Former White House counsel blasts Obama’s ‘unlawful’ unilateral Medicare changes

Sarah Hurtubise | Reporter

Unilateral changes to health care law don’t stop at Obamacare: a legal analysis is calling the administration’s changes to Medicare “not just bad policy,” but “unlawful.”

In January, Health and Human Services proposed a rule change to give itself power to interfere in private negotiations between pharmacies and prescription drug plan sponsors under the Medicare prescription drug benefit. A legal opinion from Boyden Gray & Associates LLC, released Tuesday, finds that the attempt changes Congress’s intent.

Gray was White House counsel under President George H.W. Bush.

After Republicans won a prolonged Senate struggle over what was seen as federal price-fixing, the Medicare Modernization Act of 2003 strictly banned HHS from entering into negotiations amongst drugs manufacturers, pharmacies and prescription drug plan (PDP) sponsors.

Democrats favored federal intervention in the program and have tried to amend the statute several times since, but the text of the law remains unchanged.

HHS “may not interfere with the negotiations between drug manufacturers and pharmacies and PDP [prescription drug plan] sponsors,” according to the statute. But HHS’ proposed rule change asserts to interfere between pharmacies and prescription drug plan sponsors, just not between drug manufacturers and either of the two remaining parties.

Boyden Gray’s analysis, commissioned by free-market think tank American Action forum, found this doesn’t hold up with Congress’ intent.

“HHS’s effort to revise the Act is not just bad policy — it is unlawful,” the opinion concluded. “HHS’s novel ‘interpretation’ of the Act’s noninterference provision is unsupported by the Act’s text and history.”

“The deals negotiated between PDP networks and pharmacies may be saving the nation billions of dollars,” Boyden Gray found (emphasis in original). “One recent study found that PDP’s ‘[p]referred pharmacy network plans are estimated to reduce federal Medicare spending by approximately $870 million in 2014,’ and in the next decade ‘preferred pharmacy network plans are estimated to reduce federal Medicare spending by $7.9 to $9.3 billion.”

American Action Forum health policy expert Emily Egan told The Daily Caller News Foundation that the change, legal or not, would end in increased costs for seniors using Medicare Part D.

Sponsors have negotiated exclusive contracts for lowest prices with certain pharmacies, which sell Part D-covered drugs at lower prices to consumers and make up their profit loss with increased volume of patients. But HHS’s proposal would require sponsors to offer the deal to all pharmacies, negating the deal and driving prices up for all Medicare customers in the end, Egan said.

Hundreds of business and health policy groups, including the Association of Community Cancer Centers, the Chamber of Commerce and the AIDS Institute, said last week the proposal “threatens to disrupt the positive effect [Medicare Part D] is having on beneficiaries’ health and the Medicare program as a whole.”

While the policy implications have been hotly debated for over a decade, the lawfulness of the rule change is straightforward, according to Boyden Gray.

“HHS should withdraw the proposed rule. And if HHS persists with this new policy by promulgating it as a final rule, then the federal courts should vacate it.”

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