In a move that highlights a key policy difference with Sen. Brian Schatz, Colleen Hanabusa is scheduled to be a guest speaker on a telephone “Town Hall” meeting sponsored by an organization opposing a bill co-sponsored by Schatz.

The measure, sponsored by Sen. John Rockefeller, D-W.Va., would try to reduce federal Medicare spending and cut the overall federal debt by making drug companies pay a rebate to the federal government. Among its supporters is the AARP, which argues the rebates are preferable to other Medicare cost-cutting measures like raising the co-pays or increasing age requirements for Medicare recipients.

However, Hanabusa, who is running against Schatz for his Senate seat, has opposed the idea, signing a letter last year saying drug companies would pass on the cost of the rebate to consumers.

The issue is expected to come up in Thursday’s conference call, which was organized by the Healthcare Leadership Council. The council is a diverse national organization made up of hospitals, health plans, medical device manufacturers, biotech firms, academic health centers, and also pharmaceutical companies that would all have to pay the rebates in Rockefeller’s bill.

The call, scheduled for 8 a.m. HST, is one of several periodic discussions the organization offers to update members as well as seniors, veterans and other organizations about health care issues, according to Healthcare Leadership Council Vice President Michael Freeman. Thursday’s discussion will likely touch on Rockefeller’s proposal and the organization’s opposition to it, he said. But he denied that the call is intended to rally support against the issue.

“It’s not a lobbying thing or anything,” Freeman said.

Nevertheless, the conference call comes as Congress debates the future of Medicare while drug companies lobby against the measure. On Wednesday, Richard Smith, Executive Vice President of Policy and Research at Pharmaceutical Research and Manufacturers of America (PhRMA), opposed the measure in front of the U.S. Senate’s Special Committee on Aging. AARP President Rob Romasco testified for the measure at the same hearing.

Rockefeller’s proposal, supported by Schatz, would alter the way outpatient prescription drugs are handled for people who qualify for both Medicare and Medicaid. Before the Medicare Modernization Act of 2006, people who qualified for both programs had their medication covered through Medicaid. Drug companies paid the federal government a rebate to keep down federal Medicaid costs.

Under the 2006 law, people got their drugs through Medicare, Part D. The changes affected about 32,000 Hawaii residents who are eligible for both programs. Under the new system, the recipients can sign up for a private prescription health plan. In theory, drug companies offer health plans a discount on the cost of medicine instead of a rebate. Those discounts lower the amount the federal government pays the health plans to subsidize the cost of offering the drugs. The drug companies, meanwhile, still offer rebates to the federal government in order to be made available to Medicaid patients.

But a Kaiser Foundation report noted that drug companies are giving smaller discounts than what they used to pay in the form of rebates, “which means that Medicare pays higher prices than Medicaid would for low-income enrollees,” the report stated.

In the context of calls to reduce the federal deficit through reforming entitlements, Rockefeller’s plan would make drug companies pay the higher rebate amount for Medicare recipients. According to the Congressional Budget Office, the move would save Medicare $137 billion over 10 years.

The AARP’s Romasco told the Senate committee Thursday that they should cut drug costs instead of changing age requirements or raising co-payments.

“We should focus on efforts to hold down costs, not efforts that simply shift costs in the form of higher premiums or copayments for beneficiaries,” Romasco said.

Schatz, in a statement supporting Rockefeller’s bill, said, “The bill will save more than $140 billion for taxpayers. This is a balanced, common sense approach that will generate savings while protecting Hawaii’s seniors, and I look forward to working with my colleagues to get it passed.”

As expected, drug companies are lobbying against the measure. According to the Center for Responsive Politics, the Pharmaceutical Research and Manufacturers of America has already spent $5.3 million on lobbying Congress this year — the fifth largest of any group.

Smith, of the Pharmaceutical Research and Manufacturers of America, argued that because drug companies want to be included in Medicare prescription plans, there’s an incentive to keep down the drug prices they charge.

“Part D’s competitive structure already includes substantial negotiated discounts and rebates, and Part D plans have strong incentives within the current framework to reduce costs and appropriately manage drug spending,” he said.

Changing the system, he said, would lead to insurance companies charging higher premiums. And indeed a letter from the Congressional Budget Office to Rep. Dave Camp, R-Mich., in 2009 said drug manufacturers ”could offset the rebates they would be required to pay for full-benefit dual eligible individuals by charging higher prices for new drugs—particularly for
‘breakthrough’ drugs.” In addition, the CBO letter said drug companies would lower the discounts they offer to insurance plans which “would lead to an increase in beneficiaries’ premiums.”

A recent press release by the Healthcare Leadership headlined “Medicare Drug Program Called A Success,” said the system is working. It noted that from 2006 to 2011, total spending on Medicare Part D was just 68 percent of what was initially anticipated.

However, the Center for Budget & Policy Priorities, citing a Kaiser Foundation report, said the less spending was due to the fact that less people than anticipated enrolled. The Center also cited a Department of Health and Human Services’ Office of Inspector General report that the discounts given to health plans by drug companies “reduced the costs of the most widely used brand-name drugs by only 19 percent; in comparison, the rebates that Medicaid requires cut costs for those drugs by 45 percent.”

Will Drug Companies Inject Money Into Hanabusa’s Campaign?

Aside from offering another contrast, it remains to be seen if the policy difference could inject money into Hanabusa’s campaign. Pharmaceutical and health product companies made $15 million in campaign contributions in the last election, according to the Center for Responsive Politics.

However, drug companies aren’t the only ones fighting Rockefeller’s proposal.

More than 200 organizations signed on to a letter to members of Congress when the idea was brought up during last year’s debt-reduction talks.

“We recognize the urgent need for Congress to reduce the nation’s debt and spur economic growth. We believe, however, that achieving real savings requires reducing costs, not shifting them onto others. A Part D mandatory rebate would fail this test,” said the letter. Among those signing the letter was the Healthcare Leadership Council, Pharmaceutical Industry Labor-Management Association (PILMA), as well as groups like Asian & Pacific Islander American Health Forum, the National Alliance on Mental Illness, and the National Asian Pacific Center on Aging.

Hanabusa, without naming Schatz, made reference to Rockefeller’s proposal in a press release yesterday about Thursday’s conference call.

“The main point I want to make was that we need to stand behind our commitment to seniors. I made my position clear last year when I signed on to a letter to House leadership opposing changes that would reduce benefits under Medicare Part D, which has been very successful in ensuring seniors’ access to life saving medications,” she said in the release.

“While we all see the need to reduce the budget, we must also ensure that we protect vital priorities, including protecting the health and well being of our seniors,” she said.

The letter, sent last July to Republican House Speaker John Boehner and Democratic House Minority Leader Nancy Pelosi, said: “We urge you to reject proposals that would impose new, mandatory government rebates for drugs purchased in the Medicare Part D prescription drug program, which would undermine a highly successful program that seniors rely on… Cuts to the Medicare program could return seniors to a time when they had to choose between food and medicine,” said the letter, also signed by Reps. Kurt Schrader, D-Ore. and John Carney, D-Del.

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