House Bills Propose Medicare to Negotiate Prescription Drug Prices

Published February 25, 2019

Congressional Democrats and one Republican are proposing a package of bills they say will lower drug prices, including a measure giving Medicare more power to set drug prices.

The legislation would grant the Secretary of Health and Human Services the power to regulate Medicare Part D, which covers prescription drugs. Current federal law prohibits the government from setting prices for drugs under Medicare.

Rep. Peter Welch (D-VT) and nine other House Democrats, along with Republican Rep. Francis Rooney of Florida, introduced the bill on January 8.

“Leveraging the federal government’s enormous purchasing power to cut drug prices for seniors is common sense and long overdue,” said Welch in a news release. “Paying retail prices for wholesale drug purchases is ridiculous and irresponsible. If the President is serious about lowering drug prices, he should demand that Congress send our bill to his desk.”

‘A Program on Steroids’

John Dunn, a physician, lawyer, and policy advisor for The Heartland Institute, says the bill draws a target on the back of the pharmaceutical industry.

“What they want is a program on steroids that can negotiate and drive down the prices of drugs and effectively price-fix costs instead of letting the market work its wonders,” said Dunn. “They want to make the pharmaceutical companies provide a public service and then run them like public utilities.”

Medicare will use the power of its market share to tell pharmaceutical companies what it is willing to pay, Dunn says.

“That’s not negotiation, that’s price-fixing at a level they think they can force the pharmaceutical companies into accepting, and if they can’t, then they will say they’re not making that drug available to the people insured by the program,” Dunn said. “The really expensive drugs you see advertised on TV will never be part of a program like Medicare because it restricts its formulary by lowering the price it will pay for certain drugs,” Dunn said.

Such a setup limits consumer choice, Dunn says.

“The program drives down the costs and reduces the access to drugs that might be expensive or more expensive but are worthwhile to use, on the theory that, ‘Well, we can’t afford to do that,’ but that’s the game played by socialists everywhere,” says Dunn.

Government vs. Markets

Devon M. Herrick, a health economist and policy advisor to The Heartland Institute, says it is a myth that Medicare does not already manipulate drug prices.

 “The background is that under the Medicare Modernization Act of 2003—that’s the law that created the seniors’ drug plan, Part B—Medicare was precluded from interfering in the market,” said Herrick. “That’s called the non-interference clause. It created a drug benefit administered by private companies: private insurance plans and private drug companies.

“So when people say that Medicare does not negotiate the price of drugs sold in the United States, that’s false,” Herrick said. “It does, but the government doesn’t do it: very large drug plans, pharmacy benefit managers, insurance companies, and the like manage drug benefits for seniors, 100 million or more people.”

Not Expecting Much

Dr. John C. Goodman, a senior fellow at the Independent Institute and president of the Goodman Institute for Public Policy Research, says history tells us not to expect big savings from this change.

“The [Congressional Budget Office] has already studied this and concluded there’s not going to be much savings as long as Medicare buys every drug,” Goodman said. “The Veteran’s Administration system saves money because it walks away from the table and does not buy every drug, and therefore the VA is notorious for not having the best and most up-to-date drugs.”

Matthew Glans, a senior policy analyst at The Heartland Institute, which publishes Health Care News, says the bill could be a step toward much worse legislation.

“While expanding the ability of Medicare to negotiate with drug providers is a good step toward bringing market forces into the drug industry, it is important for the federal government not to treat this as a first step toward price controls, which would be the death knell for drug innovation in the United States,” Glans said.

Kenneth Artz([email protected])writes from Dallas, Texas.

Internet Info:

Rep. Peter Welch et al.,H.R. Bill 242:

Linda Gorman, “Government Drug Price Controls Will Wind up Harming Medicare Patients,” The Hill, December 19, 2018: