Bush, Kerry both seen pressed to curb drug prices

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The pharmaceutical industry is expected to face pressure to curb rising prescription-drug costs no matter which candidate wins next week’s U.S. presidential election.

Drug makers prefer Republican President Bush’s plan to contain costs, which relies on the private marketplace and competition to drive prices down, over Democratic Sen. John Kerry’s more aggressive approach, several analysts said.

"It would be hard to imagine any president being more pharma-friendly” than Bush, said Diane Duston, a Washington-based analyst for Prudential Equity Group.

Bush signed a Medicare law that commits the government to paying for prescription drugs for seniors starting in 2006 and was crafted largely to the industry’s liking.

Kerry and other Democrats back two things drug makers do not want: importation of cheaper medicines from Canada and government authority to negotiate prices with manufacturers for Medicare patients.

Pharmaceutical industry donors have given nearly twice as much to Bush’s campaign as to Kerry’s, according to the Center for Responsive Politics. Drug industry executives are careful not to take sides publicly, but they warn against “price controls” that they say would cut their research budgets and hinder development of new drugs.

Prescription drug spending has risen rapidly for several years as prices climb and more older people take medicines. State budgets are strapped, the federal government is running record deficits and employers are struggling to pay for workers’ care.

“The budget pressure overall in the federal government, and cost overruns (in Medicare), are going to put enormous pressure on either a Bush or Kerry administration to do something on health-care costs, including drug costs,” Lehman Brothers analyst Rami Armon said.

Kerry could allow importation on his own, but he would need Congress to amend the Medicare program in order for the government to deal directly with manufacturers on prices. The American Medical Association supports that approach, but the Medicare law Bush signed expressly forbids it.

Democrats are viewed as having a chance at gaining control of the Senate, but the House of Representatives is expected to stay in Republican hands, giving them the power to block Kerry’s initiatives if he becomes president.

Bush is not expected to back any broad importation plan, even though he recently hinted he was open to the idea if the drugs from abroad could be certified as safe. Congress would have to “drag (Bush) kicking and screaming” for him to allow imports, Armon said.

Even without direct deals with drug companies, either Bush or Kerry could use Medicare to push prices lower, Armon said. Bids will come to the Centers for Medicare and Medicaid Services (CMS) from prescription drug managers, known as PBMs. CMS can reject any bids they deem too high, forcing the PBMs to go back to drug makers and get a better deal, Armon said.

Harvard University health economist Richard Frank, writing recently in the New England Journal of Medicine, said the economic impact of either importation or government controls of drug prices is uncertain. “The United States is entering uncharted waters in both of these key areas,” he said.

Generic drug makers likely will benefit from Bush’s support of Health Savings Accounts, health-care consultant Maureen Cotter said. People can set aside their own money tax-free and use it to purchase medicines and services. Cotter said she thinks people will lean toward lower-priced generics once their own money is at stake.

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