Against Big Pharma, Dems act wimpy

Marketplace Staff Jan 10, 2007

KAI RYSSDAL: Item four on the Democratic list of things to get done in their first hundred hours comes up Friday: Change the way Medicare pays for prescription drugs. It’s a test of political muscle. But commentator Robert Reich says the Democratic approach is, well, wimpy.

ROBERT REICH: House Democrats are pushing a bill to require Medicare to negotiate drug prices, but in what appears to be a bow to the political clout of Big Pharma, the bill does not authorize Medicare to drop from its approved list drugs on which manufacturers fail to offer good deals.

That’s like Wal-Mart telling its suppliers “We’re going to use our bargaining clout to get the lowest prices for our customers, but regardless of what price you offer we’ll still carry your product in our stores.” What kind of incentive is that?

The Department of Veterans Affairs gets a 25 percent discount on drug prices for veterans because if a drug company won’t give a big discount, Veterans Affairs won’t include the drug in its plan. Medicare recipients will only get these kinds of savings if Medicare can do the same thing — walk away from a drug manufacturer that won’t deal.

The way to do this without denying seniors drugs of their choosing would be for Medicare to set up its own drug plan to compete with those of private insurers. Medicare would subsidize any plan, so seniors wanting drugs not on the approved list would still have access to them, but Medicare’s plan would be the cheapest, because the plan’s size would give it the most bargaining power, and because it would only include drugs that manufacturers offered at a deep discount.

This is not what Democrats are proposing. Their bill enables them to tell seniors and the all-important AARP they’re forcing Medicare to negotiate with drug companies — but then turn around and tell Big Pharma not to worry: Their drugs will still be approved, regardless of price.

The strategy won’t work. Big Pharma will still fight the bill. They see any move toward negotiations, even one as innocuous as this, as a slippery slope toward government price controls.

House Democrats should come up with a bill with real teeth in it, that forces drug companies to offer real discounts. Even if it doesn’t pass this time, an upcoming Democratic presidential candidate could run on it, and then turn it into law after winning the next election.

RYSSDAL: Robert Reich is a professor of public policy at the University of California at Berkeley. He used to be the Labor Secretary for President Clinton.

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