth Lamirand

Editor, Health Policy Matters


About the author

The House is expected to vote late tonight on a controversial proposal to allow Americans to import prescription drugs without FDA safety oversight.

President Bush has weighed in, calling the initiative ?dangerous? because it ?would create serious drug safety problems?allowing counterfeit, adulterated, inactive, and unapproved drugs to enter the country? that could injure public health and threaten the security of the nation’s drug supply.

FDA Commissioner Mark McClellan sent a strongly worded letter to the chairman of the House Energy and Commerce Committee, Billy Tauzin. McClellan said the bill would erode the FDA’s ability to oversee the nation’s drug supply and requiring pharmaceutical companies to institute anti-counterfeiting measures would RAISE drug costs by $2 billion.

The Congressional Budget Office chimed in as well, saying that drug importation would not reduce drug costs to American consumers.

Many conservatives have argued that allowing Americans to buy drugs more cheaply abroad is free trade. But it’s hardly free trade when you are importing price controls from countries with socialized health care systems that impose global budgets and ration medical care — including prescription medicines.

Then they argue that drug companies should just refuse to sell their products to countries that don’t agree to a fair price that includes a share of the R&D costs.

House Judiciary Committee member Chris Cannon (R-UT) says that is seldom an option. ?The patent laws of almost every country in the world allow the government to confiscate or ‘compulsory license’ a company’s patent if it is not ‘worked’ locally,? he wrote in a Dear Colleague letter. That means if a drug company doesn’t agree to the prices that a government demands, the country will essentially steal the patent. What kind of a choice is this for companies whose most valuable asset is their intellectual property rights?

When Rep. Gil Gutknecht (R-MN) lobbies for his bill, he circulates a chart comparing the prices of 16 drugs in the U.S., Canada, and Europe. Not surprisingly, every one is cheaper elsewhere — because other countries don’t pay their fair share of R&D.

One enterprising researcher has produced another chart showing where those drugs were developed: 11 in the United States, 5 in Europe, and a big 0 in Canada. So where will the new drugs come from if the U.S. slaps price controls on its drug supply, either directly or indirectly by allowing Americans to import price controlled drugs?

Finally, Roll Call wrote a short article about the Wednesday Group meeting last week in which they write, ?Rep. Gil Gutknecht got savaged as he tried to pitch his drug reimportation bill to skeptical conservatives. He faced a flurry of attacks from fellow Republicans at the rowdy session.?

The article goes on to report that, ?The sparring continued in the hallway when Gutknecht left the room, with one source saying that Grace-Marie Turner of the Galen Institute was ‘literally screaming’ at the Congressman. ‘It was a very, very energetic conversation,’ Turner told HOH [Heard on the Hill] , stressing that she was not yelling. ‘I think he was sorry he came into that room.’?

I don’t scream at anyone, but we did have a heated discussion.

Rep. Jo Ann Emerson (R-MO) may be allowed to present a substitute amendment that would allow imports initially only from Canada, not all 26 countries allowed in the Gutknecht bill. But Emerson proposes a dangerous provision that would tell drug companies that they must sell their products to American consumers at the lowest price they offer anywhere in the world. This could be the most stringent form of price controls yet.

The leadership believes tonight’s vote will be very, very close. This is high stakes poker. Let’s hope that the grown-ups prevail.


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