Under The Influence

<i>60 Minutes'</i> Steve Kroft Reports On Drug Lobbyists' Role in Passing Bill That Keeps Drug Prices High

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It certainly wasn't ugly for the drug lobby which invested more than $10 million in campaign contributions during the last election and has been a source of lucrative employment opportunities for congressmen when they leave office.

Former senators Dennis Deconcini, D-Ariz., and Steve Symms, R-Idaho, and former congressmen like Tom Downey, D-N.Y.; Vic Fazio, D-Calif.; Bill Paxon, R-N.Y., and former House Minority Leader Robert Michel, R-Ill., all registered as lobbyists for the drug industry and worked on the prescription drug bill.

"I can tell you that when the bill passed, there were better than 1,000 pharmaceutical lobbyists working on this," says Rep. John Dingell, D-Mich.

Dingell has been in Congress for 52 years and is the chairman of the House Energy and Commerce Committee, which shares jurisdiction over Medicare. He says the bill would not have passed without the efforts of the drug lobby.

"There is probably a lotta truth in it that the bill was stacked in their benefit. And it's probably also true that it was written by their lobbyists," he says.

Says Jones: "You couldn't even walk to the steps of the Capitol without having somebody, maybe one or two, coming up to you to say, 'Can't you change your vote? Can't you vote for this bill?' "

Why was the drug lobby was so interested in this bill and what did it have to gain? Ron Pollack, the executive director of Families USA, a nonpartisan health care watchdog group, says it all boiled down to a key provision in the legislation.

It prohibited Medicare and the federal government from using its vast purchasing power to negotiate lower prices directly from the drug companies.

"The key goal was to make sure there'd be no interference in the drug companies' abilities to charge high prices and to continue to increase those prices," says Pollack.

Pollack says there's no question that this was prompted by the pharmaceutical lobby.

"They were the ones who wanted to make sure Medicare could charge high prices and to continue to increase those prices," he says.

The drug industry says that competition among private insurance plans that service the Medicare program help keep prices low. But Families USA reported in a January study that Medicare patients are being charged nearly 60 percent more for the top 20 drugs than veterans pay under a program run by the U.S. Department of Veterans Affairs.

For example, Lipitor, a popular cholesterol drug, the cheapest Medicare price is $785 for a year's supply — 50 percent more than the VA's price of $520.

For Zocor, another cholesterol drug, the best Medicare price is $1,485 for a year's supply. The same drug only costs $127 a year under the VA's plan.

Read the full Families USA report
Pollack says the VA successfully negotiates with the drug companies on price.

"Medicare could do the same thing," he says, "but Medicare is prohibited from doing that as a result of this new Medicare legislation."

"What was the logic? Or what was the idea, the rationale behind not giving the government the ability to negotiate drug prices?" Kroft asks Rep. Dan Burton.

Burton says it was simply that the drug companies didn't want it. "They wanted to make as much as money as possible. And if there's negotiation, like there is in other countries around the world, then they're gonna have their profit margin reduced," he says.

Before the vote, Congress was told the program would cost a whopping $395 billion over the first 10 years. In fact, Medicare officials already knew it was going to cost a lot more.

Burton said he and others were misled. "Within two weeks after the bill was passed, everybody knew it was gonna cost well over $500 billion," he says. "And many members of the Congress [who] had voted for it said, 'I would never have voted for it had I known that.' "

Medicare Chief Actuary Richard Foster later told Congress that he revised the cost estimate to $534 billion before the vote, but was told to withhold the new numbers if he wanted to keep his job.

During a Congressional hearing, Foster stated: "It struck me there was a political basis for making that decision. I considered that inappropriate and, in fact, unethical."

Foster said the person who told him to withhold Congress from getting the revised estimates was Medicare boss Tom Scully.