Bring Big Pharma to the table

Marketplace Staff Nov 29, 2006

BOB MOON: If you’re among the millions who’ve struggled with the new Medicare drug program, this may come as no surprise: The drug benefit program cost taxpayers $13 billion less than expected this year. How come? Fewer than expected actually signed up. It also helped that drug prices rose more slowly than in previous years. The new Democratic majority in Congress has an idea to hold down drug prices: Having the government bargain directly with the big pharmaceutical companies. About time, says commentator Robert Reich.

ROBERT REICH: The new Democratic Congress hasn’t even begun to work and already Republicans and pharmaceutical companies are attacking the Democrats’ plan to have Medicare use its huge bargaining power to negotiate lower drug prices for seniors. They say it will amount to government price controls.

That’s absurd. Bargaining is bargaining. The Veterans Administration already negotiates drug prices on behalf of its 4.4 million enrollees. Medicaid negotiates on behalf of millions of Medicaid recipients. Why shouldn’t Medicare use its even bigger bargaining clout to get good deals for its nearly 23 million enrollees?

Ever hear of bulk discounts? Happens all the time. Think of Wal-Mart. In fact, Wal-Mart is using its bargaining power to get lower drug prices.

The pharmaceutical industry — Big Pharma as it’s known in Washington —also contends that if Medicare tries to negotiate lower drug prices, some drugs will not be available because their manufacturers just won’t sell at lower prices. That’s no problem. Medicare beneficiaries who want these drugs could still get them through private insurers. The whole point is for Medicare to set up a plan that competes with the private companies, and offers seniors the choice of lower-priced drugs. Big Pharma also says that if Medicare gets much lower drug prices, drug companies won’t have enough money to develop new drugs. But wait a minute. These are the same companies that just a few years ago lobbied intensively for the new Medicare drug benefit because they wanted access to the billions of dollars that came with the program. Now that these billions of dollars are flowing, it’s bizarre for them to argue they won’t have enough money to develop new drugs if Medicare gets a discount.

The only thing that might stop the new Congress from going through with this sensible plan is huge bargaining power of a different kind. I’m talking now about politics. Because when it comes to campaign contributions and Washington lobbyists, Big Pharma has more bargaining clout than almost anyone.

MOON: Robert Reich Robert Reich was Secretary of Labor under President Clinton.

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