That healthcare reform bill just released by Democratic House leaders calls for a public insurance option which would negotiate rates directly with providers, including drug firms.
It’s in Subtitle B Section 224, which says: “The Secretary also has authority to negotiate prescription drug prices for the public option.”
Direct negotiations? Some things to consider:
“Neither economic theory nor historical experience suggests government price negotiation will achieve lower drug prices. Empowering the government to negotiate with pharmaceutical companies is not necessarily equivalent to achieving lower drug prices. In fact, neither economic theory nor historical experience suggests that will be the outcome. Members should think carefully before jumping on the bandwagon – this promise may bring just the opposite of what was ordered.”
Stanford Business School’s Alain Enthoven and Kyna Fong
“Both the non-partisan Congressional Budget Office and Medicare actuaries have said they doubt the government could negotiate lower costs than the private sector. Government price negotiation could leave people without drugs that manufacturers decide aren’t sufficiently profitable under the plan. The VA plan illustrates the point. It offers 1,300 drugs, compared with 4,300 available under Part D, prompting more than one-third of retired veterans to enroll in Medicare drug plans.”
“Our View On Medicare Part D: Put Brakes On Drug Plan ‘Fix,'” USA Today, 11/13/06
There’s also the potential for Uncle to dictate that Part D prices be tied to prices in other countries — a kind of Medicare reference price.
The bottom line here is that Part D is a tremendous success – due in no small part to the Non-Interference Clause. Consider:
* The projected cost for Medicare Part D is $117 billion lower over the next decade than experts estimated just last summer. This means that over the 10-year period from 2008 to 2017, the estimated $915 billion cost of Part D fell to $798 billion.
Why? Marketplace competition.
* And, according to a study published in the Annals of Internal Medicine, the Medicare drug benefit led to a 17 percent decrease in out-of-pocket expenses, or $9 a month, for seniors who enrolled in the new Medicare Part D benefit in 2006, the first full year prescription coverage became available in the federal health insurance program for the elderly and disabled.
Can Part D be made even better? Absolutely. But this is good news worth sharing — and not because it helps any particular partisan political agenda but because it means that more Americans — tens of millions of more Americans — are getting access to the medicines (largely chronic medicines) that will help them live healthier lives. And this, in no small measure, significantly reduces more drastic medical interventions — which in turn reduces our overall national health care spending.
We shouldn’t interfere with success.
“Direct negotiations” means price controls. And price controls = choice controls.
Peter J. Pitts is president of the Center for Medicine in the Public Interest and a former FDA associate commissioner.
