Trump Proposal Would Increase Drug Prices, Decrease Patient Choices
President Donald Trump recently pledged to let federal officials negotiate the prices of drugs covered under Medicare. He claims this will save taxpayers billions of dollars.
Nobody doubts that Trump and his team are shrewd negotiators, but the sorts of "negotiations" Trump refers to have nothing in common with haggling over a real estate deal. Instead, the action Trump has proposed—repealing the non-interference clause, originally drafted by former Democratic U.S. Sens. Ted Kennedy and Tom Daschle—would result in Medicare drug prices going up and patient choices going down.
This clause has been the key to Medicare's success. Between 2004 and 2013, the Medicare "Part D" prescription drug benefit program cost an extraordinary 45 percent less than initial estimates. Premiums for the program also are roughly half of the government's original projections.
These unprecedented results are largely due to the Part D market-based structure. Beneficiaries are free to choose from a slate of private drug coverage plans, forcing insurers to compete to offer American seniors the best options. This year, seniors can choose from among 746 plans nationwide, with an average monthly premium of around $35.
Such great choices and low costs have led to widespread support for the program: Nine out of 10 seniors report satisfaction with their Part D coverage, according to a recent survey.
Through their own negotiations with drug makers, private insurers offering Part D plans have had great success in keeping pharmaceutical prices down. In fact, the Congressional Budget Office observed Part D plans have "secured rebates somewhat larger than the average rebates observed in commercial health plans." The non-interference clause prohibits government officials from intruding in these negotiations.
On the other hand, doing away with the non-interference clause "would have a negligible effect on federal spending." In a report from 2009, the CBO reiterated this view, explaining that such a reform would "have little, if any, effect on [drug] prices."
Allowing the feds to negotiate drug prices under Part D likely would have a negative effect on the program. The CBO explains that to achieve any significant savings, the government would have to follow through on its threats of "not allowing [certain] drug[s] to be prescribed."
In other words, the government might drop some drugs covered by Medicare. Patients who need those drugs would be forced to pay for them out-of-pocket, which would make medicines vastly more expensive for the seniors Trump wants to help.
If patients can't afford a prescription, they might switch to a less effective drug or stop taking the medicine altogether. Their health would suffer.
Unfortunately, this isn't a hypothetical consequence. Just look at what is happening with the Veterans Affairs formulary, which permits government interference. The VA covers barely 80 percent of the 200 most popular drugs in the country. Medicare, which doesn't allow for government meddling, covers 95 percent of these medicines.
Letting Medicare go the way of the VA would be devastating for seniors.
Kennedy and Daschle knew what they were talking about. The President should pay close attention.
—Peter J. Pitts
Peter J. Pitts, a former FDA associate commissioner, is president of the Center for Medicine in the Public Interest.