Clinton and Trump are both wrong about Medicare’s ability to negotiate drug prices
AUGUST 12, 2016
Hillary Clinton and Donald trump agree that Medicare bureaucrats should be unleashed to negotiate lower prices with drug companies, and predict billions of dollars in savings as a result. In this political era when any common ground between these two adversaries should be venerated, it is a shame that we must point out that they are both wrong.
Unlike the traditional Medicare system, which sets reimbursement rates for thousands of procedures and services, the Medicare drug benefit program (Part D) uses private companies to manage the needs of its 39 million enrollees. The largest health plans in the country are participating in Part D and contract with one of four dominant pharmacy benefit managers to negotiate prices with drug companies.
Using their considerable bargaining heft, the pharmacy benefit managers have already obtained good deals for the vast majority of drugs on the market. It seems unlikely that Medicare officials can do any better on their own. Who would you rather have bargaining for you, a private business executive representing 65 million to 85 million members, or a government bureaucrat representing roughly half as many? Total Medicare drug benefit costs are well below projections, a rarity for any government program. Let’s not mess this up.