Policy Documents

Medicare: Negotiated Drug Prices May Not Lower Costs

Alain Enthoven and Kyna Fong –
December 18, 2006

In late 2006, U.S. Rep. Nancy Pelosi promised the Democrat-controlled House would repeal the ban preventing Medicare from negotiating directly with pharmaceutical companies. She must expect this would bring down drug prices dramatically.

It is not obvious, however, that allowing the government to negotiate with pharmaceutical companies will lead to lower prices than those achieved by private drug plans. This Brief Analysis describes several good reasons why not.