In a significant victory for health insurers, the House Democratic leadership plans to pass legislation as early as Jan. 12 that would give the Bush administration the authority–but not require it–to negotiate drug prices under Part D of Medicare.

A healthcare and insurance industry lobbyist confirmed the House’s plans and says quick action in the Senate Finance Committee is also possible on similar legislation.

At the same time, the healthcare practice leader at Aon Consulting in Chicago says the 3-page draft proposal being considered by the House leadership contains other provisions that might give the Bush administration pause to support it.

Specifically, the legislation would rescind the non-negotiation language in the 2003 legislation creating the drug benefit program for the elderly, which bars the government from negotiating directly with pharmaceutical manufacturers.

The decision by the incoming House Democratic leadership was disclosed to National Underwriter on Jan. 3 by lobbyists and confirmed by a congressional staffer familiar with the leadership’s plans.

Under the current plans, the bill will be introduced in the House Jan. 5. Incoming House Majority Leader Stenny Hoyer, D-Md., said the House would take up the bill Jan. 12.

John Jonas, an insurance and healthcare analyst and a senior partner at Patton Boggs in Washington, D.C., confirmed the substance of the House plan and said the Senate Finance Committee is also supportive of the legislation.

He said the Senate panel is planning a hearing on the proposal “relatively early” in the year, likely Jan. 12 or Jan. 18, and “it appears the votes are there to report it to the Senate floor.”

Thomas Lerche, healthcare practice leader at Aon Consulting, said it is his understanding that the bill being considered by the House would give the Secretary of Health and Human Services, Mike Leavitt, the flexibility and authority to negotiate prescription drug prices for Medicare recipients.

At the same time, the draft language would prohibit the secretary from restricting access to certain medications. “The implication is that the secretary could not implement formularies, which are used widely in the Veterans Administration program,” Lerche said.

The bill would also require the secretary to report to Congress on the secretary’s activities in June, and again 6 months later.

“I think the idea behind that is that the leadership wants to give the secretary wide latitude in administering the program but give Congress oversight over what the secretary does,” Lerche said.

The end to formularies is a concession to Republicans, Lerche said, but he sees Republicans still objecting on at least 2 grounds. “Republicans don’t like formularies, but at the same time, the Republicans will likely say that you cannot save significant amounts of money unless you have a formulary, and they might also say that if the government encourages use of mail-order drugs, small retail drugstores would be hurt,” Lerche said.

“I think the President may concede the end of the bar on direct talks, but the other parts of the legislation perhaps would be problematical to the administration,” he said. “So it is no slam dunk that it would be enacted.”

He said that whether the bill is enacted would depend on “how strong and invasive [on the administration's prerogatives] is the language in the final bill.”

Mohit Ghose, a spokesman for America’s Health Insurance Plans, the trade group representing the vast majority of drug benefit plans, said the focus of the industry’s efforts during the discussions “will be to demonstrate the value of this new, successful public/private partnership that has delivered significant savings for millions of Medicare beneficiaries while ensuring that limited taxpayer dollars are stretched as far as possible.”

He added, “We hope that lawmakers, in considering any legislation affecting this program, focus on building on the strengths of the existing program–including its strong focus on choice, competition and innovative program design–that is delivering for millions of Medicare beneficiaries.”