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November 30, 2012

Reducing Prescription Drug Costs Central to Administration Opening Bid on Medicare

Posted in: Uncategorized

Courtesy Think Progress, here’s a pretty good chart detailing the health program savings that were included in the White House’s opening bid on the fiscal slope. You can get this information from the White House’s FY2013 budget request.

As you can see above, the plurality of the savings come from “Medicaid drug rebates for Part D.” This basically involves extending rebates for prescription drugs that are available for Medicaid recipients into the prescription drug benefit in Medicare Part D (Republicans actually supported this for a short time in 2011). It’s a fancy way of saying that savings could be generated from bargaining down the cost of prescription drugs that Medicare will pay. Medicare is a massive purchaser of prescription drugs, and yet they currently don’t have the kind of bargaining power for Part D that could lower prices. In fact, in 2003, Republicans pushed the 6 million “dual eligibles” – who could apply for both Medicare and Medicaid – into Medicare Part D, depriving them of those Medicaid rebates. In general terms, allowing Medicre Part D to bargain for the same prescription drug prices as Medicaid would save $112 billion over a 10-year window, according to the CBO.

This is critical now because, in addition to health care costs being higher here than anywhere in the world, in particular, prescription drug prices are skyrocketing, even as the cost of generics drop. There are provisions in the Administration’s program savings to end “pay-for-delay,” where drug companies pay off competitors to effectively extend the patent for brand-name drugs and stop generics, costing the government and consumers billions in extra costs. There’s even a provision to allow for faster generic versions of high-cost biologic drugs. But the big issue is that prescription drugs are far too expensive, and the government has tools at their disposal to make them cheaper.

As long as we’re doing deficit reduction – which we shouldn’t – we might as well create these new efficiencies, to make drug prices cheaper (most of this money ends up in corporate treasuries rather than the real economy anyway), to cut down on Medicare fraud and to change payment systems to force quality over quantity of care. You do all that well before you even think about cutting a dime of benefits.

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