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The Real Reason Medicare Is a Lousy Drug Negotiator: It Can’t Say No ( from the New York Times no less )The Real Reason Medicare Is a Lousy Drug Negotiator: It Can’t Say NoA good negotiator needs to be able to walk away. That is a rule that, surely, Donald Trump knows. And yet in suggesting that Medicare could find big discounts by letting the government negotiate directly over drug prices, he seems to have forgotten it. Mr. Trump has joined Hillary Clintonand Bernie Sanders in calling for a federal government program to negotiate for Medicare’s drug prices. The current system has private insurance companies each negotiating separate deals on behalf of large groups of Medicare patients. Right now, the program is O.K. at negotiating, saving as much as 30 percent off the list price of drugs, according to government reports. But Medicare still pays much, much more than government health systems in other countries. The idea of government directly negotiating with drug makers has been a liberal favorite ever since Medicare began paying for drugs 10 years ago. You can see the appeal. The thinking goes like this: Medicare’s drug plans cover about 37 million people. Maybe if it bargained on behalf of all those beneficiaries as one, instead of dividing them into a series of smaller groups, it could get better deals. Other countries, like Britain, where the government purchases drugs for everyone in bulk, pay much, much less for drugs than the United States. In those countries, private companies don’t do the negotiating; the government does. And they don’t split the big market. “We don’t do it,” Mr. Trump said at a Farmington, N.H., campaign event,according to The Associated Press. “Why? Because of drug companies.” But if you talk to experts who study the pharmaceutical market in the United States, they aren’t optimistic that, by itself, letting the government play drug negotiator would take a big bite out of prescription drug spending. For one, the companies that run the Medicare drug plans aren’t really that small, because they also provide drug benefits to companies and individuals with health insurance. The largest pharmacy benefit manager, Express Scripts, covers more than 85 million Americans. Other big pharmacy benefit managers include CVS/Caremark and OptumRx. But size isn’t the only issue. The real problem is that Medicare can very rarely say “No way” to a drug company. Medicare beneficiaries wanted the program to cover most drugs that older people would want to use. So Congress put in place rules that strengthen the hand of the drug companies in negotiations. Medicare is required to cover almost every cancer treatment that is approved by the Food and Drug Administration, for example, one of six categories where the drug plans can almost never say no to the drug companies. If a drug maker comes out with a new cancer medicine with a sky-high price, there’s not much a Medicare plan can do to talk it down. “If you say, ‘We need to get lower prices,’ and they just say, ‘No,’ what are you going to do?” said Walid Gellad, an associate professor of medicine and the co-director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh. The Congressional Budget Office has examined several proposals to allow the government to negotiate on drug prices, and it has repeatedly said that the savings would be “negligible” without other major policy changes. Medicare’s actuary has reached similar conclusion To negotiate prices any further, the government would need to impose access or coverage restrictions on medicines,” said Doug Elmendorf, testifying before Congress in 2009. Elmendorf was the director of the budget office then; he is now the dean of Harvard’s John F. Kennedy School of Government. The government does have one program that can say “no” to drug companies, and it gets much better deals than Medicare. The Department of Veterans Affairs negotiates hard with drugmakers. But it is also bound by fewer rules than Medicare, and one result is that it covers far fewer drugs. A 2011 analysis by Austin Frakt, an economist and Upshot contributor, and two co-authors found that if Medicare limited drugs the way the V.A. does, it could save about $510 in drug spending for every beneficiary every year. But those beneficiaries would lose access to many drugs they were previously taking. In fact, many older patients who get their health insurance from the V.A. also sign up for Medicare drug plans to cover medicines that the V.A. won’t. Other countries act more like the V.A. than Medicare. In Britain, drug makers that won’t negotiate won’t be able to sell any drugs at all. That’s real leverage, but it also means that patients in England don’t have access to all the drugs that older people in the United States might want to take. The trade-offs between price and generosity are real and wrenching. None of the candidates currently talking about allowing Medicare to negotiate for drugs have endorsed allowing Medicare to say no more often. Bernie Sanders’s plan strongly suggests that all drugs would be covered with no co-payments at all. Such a plan might make the government a more generous insurer than it is now, but could also result in even higher drug prices. |
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