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Medicare Repair

by Jerry Flanagan, (310) 392-0522 ext. 319

Something that President Bush is not expected to talk about tonight in his State of the Union Address has drug companies laughing all the way to the bank.

That something is a ban in the new Medicare drug law that prevents the 41 million-member program from harnessing its buying power to negotiate drug discounts like private insurers and big businesses commonly do.

Market analysts have concluded that recent spikes in drug prices are in anticipation of the Medicare drug benefit to begin in full in 2006:

* Pfizer increased the price of its top selling cholesterol drug Lipitor by 5% - twice the consumer inflation rate.

* Bristol Meyers Squibb raised the price of its painkiller, Mobic, by 11%. Mobic has seen increased sales since Merck withdrew Vioxx from the market.

A new bipartisan effort provides a critical counter punch. Legislation introduced yesterday by Senators Wyden (D-Ore) and McCain (R-Ariz.) repeals Section 1860D-11(I) of the Medicare prescription drug benefit, which prohibits Medicare from negotiating for lower-cost drugs in bulk.

Additionally, the legislation requires the Government Accountability Office (GAO) to track ongoing changes in drug prices - an essential step to ensure that drug companies do not arbitrarily increase prices as the Medicare drug benefit takes effect.