Psychiatr News January 5, 2007
Volume 42, Number 1, page 4
© 2007 American Psychiatric Association
Price Negotiation Could Be Part Of Democrats' Part D Reform
Rich Daly
Changes to the Medicare Part D prescription drug benefit could be
limited to adding the federal government as another purchaser.
With their gain of control of both houses of Congress, Democrats plan to
move forward with a plan to allow the federal government to negotiate drug
prices in the year-old Medicare Part D program, a change that could impact the
substantial number of beneficiaries with mental illness.
During the run-up to the 2006 mid-term elections Democrats campaigned on a " Six for '06' " platform of legislative goals they wanted to
achieve. One goal was to "fix" the Medicare drug program by having
the federal government negotiate lower drug prices and "ending wasteful
giveaways to drug companies and HMOs," according to Democratic campaign
literature.
In December congressional Democrats renewed their pledges to have the
Department of Health and Human Services (HHS) negotiate directly with drug
companies for reduced prices in Medicare Part D. Incoming House Speaker Nancy
Pelosi (D-Calif.) went even further in mid-December when she said she would
push legislation that would require—not just allow—HHS to
negotiate directly with pharmaceutical companies on medication prices.
The Medicare drug benefit is administered through various private plans,
some of which are freestanding prescription drug plans, such as AARP's, and
others that are administered through HMOs and other kinds of managed care
plans.
After the election handed Democrats control of both chambers of Congress,
the Centers for Medicare and Medicaid Services (CMS) revealed that the cost of
the Medicare prescription drug benefit would be about $30 billion in 2006, or
30 percent less than its previous estimate of $43 billion. The estimated
long-term costs through 2015 also dropped to $729 billion from $926 billion.
The drop, according to CMS, is due to lower-than-expected increases in
prescription drug prices and the effect of competition among Part D plans.
In addition, some Part D plans say they will offer enhanced benefits in
2007, including elimination of cost sharing for generic medications.
Unintended Negative Effects
Opponents of the expanded government role have highlighted some evidence
that such a move could have unintended negative effects. One report,
"The Human Cost of Federal Price Negotiations: The Medicare Prescription
Drug Benefit and Pharmaceutical Innovation" by the Manhattan Institute
for Policy Research, concluded that mandated federal price negotiations would
substantially reduce the number of new drugs brought to the market each year
because drug manufacturers would have less profit to reinvest in research.
However, surveys have found public support for government negotiations to
lower prices within the program, including a November Kaiser Family Foundation
national poll that found substantial majorities of Democrats (92 percent),
independents (85 percent), and Republicans (74 percent) support allowing the
government to negotiate Medicare drug prices. Overall, 85 percent favored such
a move, with 65 percent strongly favoring it and 20 percent somewhat favoring
it.
Any changes in the prescription benefit could have a large impact on
beneficiaries with mental illness. Nearly 40 percent of low-income
beneficiaries, or about 2.5 million people who qualified for both Medicare and
Medicaid—so-called dual eligibles, have a cognitive or mental
impairment, according to a MedPAC, a research program of the federal
government.
Some Prices Already Negotiated
Supporters of federal government price negotiations point out that the
government already negotiates drug prices under Medicaid and the Department of
Veterans Affairs and pays substantially less overall for the same drugs than
do Part D beneficiaries. Critics of price negotiations, including the Bush
administration, have pointed out that those price negotiations have resulted
in a choice of drugs that is more limited for beneficiaries in those programs
than for most Medicare beneficiaries.
Due to the Bush administration's strong opposition to federal price
negotiation and the narrow margins by which Democrats control Congress, some
congressional officials said that Congress may stop short of mandating
government negotiation of all drug prices in Medicare and instead direct the
government to enter the Plan D market as another buyer alongside the existing
private plans.
Some advocates of greater change to the prescription drug program believe
that major change will not happen unless the 2008 presidential election winner
makes that a national priority.
More information on the Part D program is posted at
<www.mentalhealthpartd.org>.
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