By Lisa Seachrist

Washington Editor

A Health and Human Services report created in response to President Clinton's October directive to study prescription drug costs indicates Medicare recipients pay 15 percent more for their prescription drugs than people who have those drugs included in their insurance programs.

The report adds fuel to the debate over how to add a prescription drug benefit to the aging Medicare program and bolsters the Clinton administration's plan to include a voluntary prescription drug benefit within the program. As a result of the report's finding, Clinton will hold a national conference this summer on drug pricing and discounting practices and their impact on Medicare beneficiaries and pharmaceutical innovation.

"[This report] provides further evidence of the need for a voluntary, affordable Medicare prescription drug benefit that is available to all beneficiaries," Clinton said in a statement. "This report makes clear that uninsured seniors not only lack prescription drug coverage, but also are denied the significant discounts and rebates that those with coverage receive. This price gap is wide and growing. It's time to level the playing field for both coverage and prices for all of America's seniors."

Medicare currently provides no prescription drug coverage. Some patients in the various Medicare HMO programs enjoy coverage for prescription drugs, but those numbers are dwindling as HMOs have begun to pull out of the Medicare program. Other Medicare recipients must rely on supplemental Medigap insurance and employer plans or simply go without prescription drug coverage.

The HHS report noted seniors without coverage paid on average 15 percent more for their drugs because they didn't have the advantage of group purchasing power and insurers that negotiate lower drug prices. In addition, when manufacturers' rebates were taken into account, the gap increased to anywhere between 17 percent and 50 percent.

Nancy Myers, director of federal government relations for the Biotechnology Industry Organization (BIO), said the report largely confirms what already is known about prescription drug prices.

"It's not surprising that those who don't have group purchasing power pay more for prescription drugs," Myers said. "That's why our focus is on making sure seniors have improved access to insurance with prescription drug coverage."

In addition to highlighting the price gap between the insured and non-insured, the report indicated uncovered Medicare beneficiaries purchase one-third fewer drugs but pay nearly twice as much out-of-pocket costs compared to their insured counterparts. The report noted the utilization and spending differences hold up across income, age, health status and other categories suggesting drug coverage makes a difference at all incomes. In fact, the report also indicates 25 percent of Medicare beneficiaries with incomes greater than 400 percent of the poverty level have no coverage for prescription drugs.

Because many proposals currently in Congress concentrate on providing premium support to the most needy - seniors at or below 150 percent of poverty - the Clinton administration is using the data on the higher-income seniors as justification for its universal program. That proposal would cover half of all drug costs up to $5,000 when fully implemented in 2009. It also would include a stop-loss provision to protect seniors against catastrophic drug costs, but that provision comes into play in 2006.

"We favor a stop-loss provision from the outset," Myers said.

The issue of the high cost of prescription drugs for American seniors has taken root in Congress. Democratic senatorial candidates are leading bus tours to Canada, where many prescription drugs are less expensive due in large part to a nationalized health care system and government price controls on drugs. Sen. Slade Gorton (R-Wash.) is proposing that drug companies should be prevented from charging higher prices in the U.S. than they charge in Canada and Mexico.

Myers, however, noted a thumbprint study funded by BIO indicates only half of the biologics approved in the U.S. are available in Canada.

"Having a good debate on the best way to provide a prescription drug benefit is what is key right now," Myers said. "Beating up the industry that is providing innovative cures won't help."

The Medicare debate likely is to continue as Congress readies for its spring break next week. The joint House Ways and Means Committee and Commerce Committee proposal is expected to be introduced before Congress adjourns.