President Joe Biden has called for giving the federal government power to “negotiate drug prices.” This presidential exhortation reinforces a push by Congressional Democrats to use the upcoming budget bill to refashion Medicare by giving government bureaucrats the power to set drug prices.
This could only happen if Congress repeals the “non-interference” clause in Medicare’s drug benefit, which bars the government from engaging in the machinations that Biden asks for and Congressional Democrats seek.
Simply put, the Department of Health and Human Services cannot set foot in the negotiating arena, as it’s strictly reserved for bilateral transactions between drug manufacturers and insurers. The lawmakers who wrote the law governing Medicare’s drug benefit put this safeguard in the bill because they knew that if given the power, federal officials would restrict access to advanced medicines if it might save the Treasury Department a few dollars.
Lowering drug prices is undoubtedly a noble goal. Yet lawmakers are targeting the wrong problem. Seniors benefit enormously from Medicare’s current design. Rather than lowering pharmacy costs, removing the non-interference clause would reduce access to many important medicines — and curtail research into new therapies.
The non-interference clause makes Medicare’s drug benefit one of the government’s most successful programs. Prescription drug plans compete with one another for seniors’ business by offering robust coverage at low prices. To maximize their market share, insurers haggle hard with drug companies. Seniors, in turn, have access to virtually every medicine — and typically pay their insurers a low monthly premium.
This formula is a demonstrable success. A survey conducted by Morning Consult found that 88% of American seniors are satisfied with the coverage they receive through Medicare’s drug benefit. Additionally, 84% reported that it was important to have a variety of plans to choose from.
Alaska’s experience mirrors these national trends. The state’s 66,000 Part D enrollees enjoy access to more than 25 individual plans. They can select the plan that fits their needs without bureaucratic intervention.
The futility of eliminating the non-interference clause is also made clear by a Congressional Budget Office report which shows that merely giving HHS the power to negotiate prescription drug prices “would not provide the leverage necessary to generate lower prices.”
Federal bargaining power could only reduce costs if the government offers drug companies a take-it-or-leave-it price. This would immediately reduce access to many medicines.
The Democrats’ drug plan would also stifle innovation. If manufacturers cannot expect to generate a return on their successful drugs, they’ll have no choice but to slash research and development budgets. After all, every successful new medicine has to pay for the dozens of failures along the way.
Lawmakers should instead focus on drug pricing solutions that protect and promote this innovation — such as improving price transparency. This would empower patients to search for the lowest price available, and drive prices down across the board as companies and insurance plans try to remain competitive.
Alaska’s congressional delegation will face enormous pressure to support the Democrats’ budget push in the months ahead, as President Biden, Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi are eager for Americans to see their efforts as bipartisan. Our representatives must stand up for America’s seniors and oppose this plot.
Robert Coulter of Wasilla is a free-market policy activist who focuses on protecting the interest of mature Americans, including ensuring seniors receive the best health care possible. He leads the Greater Anchorage chapter of the Association of Mature American Citizens.
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