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Advocacy Groups Say Medicare Should Negotiate With Drugmakers

By Julie Appleby

July 24th, 2014, 8:05 AM

Medicare could save billions if Congress overcame its reluctance to anger the drug industry and allowed the program to demand rebates or negotiate prices, Rep. Henry Waxman, D-Calif., said Wednesday. He added that’s something polls show many Americans support.

Rep. Waxman (Photo by Jason Merritt/Getty Images for UCLA)

Expensive new blockbuster drugs, such as a $1,000-a-pill hepatitis C treatment called Sovaldi, highlight the need to do something soon, the California Democrat said, backing recommendations made in a report released Wednesday by two advocacy groups, the Medicare Rights Center and Social Security Works.

“We could save money, lower the deficit and not ask seniors to pay more,” said Waxman, a long-standing drug industry critic who is retiring at the end of this session. “The only opposition is from drug companies because they will make a little less money if they have someone negotiating prices with them.”

He spoke just hours before the maker of Sovaldi — Gilead Sciences — reported record sales of $5.7 billion in the first six months of the year.

The drug industry has long opposed price controls, or allowing the government to negotiate for Medicare drug prices.

Imposing price controls on Medicare could hurt seniors by altering “the competitive nature of the program” and “could increase beneficiary premiums, cause job loss, and reduce incentives for innovation,” said Robert Zirkelbach, a senior vice president at  the Pharmaceutical Research and Manufacturers of America.

The advocacy groups suggested four ways Medicare could save on drug costs, including the passage of legislation introduced last year by Waxman and Sen. Jay Rockefeller, D-W.V., to require drugmakers to offer discounts similar to those they make in the Medicaid program,  for  people who are enrolled in that program as well as in Medicare, often referred to as “dual eligibles.”

Such rebates would save an estimated $141 billion over 10 years, the groups said.

The other recommendations include:

– Allow Medicare to create its own “public” drug insurance plan that could directly negotiate drug prices, as Veterans Affairs does now. Under current law, private insurers that offer Medicare drug insurance to enrollees negotiate with drugmakers, but the main Medicare program is prohibited from doing so.
– Get bigger discounts from manufacturers to eliminate the Medicare Part D “doughnut hole” – the period in which enrollees pay the full cost of their drugs – in 2016, rather than in 2020.
– Reduce the reimbursements to doctors, hospitals and others who administer some Medicare drugs from 6 percent over the sales price to 3 percent.

None of the ideas are new and all will be controversial. Doctors and oncology centers, for example, oppose cutting reimbursements, saying the additional funds help them pay for office overhead, staff and patient services. Private insurers oppose drug plans run by the government. And drugmakers fight price setting or additional controls.

Still, the price of Sovaldi — and other blockbuster drugs in the pipeline – “should be a wake-up call for legislators who have not been focused on this issue,” said Joe Baker, president of the Medicare Rights Center. “This is an expensive drug – and an effective one, but it is price-prohibitive.”

The drug went on the market late last year, touted as an improvement over older drug regimens. But, with an estimated 3 million Americans infected with the virus, the per-treatment cost of at least $84,000 is a big worry for insurers, including government programs.

Gilead has defended the price, saying the drug cures many people, thus reducing future medical costs.

Despite the backlash over Sovaldi’s price, Waxman says Congress is unlikely to take any action this session to grant Medicare power to negotiate or demand rebates.

“Republicans, but even a lot of Democrats, are looking to the drug companies for campaign support,” he said.

This article was produced by Kaiser Health News with support from The SCAN Foundation.

7 Responses to “Advocacy Groups Say Medicare Should Negotiate With Drugmakers”

  1. Elder Barbara J Warren says:

    Just remember that either your parents are retired and thank God they are blessed to have insurance and the funds to pay for these expensive medicines. Lets hope you never become disabled as I did, oh but my employer didn’t continue my health benefits so I’m dealing with it and writing you letters, every few months!
    Be blessed

  2. killroy71 says:

    Wow, so Gilead can make its ENTIRE $11B investment back in a single year. That leaves a lot of gravy for future years. They are just courting regulation with that level of greed.

  3. Janice Schacter Lintz says:

    Please sign our petition to have Medicare cover hearing aids under HR 3150. http://petitions.moveon.org/sign/to-pass-hr-3150.fb73?source=c.fb&r_by=6379786

    Please repost to all social media.

    Janice Schacter Lintz, Chair, Hearing Access Program

  4. edward fotsch says:

    When the feds determine the price of new drugs there will be none. Drug discoveries come at great cost and risk- funded by the private sector (‘read “shareholders” including union/teacher pension funds, individuals, etc.) who have lots of investment options. Who in their right mind would invest in a company whose medical product prices are determined by a bunch of pols who promise free healthcare? For those interested in an intelligent discussion of this topic please refer to http://online.wsj.com/articles/beggar-thy-neighbor-medicine-1406245356?mod=hp_opinion

  5. J Pehoushek says:

    You are just now figuring this out? The US military has been doing this for years and pays a fraction of what the civilian sector pays. The drug companies should be forced to compete to be the lowest bidder for their medications to be on the Medicare formulary. While they are at it, they should establish Medicare brick-and-mortar pharmacies and mail order pharmacies rather than leaving patients and the government at the mercy of the retail chains. It is about time that the government targets one of the biggest reasons for soaring medical costs. As physician reembursements continue to fall, pharmaceutical companies profits are skyrocketing. Only a small fraction of the profits are going to the development of new drugs. I would venture to bet that far more money goes to lobbying our political leaders to leave the pharmaceutical companies out of cost cutting stratagies. If physicians are prohibited from taking favors or incentives from pharmaceutical companies, then why aren’t politicians? If it is now mandatory for drug companies to publicly report encentives to physicians, why are contributions and “incentives” to our politicians able to be hidden in PACs and other ways. We the people of the United States pay significantly more than people in any other country in the world for the exact same drugs. Why? The drugs don’t work better if you pay more for them. They are just harder to afford or prohibitively expensive. Why are they more in the US? Because they can be. No one in our government has the guts to take this on. But it’s time they did. Medicare is one place that we can get take some control of the drug costs.

  6. Andy says:

    “Advocacy Groups Say Medicare Should Negotiate With Drugmakers.”

    Duh…tell me something We don’t know. Talk about a brain dead statement. Must be a Republican writing the article. Only a complete moron, like a Republican, would let drug makers name their own prices and allow those corrupt drug makers to refuse to negotiate. Only a complete moron, like a Republican, allows a fox to guard the hen house. Yet, that’s exactly what Medicare (via inept Congressional Republicans) has allowed for decades. Republicans have allowed drug makers to name their own prices and then, like the morons they are, have forced Medicare to pay those inflated prices. Republican have an agenda. To protect the drug makers at the expense of healthcare consumers. You will never find a Republican advocating for the consumer or the healthcare patient. Never! Vote to put more Republicans in Congress and you deserve what you get!

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