Is the government doing enough to help us buy drugs at reasonable prices?
Last week, the US House Committee on Oversight and Government Reform released a report asserting that taxpayers pay as much as 30% more for prescriptions under Medicare Part D than under other government programs such as Medicaid. Medicare Part D is a privately administered program designed to help the elderly and disabled afford prescription drugs. When it was enacted in January 2006, drug companies were not required to provide discounts.
This always seemed wrong to me. Why shouldn’t the government, acting on behalf of the whole country, use its bargaining power to persuade drug companies to sell drugs more cheaply? That’s what Medicaid has done, and this arrangement has helped the poor. The poor obviously need the most assistance, but why can’t the elderly, disabled, and the rest of us benefit from the government’s negotiating power?
The answer, according to Richard Smith, a PhRMA vice-president, is that bargaining or price controls would seriously impair innovation. Smith cited a scholar at the American Enterprise Institute as a source for this claim.
Excuse my impolitic remark, but even without price controls, the pharmaceutical industry is not exactly setting new records for innovation at the moment. We’ve heard this argument before: the industry defends its prices by saying it must spend vast sums on research and development. If this is the case, why is the industry offering the government discounts through Medicaid?
I think pharmaceutical companies spend more money on marketing tchotchkes and direct-to-consumer advertising (a tactic of dubious help to patients, in my opinion) than they do on research.
This is a question that deserves further discussion, and I’m happy that the House Committee is investigating it. Our debate about drug pricing ought to include a wider range of perspectives and solutions. We can probably do a better job of helping patients without hurting industry.