This post (from a Pit thread, but from Malthus and therefore more than simply mindless abuse) got me thinking about an issue that perhaps the SDMB can clear up.
One of the advantages (I am told) of the Canadian system is that they can negotiate lower drug prices. I believe this is not done in the US, either under the Medicare drug benefit passed under Bush nor, I believe, in the latest version of Obamacare.
My question is, why is that?
Is this only possible under a single payer system? Or would it work in any sense to have the federal government set prices where ever they want?
If objections to the are based on free market ideas, would those objections not apply under a single payer system?
As a side note, Malthus raises an interesting point about how marketing expenses are much lower in Canada because marketing prescription drugs directly to would-be patients is extremely uncommon (but not unheard of - Canadian-made ads for Cialis and such air occasionally, though done subtly and without the “ask your doctor” or the interminable list of potential side-effects). However, the vast majority of Canadians have access to American television, where such advertisements are damn-near inescapable. Hence, the Canadian drug companies gain yet another benefit from the American system, however arguably screwed up it is.
I realize I ought to have explained more fully - the rule in Canada for Schedule F drugs (i.e. prescription-only) is the so-called “name, rank and serial number” rule. You can advertise direct to public, but only in an extremely limited manner.
From the Drugs Regulations to the Food and Drugs Act:
Well, when Medicare’s prescription drug program (Medicare part D) was passed, the bill setting it up specifically prohibited Medicare from negotiating with drug companies for lower prices. It’s likely not going to be done under Obamacare because Obama made a deal with the drug companies not to do it in exchange for getting rid of the Medicare Part D “doughnut hole”. (The “doughnut hole” mentioned is the term for a loophole in the program. In the program, once someone on Medicare has spent $2700 in drugs in a year, Medicare stops paying for additional drugs, until the person has spent about another $3000 dollars in drugs in that year. The person on Medicare is responsible for all those costs.)
It is that way simply because thats the way the legislation was passed. Medicare reimburses drugs used in care at 95% of the average wholesale price. For prescription drugs, Medicare is explicitly forbidden from negotiating with with drug companies. Rather, the insurance companies that administer the program are supposed to negotiate with the drug companies.
As to why that is there’s basically two explanations depending on your internal beliefs:
(1) The drug companies paid off the politicians in terms of donations to protect their profit margins.
(2) If the Govt. “negotiated” drug prices they would in reality be setting them, which would adversely affect research and delay the discovery of new medications. In addition, private insurance companies are better at negotiations since they are private and have a profit motive.
The government does negotiate on drug prices through the Military and VA health care systems. Generally speaking, they pay significantly less for a wide range of drugs as compared with Medicare and even private insurers.
The requirement not to negotiate makes no sense. Generally the gov’t is positively encouraged to negotiate the best price when it pays for goods or services.
The requirement makes perfect sense when Lobbyists are determining the legislation. It increases drug costs and raises profits to big PHARMA. It is not intended as a service to the American consumers.
It was political. The pharmaceutical lobby was and is opposed to government negotiation, for obvious reasons, which they argue is another word for government price controls, and they were able to stop it in 2003.
The short answer is that congress is bought by drug companies, and (more importantly) that the CBO does not think it will save any significant amount of money in many circumstances without causing other significant problems. Their conclusions are outlined in this CBO letter to Bill Frist.
Or as Peter Orszag stated wrt Medicare Part D and formularies (preferred-drug list):
The above is mostly in reference to prescription drug prices in Medicare Part D. However, more broadly speaking, the issues remain the same. The VA does negotiate drug prices, but many feel the savings are not worth it.
Some of this is just fear mongering. There is a lot of middle ground between adopting a short-sighted, restrictive formulary, and barring any negotiation. The underlying problem here is that a significant portion of congress does not believe in government or it’s ability to affect positive change, and thus would rather not interfere with the market. The reality is that government (collectively) could obvious negotiate or compel drug companies to lower costs, but there would be unfortunate and unintended consequences as a result.
As another data point on this issue, I’ll note that Pfizer is running commercials targeting patients who take Lipitor* for their cholesterol, urging them to stay on Lipitor, instead of asking their doctor fo prescribe them a generic drug. The point they hammer on is that there is no generic form of Lipitor available, and if the patient opts for a generic, he will not be getting what the doctor decided is the most appropriate drug for his condition.
Its obvious that the government has no negotiating power the way part D is set up now. Basically, the government gives part D plans X dollars per enrollee so long as they cover a certain minimum of drug types. The government isn’t directly buying the medicine, and really has no leverage in negotiations between the insurance company and the drug company. When people advocate negotiating with drug companies they advocate getting rid of the insurance companies and having the government act as the direct buyer of medicine.
Because the drug lobbies have money to put up pro-Obamacare ads, which they have been doing. Obama knows that his plans are unpopular and he’ll need all the pull he can get, and so he’s been cutting deals with special interests, wherein in exchange for their support, they’ll get a seat at the table when it comes to carving out special favors.
Reich, as a Democrat and UHC supporter, prefers to blame Big Pharma for subverting democracy, but I would take his argument a step further. The Obama administration is engaged in pushing forward a highly ambitious but controversial agenda, from universal healthcare to climate change legislation. In each case, rather than governing from the center, his aims are as far from the center, as immoderate, as he thinks he can get away with - and as a result, he runs into heavy opposition making it a coin flip whether the bills will pass or not.
So far, so good, plenty of presidents do this. BUT, what he now does, instead of trying to convince the American people that his way is the best, is go to all the relevant special interests and start cutting deals. In exchange for their support, he will give them a hand in shaping the bills. If they oppose him, then they get no skin in the game. Now this is lobbying on steroids - mandatory lobbying! It’s a highly hypocritical move for a politician who bloviated during the campaign about opposing special interests in Washington, and a disturbing trend for democracy.
I have no idea why a public insurer should reimburse customers of private insurance plans a certain amount per enrollee, rather than simply reimbursing the consumer directly. What’s the advantage of organizing it in this manner?
But I will note (as ** athelas **) does above, that if there is nothing for Congress to sell to drug companies, there is nothing for the drug companies to buy.
And no reason for them to spend their money or energies doing so.
Yes, but the letter detailed the conclusions they drew when they, “examined the effect of striking the “noninterference” provision (section 1860D-11(i) of the Social Security Act) as added by P. L. 108-173, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.” They were evaluating the effectiveness of amending the provision.
The government always has leverage. They are providing the money, so they could have a say if they wanted to. Unlike the VA, who negotiate for, and administer the drugs, Medicare (as it currently exists) will always be a step removed from the actual buying of drugs.
No they are not - or at least not exclusively. More importantly, doing so would not substantially undercut the practical and politic concerns that would prevent it from working effectively. I still think the government should negotiate, or at least keep the option on the table in all situations, but I still think there are serious practical concerns.