Incoming Senate Finance Committee member Ron Wyden (D-Ore.) is likely to play a central role in the push for legislation to give HHS greater leverage over drug pricing under Medicare.

Like most Democrats, Wyden supports repeal of the so-called "non-interference" clause in the Medicare law, which explicitly prohibits HHS from intervening in price discussions between private drug insurance plans and manufacturers.

Wyden is also well positioned to work with the GOP leadership to try to change the provision. He is one of just nine Senate democrats who voted for the Medicare Modernization Act, and he has already teamed up with Republican Finance Committee member Olympia Snowe (R-Maine) to sponsor a bill that would repeal the provision (¹ Also see "Medicare Rx Cost Estimated At $510 Bil. In White House Budget" - Pink Sheet, 9 February, 2004., p. 27).

Wyden's "Yea" vote on Medicare was expected to cost him a chance for a Finance Committee seat, considered a choice assignment for members.

However, incoming Minority Leader Harry Reid (D-Nev.) selected Wyden and New York Democratic Sen. Charles Schumer to fill the two minority vacancies on the committee.

Three current Democratic Finance Committee members are leaving the Senate: John Breaux (La.), Tom Daschle (S. D.) and Bob Graham (Fla.). The increased Republican majority in the Senate means that the Democrats are losing a seat on the committee.

Wyden Well-Placed For Medicare Rx Oversight

Wyden will give up his seats on the Environment and Commerce Committees. However, he will continue to serve on the Budget and Aging Committees, along with Intelligence and Energy.

Wyden's positions on Finance, Aging and Budget make him the only Democrat serving on all three committees that are likely to have significant input into the future of the Medicare Rx program.

There are some other potential significant changes in the Aging Committee line-up. Breaux is the current ranking Democrat on the committee; Wisconsin Democrat Sen. Herb Kohl will replace him in that role.

Reid is giving up his seat on the Aging Committee, as is Michigan Democrat Sen. Debbie Stabenow. They are being replaced by Florida Democrat Bill Nelson and New York's Hillary Rodham Clinton.

The Democratic line-up on the Health Committee will not be changing in 2005, apart from the departure of Sen. John Edwards (D-N.C.).

More Committee Changes

The Commerce Committee line-up, however, will have several changes, with Daniel Inouye (D-Hawaii) replacing Sen. Fritz Hollings (D-S.C.) as ranking member. Breaux is also a current member of the committee who will not be returning.

Sens. Ben Nelson (D-Neb.) and Mark Pryor (D-Ark.) will be filling the vacancies on the committee.

The pharmaceutical industry views Nelson as a potential key ally in the new Congress (² Also see "Pharma Seeking Democratic Allies In Senate: Nelson, Bayh May Be Contacts" - Pink Sheet, 29 November, 2004., p. 21).

As a member of the Commerce Committee, he may be able to counter fellow Nebraska Democrat Byron Dorgan, who has used his position on the Competition & Foreign Commerce Subcommittee to champion reimportation legislation.

The "non-interference" clause was certain to receive attention from Congress in 2005, but advocates for repealing the provision received an unexpected boost when HHS Secretary Tommy Thompson announced his resignation Dec. 3.

Thompson's last words during a Washington, D.C. press conference announcing his resignation are likely to be cited repeatedly by Democrats during the new legislative session.

Sec. Thompson's Parting Shot

After describing the Medicare prescription drug law as one of his proudest accomplishments as HHS secretary, Thompson was asked whether there is anything he wished had been different in the law.

"I would have liked the opportunity to negotiate," Thompson responded. He paused for a final glance at the audience of reporters, and promptly left the auditorium.

Centers for Medicare & Medicaid Services Administrator Mark McClellan is considered the leading candidate to succeed Thompson, and he is unlikely to agree with the need for HHS to have explicit price negotiation authority

Nevertheless, the confirmation process for a new HHS secretary offers a prime opportunity for discussion of the non-interference clause - and Thompson's parting shot offers a good starting point for advocates of a repeal.

Wyden has one of the longest and deepest records in Congress regarding drug pricing issues, and particularly the dynamics of government "negotiations."

Direct Experience With Price Negotiations

As a Congressman, Wyden led the effort to force the National Institutes of Health to invoke its "reasonable pricing" authority under its agreement with Bristol-Myers Squibb for Taxol (paclitaxel). As a result of Wyden's intervention, Taxol remains the one unequivocal instance of a drug whose price was negotiated by a manufacturer with the federal government.

Wyden was an advocate of the 1990 Medicaid rebate law, which he describes as another example of the government leveraging its buying power.

He also has a long-standing interest in the pharmacy benefit management sector, derived primarily from his oversight of manufacturer-owned PBMs during the mid-1990s.

In the context of the Medicare debate, Wyden was one of the early supporters of applying the Federal Employees Health Benefit Program model to a drug coverage plan for seniors. He introduced a bill (the so-called "SPICE" Act) in 1999, co-sponsored by Snowe.

During hearings in 2002, Wyden stressed that one of his concerns with the Administration's proposed Medicare discount card plan is that it would "fracture" the market and therefore reduce the leverage of seniors (³ Also see "White House Wants To “Manage” Expectations For Medicare Rx" - Pink Sheet, 18 February, 2002., p. 6).

Wyden continued with that theme during floor debate on the Medicare law.

"In my mind, the key to effective cost containment is creating bargaining power for older people in the health care marketplace," Wyden said Nov. 23, 2003. "Getting seniors more purchasing power by getting them into large buying groups is an absolute prerequisite for keeping costs at bay."

"Baby Steps" In Current Law

"That was the principle behind my Medicaid drug rebate law" enacted in 1990, Wyden maintained. "That's the principle I worked to follow in 1999," with the SPICE bill.

FEHBP is "proven to contain costs well because of the sheer size of the group of federal employees for which it bargains."

"The conferees clearly rejected a model like the Federal Employees Health Benefit Plan, and that's unfortunate," Wyden declared. "They did take some baby steps in the right direction. This bill begins to leverage the potential bargaining power of 30 million seniors by giving them the opportunity to join large managed care plans and big fee-for-service plans that can use their numbers to negotiate discounts."

"But I wish this bill would go further. There should be a way to bargain for even bigger segments of seniors, not just for the fractions of the population who end up in various HMOs or other private health care plans."

"I'm concerned that while private plans have the power to bargain under this bill, the Medicare program is specifically enjoined from bargaining. By prohibiting the Medicare program from giving seniors the kind of bargaining power members of Congress have in the FEHBP, the field is being tilted away from Medicare and toward private plans."

Still Time For Legislation?

The timeline for Medicare implementation makes for some interesting possibilities if Congress does revisit the "non-interference" clause. The bidding process for private drug plans includes a built in negotiation period during which CMS is supposed to try to improve the proposed benefit.

Those negotiations are scheduled to begin in June. If Congress were to repeal the "non-interference" provision before then, CMS could expand the scope of those negotiations to include discussions with manufacturers (see ⁴ Also see "Medicare Rx Sponsors Must Notify CMS Of Part D Intentions In February" - Pink Sheet, 13 December, 2004.).

HHS Price Negotiators: Wyden, Thompson And “Non-Interference”

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