The Bush administration's 2006 prescription drug benefit, the Medicare (Part D) program has been largely successful, and apparently the Democrats can't stand for it any longer. One of the first items on the Pelosi agenda is to alter the Medicare program to allow the government to negotiate directly with pharmaceutical companies, presuming (pretending?) that this will save money on drugs, and help pay for the program.
An article from the Dec. 25 issue of The Weekly Standard, by Robert M. Goldberg (not available free online) explains that the market mechanisms were instituted precisely to avoid the kind of government price-controlling proposed by Democrats today, and proven destructive in the past.
The Medicare legislation creating the prescription drug benefit that took effect in 2006 (known as Part D) prohibited the government from negotiating directly with drug or biotech companies in order to guard against price controls. Instead, pharmacy benefit managers--the same service organizations most health plans use--would negotiate drug prices, pay pharmacy claims, etc., while offering competing versions of the Part D benefit to seniors. Democrats and most policy experts predicted the new drug benefit would be confusing and unworkable, that seniors would fail to sign up, and that those who did would receive scant coverage as drug companies jacked up prices to cash in on sweetheart deals absent any government jawboning.Liberal and conservative opponents of the Bush program both predicted that angry seniors by this fall would be headed to the polls outraged at the cost, complexity, and inadequacy of their new drug benefit. In fact, as the Washington Post reported (after the election), polls show 80 percent of those covered are satisfied with the plan. The plan covers 22.5 million people who previously had no prescription drug coverage. Another 9 million poor seniors have their entire drug costs covered, with fewer restrictions on choice than under the state or Medicaid programs on which they previously relied. Under the lash of competition, the cost of the program has been lower than expected--by a whopping $26 billion in 2006. Medicare officials believe the plan's average per-person subsidy will drop 15 percent next year to under $80 per month, even as the out-of-pocket costs of seniors continue to drop.
Unwilling to recognize the good news, Democrats have consistently pointed to the government-negotiated drug prices offered by the Department of Veterans Affairs as a model for what they would do with Medicare Part D. Ron Pollack, executive director of the liberal advocacy group Families USA (which supported a market-based approach to Medicare drug coverage when Democrats and President Clinton advanced it in 2000), has asserted, "Medicare is overwhelmingly the largest purchaser [of prescription drugs], and it's ridiculous for Medicare not to get the best deal of all institutional purchasers."
However, both the Congressional Budget Office and Medicare analysts estimate that the government could do no better than a private company in negotiating prices. So why do Democrats insist they can? Because they aren't proposing market-like negotiations but a combination of price controls and restrictions on what drugs seniors can use. In a word: HillaryCare.
The point is that the track record of the Veterans Affairs system that Democrats want to clone for Medicare's prescription drug benefit is miserable. The system actually prevents the newest (and thus most effective) medicines from being available to the people they purport to serve. More from the Goldberg piece:
Far from negotiating drug prices, the VA imposes them. Federal law requires companies to sell to the VA at 24 percent below wholesale price. If they won't, they are banned from selling medicines to Medicaid, Medicare, and the public health service. The VA demands even deeper discounts by creating a national formulary--a restrictive list of approved drugs for its patients. Companies that don't meet that additional discount don't make the list. Patients must get drugs from VA pharmacies instead of retail outlets. Patients who endure side effects from a formulary medicine--or who fail to respond to one--must submit themselves to an arduous and time-consuming bureaucratic process to gain access to any pharmaceuticals not on the list.In opposing the Medicare Part D reform in 2003, Democratic senator Patty Murray stated that she "was unhappy at the prospect that this plan could tell patients with MS, Parkinson's disease, and ALS that they can't get the drugs they need because their plan will not cover them." Yet Azilect, the newest drug to treat the symptoms of Parkinson's disease, approved in 2006, is not on the VA drug list, though every Medicare Part D plan has adopted it. In delaying access to new medicines, the VA is no different from the national health services of Canada and Great Britain. Tysabri, a new drug for multiple sclerosis, is available under every Medicare plan. It is not on the VA drug plan.
That doesn't seem to bother Speaker-to-be Nancy Pelosi. She is readying a proposal to force Medicare to
ratchet down prices for every drug now and in the future using the VA approach. Yet as former Medicare director Mark McClellan points out, the Stark proposal will perversely encourage higher prices. "You set a top price for Medicare or the VA, or demand a deeper discount than the private sector, and watch the drug prices increase and discounts disappear. Demand cost-effectiveness studies, and the drugs will be offered to Medicare last while the case is made to the private sector first. That's one reason lots of drugs are available to Medicare patients now, but not to folks in the VA system."Indeed, the VA price controls take a toll on the health of seniors who depend on the veterans' system for their care. Frank Lichtenberg, an economist at Columbia University's Graduate School of Business, found that the majority of the drugs on the VA formulary are more than eight years old--just 19 percent of prescription drugs approved since 2000 and 38 percent of those approved from 1990-2000 have made it onto the VA formulary. None of the drugs regarded as priority medicines since 2000 by the Food and Drug Administration are on it either. Lichtenberg estimates that "the use of older drugs in the VA system may have reduced life expectancy by 2.04 months" per person.
Our veterans are not getting access to 81% of all of the newest and most effective drugs approved since 2000, and are able to get less than 40% of all new drugs approved in the last 16 years, because their system is crippled by bureaucracy and federal price controls.
That's an outrage in itself, but it's even more outrageous that the Democrats now plan to take it national! They just can't figure out how a private company can be making a profit in there somewhere, and yet the system is far more efficient and effective than the one in which drug prices are "negotiated" by the government. They are indeed slow learners.
This proposal isn't "progressive" policy of any stripe. All kinds of cliché truisms apply here. If it ain't broke, don't fix it. When a person or group is doing a bad job at one task, you don't give them more to do.
The Democrats' proposed "reform" rings ideological, because it sure isn't practical. It's a power grab, and an anti-market hissy fit prompted by the success of the privatization aspects of the existing Bush plan. (It would suffice that it is the "Bush plan".) Today's Democratic power brokers will have none of that privatization stuff, thank you, even if they have to take a large step backwards, reversing positive reforms, and in the process denying seniors the best drugs our companies can produce.
Having already stomped all over the fair use doctrine in this post, (did I mention you should subscribe to TWS?) , I'll post one more paragraph from the Goldberg article. There are some indications of sanity among Democrats:
Some prudent Democrats have begun to hedge their bets. Incoming House Way and Means chairman Charles Rangel appears more interested in working with drug companies to expand their existing patient assistance programs, which help subsidize needy patients. Incoming Senate Finance Committee chairman Max Baucus, who supported the Medicare drug benefit, has agreed to hold hearings on government price negotiations but is cool to the idea. For all the talk about the supposed virtues of the VA price controls, nearly 2 million VA beneficiaries have signed up for Medicare Part D. That's because the new plans give them access to medicines they can't get under the VA. Congressional Democrats should take note.
Let your Congressman know how you feel about regressive policy-making.
UPDATE 1/7: Turns out the Goldberg article isn't "protected" online after all.
Posted by dan at January 4, 2007 10:47 PM