Published Online: Thursday, March 1, 2007

Legislation requiring the federal government to negotiate with the pharmaceutical industry for lower Medicare Part D drug prices could backfire on the program, officials from the Centers for Medicare & Medicaid Services (CMS) warned Congress.

The bill, a key plank in this year's legislative agenda being pushed by congressional Democrats, would not generate any savings at all, testified actuaries from CMS. "Although the bill would require the secretary [of Health and Human Services] to negotiate with drug manufacturers regarding drug prices, the inability to drive market share via the establishment of a formulary or the development of a preferred tier significantly undermines the effectiveness of this negotiation," said Paul Spitalnic, director of the Parts C and D Actuarial Group in the Office of the Actuary. "Manufacturers would have little to gain by offering rebates that aren't linked to a preferred position of their products, and we assume that they will be unwilling to do so."

A separate report issued by researchers at the Government Accountability Office stopped short of predicting failure. It did, however, raise questions about the feasibility of the plan.

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