It was only a matter of time. Eventually, Medicare would refuse to continue paying drug-makers whatever they choose to charge. Now, it appears that this is happening. (Kudos to Igor Volksky over at Think Progress Health.)
In 2006 when the Bush administration expanded Medicare to cover prescription drugs, it included a gift to drug companies that specifically prohibited the government from directly negotiating on drug prices.
Four years later, when health care reformers were trying to push a politically prickly piece of health reform legislation through a deeply divided Congress, they didn’t try to reverse that provision. It just wasn’t the time to try to take on Pharma. Too many legislators are beholden to the industry for campaign contributions. As it was, the Affordable Care Act barely made it through Congress.
Nevertheless, some liberals groused that the administration had made a “deal” with Pharma. As I wrote at the time, I very much doubted that the president had pledged that Medicare would never, ever ask for lower drug prices. I also assumed that sometime between the spring of 2010, and the beginning of 2014, reformers would revisit the issue. The Affordable Care Act was, and is, a work-in progress.
Then, in April, as Naomi reported here on HealthBeat, President Obama put the idea of letting Medicare using its clout to secure lower drug prices “back on the table.”
“During a speech at George Washington University, President Obama revealed that one of the ways he plans on cutting Medicare costs will be to cut government spending on prescription drugs by $200 billion over the next ten years.” With this statement, Naomi observed, “Obama seems to suggest that he wants Medicare to . . . start negotiating prices directly with pharmaceutical companies, something the Veterans Administration, for one, has been doing for years.” (And, I would add, with great success.)
Pharma Becomes Part of the Mix in Debt Negotiations
Late this afternoon, Igor Volsky reported that the president has now opened the door to slicing Medicare’s drug bill.
“In response to my question about pharmaceutical cuts being included in the debt ceiling negotiations” Volsky writes, “The Hill’s Julian Pecquet reports that Republicans and Democrats may both agree on a provision to extend Medicaid drug rebates” to patients eligible both for Medicaid and for Medicare.
The deal could be attractive, Pecquet argues, to conservatives: “By demanding that the rebates count as revenue raisers rather than spending cuts, Republicans would be able to say they’re meeting Democrats halfway — without actually having to raise taxes, which is anathema to conservatives. The proposal would extend Medicaid drug rebates to the nation’s 9 million ‘dual eligibles' who are on both Medicaid and Medicare but aren’t currently covered by the rebates.
Back in 2003, Volsky explains: “the Medicare part D legislation moved the 6 million Americans who were eligible for both Medicare and Medicaid into the Medicare part D program, thus creating a windfall for the industry. Whereas Medicaid obtained an average discount of about 34 percent from pharmaceutical companies that participated in the Medicaid program, the average discount obtained by the [Medicare] Part D plans was 14 percent,’ according to a report issued by Rep. Henry Waxman (D-CA). As he put it, ‘The drug companies are making the same drugs. They are being used by the same beneficiaries. Yet because the drugs are being bought through Medicare Part D instead of Medicaid, the prices paid by the taxpayers have ballooned by billions of dollars.
“CBO estimates that if drug manufacturers provided the Medicare Part D program with the same prices that Medicaid receives, the government could save $112 billion over 10 years. One Washington investment analyst told Pecquet, ‘PhRMA is scared, and I think they have reason to be.’”