Use Medicare’s Muscle to Lower Drug Prices

The Opinion Pages | EDITORIAL

By THE EDITORIAL BOARDSEPT. 21, 2015

A poll last month by Consumer Reports found that a third of the patients who take prescription drugs are paying significantly more this year, forcing many to cut back on other necessities or load up on credit card debt. Another poll in August by the Kaiser Family Foundation found that about a quarter of those surveyed said they had trouble paying for prescription drugs.

Many of the people most affected by rising drug prices are older patients on Medicare, who often live on modest incomes, are in poor health, and take four or more prescription drugs. One way to reduce drug costs for this population is to reverse the policy set by the 2003 Medicare Modernization Act, which created Medicare’s prescription drug program.

At Republican insistence, that law barred the federal government from negotiating with drug manufacturers. It relied on bargaining by private insurers that manage drug benefits for Medicare patients, like UnitedHealth, Aetna and CVS Caremark, to wring discounts from the drug makers. That wasn’t enough.

CreditDavid Ahntholz for The New York Times

The drug makers point out that what Medicare spends on drugs has been rising more slowly than had been projected over the past decade. But that is mostly because enrollment grew more slowly than expected and many widely used brand-name drugs lost their patent protection and were replaced by low-cost generics. 

While drug prices paid by insurers are usually discounted from the list price, those prices can still be very high. Medicare, with its enormous buying power, could drive costs down more. This is important because the newest, most expensive drugs for high cholesterol, hepatitis C, cancer and other ailments are needed by a large number of the elderly and disabled people enrolled in that program. Those high prices then result in high co-payments and other cost sharing for its beneficiaries.

Hillary Rodham Clinton, Senator Bernie Sanders of Vermont and the Obama administration have voiced support for federal government intervention in Medicare price negotiations, but they have been so vague that it is impossible to discern exactly what they would do.

Massachusetts is considering allowing state officials to set price caps on some of the most expensive medications, and bills have been introduced in several states to require greater transparency from drug companies on how they set prices, a prerequisite for determining whether the pricing is reasonable.

The Congressional Budget Office has long concluded that curbing Medicare drug spending requires that federal officials have stronger tools, like the power to offer preferential treatment to drug makers that offer big discounts. Medicaid, the state-federal insurance program for the poor, has ways to get big rebates from drug manufacturers; Medicare should be given such powers as well.

Congressional Republicans would no doubt balk at having the federal government negotiate Medicare drug prices, but the public is clamoring for action, and it’s the right thing to do.

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