Washington Outlook
Edited by Richard S. Dunham
Drug Prices! Just When the GOP Thought It Was Safe...
Last month, when the Republican House approved a $350 billion drug benefit for seniors, GOP strategists thought they had inoculated themselves against a key Democratic campaign issue: health care. And with Senate Democrats scrambling to agree among themselves on an alternative Medicare drug plan, Republicans had reason to feel good.
That was then. As the Senate kicked off a health debate on July 17, Democrats came up with a new strategy that caught the GOP off balance and sent a chill through the drug industry. Their plan: shift the focus beyond Medi-care and push measures that promise to lower prescription costs for all consumers, not just seniors. "If we just attempt to update Medicare without dealing with the explosion of prices, we will simply break the bank," says Senator Debbie Stabenow (D-Mich.). "We have to deal with both."
And as corporate scandals unnerve the GOP and embolden Democrats, Republicans must deal with both, too. A number of Senate Republicans, especially those running for reelection this fall, may embrace some of the cost-cutting drug bills. "They are all searching for something they can hold up and say, `We did X,"' says a health-industry lobbyist.
Senate Dems, joined by some Republicans, are trotting out three proposals to appeal to voters angry at high drug prices. A plan by Byron Dorgan (D-N.D.) and Stabenow would let Americans import drugs from Canada, where retail prices are usually lower. Senators Charles Schumer (D-N.Y.) and John McCain (R-Ariz.) would make it easier for generic drugmakers to bring lower-cost products to market. And a Stabenow plan would give states greater authority to negotiate directly with manufacturers over drug prices for Medicaid recipients and state workers. Lawmakers like the proposals because they could slash the feds' own drug costs--in sharp contrast to a Medicare bill, which will add hundreds of billions to the deficit.
With the Medicare debate bogged down in partisan wrangling over costs and whether the plans should be administered by private insurers or Uncle Sam, Democrats think they have fresh ammunition for Election 2002. Their new claim: While the GOP may back a new drug benefit for seniors, only we favor lower costs for everyone. Democrats are test-marketing the theme in Maine, where Senate candidate Chellie Pingree has chipped away at GOP incumbent Susan Collins' lead by hammering at soaring prescription prices.
While there's growing support on Capitol Hill for the generic-drug bill and the Canadian import legislation, the powerful brand-name drug industry is fiercely lobbying against both. Drug-company reps say the generics bill, which would limit Big Pharma's ability to block low-cost rivals, will hurt profits and innovation. And the industry insists the import bill will expose Americans to unsafe drugs, such as gray-market knockoffs. Nonetheless, it's on the defensive. One reason: Some big employers, including General Motors and Verizon, back the generics bill. Says one beleaguered lobbyist: "It doesn't look pretty. There's a hell of a lot of pressure here."
Capitol Hill handicappers say the Canadian import bill is the most likely to become law this year. That may be little more than a Band-Aid for cost-conscious consumers. But it will allow lawmakers to say they did something, especially if a Medicare drug bill stalls. Dems could win either way: They can claim they've helped consumers or they can campaign against the GOP for thwarting more sweeping change.
By Howard Gleckman, with John Carey and Lorraine Woellert
CAPITAL WRAPUP
The Fed: The Market Hits Home
As stewards of the economy, Federal Reserve officials shy away from actively buying and selling stocks. But they're not immune to bear markets. In fact, most monetary mandarins saw their personal wealth shrink last year, according to an analysis by the nonprofit Financial Markets Center.
Since Fed officials don't disclose precisely how much they're worth--and instead release the value of their assets in ranges--it's hard to know exactly how much money they lost last year. Yet even if the central bankers' wealth is near the low end of the ranges provided, the officials still lost out. For example, Fed Chairman Alan Greenspan and his wife, NBC News correspondent Andrea Mitchell, saw their combined holdings of between $4.1 million and $8.7 million shrink by as little as 2.7% or as much as 28% in 2001. While Greenspan confines his holdings to savings accounts, money-market funds, and Treasury bills, Mitchell holds some stocks.
Two other Fed officials also got hurt in 2001. Fed Vice-Chairman Roger Ferguson saw his family's assets shrivel by 3% to 4.2%. And Fed Governor Edward Gramlich's family holdings fell 3.2% to 4.8%. It's not known how much Governors Susan Bies and Mark Olson lost: They just joined the Fed and did not have to file last year
While most Fed officials are worth well over $1 million, losing money in the markets brings "extremely relevant personal experiences to bear on an otherwise abstract policy question" of whether the Fed should target stock prices, the analysis concludes. In other words, they feel your pain.
By Laura Cohn
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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