If It Isn’t Broke …

BIOtech Now
Brian Newell

Congress created the Medicare Part D prescription drug program in 2003, and for more than a decade, the program’s track record has been one of remarkable success and popularity. In fact:

  • In its first 10 years the program cost $349 billion less than originally expected, according to figures from the nonpartisan Congressional Budget Office;
  • Premiums for beneficiaries are expected to drop by 3 percent next year;
  • Plans and patients pay an estimated 35 percent below drugmakers’ list prices for many of the most widely-used treatments; and
  • Nearly 90 percent of seniors are satisfied with the program.

So what’s behind the success of the Medicare prescription drug program? The answer: Private-sector competition. As Gary Puckrein, head of the National Minority Quality Forum, wrote earlier this week:

“The key to Part D’s success? The government’s willingness to let insurers drive down prices. Insurance companies currently negotiate with drug makers to obtain steep discounts on medicines. Insurers try to get the lowest price possible, because big discounts enable them to undercut rival insurers and attract customers by offering lower co-pays, deductibles, and premiums.”

Lower co-pays, deductibles, and premiums equal better value and affordability for seniors. It can also mean better health outcomes, and Puckrein writes that the program has been especially beneficial for minorities:

“A study from Johns Hopkins University showed that when seniors gained coverage through Part D, it reduced their hospital admissions by 8 percent, saving Medicare $1.5 billion each year.

“Part D has particularly helped minorities access care. The program reduced the likelihood that blacks would ration or go without prescriptions by 4 percent. It has cut out of pocket drug costs by 39 percent for blacks and 31 percent for Hispanics.

“And Part D reduced the gap between the number of prescriptions filled by whites and the number filled by Hispanics by three scripts per year. This improved access to care is crucial. Many diseases disproportionately affect minorities.”

Unfortunately, the success of the program would be derailed if a proposal floating around Capitol Hill gains greater traction. The idea is to empower the federal government to directly negotiate the price of prescription drugs in the Medicare program. But Mary Grealy, president of the Healthcare Leadership Council, warns this will ultimately hurt the very seniors the program is supposed to help:

“The Congressional Budget Office has analyzed this issue and came to the conclusion that federal government involvement in Medicare drug pricing would not bring about leverage any more powerful than what private payers are already exercising. The only unique weapon the executive branch could use—maintaining strictly limited drug formularies like the Veterans Administration does—would not be in the best interests of beneficiaries.

Or as Puckrein noted:

“The only way the government could lower drug prices, according to the CBO, would be to create a ‘one-size-fits-all’ formulary. That means federal officials would decide which medicines Part D would cover. To keep costs down, the government would exclude certain medicines currently offered on Part D plans.”

If policymakers want to tackle drug costs, there are better ways do it. A coalition made up of drugmakers, insurers, employers, consumer advocates, and others have put forward a consensus set of reforms that would help expand access to affordable medicines. These reforms include accelerating the approval of generic medicines and moving toward a payment system that rewards value over volume.

There are other responsible solutions within the proposal that policymakers should consider. At the very least, Congress should heed Grealy’s advice when it comes to a prescription drug program tens of millions of seniors now rely on:

“Instead of using the old cliché about not fixing what isn’t broken, I would suggest instead that Congress shouldn’t even consider breaking a program that has become indispensable.”

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