Efforts by congressional Democrats to give the government the authority to negotiate drug prices under Part D of Medicare suffered a serious blow last week when they fell 5 votes short of having the full Senate debate even a watered-down compromise measure.

Given that the Senate bill is more moderate than far stronger legislation passed by the House in January, Tim Vandenberg, an analyst at Washington Analysis, said after the vote that the “odds of getting anything done on the issue this year are pretty much put to bed.”

At the same time, Vandenberg cautioned that the issue “could linger.” He noted that moderate Republican Sen. Olympia Snowe, Maine, has another compromise proposal that would allow the government to negotiate prices if Medicare recipients ask them to.

The Senate vote on the issue was 55-42, with 60 votes needed to clear the legislation for floor action. Vandenberg noted that the bill faces an even higher hurdle because Bush administration officials have issued statements saying they oppose both the House and Senate versions, and that the president is likely to veto legislation containing either the Senate or the House proposal. That would require 67 votes in the Senate to override the veto, Vandenberg said, which was clearly unrealistic given last week’s vote.

Health insurers, who offer the program to seniors, are opposed to government negotiation.

Following the vote, Mohit Ghose, a spokesman for America’s Health Insurance Plans, which represents 85% of the providers of the benefit, said, “For many weeks, we have been reaching out to members of Congress to inform them about the unprecedented savings for beneficiaries and for the federal government through the public/private partnership that is providing millions with much needed prescription drugs.”

He added: “We continue to believe that Medicare beneficiaries are best served by the competitive system that is delivering the drug benefit for millions who previously had no access to prescription drugs. We look forward to working with members of Congress to improve the prescription drug benefit without undermining the successes achieved so far.”

Under the current program, private insurance plans negotiate with drug makers over the price of medicine for their customers. About 22 million seniors and the disabled are enrolled in such plans.

Democrats contend the government could use its leverage to drive a better bargain than individual insurers, which would lower the cost of the program for taxpayers and seniors.

But in the floor debate last week, Republicans contended that the program is costing much less than expected precisely because it’s the private sector–not the secretary of Health and Human Services–conducting the negotiations. Sen. Mitch McConnell, R-Ky., Senate minority leader, said the program will cost about $265 billion less than anticipated over the coming decade.

“I doubt a single government program in modern history, let alone one this big and this important, has ever, ever come in under budget,” McConnell said. “So it’s a mystery why our Democratic friends would want to tamper with this Medicare drug benefit. If it isn’t broke, why fix it?”

Security analysts say the real reason the program is costing less than projected is because of the growing number of high-priced drugs coming off patent, and now being sold generically.

The author of the bill shot down on the floor today was Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. A disappointed Baucus said after the vote that it “… gives the short end of the stick to America’s seniors.”

“It’s beyond me why the Senate would not choose to stand up for seniors,” he said. “Concerns about a bill from the House should not frighten Senators into silence on an issue this important. The Senate ought to debate this legislation, take a position, and actually work to make smart changes to improve the Medicare drug benefit.”

Baucus’s bill would have struck language in the 2003 Medicare Modernization Act that prohibits the HHS Secretary from participating in price negotiations for the drug benefit.

The proposal also provided for greater transparency in drug pricing for the Medicare benefit and sought to give doctors and patients information that will allow them to compare the effectiveness of drugs and other medical treatments.