Hillary Clinton and Donald Trump don’t see eye-to-eye on much. But they do agree that drug costs are spiraling out of control at the public’s expense. Both the Democratic and the Republican candidates for president have said that Medicare should be able to negotiate drug prices, something that currently isn’t allowed by law. Letting Medicare do that — which the Department of Veterans Affairs and other countries have been doing for years — has the potential to transform health care.
Most developed nations, including Canada and the United Kingdom, negotiate with pharmaceutical companies to determine how much they will pay for medications. In the US, health care is covered by many different payers, with Medicare being the largest by far. The federal government never gave Medicare the power to negotiate drug prices. Instead, that’s done by the many private insurers that manage Medicare drug plans.
Giving Medicare the power to negotiate drug prices would immediately save billions of dollars. The implications would also reach far beyond the 37 million Americans covered by the Medicare drug benefit (Part D), because commercial insurers often follow Medicare’s lead.
As a neurologist and a neuro-ophthalmologist, we work with people who have conditions such as multiple sclerosis and dementia. Each year in the United States there are 15 million visits made to neurologists. The drugs used to treat neurological conditions are expensive. In 2013, Medicare paid $5 billion for medications prescribed by neurologists, the third highest of any physician specialty. If Medicare had been able to negotiate drug prices and pay the same amount that the VA pays for these same medications, we would have saved $1.8 billion. That estimate is likely on the low end, as Medicare Part D covers many more individuals than veterans, giving Medicare even greater buying power.
Other countries, such as Canada and the United Kingdom, pay even less than the VA, likely for a similar reason of increased buying power. Some investigators have estimated that the savings would be about $22 billion if Medicare paid the same rates as the VA for all medications, not just those prescribed by neurologists.
Drugs for MS alone account for more than $1.8 billion of the $5 billion spent on medications ordered by neurologists. In fact, just one MS medication, glatiramer acetate (Copaxone), accounted for $820 million.
Let us put that number into perspective. During a medical visit, your doctor must figure out the problems you are having, order tests, assess possible treatments, and counsel you on your options. In 2013, Medicare spent $939 million on all visits to all neurologists, suggesting that this time and expertise is valued about the same as one medication that slows MS a little bit. Writing a prescription is easy, but guiding patients through their medical problems is difficult.
It is curious that each of the nine MS medications on the market cost about $60,000 a year per patient, even though some have been on the market since the early 1990s. In fact, each time a new MS medication becomes available, the prices of the old ones are hiked to match the new drug’s price.
Cost increases for MS medications have far outpaced prescription drug inflation. The costs have risen to such levels that the US currently has no cost-effective treatment option for MS, while cost-effective options do exist in other countries. What’s crazy is that the medications are the same in both countries, but at vastly different prices.
While the Democratic and Republican presidential candidates both support allowing Medicare to negotiate drug prices, come Election Day the fight is far from over. A new bill would have to be crafted and signed by both the House and the Senate. Given the strength of the pharmaceutical lobby and the caustic political climate, passing such a bill would be an enormous task that requires a groundswell of support from Americans across the country.
If you believe, as we do, that strong and swift action is needed to rein in drug prices, don’t be shy about contacting your representative and senator to let them know you want Medicare to be able to negotiate drug prices and save billions for the American public.
Brian Callaghan, MD, is an assistant professor of neurology at the University of Michigan, a neurologist at the VA Ann Arbor Healthcare System, and a fellow at the Center for Healthcare Research and Transformation at the University of Michigan. He receives research support from Impeto Medical Inc., performs medical consultations for Advance Medical, and consults for a PCORI grant. Lindsey De Lott, MD, is an assistant professor of ophthalmology and visual sciences at the University of Michigan.
If denying Medicare the right to negotiate drug prices was not so important, than why did Big Pharma spend over $250 Million to ensure passage of the Medicare Part D Act of 2002, which created the open spigot at retail pricing and denied Medicare the opportunity to negotiate drug prices?
We need to learn from Canada, the EU, UK, and Australia and explicitly limit the price and profit percent allowed on drugs. Any threat by Big Pharma to cut R&D is bogus, as the USA is still their largest market. Our taxpayers do not need to subsidize Big Pharma profits, which are limited everywhere but here.
This article is Senior Hate Speech of the worst kind. No where in the article do the authors mention the most important fact in the 20-year-old debate over Medicare negotiating drug prices. Medicare does not buy drugs. Why should Medicare negotiate the price of something it does not even buy?
The fact that the Department of Veterans Affairs negotiates drug prices makes sense; the VA does buy drugs. However, this article fails to mention that the VA has a much more limited formulary than all Medicare drug insurance plans. The VA buys only a few types and brands of drugs for vets, relatively, forcing almost all the vets on Medicare I know to also sign up for Medicare drug coverage.
And CBO and others have studied the issue and shown that letting the Federal government dictate drug pricing for seniors has neither the “potential to transform health care” (an absurd claim on the face of it) nor any potential to save the Medicare trust funds any money at all. Not only would the $1200-toilet-seat Feds dictating drug prices not “save billions of dollars” but CBO has estimated our drugs might cost more. See http://healthaffairs.org/blog/2016/02/01/how-would-government-negotiation-of-medicare-part-d-drug-prices-work/ Others have estimated up to 10% savings (nothing earthshaking in other words) but only if Medicare only bought the drugs on the limited VA formulary (see second paragraph)