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Democrats take on drug pricing

Marketplace Contributor Jan 12, 2007

Democrats take on drug pricing

Marketplace Contributor Jan 12, 2007


SCOTT JAGOW: House Democrats are expected to fulfill one of their big election promises today. This has to do with drug prices for seniors. In the bill that set up the Medicare Drug Benefit, Republicans banned the government from negotiating drug prices. Democrats want to reverse that decision. Marketplace’s Helen Palmer joins us from the Health Desk at WGBH. Helen, why was this prohibited in the first place?

HELEN PALMER: Ooh, depends on who you listen to. If you listen to the Democrats, it was because Republicans sold out to the drug industry.

JAGOW: But what do the Republicans say?

PALMER: Well the Republicans say basically they believe the market can give us the best price and, you know, you should let the market do its job.

JAGOW: So how does it work right now? Who negotiates these prices?

PALMER: Private plans basically negotiate all the drug prices for seniors. Seniors sign onto the private plans, they choose the one that suits them best, with the lowest premium or covering the drugs they want. What this bill today is going to do is give the Secretary of Health and Human Services responsibility for negotiating. It’s going to require him to negotiate and report back to the Congress in six months as to how he’s doing in terms of getting cheaper prices.

JAGOW: And what kind of leverage will he have to negotiate with the drug companies?

PALMER: Not quite as much as you might expect. It is expressly forbidden in the old bill and also in this new bill for the Secretary to say ‘OK we won’t cover this drug because you won’t give us a good price on it.’ Nevertheless health economists say that there is quite a lot the government could do. For instance, they could insist that there are homogenous prices across the whole country. There are huge disparities in drug prices even in the cheapest plans from one state to another. He could also say that if a drug is advertised to the public, then the government must get a rebate, say 5 percent back, because why should the government be paying for the drug industry’s advertising. And also he could take on some of these really high-priced drugs for things like cancer or rheumatoid arthritis, these new drugs, and insist that the government does get a price break on those.

JAGOW: OK we’ve talked about this bill, is it going to pass?

PALMER: It’s unquestionably going to pass in the house but that’s only half the story of course. Then it has to go to the Senate. The Senate being a more judicious body is not going to have such strong language. It’s not likely to require the Secretary of Health and Human Services to negotiate. It might allow him to negotiate.

JAGOW: OK Helen, thanks so much.

PALMER: My pleasure.

JAGOW: Helen Palmer from our Health Desk at WGBH. By the way, President Bush has threatened to veto that bill even if it does get through the Senate.

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