# 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:** 17\ **Page:** 2
**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, 7:21pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/21 "2009-08-24T19:21:44Z")
> [@treis](#): > > Can you explain how the government would negotiate within the framework of part D? > > The amount insurance companies are reimbursed is based off of bids submitted by qualifying insurers. Why organize it in this indirect manner? Here in Ontario (drug plans are provincial and not federal in Canada), the gov’t publishes a Formulary, and those eligible for reimbursement get their drugs from those on the Formulary; and in order to get on the Formulary, manufacturers must bargain. Private insurers do something similar. I understand that Medicare is different, but I do not understand the advantages of this system. ---
**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, 7:43pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/22 "2009-08-24T19:43:22Z")
> [@treis](#): > > Can you explain how the government would negotiate within the framework of part D? Are you joking? I linked to several places outlining the provisions which bar negotiating drug prices. Clearly, doing so within the system as it currently exists is impossible. That being said, several bills have been proposed or introduced that would strike that provision and establish a [means](http://www.medpagetoday.com/PublicHealthPolicy/Medicare/12631) of negotiating. > [@](#): > > House Democrats have introduced a bill to establish a government-controlled prescription drug plan to compete with private plans that provide Medicare prescription drug coverage. > > A key element in the bill would permit the HHS secretary to directly negotiate drug prices with pharmaceutical companies. The proposed Medicare-run drug plan is modeled after a similar plan in the VA. > > The government-run plan or plans would compete with current Medicare Part D providers by offering Medicare beneficiaries a potentially cheaper option, said Rep. Marion Berry (D-Ark) another co-sponsor of the bill. > > And by offering this alternative, the government could realize substantial savings, said Berry, who estimated that the savings could add up to as much as $20 billion a year for the next 10 years if half of the current Medicare Part D beneficiaries switched to a government-run prescription plan. So if a bill like this passed, there would just be a competing government prescription drug insurance. [QUOTE=IdahoMauleMan] 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. [/QUOTE] You are either too caught up on the semantics (buying/selling), or you are astoundingly naive. They don’t bribe politicians (generally), they just provide the means for them to continue doing their job. All politicians serve at the behest of coalitions and corporations because no politician can get elected without lots and lots of money, a good name, and a forum to voice their ideas. They generally don’t need to influence people in the sense that they coerce them to act in a way they would have otherwise not, all they have to do is help elect a person that shares their outlook and proclivities. ---
**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, 7:54pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/23 "2009-08-24T19:54:51Z")
> [@Malthus](#): > > Why organize it in this indirect manner? Here in Ontario (drug plans are provincial and not federal in Canada), the gov’t publishes a Formulary, and those eligible for reimbursement get their drugs from those on the Formulary; and in order to get on the Formulary, manufacturers must bargain. Private insurers do something similar. > > I understand that Medicare is different, but I do not understand the advantages of this system. The point was to avoid Medicare having to create a formulary. In this system, the government pays a subsidy determined by the market to cover drugs determined by the market. If they directly subsidized consumers they would have to decide which drugs specifically to cover and specifically how much to subsidize them by. > [@brickbacon](#): > > Are you joking? I linked to several places outlining the provisions which bar negotiating drug prices. Clearly, doing so within the system as it currently exists is impossible. That being said, several bills have been proposed or introduced that would strike that provision and establish a means of negotiating. I don’t know if we are talking passed each other or what. You posted something from the CBO saying that negotiation wouldn’t save much money. I pointed out that yes, that’s true in the system set up by part D. To which you responded that they government could still negotiate for lower prices, which I assume meant within the part D framework. This last post of yours refers to something outside of the part D framework, which doesn’t follow in the line of argument. ---
**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, 8:03pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/24 "2009-08-24T20:03:44Z")
> [@treis](#): > > The point was to avoid Medicare having to create a formulary. In this system, the government pays a subsidy determined by the market to cover drugs determined by the market. If they directly subsidized consumers they would have to decide which drugs specifically to cover and specifically how much to subsidize them by. Well, yes; but doesn’t this merely mean that the _private insurers_ are forced to have a formulary, and how much to pay, etc.? The problem appears that the market mechanism, as so often the case in medical-related matters, isn’t working all that efficiently to create true price competition between private insurers: perhaps (just thinking out loud here) because a multitude of private insurers have less bargaining power than a single public one, and where the gov’t happily underwrites their expenses, more incentive to collude on prices than compete. ---
**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, 8:04pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/25 "2009-08-24T20:04:37Z")
> [@brickbacon](#): > > You are either too caught up on the semantics (buying/selling), or you are astoundingly naive. They don’t bribe politicians (generally), they just provide the means for them to continue doing their job. All politicians serve at the behest of coalitions and corporations because no politician can get elected without lots and lots of money, a good name, and a forum to voice their ideas. They generally don’t need to influence people in the sense that they coerce them to act in a way they would have otherwise not, all they have to do is help elect a person that shares their outlook and proclivities. I suppose I could be astoundingly naive. But let’s take the next step in your assertion, which I agree is true. Why would the corporations give a politician lots and lots of money to get re-elected? Why would they think that is a good thing to do? What return do they think they are going to get on their investment? ---
**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, 8:13pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/26 "2009-08-24T20:13:11Z")
> [@IdahoMauleMan](#): > > I suppose I could be astoundingly naive. > > But let’s take the next step in your assertion, which I agree is true. > > Why would the corporations give a politician lots and lots of money to get re-elected? Why would they think that is a good thing to do? What return do they think they are going to get on their investment? Perhaps I was being a bit harsh. They give politicians lots of money because they know they will have an advocate for their goals; often someone who will tilt the playing field in their favor, or at least give them face time. That’s the point, it’s an investment. Why else would they give money if they were not going to get special considerations or some benefit? ---
**Author:** ![spazattak](https://avatars.discourse-cdn.com/v4/letter/s/8e8cbc/32.png) [@spazattak](https://boards.straightdope.com/u/spazattak)\ **Post date:** [August 24, 2009, 8:15pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/27 "2009-08-24T20:15:45Z")
> [@kaylasdad99](#): > > 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. Just to add to this - drugs also become available OTC much quicker in Canada. You’ve been able to get Allegra OTC in Canada for about 8 years now and you still need a 'script here in the US. I would imaging going OTC would put tremendous downward pressure on the price. ---
**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, 8:20pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/28 "2009-08-24T20:20:14Z")
> [@Malthus](#): > > Well, yes; but doesn’t this merely mean that the _private insurers_ are forced to have a formulary, and how much to pay, etc.? Yes, but the point is that competition will drive the insurers to a better formulary than what a government bureaucrat would come up with. > [@Malthus](#): > > The problem appears that the market mechanism, as so often the case in medical-related matters, isn’t working all that efficiently to create true price competition between private insurers: perhaps (just thinking out loud here) because a multitude of private insurers have less bargaining power than a single public one, and where the gov’t happily underwrites their expenses, more incentive to collude on prices than compete. Yes, I agree that the way part D is set up causes it to be much more expensive to administer than a single payer system would. It has resulted in increased administration cost and reduced purchasing power compared to what a single payer with the ability to negotiate would have. ---
**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, 8:53pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/29 "2009-08-24T20:53:41Z")
> [@brickbacon](#): > > P1.Perhaps I was being a bit harsh. > P2. They give politicians lots of money because they know they will have an advocate for their goals; often someone who will tilt the playing field in their favor, or at least give them face time. That’s the point, it’s an investment. Why else would they give money if they were not going to get special considerations or some benefit? P1. Don’t worry about being too harsh. No blood was drawn here. No blood, no foul. P2. Ding-ding-ding-ding-ding-ding! Whoop! Whoop! Whoop! Whoop! \ \ \ \ Excellent! Excellent! You just made my day! That’s absolutely right! So why, in the name of God, would we _ever_ elect politicians who think they have the power to tilt the playing field in favor of anybody? Who do they think they are, assuming that they have that power? Why would we ever elect anybody who thinks they can take our money, or our neighbors money, and tell us what we can and cannot do? And what choices we can make? Because if Congress doesn’t have that power, they have nothing to sell. There is nothing that they can do. And there is no reason for the drug companies to approach them and try and curry favor for anything, because there are no favors that Congress can provide. The only interaction that will ever take place is between a drug company, or a drug testing company, or a drug sales company, and you. Congress will be taken out of the picture. Wonderful. I think I’ll go mix myself a drink to celebrate. Oh…I’m going to assume from your thoughtful posts that you vote for small government candidates, support small government principles, and fiercely oppose anything and everything the present government is doing to expand its power and involve itself in the types of decisions we were discussing above. Because that only creates new problems and makes it worse, doesn’t it? We just neatly and cleanly dissected that argument above. Once we, the citizens, allow the government to get involved in this sort of thing, we’ve created our own problem. Thanks for helping out the cause and for trying to move the needle back in the right direction. We have major elections in 2010 and 2012 to give us that opportunity. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [August 24, 2009, 10:12pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/30 "2009-08-24T22:12:56Z")
There is no necessity for a _quid pro quo_ arrangement, the Congresscritter need not even be aware. Let the candidate begin speaking with passionate intensity about getting government off the backs of business men and farmers, fostering a climate that encourages entrepreneurship and innovation…and the checks begin to flow. The don’t flow from AIG or Enron, they flow from grassroots citizen’s groups like Americans United for Sane Fiscal Smartness, and the Free American Liberty Goodness Coalition. Read their mission statement in the home page, and you see nothing but bloviation about keeping big government from needless regulatory orgies of interference. They nourish their own, and they have people who know exactly how much you can give Sen. Runningdog Jackal (R-Moloch) without running afoul of campaign contribution laws. Being civic minded and patriotic, they are not shortsighted, it doesn’t matter what district a Congresscritter represents, its not about geography, its about one’s civic duty. He never says “I favor Big Pharma ripping every dime it can get its grubby mitts on”. They say “I oppose needless regulations hampering a vigorous climate for business and competition”. They never say “I support the right of Koch Refineries to dump whatever rotten shit they want to into your drinking water”, they say “I support small government”. Believe it or not, some folks actually fall for that one. No, really. ---
**Author:** ![athelas](https://avatars.discourse-cdn.com/v4/letter/a/5e9695/32.png) [@athelas](https://boards.straightdope.com/u/athelas)\ **Post date:** [August 25, 2009, 1:52am UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/31 "2009-08-25T01:52:53Z")
By the way, the US is in effect [subsidizing](http://www.cato.org/pub_display.php?pub_id=3710)drug development for the rest of the world. Social democracies should hope that the US persists in a competitive non-monopsonistic drug policy, so that they can soak up the free benefits: > [@](#): > > As a result, U.S. citizens are bearing a steadily increasing medical burden: Since 1999 America has accounted for 71% of the sales of new chemical entities, up from 62%. Japan and Germany, the next two largest pharmaceutical markets, account for just 4% each. > > Germany’s newly tightened therapeutical reference-pricing program is an unfortunate example. Under reference pricing, drugs are grouped by pharmacological equivalence. Generics and patented products are listed together and reference prices are set based on the difference between the cheapest and most expensive drugs. Innovative and therapeutically important drugs are, theoretically, exempt. > > Unfortunately, paying generic prices for patented products obviously discourages further medical development – except when one can rely on the output of the freer American market, as Berlin does. The generics now serving as price benchmarks themselves would never have been developed if the U.S. followed Germany’s policy. ---
**Author:** ![Number43](https://avatars.discourse-cdn.com/v4/letter/n/58956e/32.png) [@Number43](https://boards.straightdope.com/u/Number43)\ **Post date:** [August 25, 2009, 6:45am UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/32 "2009-08-25T06:45:52Z")
There are two ways of negotiating with drug companies on prices. The first kind, the kind used by private insurance companies, involves threatening to put their drugs into non-preferred status in favor of other drugs in the same class, either making them non covered or at a substantiated higher co-pay, thus encouraging patients to ask their doctors to use a different drug. Note that some may think this may degrade the standard of care by putting people on drugs which aren’t the best choice for their situation and taking it out of the hands of the doctors. The second kind, the kind usable only by governments (including Canada), is mandating the price, and if the drug companies do not comply either making the drug either completely unavailable or revoking patent protection. Naturally both the drug companies and free-market types have a problem with this. ---
**Author:** ![Squink](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Squink](https://boards.straightdope.com/u/Squink)\ **Post date:** [August 25, 2009, 1:57pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/33 "2009-08-25T13:57:24Z")
> [@Shodan](#): > > Why Doesn’t the Fed Govt Negotiate Lower Drug Prices Because Republicans filibustered the bill that would allow the Feds to negotiate drug prices: [Bill to Let Medicare Negotiate Drug Prices Is Blocked](http://www.nytimes.com/2007/04/18/washington/18cnd-medicare.html) > [@](#): > > April 18, 2007 > Democrats could not muster the 60 votes needed to take up the legislation in the face of staunch opposition from Republicans, who said that private insurers and their agents, known as pharmacy benefit managers, were already negotiating large discounts for Medicare beneficiaries. > > Fifty-five senators, including 6 Republicans, supported a Democratic motion to limit debate and proceed to consideration of the bill, while 42 senators voted against it. Such motions require a three-fifths majority under Senate rules. Without a limit on debate, opponents can prevent legislation from ever coming to a vote. Crazy, huh? ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [August 25, 2009, 6:07pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/34 "2009-08-25T18:07:24Z")
> [@brickbacon](#): > > Or as Peter Orszag [stated](http://www.heritage.org/Research/HealthCare/wm1426.cfm) wrt Medicare Part D and formularies (preferred-drug list): You’re not quoting Orszag here, but rather Greg D’Angelo of the Heritage Foundation. D’Angelo does include some quotes from Orszag in his piece, but most of what you quote as Orszag is D’Angelo. ---
**Author:** ![Brainiac](https://avatars.discourse-cdn.com/v4/letter/b/8797f3/32.png) [@Brainiac](https://boards.straightdope.com/u/Brainiac)\ **Post date:** [August 25, 2009, 7:31pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/35 "2009-08-25T19:31:22Z")
Why “negotiate” prices at all? That implies that some people will pay more. Just “set” the prices. Tax everything over the set price as “windfall profits” and the excess will go away. ---
**Author:** ![Malthus](https://avatars.discourse-cdn.com/v4/letter/m/85f322/32.png) [@Malthus](https://boards.straightdope.com/u/Malthus)\ **Post date:** [August 25, 2009, 9:16pm UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/36 "2009-08-25T21:16:00Z")
> [@Number43](#): > > There are two ways of negotiating with drug companies on prices. > > The first kind, the kind used by private insurance companies, involves threatening to put their drugs into non-preferred status in favor of other drugs in the same class, either making them non covered or at a substantiated higher co-pay, thus encouraging patients to ask their doctors to use a different drug. Note that some may think this may degrade the standard of care by putting people on drugs which aren’t the best choice for their situation and taking it out of the hands of the doctors. > > The second kind, the kind usable only by governments (including Canada), is mandating the price, and if the drug companies do not comply either making the drug either completely unavailable or revoking patent protection. Naturally both the drug companies and free-market types have a problem with this. That’s not factually accurate. In Canada, the situation is more complex than that. The Canadian _federal_ government sets a maximum price for _patented_ drugs as a condition of granting the patent. This is not subject to “negotiation”, but by fiat through the PAAB process. However, the Canadian _federal_ government does not operate health insurance plans (except for some exceptions like veterans). The Canadian _provincial_ governments fund public insurance plans. They “negotiate” for prices _lower_ than the maximum set by PAAB, and in exactly the same way as private insurers: threatening to not include them on the relevant Formulary. ---
**Author:** ![foolsguinea](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/foolsguinea/32/14751_2.png) [@foolsguinea](https://boards.straightdope.com/u/foolsguinea)\ **Post date:** [September 2, 2009, 5:03am UTC](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507/37 "2009-09-02T05:03:48Z")
> [@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? I think the two major parties rely on donations to get Congressmen elected, & the drug companies donate to a key proportion of candidates (esp. at Senate level) early. It’s not bribery so much as picking the candidates that are sympathetic to you. That’s a systemic explanation. The Congressmen, in their own minds, may be Reaganite/Norquistians who fear government power & want to undermine the government’s ability to hurt private business, even if the real effect is less freedom & more expense for the taxpayer. That, or GOP lawmakers actively trying to make the law work less well so they can campaign against it. [Previous page](https://boards.straightdope.com/t/why-doesnt-the-fed-govt-negotiate-lower-drug-prices/507507.md?page=1)