The Medicare Prescription Drug Price Negotiation Act mandates the Secretary of Health and Human Services to negotiate with pharmaceutical manufacturers to get the best possible bulk prices for drugs purchased under the Medicare Part D prescription drug plan. In the process, it lifts the provision in Medicare Part D which currently bans negotiating.
The Middle-Class Position:
The Middle Class Supports: Often living on fixed incomes, America’s seniors struggle to cope with prescription drug prices that increase every year. The new Medicare prescription drug plan was ostensibly designed to save these seniors money on needed medications. But the plan provides far less savings than it could – both for the seniors it covers and for the taxpayers who bear the costs of the new plan – because it fails to take advantage of the federal government’s ability to negotiate for better prices by buying drugs in bulk. For example, if the federal government were to buy a million pills of cholesterol-lowering medication, enough for every Medicare recipient in the country, they could receive a very low price because of the huge quantity. Instead of realizing these savings, the program relies on individual insurance plans to make drug purchases. Because none of these individual insurers has the purchasing power of the federal government, the result is a less efficient system with higher prices.
Most industrialized countries, including Canada, use the government’s bulk purchasing power to bargain for better drug prices. Domestically, the United States Department of Veterans’ Affairs (VA) also uses this common-sense practice to reduce its costs. Studies suggest that the prices negotiated by the VA for many drugs are substantially lower than those offered under the new Medicare plan. Middle-class Americans, whether they are senior citizens, taxpayers or both, cannot afford to see the federal government squander this opportunity to rein in the ever-escalating costs of prescription drugs.
From the Experts:
“Had the Medicare Reform Act allowed direct negotiation for Medicare patients, similar to the manner in which the Department of Veterans Affairs negotiates primary pharmacy purchasing, we estimate that a typical patient being treated for [heart] disease could save at least 50% annually on the costs of prescription medicines under coverage from the anticipated prescription card plan.” —John Hayes, MD; Heather Walczak, MD; Allan Prochazka, MD; writing in the Journal of the American Medical Association (July 2005)
“On behalf of AARP’s over 38 million members, we… support S. 3, the Medicare Fair Prescription Drug Price Act of 2007. This legislation will build upon the strong foundation of the Medicare prescription drug law by enabling the Secretary of HHS to negotiate for lower prescription drug prices on behalf of Medicare beneficiaries, increasing transparency, and encouraging greater use of evidence based medicine. Enactment of this legislation is another important step toward further lowering drug prices for Medicare beneficiaries.” -William Novelli, Chief Executive Officer, AARP (April 13, 2007)
“In requiring the Secretary to negotiate prices for Part D drugs, HR 4 is an extremely important step towards making Part D more cost effective for beneficiaries and taxpayers. The current statutory prohibition on such negotiations is unsupportable. HR 4 will help keep drug prices from sky-rocketing at the expense of current beneficiaries, taxpayers, and the future of Medicare." - Judith A. Stein, Executive Director, Center for Medicare Advocacy Inc (January 5, 2007)
Beyond this Bill:
If the price negotiation measure had passed the Senate and become law, it would have been an important step towards reducing Medicare drug prices. However, a recent report by the Congressional Budget Office suggests that in order for Medicare to achieve significant savings, the Secretary of Health and Human Services will need not only authorization to negotiate but also an effective means of leverage to win price concessions from the drug industry. This leverage could be achieved by means of a Medicare preferred drug list, which many of the private insurance companies providing the Medicare drug benefit, as well as many state Medicaid programs, already use to lower their drug costs. Preferred drug lists delineate which drugs are “preferred” by the program because of their proven effectiveness and reasonable price. These drugs would then be pre-approved for use and reimbursement by the state or private insurer. Doctors are still free to prescribe drugs that aren’t on the list, but they must get approval from the state or insurer in order to be reimbursed. Since the process of prescribing preferred drugs is more streamlined, doctors tend to prescribe them more often, and pharmaceutical companies are willing to make significant price concessions in order to get their products on the preferred list. Since the entire Medicare program is larger than any individual insurance company that offers Medicare prescription drug benefits under it, a preferred drug list for the entire Medicare Part D program combined with a mandate to negotiate prices on behalf of the whole program would be the most powerful tool the nation has for lowering drug prices.
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Injustice Index Facts
Percentage increase between 2000 and 2006 in the cost of brand-name drugs commonly prescribed to seniors: 53.6
Percentage rate of general inflation during this period: 20.1
Percentage of Americans who support the idea of Congress allowing the federal government to negotiate with drug companies for lower prices on Medicare prescription drugs: 80
Estimated amount taxpayers and Medicare beneficiaries would save in 2008 alone if the federal government negotiated drug prices directly with pharmaceutical companies: $30 billion
Lowest Medicare Part D price in 2006 for a year of treatment with Zocor, a popular drug for patients with high cholesterol: $1,485.96
Lowest VA price in 2006 for a year of treatment with Zocor: $127.44
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