February 2, 2015 / 9:18 PM / 3 years ago

UPDATE 2-Obama administration seeks to negotiate Medicare drug prices

(Adds drug industry response, 5th paragraph)

By David Morgan

WASHINGTON, Feb 2 (Reuters) - The Obama administration said on Monday it would seek authority to negotiate prices for high-cost drugs under the government's Medicare Part D program, which offers private drug coverage for senior citizens and the disabled.

President Barack Obama's new $3.99 trillion budget for fiscal-year 2016 proposes allowing the U.S. secretary for health and human services to negotiate prices for biotechnology treatments and other high-cost drugs in Part D "to ensure access to and affordability of these treatments."

But the plan would require the administration to get a green light from Congress, where Republicans who control the House of Representatives and Senate have openly favored market forces over government intervention as a vehicle for containing healthcare costs.

Congress prohibited Medicare from negotiating directly with drug companies in 2003 when it created Part D under then-President George W. Bush.

The drug industry's main lobbying group, Pharmaceutical Research and Manufacturers of America, warned that the president's budget plan contained "harmful proposals that fundamentally alter the structure of the Medicare Part D program," including one that would reduce patent protection on brand-name biotechnology drugs.

Health and Human Services Secretary Sylvia Burwell said she hoped talks with lawmakers would lead to a detailed plan, describing negotiations as an important element of the administration's goal of containing costs across the healthcare system.

"This is about us trying to find ways that we can continue with what we have talked about as a real priority for us," she told reporters.

The budget plan projects a 30 percent rise in Part D drug benefits, from $63.3 billion this year to $82.5 billion in 2016, partly due to the rising cost of specialty drugs.

Biotechnology treatments, or biologics, are generally patented, genetically engineered drugs that can be more effective than traditional medicine.

But they can also be more expensive because they are more complex to manufacture. Some biologics play a role in precision medicine, which seeks to better tailor treatments to individual patients based on their genetic makeup and other influences. Obama last week proposed $215 billion in government funding to support genetic-based treatments.

The proposal to allow drug price negotiations follows a campaign by private insurers and pharmacy benefits companies against Gilead Sciences Inc's $84,000 hepatitis C drug, Sovaldi.

U.S. payers argued that the drug, which cures nearly all patients of the liver-wasting disease, could cost $200 billion to cover the entire hepatitis C population, an unsustainable sum for society. (Editing by Matthew Lewis and Jonathan Oatis)

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