Why Can’t Medicare Negotiate Lower Drug Prices for Part D?

Why Can’t Medicare Negotiate Lower Drug Prices for Part D?

“Part D already costs about $80 billion a year and is on track to double by 2022 as benefits improve and Baby Boomers retire. For two reasons, a significant chunk of that money is wasted on overpayments to drug companies: When Part D began, millions of patients were shifted over from Medicaid, the state-federal program for low-income people that gets far lower drug prices than Medicare. Suddenly, the cost of providing drugs to the same people shot up. Congress barred Medicare from negotiating the way Medicaid and the Department of Veterans Affairs do with drug makers to get lower prices. Instead, lawmakers insisted the job be done by private insurance companies.”

This is a quote from a USA Today editorial and it highlights the absurdity of prohibiting Medicare from negotiating prescription prices with drug makers, especially in a time  when government calls for cuts in Medicare and ways to reduce Medicare spending. Both Medicaid and the Department of Veteran Affairs negotiate for lower prices, but Medicare Part D, from it’s inception in 2006, is barred from doing this.

This is a very different scenario than in other countries, like Canada and Europe, where all government health plans bargain with the drug companies to protect their citizens. “Per capita drug spending in the U.S. is about 40% higher than in Canada, 75% greater than in Japan and nearly triple the amount spent in Denmark,” according to an article in Health Care for America Now.

And, it’s no accident that the law prohibits Medicare to negotiate lower drug prices. A recent article by the National Committee to Preserve Social Security & Medicare points out that “the drug lobby worked hard to ensure Medicare wouldn’t be allowed to cut into the profits which would flow to big Pharma thanks to millions of new customers delivered to them by Part D.”

For years these big Pharma companies have used the argument that negotiating lower drug prices would actually hurt seniors in the long run because it would take away the necessary funds for innovative research and development to “save lives.” Yet, this just isn’t true. “Half of the scientifically innovative drugs approved in the U.S. from 1998 to 2007 resulted from research at universities and biotech firms, not big drug companies, research shows,” according to an article in Health Care for America NOW. The article also notes that “despite their rhetoric, drug companies spend 19 times more on marketing than on research and development.” In fact, 5 pharmaceutical companies have reported million-dollar increases in their spending on lobbying the federal government during the 1st quarter of 2014 alone.

Join us and many other advocacy groups in helping Americans and our government save money by urging Congress to allow Medicare the same drug negotiate powers as Medicaid and Veterans Affairs.

For more information see, Negotiating for Lower Drug Costs in Medicare Part D.

Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.