January 11, 2007

H.R. 4
Common Sense Tells You It Saves Money

Dear Colleague:

The Congressional Budget Office (CBO) recently released a letter stating that H.R. 4 would have only a "negligible effect" on Federal spending. This is not the first time that Congress and the Congressional Budget Office have had differing views on the savings that could be achieved by a particular proposal.

The cost estimate by CBO is for Congressional budgeting purposes and should not influence or affect the actual outcome of the cost-saving negotiations that Department of Health and Human Services (HHS) Secretary Michael Leavitt will conduct. In fact, if the opponents of H.R. 4 actually believed CBO, I would expect the flurry of dear colleagues, talking points, and missives crying the sky is falling to abate quickly.

There is ample evidence that Medicare could get a much better deal on the prices seniors and people with disabilities pay for their medicines.

A January 2007 report by Families USA found that half of the top 20 drugs most often prescribed to seniors, the lowest price charged by the largest Part D insurers was at least 58 percent higher than the prices under the system used by the Veterans Administration (VA). My bill does not adopt the VA approach, but since Medicare and the Veterans Administration are both Federal programs, it makes no sense for one program to be paying 60 percent more for exactly the same products as the other.

An October 2006 Consumers Union report looking at prices for a set of six common drugs in one Florida county found that people in the doughnut hole could have gotten their drugs cheaper 80 percent of the time by comparison shopping retail pharmacies than by obtaining their drugs through their current plan. If beneficiaries could do better without their Part D plan, there is clearly room for the HHS Secretary to do better.

Right now plans are not obtaining good discounts. We know that the Federal Government can, when need be, obtain good discounts. As an example, consider the Secretary's success with Cipro, where negotiation reduced the price 490 percent. In 2001, the Average Wholesale Price for Cipro was $4.67 per dose and the Federal Supply Schedule price was $1.77 per dose. Secretary Thompson purchased 100 million doses at $0.95 per dose with the option to purchase another 100 million at $0.85, and a third 100 million doses at $0.75 per dose.

H.R. 4 gives the Secretary of Health and Human Services a powerful new tool to obtain more affordable prescription drugs. I have every confidence that if the Bush Administration uses this tool wisely, they will save money for both Medicare beneficiaries and taxpayers. If they cannot get discounts, it is not because the backing of 43 million beneficiaries does not give them enough leverage -- it is because they are not trying hard enough.

I urge you to support H.R. 4.

Sincerely,

JOHN D. DINGELL
CHAIRMAN
COMMITTEE ON ENERGY AND COMMERCE