The Senate Finance Mark-Up: Pharma 1, You 0

by Tim Foley

categories: Medicare and Medicaid, Obama and Congress

Published September 24, 2009 @ 09:56PM PT

As the Senate Finance Committee plunges ahead with the pageantry of its mark-up on a comprehensive health reform bill -- the last congressional committee to do so -- there’s a subplot to watch. Keep your eyes peeled for who benefits by the 564 proposed amendments: the various health care industries already making money off the system or the American people desperate for reform? Today was a textbook example of an amendment that directly pitted the interests of Big Pharma against you, the American taxpayer. In short, you didn’t do so well.

To give credit to the Baucus Bill, there is a provision wherein Medicare beneficiaries would get some relief from the “doughnut hole.” In Part D, beneficiaries’ prescription drugs are only covered for their first $2,700 per year. Once they reach that threshold, they have to pay for their drugs out of pocket until their total costs reach $6,154, at which point “catastrophic coverage” picks up for the remainder of their drugs. Being stuck in between those dollar figures is being stuck in the doughnut hole, and about 1/4 of the seniors on Medicare hit it each year. Making the elderly pay as much as $3,543 out of pocket on prescription drugs before their coverage kicks in again is obviously a huge problem. So Sen. Max Baucus negotiated a deal with the White House and with Big Pharma. The drug companies would kick in a rebate of up to $80 billion per year which would specifically be used for those stuck in the doughnut hole. Those in the hole would get drugs at half-price, which would be a huge relief for millions of seniors.

With that rebate came Big Pharma’s pledge to support reform, rather than fight it tooth and nail. They’ve been good on their word, running expensive but fairly milquetoast ads in support of a general notion of reform. But it came at a high cost -- an assurance that Pharma wouldn’t be asked to give up any more of their profits. The backroom deal was the exact opposite of what President Obama said would happen when he campaigned on health care, yet here we are.

Cut to today’s most notable moment in the mark-up: the amendment by Sen. Bill Nelson (of Florida, natch) which would have closed the doughnut hole entirely. Not only that, but the move would actually have saved more money than the current proposal. It also wouldn’t have been a radical move so much as re-establishing what had been the norm as recently as 6 years ago. It had broad Democratic support. And yet it failed to pass anyway.

Here’s the crux of Nelson’s amendment: about 8 million disabled Americans are simultaneously on Medicare and Medicaid, largely because of disability. They’re called “dual eligibles.” Overall, they tend to be low-income, unable to work because of their condition, and in the poorest level of health. They’re covered under Medicare, and use their eligibility for Medicaid to pay for their Medicare premiums for Part B. Now, before the Bush prescription drug bill in 2003, these folks’ prescription drugs were covered by Medicaid. Pharma got paid at Medicaid rates. As part of the Medicare Part D bill, however, Big Pharma got a raise – dual eligibles would be covered under Medicare. Pharma would get paid much higher rates and Uncle Sam would pick up the tab, minus a $1-$3 co-pay. How much higher were the rates? List price – or, if you prefer, “name your price.” Nelson’s amendment would simply return dual eligibles to being covered for prescription drugs under Medicaid, saving Uncle Sam a lot of money. How much? Enough to close the entire doughnut hole and still have $50 billion left over in savings.

Yeah, that’s your tax dollars we’re talking about.

You would expect the Republicans on the committee to vote against the amendment. After all, many of them had helped give Pharma that raise just a few years ago. But the amendment failed when three Democrats -- Tom Carper, Robert Menendez, and Max Baucus himself -- voted against it as well. All three of them cited the once top-secret deal as the reason for their vote.

“We don't represent their stockholders, we represent our stockholders, which are the taxpayers,” said Sen. Charles Schumer, who voted for the amendment. Apparently 10 Republicans and 3 Democrats weren’t so sure. And neither am I.

(Photo credit: http://www.flickr.com/photos/tomsaint/ / CC BY 2.0)