Daley’s View: Why cut benefits when we can cut drug costs?

In the United States we pay more for pharmaceuticals than any other country. We also have the most expensive health care system in the world. Could there be a connection?

This question takes on a special importance as we contemplate the discussions at the Federal level about cutting the benefits for Medicaid recipients. We are being told by the deficit hawkers that to avoid an economic disaster we have to cap Medicaid benefits received by the elderly and the poor. Really?

Reducing the cost of prescription drugs instead would save us money in Medicaid and have a positive effect throughout the health care system.

Why are the drug companies treated as sacred in Washington? Not only do we pay more than anyone else for prescription drugs, but there are other benefits we provide for the pharmaceutical industry as well:

  • Advantageous patent protections
  • Prohibitions on re-importation of less expensive drugs from other countries
  • Access to Federally funded research
  • Permission to advertise (a policy we share only with New Zealand)
  • Prohibitions against negotiating drug prices in Medicare and Medicaid

The prohibition against negotiating prices was brought to us as a part of the Bush Administration’s expansion of Part D drug benefits under Medicare. The deal was extended during the creation of the Affordable Care Act, and it’s time to revisit this policy.

It is true that the overall annual rate of growth in drug prices has slowed since the enactment of the ACA. However, a study by the HHS Inspector General suggests that negotiation of drug prices in the Medicaid Program could be reduced by $474 million annually if the Fed negotiated prices directly with drug companies. Even more savings could come if we negotiate these prices for Medicare.

So, when you hear that we have to save our selves from deficits by cutting the national health care programs, consider the math. If negotiating drug prices in Medicare alone can save $4 billion plus over ten years and $155 billion in Medicare, why not do this rather than cut benefits?

This issue needs to be joined now. Pharmaceuticals play an increasingly important role throughout the health care system. This drug dependency will only grow as the population ages. As we listen to the lamentations about how health care costs are driving national expenditures, we need to point to reducing drug prices as a way out of the problem.

Bill Daley is the Federal Issues Policy Director at The Alliance for a Just Society.


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