Negotiating Fair Prices for Medicare Part D

Kristin Chambers

“Something’s wrong!” my daughter complained. Glancing at her in the car, I saw blotches and welts appearing on her face and neck. We sped to the ER where they immediately gave her an IV and stopped the allergic reaction. Within two hours, she was fine though we were perplexed as to what triggered her attack. It took a year to identify the culprit, but we were comforted by having EpiPens nearby should the problem arise again. Our co-pay was $10. Five years ago, she was on her own, between jobs, and therefore uninsured. Seeking a refill, she was aghast at her out-of-pocket price of over $600.

You see, the manufacturer of the EpiPen, led by Martin Shkreli, raised the price from around $100 in 2009 to more than $600 today. The device contains a dollar’s worth of epinephrine, but under our free market system the company is free to gouge the market.

Nirmal Mulye, chief executive of Nostrum Laboratories explained: “I think it is a moral requirement to make money when you can ... to sell the product for the highest price.” He was responding to questions from the Financial Times about his quadrupling the price of an essential antibiotic to $2,392 per bottle. “I agree with Martin Shkreli that when he raised the price of his drug he was within his rights because he had to reward his shareholders.”

The question is, does it make sense to leave it up to the “free market” when it comes to the price of drugs? Is the health of the population for sale? That’s not how it works in the rest of the world. Per capita drug spending in the US is about 40 percent higher than in Canada, 75% higher than in Japan and nearly triple the amount spent in Denmark. For example, that EpiPen costing $600 here is $69.00 in Britain. If it weren’t profitable, I am certain the manufacturer would stop making it.

The numbers highlight the stark differences in the way drugs are priced in the U.S. and Britain, where the government negotiates with pharmaceutical companies to limit costs. When Congress approved Medicare Part D in 2003 to help seniors buy prescription drugs, it slapped on an unusual restriction: The federal government was barred from negotiating cheaper prices for those medicines.

Part D often pays far more for drugs than do Medicaid or the Veterans Health Administration. One report found that Part D pays 80 percent more for medicines than the VHA and 73 percent more than Medicaid.

It was hoped that the insurance companies delivering Part D coverage would hold down costs. They have not. Instead, the ban on government price bargaining was a giant gift to the drug industry.

It is time to end the gift giving. HR 1776, languishing in Congress for two years now, would allow the Secretary of Health and Human Services to negotiate Medicare Part D prescription drug prices. All members of Congress who claim to care about their constituents’ health, personal and financial well-being should be advocating vigorously for this bill. Instead, our Congressman Tom Reed, touts his meaningless accolades from organizations that are actually fronts for big pharmaceutical companies, such as the Alliance for Patients Access or the Partnership to Fight Chronic Disease. He should be ashamed of his hypocrisy and we should be sick of it.

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