CLINTON GOES ON THE OFFENSIVE TO OFFER ELDERLY A DRUG PLAN

WASHINGTON -- President Clinton is opening a new attack on drug
companies, saying they charge too much and have grossly misrepresented
his proposal to offer drug coverage to all Medicare beneficiaries,
White House officials said Sunday.

The political offensive, echoing Clinton's harsh criticism of the
industry in 1993, is set to begin on Monday in a speech that will set
the stage for an election-year fight over Medicare drug benefits in
2000. Democratic candidates for Congress and the White House say they
will press the issue because they see it as a way to underline their
differences with Republicans on a question vital to millions of voters.

White House documents, written to buttress Clinton's case, say the
pharmaceutical industry is running a "multimillion-dollar scare
campaign" of advertisements to kill his proposal. Clinton is also
expected to observe that prescription drug prices are often higher in
the United States than in other advanced industrial countries.

In an interview Sunday, Joel Johnson, a senior adviser to the
President, said: "We have reluctantly concluded that the
pharmaceutical industry has chosen the path of confrontation rather
than cooperation. The President extended an olive branch to the
industry. They snapped it off. Their ad campaign is evidence of that."

Though the Administration demonized the drug companies in 1993, it has
since won high marks from the industry for its efforts to speed up the
approval of new drugs. Now, with elections approaching, White House
officials said they welcomed the opportunity to take on the
politically powerful, well-financed pharmaceutical industry.

Drug company executives defended their prices as fair and their
advertising as accurate.

Alan F. Holmer, president of the industry's trade group, the
Pharmaceutical Research and Manufacturers of America, said: "Drug
discovery is a very high-risk enterprise. On the average, it costs
$500 million to get one new medicine to market over 12 to 15 years. In
1999, the pharmaceutical industry is investing $24 billion in research
and development. This represents 20 percent of sales revenues, the
highest percentage of any industry in America."

The President's attack comes just as the drug industry is encouraging
Medicare beneficiaries to write Congress in opposition to the
President's plan. Republican leaders of the House and the Senate have
already said that no new prescription drug benefit will pass this year
but that they will consider it next year.

The industry and its allies, operating through an organization called
Citizens for Better Medicare, are circulating the suggested text of
letters to Congress. The letters say, for example, "I hope you will
oppose the Clinton plan" and "the White House plan is basically a
government takeover of the prescription medicine business."

Drug companies say they support the goal of providing drug coverage to
the elderly, but fear that the Democratic proposals could lead to
Federal price controls, which could reduce revenues and thus the
resources they need for drug research.

Johnson described one theme of the remarks to be delivered by the
President: "High drug prices hurt seniors every day. A Medicare drug
benefit could alleviate that pain. Seniors often forgo the medicine that a
physician prescribes because they can't afford to pay for it."

On Monday, White House officials said, Clinton will direct the
Secretary of Health and Human Services to do a 90-day study of drug
costs for the elderly. Specifically, he will ask for data to show that
elderly people who buy drugs on their own pay much higher prices than
favored customers like health maintenance organizations and the
Federal Department of Veterans Affairs.

The industry's message is being carried in radio, television and
newspaper advertisements featuring a woman named Flo, who frets that
President Clinton would allow the Government to meddle in her medicine
chest and force elderly people to get drug benefits through a
Government-run health plan.

Holmer said he believed that the advertisements were "utterly
accurate."

But Clinton says the advertisements spread several myths. Under his
proposal, he says, Medicare would hire private companies to manage
drug benefits, and the Government would not regulate drug prices or
tell doctors what drugs they could or could not prescribe.

Moreover, White House documents say, Clinton will rebut the contention
that his proposal would force Medicare beneficiaries into a
Government-run health plan. He will insist that drug benefits under
his proposal are "purely optional" and that beneficiaries may keep any
private drug coverage they have.

On these issues, the disagreements are often matters of
interpretation. Independent experts said Clinton had probably
underestimated the cost of his plan, which he put at $118 billion over
10 years. But they noted that the industry, while criticizing the
Clinton plan, had not offered a detailed alternative.

Under the President's proposal, Medicare would pay half of a
beneficiary's drug expenses, up to certain limits. The maximum Federal
payment would start at $1,000 in 2002 and would increase to $2,500 in
2008.

In town meetings across the country, members of both parties say, they
have heard countless complaints from elderly people about drug prices.

Senator William V. Roth Jr., a Delaware Republican facing a tough
fight for re-election, said in June that the disparity between drug
prices in the United States and other countries was "a matter of real
concern." Senator Richard H. Bryan, Democrat of Nevada, said, "The
public in America is getting gouged." Representative Marge Roukema,
Republican of New Jersey, said, "We've all heard horror stories of
seniors on fixed incomes forced to choose between their medication and
food."

Republicans have said they see a need for Medicare drug benefits and
want to start with low-income people. But the American Association of
Retired Persons says that "all beneficiaries, regardless of income,
can have high out-of-pocket drug expenses" and should therefore have
access to Medicare drug coverage.

A new study prepared for the Kaiser Family Foundation says the
proportion of large employers offering retiree health benefits has
declined, to 67 percent in 1998 from 80 percent in 1991.