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Driving down the price of drugs

Dan Grech Dec 18, 2006


SCOTT JAGOW: The pharmaceutical business is under a lot of pressure to reduce drug prices. For example, Wal-Mart offering $4 generics. That kind of undercutting is prompting pharmacy companies to look for ways to save money. Like mergers. Today, a pharmacy middleman called Express Scripts made a bid for rival Caremark. Drugstore chain CVS also wants Caremark, so we could see a bidding war. Meanwhile, the Bush Administration offers its own plan today for cutting drug prices. Dan Grech has more on that.

DAN GRECH: Medicaid, the government health program for America’s poor, is supposed to pay the lowest price for prescription drugs, but a Congressional investigation found Medicaid pays 35 percent more than that lowest price.

The Bush administration will propose today adjusting what Medicaid pays pharmacies so it’s the lowest price available.

Princeton professor Uwe Reinhard is an expert in health care economics.

UWE REINHARD: What they now want to do is to say, look we’re going to use the actual prices paid at the pharmacy as the benchmark and say, we’re gonna get the same prices that the lowest payer pays.

By paying that lowest price, Medicaid will save taxpayers an estimated $8.4 billion over the next five years. The pharmaceutical industry will have to absorb that loss.

The new rules won’t affect individual consumers, but the government will publish the average manufactured price for drugs on a quarterly basis.

In New York, I’m Dan Grech for Marketplace.

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