Democratic Senators Propose Medicare Drug Rebates

— Freshman Sen. Jeff Merkley of Oregon and 21 other Democrats have asked Finance Committee Chairman Max Baucus to require pharmaceutical companies to pay the government rebates on certain drugs provided under Medicare, as a way of helping fund a health-care overhaul.

Under the proposed rebates, drug makers would pay back to the government some of the difference between higher prices charged for medicine under Medicare and the lower prices that are charged under Medicaid. In 2006, low-income seniors covered by Medicaid were moved into Medicare, which provides health care for the elderly.

“We say we’re trying to reduce costs, and this has been scored at $63 billion even if the companies only do rebates on low-income seniors,” said Mr. Merkley in an interview Friday, referring to Congressional Budget Office estimates of how much the government might save over a decade through such rebates.

Early this year, brand-name drug makers and their lobby, the Pharmaceutical Research and Manufacturers of America, or PhRMA, began a campaign on Capitol Hill and at the White House to prevent rebates, which they call “price controls,” from resurfacing in the health-care debate.

In a statement, PhRMA’s senior vice president, Ken Johnson, said: “The inclusion of mandatory rebates in [Medicare] Part D would undermine the benefit’s market-based approach that has led to unprecedented savings for seniors on their prescription medicines.” He said the steps could stifle pharmaceutical companies’ innovation.

Mr. Merkley said Medicare drug costs are artificially high because the government isn’t allowed to negotiate prices directly with companies.

His letter says that if negotiation isn’t permitted, the government should demand the return of Medicare D rebates, and that should be part of the Senate’s health-care legislation. The letter’s signatories include Sen. Barbara Mikulski of Maryland; Dianne Feinstein of California, and Chuck Schumer of New York.