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Published: Saturday, 12/30/2006

Improving Part D

THE American pharmaceutical industry has a powerful hold on the outgoing Republican-led Congress. Most of its lobbying money and campaign contributions have gone to GOP lawmakers, who in turn created the prescription-drug benefit under Medicare in a form that could hardly have been more lucrative to the industry.

With a new Democratic majority in power come January, the task for Congress as we see it is to preserve the best aspects of the Part D - accessibility to a wide choice of drugs, for example - while reducing the cost of the popular year-old program both for seniors and for taxpayers.

In other words, Democrats shouldn't let their well-known (and well-deserved) animus toward Big Pharma lead them to screw things up by trying to punish the industry.

A partisan flash point will be whether Medicare should be allowed to negotiate lower prices with the drug companies, as is now allowed for the Veterans Administration but which is prohibited for Part D.

Negotiation, championed by Democrats in their winning campaign, seems like a logical step to cut costs but it's one the industry says it will never accept. Government "price controls," as the drug firms prefer to categorize negotiation, would weaken the program's delicate structure, they say, and cause it to collapse.

For example, industry officials say, the VA can negotiate lower prices only because it narrows the range of drugs available to sick veterans.

The unfortunate fact is, however, that the pharmaceutical industry is fueled by high prices for its products that seem destined to spiral uncontrollably upward, far above both the rate of inflation and any rate of business return that can be considered reasonable.

That dynamic leaves the Part D benefit stranded on an upward cost escalator that has slowed somewhat in its first year over initial expectations but shows no real sign of being curbed by competition.

News reports indicate the industry is preparing to battle to maintain its price structure by hiring Democratic lobbyists to schmooze the new committee chairmen who will hold sway over Medicare funding.

In addition, various drug companies are coming up with discount programs that help those who fall into the "doughnut hole," the coverage gap in Part D, which results in many seniors unexpectedly paying full price for their drugs for a portion of each year.

One alternative to repealing the negotiation ban or outright price controls involves directing Medicare to compete with private insurers by setting up its own prescription plan using negotiated prices to test whether such public-private rivalry would level out the drug-price spiral.

In any event, the new Democratic majority needs to rigorously scrutinize Big Pharma's claim that high prices - and untamed profits - produce some sort of inherent benefit for the American people that lower prices would not.

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