Medicare chief rejects negotiation

By Susan Heavey

WASHINGTON (Reuters) - The U.S. government could not negotiate lower drug prices for the Medicare drug benefit without restricting access to some therapies, the head of the agency that oversees the program said on Monday as lawmakers prepare to consider a related bill.

U.S. Centers for Medicare and Medicaid Services (CMS) Acting Administrator Leslie Norwalk, said in an interview that the only leverage in bargaining for discounts with drugmakers is to block some products from the list of covered drugs.

But such an action under the Medicare insurance program for the elderly and disabled would limit patients' access to various drugs, she told the Reuters Regulation Summit in Washington.

"It's not negotiation -- it's interference," Norwalk said.

The U.S. House of Representatives is expected to consider a bill this Friday that would require the health secretary to negotiate directly with pharmaceutical manufacturers for lower prices. That bill does not authorize the government to establish a list of covered drugs, or a "formulary."

Currently, insurers such as Humana Inc. and UnitedHealth Group Inc. offer dozens of drug coverage plans under CMS. Medicare's roughly 43 million beneficiaries can voluntarily sign up and pay monthly premiums.

Democrats who now control Congress argue Medicare patients would get a better deal if the government bargained on their behalf. They and other critics say the benefit, passed by a Republican-led Congress in 2003, was a boon to insurers and see the proposal as one way to push for lower prices. Patient advocates, including the seniors advocacy group AARP, have welcomed the House proposal.

But Norwalk and others have their doubts about the bill, and industry analysts have said the legislation, if it also clears the Senate, may be vetoed by President Bush.

For the government to push for lower prices without restricting available drugs would be challenging, Norwalk said. With numerous insurers offering multiple plans, those who want a specific drug can now choose a plan offering it.

"For the government to restrict that formulary makes me nervous," Norwalk said. "Do you really want the government in your medicine cabinet deciding which (drug) makes the most sense for you?"

Medicare officials would also be subjected to political pressure over which drugs to target during negotiations, she predicted.

Norwalk said the benefit is working well without government price negotiation.

"It's a solution in search of a problem," she said. "We have 90 percent Medicare beneficiaries with coverage, an 80 percent satisfaction rate and it costs us 30 percent lower than originally estimated."

She rejected the idea that the agency could negotiate as effectively as the insurers offering the drug plans, adding Medicare would need additional staff and money.

"I am so relieved that we have companies that do this all the time, every day out there on behalf of Medicare beneficiaries," Norwalk said. "This is what they do for a living. No one at CMS has ever done this for a living."

(Additional reporting by Lewis Krauskopf)