Next up in reform debate: Medicare rebates

Democratic Senators have tee'd up pharma rebates as a healthcare cost-cutting strategy. Led by freshman Sen. Jeff Merkley of Oregon, a cadre of Democrats have asked Finance Committee chief Max Baucus to have drugmakers rebate part of the cost difference between Medicare and Medicaid. Even if the rebates only applied to drugs for low-income seniors, the government would save $63 billion, Merkley told the Wall Street Journal.

As you know, low-income seniors covered by Medicaid were in 2006 moved to the Medicare program, which pays higher prices for prescription drugs. Under Merkley's plan--backed by 21 other Democrats--mandatory rebates would be included in Medicare Part D coverage. "Everyone is aware that this is not an area that Max [Baucus] has or desires to explore, but senators who signed with me don't see why this issue shouldn't be on the table," Merkley told the Journal.

Pharma firms beg to differ. It was in an effort to preclude these sorts of cost-cutting provisions that drugmakers agreed to $80 billion in cost-saving measures, in a deal with none other than Baucus. So Merkley's suggestion is meeting with stiff drugmaker opposition. A PhRMA statement said that mandatory Medicare rebates would "undermine the benefit's market-based approach" and could hurt innovation. Meanwhile, similar rebates are under discussion in the House, with two committees OKing legislation that includes them. Stay tuned.

- check out the WSJ story