Task Force Weighs Drug Price Freeze : Health: Key members of President’s panel are promoting a wide range of measures to combat excessive profiteering.

WASHINGTON — Even as leading pharmaceutical firms are negotiating with the Clinton Administration on voluntary price controls, key members of the White House health care task force are privately urging an immediate mandatory freeze on all drug prices, sources said Monday.

The task force members also are advocating the creation of a national board to assess the fairness of drug prices, using the industry’s proprietary information and imposing penalties when appropriate, according to internal White House working documents.

These task force analysts--who are said to represent an important but not necessarily a consensus viewpoint--also want President Clinton to promote greater use of less expensive generic drugs, sources said.

“No decisions have been made. And there’s a wide range of options--especially on these pharmaceutical issues,” one task force member said Monday.

Still, as Clinton begins to confront the many decisions he faces in coming weeks, the internal Administration debate over drug pricing reflects the larger controversy over whether to impose mandatory price controls on all sectors of the private health care industry or to seek voluntary restraints instead.

As recently as a month ago, the Administration was sending strong signals that it was likely to seek congressional authorization to impose short-term price controls as a way of buying time for the overall reforms to phase in.

But some sources now say that the President may end up seeking voluntary cooperation instead, especially from the nation’s doctors, given the strong anti-price control sentiment in Congress.

Senate Majority Leader George J. Mitchell (D-Me.) joined that camp Sunday, saying on NBC’s “Meet the Press” that he “generally” does not favor mandatory price controls.

Such doubts notwithstanding, key task force members are advocating “an aggressive mix of market forces and regulation” to combat what they regard as excessive profiteering by pharmaceutical companies.

Their proposal states that “in recent years, more than half of all drugs introduced in the United States offered little or no therapeutic advantage over others on the market.”

These task force members are urging an immediate but temporary freeze on drug prices while unspecified long-term cost control strategies are developed.

In addition, they are calling for an independent “national price review board” to “assess the fairness and equity of new and existing drug prices” and take appropriate action.

For instance, such a board might reduce the life of an offending firm’s drug patent or eliminate, on a case-by-case basis, the tax break that drug makers enjoy for producing medicine in Puerto Rico and other U.S. territories, sources said.

In calling for a greater emphasis on generic drugs, the working papers stated: “On average, generic substitutes cost half the price of brand-name products,” adding that as much as 70% of all prescriptions could be filled with generic brands--twice the existing practice.

The working document was provided to The Times Monday by its author, Peter S. Arno, with the blessing of leading task force members and congressional experts on pharmaceutical issues, according to Arno, who is a faculty member at the Albert Einstein College of Medicine in New York.

Arno is not a task force member, and the paper he directed was commissioned by a grant from the Kaiser Family Foundation of Menlo Park., Calif., a private philanthropy. But Arno said that numerous task force members were active contributors to the paper.

“We’re obviously trying to move the task force in directions we think it should move,” Arno said Monday.

His paper also calls for greater post-marketing monitoring of new drugs for efficacy.

Pharmaceutical companies, more than any other segment of the health care industry, have been singled out by the President as the major villains in the health care reform debate.

During the 1992 campaign, Clinton repeatedly vowed to end “price gouging” by drug makers, calling their prices “shocking.”

In February, he and First Lady Hillary Rodham Clinton, who chairs the task force, denounced manufacturers of childhood vaccinations for reaping excessive profits “at the expense of our children.”

In its own defense, the pharmaceutical industry has characterized the Administration rhetoric as overblown--noting, for instance, that drugs represent only 7% of total health care costs and that prices in part reflect the high cost of research and development, which now run about $11 billion a year.

In recent weeks, 15 drug companies, with more than 50% of all pharmaceutical sales in the United States, have sought antitrust relief from the Justice Department so they can freely discuss price restraints among themselves. The department and industry officials have entered exploratory discussions, sources said.

The drug makers are proposing to voluntarily keep price increases at the same pace as the rate of inflation, as measured by the consumer price index. From 1980 to 1992, drug prices rose at six times the rate of inflation. But prices have moderated dramatically since, said Jeffrey Warren, a vice president of the Pharmaceutical Manufacturers Assn.

He said Monday that for the 12 months ending in March, drug prices have grown at a rate of 4.2% annually. “We’re getting awfully close to inflation,” Warren said.

Just last week, Merck & Co. disclosed a proposal that calls on all drug makers to sign a three-year, binding contract that ties annual price increases to the inflation rate.

But the Administration is wary of the industry overtures, task force sources said Monday. And that, in part, explains the pending proposal by some task force members to create a board with access to certain industry proprietary information, such as a firm’s costs, revenues and profits.