The US House recently passed a component of the Democrats' 100-hour agenda, a bill to allow the federal government to "negotiate" directly with pharmaceutical and biotech companies. Dave Reichert wisely voted against the bill, thus upsetting liberal blogger and anti-Reichert zealot, Daniel Kirkdorffer.
What's interesting about Kirkdorffer's analysis is the total absence of discussion of what independent critics of the bill have said. He blames it all on evil Republicans, including Reichert, and especially on George W. Bush.
Ok.
Now, I've written a thing or two about Medicare "negotiating" drug prices (most recently here and here). I've tried to rely heavily on non-Republican criticism of the bill, though there is much to say on ideological grounds regarding the benefit of market-based solutions over government monopolies. But let's just humor Kirkdorffer and like-minded folks further by sticking to some more independent sources of skepticism for a bit.
The latter portion of theWashington Post's coverage of the bill's passage notes: "Although the measure moved quickly through the House, its prospects are murkier in the Senate, where no companion bill has been introduced." The Senate has in the past only supported much more modest versions of the current bill in question, and Finance Committee Chairman Max Baucus remains skeptical (discussed in the second half of this article). All that, and Democrats have to worry about finding veto-proof majorities for any legislation akin to what the House just passed.
Finding such margins won't be easy. Why? The bill isn't a very good idea. But don't take my word for it, take that of a true stalwart of Republican ideas, the Washington Post editorial page. Today they ran an editorial entitled, "The Wrong Prescription: Government should not negotiate drug prices in Medicare." The editorial runs through the list of criticisms against the idea that are familiar to loyal readers of this site: the comparison of VA drug coverage to Medicare is flawed, the proposal won't save any money (supposedly the whole point of the idea), it ignores the success of the current program's use of competing private sector providers, and it relies excessively on government-run answers rather than on more effective private sector solutions already proven to work.
Regrettably for Kirkdorffer, this proposal, like many a liberal idea, is long on passion, short on common sense. Off to a skeptical Senate it goes, where bad bills often go to die.
Posted by Eric Earling at January 13, 2007 10:07 PM | Email ThisThe government has the ability to negotiate prices for everything else the government buys. Why should this be different for Medicare drugs?
It makes no sense to disallow negotiation of prices. This bill restores that ability, to be used as needed.
Of course it is no surprise that the powerful drug and insurance lobbies aren't fans.
As for whether this can pass through the senate, I think it has a chance, perhaps not without adjustment, but it has a chance.
What matters to me is that the artificial restriction against negotiation is removed.
Posted by: Daniel K on January 13, 2007 11:17 PMAnybody hear from Darcy lately? Has the Governor appointed her to something yet? Let us all follow the Kirkdorfferian model and whine about Darcy does and does not do, like voting, for the next two years.
You know we all need to invest in Harry's future, but we haven't been blessed with Darcy's "yeah or nay" on the School bond in her own district yet. Hey I thought this was someone who was "involved" in her community.
Posted by: Huh? on January 14, 2007 06:37 AM100 hours, how many items will actually make it into law?
.....Yawn
They put all their Dinosaurs in the same key offices that they lost 12 years ago.
.....Yawn
Posted by: GS on January 14, 2007 06:44 AMThis GAO report will fill you in on some of the details.
Posted by: scottd on January 14, 2007 09:32 AMAnd that is precisely the main point where we differ. You want government to "step in" and influence prices. I don't.
Posted by: jimg on January 14, 2007 09:45 AMSorry, but you're still missing the point. You keep trotting out the term "negotiate," but that's not what actually occurs in the VA system or in Medicaid. Medicaid sets prices based on a formula, the VA "negotiates" by aggressively excluding drugs that the manufacturer won't offer at the price it wants to pay. As the Post and others have pointed out ad nauseum, it makes no sense in terms of politics or healthcare delivery to dramatically restrict the availability of certain prescriptions to the Medicare population.
Moreover, the Congressional Budget Office confirmed that if you don't do what the VA does, limit patient choice (see TrueSoldier's comments), then the proposal you favor won't actually save any money compared to the competitive negotiations already occurring with the private sector entities currently providing the benefit. The only advantage the proposal can claim to offer is to save the government money. The CBO confirms it won't do that. Why "fix" a program that is working well? I realize it's a cute political point for House Democrats, but Senate Democrats made no such pledge and are likely to give it much more skepticism given that the bill as passed is more bark than bite.
Posted by: Eric Earling on January 14, 2007 11:32 AMBoth of the programs use formularies and both negotiate prices. Any well-administered program will do this, if for no other reason than to avoid paying ridiculous prices for overly hyped drugs when there are alternatives that are just as effective. For some reason, you seem to think this is a bad thing -- and yet, you admit to having been satisfied with the DoD program.
The bill makes no reference to the VA, that's a comparison you make.
The program is not working well, and the CBO isn't the end all authority on whether this will save beneficiaries money, and close the "donut hole" that's hurting patients with the current plan.
Posted by: Daniel K on January 14, 2007 12:53 PMSo how much are they paying for a government issued hammer these days? What about toilet seats?
Posted by: Michael on January 14, 2007 02:29 PMDefenders of the "negotiation" idea have repeatedly cited the VA as an argument for why Medicare should supposedly "negotiate" in the same manner. Critics of bill, such as the Post, have in contrast pointed out the only way the VA achieves savings in its program is by refusing to pay above a certain price and thus excluding thousands of drugs from VA beneficiaries that are meanwhile available to those under Medicare. You may not be specifically making the point about the VA, but supporters of "negotiations" have. Ironically, the bill is now crafted in a way that doesn't allow for the sort of restrictive formularies the VA utilizes, thus the CBO estimate saying it won't save the government any money.
Also, I'm curious if you could point to one recent poll saying beneficiaries are unhappy with the benefit. As I've covered at this site before, the program is costing the government less than expected, premiums for beneficiaries are lower than forecast, and seniors themselves are satisfied (all summarized in articles like this one, which I've linked to in the past).
You notice how the issue virtually disappeared from the Democratic playbook in the last few months before the election? There's a reason for that, like this pre-election summary of polling data by the Tarrance Group showing the drug benefit plunging on the list of priorities for voters. Why? The program is working. Tarrance found 83% of seniors somewhat or very satisfied with their plan, and 75% willing to recommend their plan to others.
Here are some other polls I've seen in the past:
Harris Online (11/06)
-75% satisfied with their plans
-82% find the plan easy to use
-70% are saving money
Kaiser (7/06)
-More than 8 out of 10 seniors satisfied
-3 out of 4 seniors would choose the same plan again
WaPo/ABC (4/06)
-3/4 of those enrolled say paperwork was easy to complete
-2/3 of those enrolled are saving money
Listen, I admire your passion. But that doesn't change the fact this issue on the 100-hour agenda is all rhetoric and no reality. If the program wasn't saving people money, was costing the government more than expected, and seniors were unsatisfied you'd hear people clamoring for change (trust me...if seniors are unhappy about a government program they use they let Members of Congress know). But they're not. The current structure of competition between private sector providers is working. Even Democratic pollsters are finding that people don't like the government "negotiation" idea when they understand the details.
So, good luck in the Senate. You're going to need it.
Posted by: Eric Earling on January 14, 2007 03:59 PMThe senate will laugh at them,
The Veto Pen has endless Ink.
Pelosi and her gang of old tired demoncraps are lucky they lived 100 hrs with their ages and tired endless rhetoric.
Nothing more than a tired fart in a windstorm of history.
Frankly, I am unsure how much he really does. He can say he isn't concerned about his legacy, but his actions on a last ditch, but ill-advised effort to turn the war around in Iraq says otherwise.
Posted by: KS on January 14, 2007 09:17 PMWhen the government BUYS drugs for the government's use that is a different issue. They are the consumer of the drugs.
Posted by: Right said Fred on January 15, 2007 08:47 AMI don't agree with him much, but I think over the years as he gets older he will become a conservative. What is the old saying, "if you are not a liberal when you are in school, you have no heart and if you are not a conservative ....."
Posted by: swatter on January 15, 2007 01:56 PM
You keep trotting out the term "negotiate," but that's not what actually occurs in the VA system or in Medicaid. Medicaid sets prices based on a formula, the VA "negotiates" by aggressively excluding drugs that the manufacturer won't offer at the price it wants to pay.
Then, logically, you also oppose the practices of WalMart, Toyota, Starbucks, etc. There's a word for that: marketplace. So which is it? Do you want government to act more fiscally responsible, I dare say "more business-like", or not?
I'm eager for the day when a "free market" proponent devises a coherent thesis.
Cheers, Jason
WalMart competes against Target, K-Mart, etc. Toyota competes against Honda, GM, Ford, etc. Starbucks competes against Tully's, indy coffee shops, etc. Who would the Federal Government "compete" against in the United States as a sole-source negotiator for providing the Medicare drug benefit?
Posted by: Eric Earling on January 16, 2007 07:56 AMI say: "Who would the Federal Government 'compete' against in the United States as a sole-source negotiator for providing the Medicare drug benefit?"
You say: "Canada. Next question."
Thanks for the geography lesson.
Posted by: Eric Earling on January 16, 2007 09:38 AMThanks for the geography lesson.
You're very welcome. Being unfamiliar with your education and background, I thought it best to make no assumptions and start at the very beginning.
I'm sorry that I ignored your strawman argument and instead answered the question you should have asked. But you didn't answer my question regarding whether the government should participate in a marketplace or not. So I guess that makes us even.
As previously pointed out by others "upthread", other branches of government do negotiate. And I believe state programs also negotiate with pharma.
Are these counter-examples to your hypothetical concern not sufficient for you?
Apparently not. So I helpfully pointed out the gray market of Canada pharma selling abroad. Residents of the United States buy drugs from Canada. Even Medicare/Medicaid enrollees.
And many of these people use a communication tool that you may have heard of: The Internets. In case you hadn't heard of it, it's kind of like mail order catalogs. But without all the paper. So, really, a customer can be pretty much anywhere, not just in the United States.
I admire your enthusiasm for consumer "choice". Fortunately, we do have a choice. I always check the Canadian prices for the drugs I buy (via Froogle). And, honestly, I found it very weird that the very same people who would exclude price negotiation were also trying to reduce my choice by outlawing the resale of US drugs to US residents via Canada.
All the while, I kept reading about the "free market" being used as a justification. But I admit that I never understood the connection.
Cheers, Jason
Other branches of the government do at times negotiate, when for example multiple companies compete with each other to fill a government contract. That's not how things are done in Medicare outside of the drug program, where generally speaking Medicare sets a price and healthcare providers can take it or leave it. Meanwhile, no, state programs do not negotiate with pharma. Medicaid prices are set under an established formula of X percentage off the "Average Wholesale Price." At the same time, the VA example defenders of the negotiations proposal doesn't "negotiate" either, they set prices too. Which is why, as the Post editorial I linked to notes, the VA covers only 1,300 of the 4,300 drugs currently provided by Medicare.
You're also demonstrating a lack of understanding as to how the drug program works. Sales from Canada to the US have diminished because Canada has limited sales opportunities, but more importantly because more seniors have drug coverage now through Medicare and are thus paying only a monthly premium and a copay rather than worrying about if Canadian retail prices are lower than the US.
That point about Canada is particularly important in your concoction where in a "free market" the US will just get its drugs from Canada. That country doesn't have a free market for drug prices, moreover the reason they clamped down on drug purchases from the US is that the physical size of the Canadian market is dwarfed by the US market for prescription drugs. "Market" comparisons between the two countries don't work.
I don't object to market forces benefiting the Medicare drug program. That's what's happening right now with competing providers negotiating with drug companies for the best deal to provide products to their enrollees.
In the end, you're still doing what lots of liberal opponents of the current program are stuck on. You're complaining about a program that is working well; saving citizens money, saving the government money, and earning high satisfaction from its beneficiaries. Independent analysis shows the Democratic proposal won't save the government any money, or presumably beneficiaries, unless it is able to limit patient choice - which isn't going to happen. All why the bill in question is going to get flayed in the Senate.
Posted by: Eric Earling on January 17, 2007 07:13 AM