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Has the Post Heard of Canada, or Maybe the Veteran's Administration?
Politicians excel at creating low expectations so that they can do "better than expected." A Post article yesterday on a new report from the Center for Medicare and Medicaid Services fell completely for the lowered expectations trick.
The article tells readers that drug prices increased less rapidly in 2006 than had been projected, in part because of the new Medicare drug benefit. The article presents this as a success of the benefit, although it does note that critics contend that Medicare could get lower prices if it negotiated directly with the drug industry.
Well, I would love to hear the economic argument as to why Medicare, which would represent a much larger block of consumers than Canada, Australia, or the Veteran's Administration, would not be able to get the same or lower prices than they do. All three pay prices that average 30-50 percent less than the prices paid by the private insurers participating in Medicare Part D. In other words, it is not just critics of Part D that say that Medicare negotiate lower prices -- it is true (unless the Post has some new economic theory that it wants to share with readers).
If the success of Part D is measured against the projected costs from two years ago, then the program is doing well. However, if it is measured against the drug prices paid by Canada or the VA, Part D is doing very poorly. If we had money to burn, maybe we wouldn't mind giving the drug industry an extra $30-$40 billion a year, but given that we have a budget deficit and are making cuts to many important programs, it is reasonable to ask whether the excess payments to the drug industry could go to better uses, even if the excess payments are somewhat lower than had originally been projected.
--Dean Baker
COMMENTS (6)
It's my understanding that Congress is pulling a fast one on seniors so they can protect the pharmaceutical industry while claiming to help seniors. This is done through the use of their formulary. Let's say there are five drugs for lowering cholesterol. If all the makers have to compete for a place on a Medicare formulary, Medicare has negotiating power. However congress has decided that drugs can't be kept off a Medicare fromulary therefore undercutting Medicare's negotiating power. The result more redundant drugs will be available, but at a higher price. Seniors will have more choices which they still can't afford.
The Department of Veterans Affairs is able to use access to their formulary as a negotiating tool. That's why the cost of Medicare drugs can't compete with Veterans Affairs. Congress won't allow it.
Posted by: wjd123 | February 22, 2007 11:28 AM
I'm chronically ill. I only take generic drugs. I've told my doctors that if it isn't generic, I don't want it. I simply can't afford non-generic drugs. Two years ago before Part D came into effect I could get all the generic drugs I wanted from my Medicare HMO. The cost to me was my co-payment of $7.00 for each prescription. Last year after Medicare Part D was passed I ran into the donut hole in September and ended up paying an extra $428.00.
I consider that $428.00 a tax put on me by the Republican Party and the Bush Administration. A tax on the chronically ill for the benefit of the pharmaceutical industry, an industry with huge profit margins.
This year my cost will return to what they were before Part D because my HMO has removed generic drugs from the penalty of the donut hole. This year also allows me to get a measure of revenge on the pharmaceutical industry. I now purchase half of my generic drugs from Wal-Mart, each month's supply costing me $4.00 or $6.00 per prescription.
I don't know what Wal-Mart's cost are. Supposedly, their program for generic drugs is a lost leader designed to bring people into their stores. That's Wal-Marts business. My interest is that when I buy from Wal-Mart I'm saving Medicare money since they are not charged anything, and, considering Wal-Mart's purchasing power, when I buy from Wal-Mart I'm cutting into the profit margin of the pharmaceutical industry
Here is an example: The total monthly cost--my copay plus what BC/BS picks up--of Metformin, a common generic drug used by millions of Americans, is $46.00 when purchased through Blue Cross/Blue Shield, my Medicare HMO. When I buy from Wal-Mart I pay $6.00 for that prescription while my HMO and Medicare pay nothing. If, lets say, three million Medicare Part D users buy Metfromin through Wal-Mart, that's a monthly savings to Medicare of $138 million and a yearly savings of over $1,656 million.
My generic drug problems have been solved for this year. However, I don't get the last laugh. I'm a veteran entitled to Medicare. Therefore, I can't get my drugs through the Dept. of Veterans Affairs which is allowed to negotiate for lower drug prices. I'm stuck in Medicare the program where drugs cost more. As a result non-generic drugs are still too expensive for me. I'm still telling my doctors, "If if it isn't generic, I don't want it.
Posted by: wjd123 | February 22, 2007 11:39 AM
Mainstream journalists appear to believe they work for Wikipedia. It makes sense for the online encyclopedia to enforce a rule against original research. For big newspapers it means they're not doing their job.
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