Seniors, Democrats ask: Must drugs be so costly?

WASHINGTON -- Seventy-seven-year-old Jim Parker asks the same question as elected leaders who want to negotiate their way to lower prescription drug prices: Why are prices so high?

Last year, when his wife, Evelyn , entered the coverage gap in Part D, the Medicare prescription drug benefit, the Parkers paid thousands of dollars to buy drugs to treat the 79-year-old's ailments.

That included $759.47 for a 90-day supply of a treatment for Crohn's disease, $609.58 for a 90-day supply of cholesterol-lowering Lipitor , and up to $100 for a bottle of eye drops .

The prices are "outrageous," said Jim Parker of Clinton. "Absolutely outrageous."

Some say it shouldn't be this way. Millions of Americans share the Parkers' plight, but Democratic congressional candidates promised voters they would make changes once they reached office. Last week , the House, in a 255-to-170 vote, made good on the promise. Next the prescription drug pricing debate takes center stage -- likely by month's end -- in the Senate, with many saying that more aggressive government negotiations would lower drug prices for over 23 million Part D beneficiaries and, potentially, eliminate the coverage gap.

The current law, passed after stiff lobbying by the drug industry while Republicans controlled Congress, prohibits the government from directly negotiating with manufacturers to lower drug prices. That leaves companies free to set drug prices as high as they think the market will bear.

Mick Kolassa , who has written about drug pricing and testified on behalf of the drug industry in pricing lawsuits, said, at times, the industry sets prices artificially low to gain market share for new drugs, then incrementally raises them.

The pharmaceutical industry says it plows profits back into research and development, but some question that argument. Drug manufacturers receive the bulk of a drug's retail price , said Stephen Schondelmeyer , a University of Minnesota researcher who tracks drug pricing. Such branded drug makers as Pfizer Inc. spend, on average, 30 percent of that to cover manufacturing, shipping, and distributing products, he says, quoting federal government research. They devote roughly 13 percent to research and development that can lead to new therapies and expanded uses for existing drugs. Six percent pays for taxes and such expenses as defending against product liability lawsuits.

But they spend 31 percent on such administrative expenses as sales and marketing.

A Government Accountability Office report released last month said the drug industry's spending on prescription drug advertising grew twice as fast as research and development spending. The GAO found that costly advertising contributed to increases in drug spending.

Senator Edward M. Kennedy , chairman of the Senate Health, Education, Labor and Pensions Committee, said government price negotiation has strong support among the majority of Democrats and will come up in his committee.

Kennedy says the issue can be tackled through "two or three different approaches. And the question is whether you can get enough Republicans" to vote for one so the legislation passes. Those who want to take a more divisive tack could "force" the issue and imperil the bill's chance for passage, he said.

To win enough Republican support, Kennedy said, it's likely that any change will allow -- but not require -- the government to negotiate prices.

For her part, Senator Hillary Rodham Clinton , Democrat of New York , said yesterday in a statement that she has "long urged that Medicare be permitted to negotiate drug prices." Clinton pledged to "help pass legislation to bring down prescription drug costs."

Senator Max S. Baucus , chair of the Finance Committee, is a strong proponent of Part D, owing to its high approval ratings among seniors. Baucus, Democrat of Montana , last week held a promised fact-finding hearing looking at the impact of such changes.

After the hearing, Baucus said: " There are areas of the drug benefit in which market competition is not working. In some cases, the private market may be failing to provide seniors with the affordable medicines this benefit has promised."

But he joins Republicans in arguing that "heavy-handed intervention" may not be the right solution.

Pharmacy benefit managers , for instance, argue that their proven negotiating skills saved Part D beneficiaries 35 percent on branded drugs and 46 percent for generic drug purchases, compared with the cash price they would otherwise pay, according to Mark Merritt , Pharmaceutical Care Management Association president .

There is a "better than even" chance the government could not negotiate similar discounts, according to the Congressional Budget Office, said Kolassa , managing partner at Medical Marketing Economics LLC , consultants to the drug and biotech industry.

"There is good policy, and there's good politics. This is great politics and lousy policy," Kolassa said.

Those arguments, however, face growing skepticism on Capitol Hill and among Americans who, in a recent poll conducted by the Henry J. Kaiser Family Foundation and the Harvard School of Public Health , overwhelmingly endorsed direct government negotiations to benefit Part D beneficiaries.

Eighty-year-old James Aloisi Sr. for years has filled the same prescription for a 90-day supply of the heart remedy Zestril on behalf of his wife, Rose . Last year, that prescription set the couple back $96.36 , twice as much as in 2005 .

Aloisi, of East Boston , said he hopes Part D revisions have the trickle-down benefit of also lowering his co payments. "Instead of saving, I'm still going up," Aloisi says of his rising drug bills.

To cope with increased costs, the Parkers changed insurance policies and slashed spending. "When you're in the coverage gap, you have to be very conservative," Jim Parker said. "You don't go out for dinner. You don't go to concerts. You don't do lots of things that you might like to do because you don't know what the next bill is going to be."

Diedtra Henderson can be reached at dhenderson@globe.com.