# Why Doesn't the Fed Govt Negotiate Lower Drug Prices? **URL:** \ **Category:** Great Debates\ **Created:** [August 24, 2009, 3:31pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507 "2009-08-24T15:31:56Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [August 24, 2009, 3:31pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/1 "2009-08-24T15:31:56Z")
[This post](http://boards.straightdope.com/sdmb/showpost.php?p=11478010&postcount=60) (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? Regards, Shodan ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [August 24, 2009, 3:35pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/2 "2009-08-24T15:35:41Z")
> [@Shodan](#): > > [This post](http://boards.straightdope.com/sdmb/showpost.php?p=11478010&postcount=60) (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? > > Regards, > Shodan I didn’t realize they _didn’t_ do that. After all, the gubmint essentially negotiates lower prices for medical services (not drugs) via the Medicare program. Good question. I anxiously await the response from someone knowledgeable. ---
**Author:** ![Bryan\_Ekers](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bryan_ekers/32/183_2.png) [@Bryan\_Ekers](https://boards.straightdope.com/u/Bryan_Ekers)\ **Post date:** [August 24, 2009, 3:46pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/3 "2009-08-24T15:46:39Z")
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. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [August 24, 2009, 3:53pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/4 "2009-08-24T15:53:42Z")
> [@Bryan\_Ekers](#): > > 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: > [@](#): > > C.01.044. (1) Where a person advertises to the general public a Schedule F Drug, the person shall not make any representation other than with respect to the brand name, proper name, common name, price and quantity of the drug. ---
**Author:** ![Captain\_Amazing](https://avatars.discourse-cdn.com/v4/letter/c/6de8d8/32.png) [@Captain\_Amazing](https://boards.straightdope.com/u/Captain_Amazing)\ **Post date:** [August 24, 2009, 3:55pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/5 "2009-08-24T15:55:37Z")
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.) ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [August 24, 2009, 4:03pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/6 "2009-08-24T16:03:11Z")
> [@Captain\_Amazing](#): > > 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.) I’m not sure I understand. What leverage do the drug companies have to require such a stipulation? Why do they lack that leverage in Canada? ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 24, 2009, 4:07pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/7 "2009-08-24T16:07:29Z")
> [@Shodan](#): > > [This post](http://boards.straightdope.com/sdmb/showpost.php?p=11478010&postcount=60) (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? 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. ---
**Author:** ![St.Urho](https://avatars.discourse-cdn.com/v4/letter/s/8e7dd6/32.png) [@St.Urho](https://boards.straightdope.com/u/St.Urho)\ **Post date:** [August 24, 2009, 4:08pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/8 "2009-08-24T16:08:35Z")
The legislation for Medicare Part D forbid the government from negotiating lower drug prices: From [here](http://www.cbsnews.com/stories/2007/03/29/60minutes/main2625305_page2.shtml?tag=contentMain;contentBody) > [@](#): > > It prohibited Medicare and the federal government from using its vast purchasing power to negotiate lower prices directly from the drug companies. > > \ > > The drug industry says that competition among private insurance plans that service the Medicare program help keep prices low. But Families USA reported in a January study that Medicare patients are being charged nearly 60 percent more for the top 20 drugs than veterans pay under a program run by the U.S. Department of Veterans Affairs. > > For example, Lipitor, a popular cholesterol drug, the cheapest Medicare price is $785 for a year’s supply — 50 percent more than the VA’s price of $520. > > For Zocor, another cholesterol drug, the best Medicare price is $1,485 for a year’s supply. The same drug only costs $127 a year under the VA’s plan. The VA is allowed to negotiate prices. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [August 24, 2009, 4:10pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/9 "2009-08-24T16:10:08Z")
> [@Captain\_Amazing](#): > > 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. What was the rationale for this, as well as for the same stipulation in Obamacare (as you mention)? Regards, Shodan ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [August 24, 2009, 4:13pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/10 "2009-08-24T16:13:29Z")
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. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [August 24, 2009, 4:18pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/11 "2009-08-24T16:18:09Z")
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. ---
**Author:** ![Captain\_Amazing](https://avatars.discourse-cdn.com/v4/letter/c/6de8d8/32.png) [@Captain\_Amazing](https://boards.straightdope.com/u/Captain_Amazing)\ **Post date:** [August 24, 2009, 4:25pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/12 "2009-08-24T16:25:35Z")
> [@Shodan](#): > > What was the rationale for this, as well as for the same stipulation in Obamacare (as you mention)? 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. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [August 24, 2009, 4:30pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/13 "2009-08-24T16:30:52Z")
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](http://www.cbo.gov/ftpdocs/49xx/doc4986/FristLetter.pdf) letter to Bill Frist. Or as Peter Orszag [stated](http://www.heritage.org/Research/HealthCare/wm1426.cfm) wrt Medicare Part D and formularies (preferred-drug list): > [@](#): > > As CBO Director Peter Orszag explained after the passage of H.R. 4, the House’s price negotiation bill, "**Just showing up and saying ‘we’re from the government and would like a lower price’ doesn’t help very much."[5] For the government to move market share, it would have to impose a government formulary or pricing structure or some other regulatory regime. Its interference would necessarily become an exercise of government power to control prices, directly or indirectly, and exclude from the market any drug offered at a higher price. In turn, this would result in a one-size-fits-all Medicare benefit that would preclude competition between private plans and replace consumer choice with decisions handed down by Washington bureaucrats.** > > CBO Director Orszag has explained that the key factor in determining whether government negotiations would lead to price reductions beyond those negotiated by private firms is the leverage that the Secretary could wield to secure price concessions from drug manufacturers. But S. 3, like H.R. 4, would strike the noninterference clause but explicitly prohibit the Secretary from “requiring a particular formulary or instituting a price structure for the reimbursement of covered Part D drugs,” the very tools that CBO and other independent experts explain are necessary to obtain meaningful discounts beyond the current private sector model. > > In Orszag’s assessment of S.3, he predicts that government negotiations would have a **“negligible effect on federal spending” because the Secretary would “lack the leverage to negotiate prices across the broad rang of covered Part D drugs that are more favorable than those obtained” without the “authority to establish a formulary or other tools to reduce drug prices.”** [6] In a separate correspondence with Congress,[7] he elaborated on this point: > > Negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions. The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers. In the absence of such authority, the Secretary’s ability to issue credible threats or take other actions in an effort to obtain significant discounts would be limited. > > In the same letter, Orszag speculated that absent this authority “cost savings might be possible” through use of the bully pulpit if negotiations were limited to selected drugs.[8] But even so, “the impact on Medicare’s overall drug spending would be limited,” because the bully pulpit is already in wide use and would work only in a few instances.[9] Moreover, drug manufactures could easily make pricing adjustments to offset any potential effects.[10] Hence, the cost of government interference, in terms of market uncertainty, would likely far outpace any potential benefits that may be had through such selective negotiations. The above is mostly in reference to prescription drug prices in Medicare [Part D](http://en.wikipedia.org/wiki/Medicare_Part_D). However, more broadly speaking, the issues remain the same. The VA does negotiate drug prices, but many feel the [savings](http://www.washingtonpost.com/wp-dyn/content/article/2007/01/12/AR2007011201885.html) are not worth it. > [@](#): > > The Democrats point to the Department of Veterans Affairs, which manages to negotiate discounts for the drugs covered in the veterans’ health program. But the department can do this because it is free to deny coverage for drugs whose makers refuse to provide discounts: **Fully 3,000 of the 4,300 medicines covered by Medicare are unavailable under the veterans’ program. Restricting the list of covered drugs saves money, but it also reduces the quality of the benefit – 1.5 million veterans are sufficiently unhappy with the result that they opt to buy the more inclusive Medicare coverage.** Recognizing that narrow formularies are unpopular, the Democratic plan does not permit Medicare to establish one. But if drugmakers know that Medicare must buy their pills, why would they grant a discount? The Congressional Budget Office estimated this week that savings from direct negotiation would be “negligible.” 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. ---
**Author:** ![kaylasdad99](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kaylasdad99/32/3398_2.png) [@kaylasdad99](https://boards.straightdope.com/u/kaylasdad99)\ **Post date:** [August 24, 2009, 5:02pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/14 "2009-08-24T17:02:57Z")
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. Fair enough. But [look what Canadians can get.](http://www.blueskydrugs.com/Product/Lipitor) Looks like the monopoly that keeps generics off the market doesn’t last as long in Canada as it does in the U.S. \*I discuss Lipitor merely as an example. I suspect that other drugs display a similar disparity in treatment between the U.S and Canada. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 24, 2009, 5:56pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/15 "2009-08-24T17:56:14Z")
> [@brickbacon](#): > > 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](http://www.cbo.gov/ftpdocs/49xx/doc4986/FristLetter.pdf) letter to Bill Frist. 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. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 24, 2009, 6:31pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/16 "2009-08-24T18:31:11Z")
> [@Malthus](#): > > I’m not sure I understand. What leverage do the drug companies have to require such a stipulation? Why do they lack that leverage in Canada? Because the drug lobbies have money to put up pro-Obamacare ads, which they [have been doing](http://www.nytimes.com/2009/08/09/health/policy/09lobby.html?_r=2&partner=rss&emc=rss). 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. More, from a Clinton-era [Secretary of Labor](http://robertreich.blogspot.com/2009/08/white-houses-deal-with-big-pharma.html): > [@](#): > > I’m a strong supporter of universal health insurance, and a fan of the Obama administration. But I’m appalled by the deal the White House has made with the pharmaceutical industry’s lobbying arm to buy their support. > > Last week, after being reported in the Los Angeles Times, the White House confirmed it has promised Big Pharma that any healthcare legislation will bar the government from using its huge purchasing power to negotiate lower drug prices. That’s basically the same deal George W. Bush struck in getting the Medicare drug benefit, and it’s proven a bonanza for the drug industry… > > In return, Big Pharma isn’t just supporting universal health care. It’s also spending a lots of money on TV and radio advertising in support. Sunday’s New York Times reports that Big Pharma has budgeted $150 million for TV ads promoting universal health insurance, starting this August (that’s more money than John McCain spent on TV advertising in last year’s presidential campaign), after having already spent a bundle through advocacy groups like Healthy Economies Now and Families USA. > > Let me remind you: Any bonanza for the drug industry means higher health-care costs for the rest of us, which is one reason why critics of the emerging healthcare plans, including the Congressional Budget Office, are so worried about their failure to adequately stem future healthcare costs. To be sure, as part of its deal with the White House, Big Pharma apparently has promised to cut future drug costs by $80 billion. But neither the industry nor the White House nor any congressional committee has announced exactly where the $80 billion in savings will show up nor how this portion of the deal will be enforced. In any event, you can bet that the bonanza Big Pharma will reap far exceeds $80 billion. Otherwise, why would it have agreed? > > I want universal health insurance…But I also care about democracy, and the deal between Big Pharma and the White House frankly worries me. It’s bad enough when industry lobbyists extract concessions from members of Congress, which happens all the time. But when an industry gets secret concessions out of the White House in return for a promise to lend the industry’s support to a key piece of legislation, we’re in big trouble. That’s called extortion: An industry is using its capacity to threaten or prevent legislation as a means of altering that legislation for its own benefit. And it’s doing so at the highest reaches of our government, in the office of the President. 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 _im_moderate, 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. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [August 24, 2009, 6:44pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/17 "2009-08-24T18:44:01Z")
> [@treis](#): > > 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. 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? ---
**Author:** ![IdahoMauleMan](https://avatars.discourse-cdn.com/v4/letter/i/71c47a/32.png) [@IdahoMauleMan](https://boards.straightdope.com/u/IdahoMauleMan)\ **Post date:** [August 24, 2009, 7:01pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/18 "2009-08-24T19:01:54Z")
> [@brickbacon](#): > > The short answer is that congress is bought by drug companies, > > \ Thanks for the links. Good stuff. 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. ---
**Author:** ![brickbacon](https://avatars.discourse-cdn.com/v4/letter/b/898d66/32.png) [@brickbacon](https://boards.straightdope.com/u/brickbacon)\ **Post date:** [August 24, 2009, 7:03pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/19 "2009-08-24T19:03:23Z")
> [@treis](#): > > Its obvious that the government has no negotiating power the way part D is set up now. 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. > [@treis](#): > > 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. 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. > [@treis](#): > > 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. 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. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 24, 2009, 7:16pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/20 "2009-08-24T19:16:51Z")
> [@brickbacon](#): > > 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. Can you explain how the government would negotiate within the framework of part D? > [@Malthus](#): > > 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? The amount insurance companies are reimbursed is based off of bids submitted by qualifying insurers. [Next page](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507.md?page=2)