Dec. 7 (Bloomberg) -- Representative John Dingell said that he will move to force the Bush administration to negotiate Medicare drug prices when he takes over in January as chairman of the Energy and Commerce Committee.

Such a move, which may curb profits for drugmakers, would go beyond earlier efforts by Senate Democrats to allow the government to negotiate lower drug prices. Health and Human Services Secretary Michael Leavitt said last month that he would resist efforts by congressional Democrats to force him to negotiate volume discounts for drugs.

Dingell, 80, a Michigan Democrat, said the secretary must be required to negotiate, ``not just permitted, because we have reason to think that if he's just permitted, nothing will happen.''

Dingell's plan would fulfill a Democratic campaign promise to have the Medicare program for the elderly and disabled negotiate lower drug prices with drugmakers. The Wall Street Journal last month portrayed Democrats as debating whether to force Medicare to negotiate or simply allow the program to bargain with drugmakers. The current law, passed in 2003, bars such negotiations.

``When you have one buyer of drugs for 40 million people, it may really hurt the industry in a very significant way,'' Sheryl Skolnick, an analyst with CRT Capital Group LLC in Stamford, Connecticut, said in a telephone interview yesterday. ``You can kiss profit margins all the way down the food chain good-bye.''

Complex

Forcing the administration to negotiate prices is much more complex than simply allowing the agency to do so, Dingell said. It may involve creating a new office in the Centers for Medicaid and Medicare to handle the negotiations. Many Democrats cite the Veterans Administration, which negotiates drug prices, as the model for the Medicare program.

``That power is now in the Veterans Administration; it is used, it works quite well,'' Dingell said. ``It would be early for me to comment on precisely how these things will be done.'' Dingell plans to work with other lawmakers, including those on the Ways and Means Committee, on the legislation.

Kevin Smith, a spokesman for House Majority Leader John Boehner, an Ohio Republican, said the drug plan now benefits seniors and shouldn't be changed.

``If you look historically at the government's experience in attempting to regulate prices, it's always been an absolute disaster both for the people we're intending to help and for the government itself,'' Smith said.

Medications

Insurance plans individually negotiate prices of medications for the 22.5 million seniors that receive the benefit. There are as many as 40 different plans in each state. Democrats say that allowing Medicare to negotiate prices in bulk could save as much as $60 billion over 10 years.

Leslie Norwalk, acting administrator of the Centers for Medicare and Medicaid, raised concerns that forcing price negotiations would deprive patients of choice.

She said it ``comes down to a basic philosophic question: Is it better for the government to run health care, or is it better for consumers to be able to make decisions for themselves?''

Mark McClellan, former head of the Centers for Medicare and Medicaid Services, said yesterday at an investment banking conference in New York that he doesn't think there will be a change to how the government negotiates prices because most people are happy with their benefits under the current system and the cost of the program is likely to be less than projected.

Even if the price negotiation clause were removed, it would take a lot of reorganization of the program for the government to negotiate directly with manufacturers, McClellan said.

Top Priority

However complicated it is, it remains a top priority for Democrats, said Senator Richard Durbin of Illinois, the No. 2 Senate Democrat.

``We're for Medicare being able to negotiate with the pharmaceutical companies in order to save money for seniors,'' Durbin said.

The Pharmaceutical Research and Manufacturers of America, a Washington-based trade group for drugmakers, opposes negotiations between Medicare and companies, saying competition among Medicare drug plans ``continues to drive down costs for both seniors and taxpayers,'' said Ken Johnson, the group's senior vice president.

``Despite what critics say, the new Medicare prescription drug program is working,'' Johnson said.

Taurel

Sidney Taurel, chief executive officer of Indianapolis, Indiana-based Eli Lilly & Co., said that the total cost for Medicare Part D is 30 percent less than budgeted for 2006.

``The question is, can the government do better? I don't think so,'' he said at a meeting with analysts today in New York.

``Some people point to the VA as an example of government price negotiation,'' he said. ``The VA keeps prices down by limiting choice.''

It's unlikely the measure would clear Congress and be signed by President George W. Bush, said Les Funtleyder, a health-care strategist with Miller Tabak & Co. in New York. Democrats will control 51 seats in the Senate, nine short of the number needed to overcome Republican opposition.

House Democrats in 2005 introduced legislation that would have forced the administration to negotiate prices and created a negotiating mechanism. While the measure garnered 133 supporters, the Republicans never brought it up for a vote.

The cheapest drug insurance policies under Medicare will cost elderly and disabled Americans 44 percent more next year, based on rate quotations published by the government health program.

The average monthly outlay for the least expensive plans will rise to $13.58 from $9.46, according to data compiled by Medicare. Louisville, Kentucky-based Humana Inc., the biggest provider of low-cost drug plans, raised prices as much as fivefold, while Medicare cut its monthly subsidy by 15 percent, to $80 a person, Peter Ashkenaz, a Medicare agency spokesman said in October.

To contact the reporter on this story: Jay Newton-Small in Washington jnewtonsmall@bloomberg.net

Last Updated: December 7, 2006 12:36 EST