The House is set to vote tomorrow tomorrow on H.R. 4, the bill that would require the Secretary of Health and Human Services (HHS) to negotiate lower Medicare Part D drug prices. Yesterday, the Congressional Budget Office concluded that the bill will not lower Medicare Part D costs as also suggested by critics of the bill. (Finally the Washington Post and the New York Times have recognized that the VA relies on statutorily mandated pricing, rather than negotiations for its discounts and that the VA healthcare system is not analogous to Medicare).

Today, HHS Secretary Leavitt explained in the Washington Post why he opposes the bill, and later the President announced that he will veto the bill if Congress enacts it. (A similar bill, S. 250, was introduced in the Senate today.) It is highly unlike that Congress could overturn that veto with the required 2/3s vote.

Express Scripts has filed a Delaware lawsuit seeking to void the $695 million breakup fee required by the CVS/Caremark merger agreement, according to the Wall Street Journal.

A CMS study on 2005 U.S. health care spending was published today in Health Affairs. The abstract explains that

In 2005, U.S. health care spending increased 6.9 percent to almost $2.0 trillion, or $6,697 per person. The health care portion of gross domestic product (GDP) was 16.0 percent, slightly higher than the 15.9 percent share in 2004. This third consecutive year of slower health spending growth was largely driven by prescription drug expenditures [greater use of generic drugs]. Spending for hospital and physician and clinical services grew at similar rates as they did in 2004.

In contrast, the U.S. consumer price index (urban) increased 3.15% from December 2004 to December 2005. AHIP issued a press release on the study.

Yesterday, after the Caremark board of directors spurned the Express Scripts merger proposal, Express Scripts announced that it is making four nominations to the Caremark board through a proxy vote effort. Today, it was revealed in an SEC filing that an Express Scripts subsidiary “bought 591,000 shares of Caremark Rx Inc. last month for almost $30 million.” CVS is not pleased.

In a separate development, a federal judge in Nashville, TN, where Caremark is headquartered, has dismissed two shareholder suits challenging the CVS merger proposal “on grounds that [the suits] cover the same issues as a separate case pending in chancery court in Delaware,” where Caremark is incorporated.

The Washington Post reports that Acting Centers for Medicare and Medicaid Services Administrator Leslie Norwalk expressed doubts about the value of the bill — H.R. 4 — that would authorize her agency to negotiate Medicare Part D drug prices with manufacturers, echoing criticisms published in yesterday’s New York Times (see 1/7 FEHBlog entry). The Department of Health and Human Services announced today that the current competitive system under which the private Medicare Part D drug plan sponsors negotiate with the manufacturers is producing lower Medicare Part D program costs. Of course, the sponsors of HR 4 beg to differ. The bill is expected to be put to vote on January 12 pursuant to Section 510 of H. Res. 6, which the House passed on January 5.

Yesterday, Caremark’s Board of Directors unanimously rejected holding discussion with Express Scripts over its merger proposal and “affirmed its strong commitment to Caremark’s pending merger of equals with CVS Corp.” In a detailed press release, Caremark further explained that

As a result of having received antitrust clearance, integration planning for a CVS/Caremark merger is underway, assuring achievement of synergies starting in 2007. Caremark and CVS have filed a joint proxy statement with the Securities and Exchange Commission and are proceeding forward to a vote on the pending merger at special shareholders meetings to be held in the first quarter of this year.

The Caremark proxy statement for this shareholders meeting can be viewed on the SEC website. is publicly available CVS expressed its appreciation of the Caremark Board’s decision.

Express Scripts issued its own press release which seeks to rebut the Caremark Board’s rationale for rejecting its proposal and announcing that

Express Scripts intends to file a proxy statement in connection with Caremark’s special meeting of stockholders at which the Caremark stockholders will consider the CVS Merger Agreement and matters in connection therewith.

On January 12, during the first 100 hours of the 110th Congress, the House of Representatives will consider H.R. 4, a bill with 189 co-sponsors and the AARP‘s backing, that would require the Secretary of Health and Human Services, beginning in 2008, to negotiate with drug manufacturer “lower” prices for Medicare Part D covered drugs without using a formulary. (A private Medicare Part D plan sponsor would be permitted to attempt to negotiate even lower prices.) The bill’s objective is lower the cost of the Medicare Part D program in order to close the so-called doughnut hole in Part D coverage.

The New York Times and the Washington Post published articles today describing the flaws in this approach as articulated by critics. The New York Times also reported that HHS announced yesterday a lower long term projection of Medicare Part D costs — “In July, the Bush administration estimated that payments to private plans offering the Medicare drug benefit would total $1.077 trillion from 2007 to 2016. Officials now estimate they will be $964 billion.” According to the Times report, CMS Acting Administrator Leslie Norwalk attributed the reduction to lower drug costs in general and lower enrollment as seniors found alternate drug coverage, such as employer sponsored coverage.

Sen. Max Baucus, who chairs the Senate Finance Committee, plans to hold hearings on the issue soon according to the Washington Times.

On January 4, 2007, the White House announced that President Bush will appoint Howard Weizmann to be the Deputy Director of the U.S. Office of Personnel Management. Mr. Weizmann currently is the President of the Private Sector Council (PSC), a program of the Partnership for Public Service.

Mr. Weizmann’s bio indicates that during the course of his carrier he has been Senior Vice President of the European Business Operations and Senior Vice President of Human Resources at Digex, Inc.; a Managing Consultant at Watson Wyatt Worldwide; Vice President in charge of Aetna Life Insurance Company’s value-added consulting business; a compensation and benefits attorney with Drinker Biddle and Reath; and the Manager of Benefits Planning and in-house attorney for the Sun Oil Company.

Mr. Weizmann’s nomination requires Senate confirmation. He will replace Dan Blair, who has become Chairman of the Postal Regulatory Commission (previously the Postal Rate Commission).

Express Scripts has sent a letter to Caremark stockholders urging them to reject the CVS proposal to acquire CVS, which already has cleared Hart-Scott-Rodino anti-trust review. According to an AP report, “Analysts say Caremark managers prefer the CVS offer while shareholders like the Express Scripts deal better” as it offers a higher premium. In a press release, Tom Ryan, Chairman, President and CEO of CVS replied that “CVS remains resolute in its commitment to seeing our merger through.” Meanwhile, the shareholder lawsuits against the CVS deal wind their way through the courts. This should come to a head soon.

The Democrat Party controlled 110th Congress will convene on Thursday January 4. Sen. Joe Lieberman of Connecticut and Rep. Henry Waxman of California will chair the Senate and House committees with oversight responsibility for the Federal Employees Health Benefits Program. According to Steve Barr’s column in today’s Washington Post, an aide to Sen. Daniel Akaka, who will chair the Senate’s Oversight of Government Management, Federal Workforce, and District of Columbia subcommittee, “plans to review the federal employees health insurance program and how it sets premiums.”