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With Deficit Reduction Committee Set to Meet, Higgins Recommends Plan for Billions in Medicare Savings

Sep 8, 2011
Press Release

With the first public meeting of the Joint Select Committee on Deficit Reduction set for Thursday, September 8, Congressman Brian Higgins (NY-27) is asking the Committee co-chairs for serious consideration of an effort to negotiate lower drug prices through the Medicare program, a change that could save the nation as much as $200 billion over the next 10 years. 

“We are failing to use the purchasing power of 47 million beneficiaries to negotiate better prescription costs leaving seniors and American taxpayers paying the price while drug companies make record profits,” said Congressman Higgins.

In his letter, Congressman Higgins points to the success and savings the Veterans’ Administration has seen as a result of their efforts to negotiate lower prescription prices.

“Medicare is the lifeline for over 460,000 seniors in Western New York and we owe it to them and the millions of others across the country to find smart solutions that provide the cost savings we need to protect our economy without leaving the people that built this great nation behind,” added Higgins.

Below is the text of Congressman Higgins letter to the Deficit Reduction Committee:

September 7, 2011
The Honorable Jeb Hensarling                               The Honorable Patty Murray
Co-Chair                                                                      Co-Chair
Joint Select Committee on Deficit Reduction       Joint Select Committee on Deficit Reduction
129 Cannon House Office Building                       448 Russell Senate Office Building
Washington, D.C. 20515                                         Washington, D.C. 20510-4704

Dear Co-Chairs Hensarling and Murray,
As you begin the considerable task of making recommendations to reduce America’s federal budget deficit, I urge you to consider a proposal that has a proven track record of substantially reducing health care costs to empower the Department of Health and Human Services to negotiate lower drug prices for Medicare beneficiaries.  This proposal would decrease out-of-pocket costs to seniors and it would save the federal government up to $24 billion annually according to estimates.

Considering its broad mission and large number of enrollees, Medicare remains a very efficiently run program.  Per enrollee spending growth is often less than private insurance, despite the fact that Medicare beneficiaries tend to be older and more sickly.  And the administrative costs of Medicare are much less than those of many private insurance companies.

Yet Medicare could be much more efficient and effective for beneficiaries on the price of prescription drugs covered under Medicare Part D.  Even though Medicare has more than 47 million beneficiaries, it does not have the ability to negotiate, forcing beneficiaries -- and taxpayers -- to pay unnecessarily exorbitant prices without any demonstrative alternative.
There is a strong precedent for such negotiations. The Department of Veterans Affairs (VA), the other large federal purchaser of prescription drugs for beneficiaries, has this negotiation authority.  Studies have shown that by using the leverage of a large customer to negotiate lower prices, the VA is able to reduce prescription costs by 25%. Applying that analysis to Medicare, negotiation authority would have saved taxpayers $15.5 billion dollars last year alone.  And estimates by the National Committee to Preserve Social Security and Medicare project drug price negotiation would save Medicare over $200 billion over 10 years.

I appreciate the very difficult and challenging task the Joint Committee has been given, and I respect the amount of effort that will be undertaken to reduce our deficit. It is my hope that this proposal will be given a full and fair consideration during your deliberations. I look forward to working with you on this issue.


Member of Congress