Prescription Pricing

When the next Congress takes office in January, the Democrats will have a majority in both houses. What is the most constructive action they can take? I suggest they start by modifying the rules for Medicare Part D, the prescription drug benefit.

Q1. How does Part D work?
A. Every American over 65 years old has the choice of a wide-variety of insurance plans that pay for prescriptions, including managed-care plans. Medicare pays most of the cost of these plans.

Q2. Since the Government pays for the medicines, can it negotiate lower prices from the pharmaceutical companies?
A. No, Republican congressmen, many of them recipients of massive campaign contributions from pharmaceutical PAC's, inserted a provision in the bill specifically prohibiting Government officials from doing so, over Democratic objections.

Q3. Should the Democrats use their new majority to repeal this language?
A. Yes. Negotiated prices could save more than $40 billion per year. (1)

Q4. Would President Bush sign a bill that would reduce pharmaceutical profits?
Even if he signed it, would his appointees really negotiate for price cuts?
A. My guess is he would sign it, but issue a "signing statement" saying that he would not use the authority to seek reduced prices. But his successor probably would, so it is still worth passing.

Q5. Would lower drug prices remove a needed incentive for pharmaceutical firms to research and develop new medicines?
A. Most valuable research and development of new medicines already takes place under Government auspices, typically paid for by grants from the National Institutes of Health (NIH), not in private-enterprise labs. (1)
A great deal of lab work at pharmaceutical firms is devoted to modifying existing profitable drugs, whose patents are expiring, into new versions that can be patented. The most profitable drugs are those aimed at common conditions (obesity, high blood pressure, high cholesterol, sleeplessness, nasal allergies, etc.) rather than at more serious ailments that affect only few patients.
Drug companies often cite their huge expenditures for research, but seldom mention that they spend even more on marketing and advertizing.

Q6. Many TV ads say "Ask your doctor if Product X is right for you."
What does this mean?
A. If your doctor prescibes your medications on the basis of a TV ad, it means you need a new doctor.
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(1) "Private Lesson" by Jonathan Cohn in the November 20, 2006, issue
of The New Republic, page 17.