Congress Blocks Move To Set Retail Drug Discounts

Drug Discounts Blocked
Tom Philpott | October 13, 2006
Congress Blocks Move To Set Retail Drug Discounts
Military.com

Pressured by the White House and drug industry lobbyists, Congress has killed a Senate-passed provision that would have forced pharmaceutical manufacturers to grant the Department of Defense deep discounts on drugs dispensed through the TRICARE retail pharmacy network.

House Republicans were under enormous pressurelast month to sideline a provision inserted in the 2007 defense authorization bill that would cut 40 percent or more off the cost of many drugs available to TRICARE beneficiaries through retail network pharmacies and stores.

DoD officials contend that the Veterans Health Care Act of 1992 requires drug makers to include TRICARE retail drugs in Federal Supply Schedule (FSS) discount agreements negotiated with the Department of Veterans Affairs. The discounts already apply to drugs dispensed through base pharmacies, the TRICARE mail order program and VA pharmacies.

To avoid having to grant morediscounts, drug manufacturers have filed a lawsuit challenging DoD's contention. The Senate Armed Services Committee voted to make that lawsuit moot with clarifying language in its defense bill that federal discounts are to apply to TRICARE retail drugs too.

After the Senate passed its bill, White House politicos began to pressure House Republicans to fight the Senate provision in final negotiations over the defense bill, in effect, undercutting their own Defense Department as it strives to curb soaring drug costs.

"Tremendous forces" targeted conferees from the armed services committees as they began to negotiate over the bill, said a staff member. "Pharmacies, drug manufacturers…the politics went right through the roof."

Given that pressure, Rep. Chet Edwards (D-Texas) introduced a "motion to instruct" House conferees to accept the Senate's drug discount provision when negotiating behind closed doors. Edwards, joined by several Democratic colleagues, argued that applying FSS discounts for TRICARE retail drugs would save $251 million in 2007 alone. It also would suck the wind out of plans to hold down TRICARE costs by raising co-payments on military retirees and others who use the more costly retail network.

Opposing Edwards' motion was Rep. Steve Buyer (R-Ind.), chairman of House Veterans Affairs Committee and a friend to drug manufacturers. Eli Lilly & Co. has its headquarters within miles of Buyer's district. The company this year is his second largest campaign contributor, providing $10,000.

While no member of the Senate Veterans' Affairs Committee had objected to squeezing the drug companies, in the House, Buyer alone vigorously attacked the Senate plan, calling it "a very bad idea" that would lead to higher drug costs for disabled vets.

"I have come to the floor, as chairman of the Veterans' Affairs Committee, appalled, appalled," Buyer exclaimed. "I am just dumbfounded that we are - what - going to vote on a motion to instruct that we should accept what the Senate does? It seems that some people in this body are possessed in their fight against drug companies.''

Buyer's reelection campaign, as of Sept. 11, had received more than $45,000 from drug manufacturers through political action committee contributions. Only 13 House members, all of them Republicans, had received more in pharmaceutical dollars, according to data gathered by the Center for Responsive Politics.

During floor debate, Buyer said that as chairman of the House armed services personnel subcommittee several years ago he had created the TRICARE retail program. "If I ever intended for FSS pricing to be included, I would have included it in the bill," he said.

"But please, my colleagues, do not, just before an election, open up the Federal Supply Schedule. Do not do this," Buyer said. "We do this to protect very important members of our society, (veterans) who have been injured and the disabled."

Drug manufacturers worry that expanding FSS discounts to all TRICARE drug sources will lead to them having to negotiate discounts with other federal programs, including Medicare and Medicaid. Buyer echoed that concern in his remarks but emphasized always the impact on disabled vets.

"A discount for everyone is a discount for no one," he said later in a written statement.

In the end, Buyer lost the battle but won the war. Edwards' motion passed Sept. 7, on a lopsided vote of 370 to 30, with Buyer and 29 other Republicans in opposition.

The motion wasn't binding, however. A few weeks later a compromise defense bill emerged with the Senate's drug discount provision removed.

Buyer wasn't available for an interview.

Critics of the conference can argue that tax dollars are being sacrificed to drug industry profits. But they can't argue that TRICARE beneficiaries have been harmed, at least not for 2007. That's because, in a surprise move, conferees also shelved a House plan to raise TRICARE co-payments on generic and military formulary drugs obtained through retail outlets. Congress wants no change in TRICARE fees or co-pays for at least a year.

Rep. John McHugh (R-N.Y.), current chairman of the personnel subcommittee and a conferee on the defense bill, said in a phone interview that "the administration, the VA committee and others weighed in strongly against" the Senate provision. Though Buyer wasn't a conferee his words as VA committee chairman had an impact, McHugh said. Not on him, however.

McHugh said he favored the Senate provision and doesn't believe that applying discounts to the retail network will have "a cataclysmic" impact on veterans. "If there are savings, I'm for finding them," he said.

That will have to wait for at least another year and another Congress.