Senate Democrats just passed a budget plan that would give federal bureaucrats the ability to “negotiate” drug prices directly with manufacturers.
To the uninitiated, that sounds attractive. After all, who wouldn’t want to pay less for medicines?
But in reality, the negotiations aren’t going to lead to lower prices at the pharmacy. They’re going to instead mean less access to lifesaving medicines today and fewer new medicines tomorrow. And any savings that do result from this new policy are going to accrue to the government for unrelated programs.
The word “negotiation” is a euphemism, of course. When Big Government bigfoots its way into a market to tell a private business what it can charge for its products, that’s price control.
The lawmakers touting negotiations hope to achieve their goal by repealing the “non-interference” clause that’s embedded in the law governing Medicare’s drug benefit. This language bars the Secretary of Health and Human Services from interfering in the private price negotiations for Medicare Part D plans. The rule has served America well, keeping government at bay for the 18 years (and counting) of Part D’s existence.
Part D plans are currently administered by private insurers that already extract steep discounts and rebates from drug manufacturers.
Government negotiators are unlikely to fare as well — unless they restrict access to medicines. As the Congressional Budget Office has noted, “the secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those [already] obtained” absent the ability to put “pressure on drug manufacturers.”
Indeed, the noninterference clause has remained a key component of Medicare because lawmakers have recognized that the tradeoffs are too high. Negotiations would only work if patients’ access to drugs is diminished. Prices will only be driven lower if the provision of new medicines is restricted. Certain drugs just won’t be available to seniors any longer.
Will those restrictions be through a national “formulary” that only covers older, less expensive medicines? Or through the philosophically toxic device of QALYs — quality-adjusted life-years — by which younger, healthier patients are deemed more worthy of treatment than older, sicker ones?
The strongest argument against drug-price controls is the asphyxiating effect the policy would have on innovation. Companies must have a chance of a return on investment. Reduced revenues that result from reduced prices will mean greatly reduced investment into new treatments and cures.
These tradeoffs are the dirty secret of “negotiations.”
Another dirty secret is, of course, that these “negotiations” would be a scam. The money reaped from the repeal of non-interference is going to be deployed in Washington as what’s known as a “pay-for.” The $500 billion “savings” that Democrats claim will result from negotiation will be used to pay for billions in spending on the Green New Deal and other initiatives entirely unrelated to the medical needs of our seniors.
The real debate isn’t between those who are for or against “negotiation.” It’s one between those who would protect a law that safeguards access and choice for seniors and those with disabilities, versus those who would put it all at risk for cheap political points. The noninterference rule ensures that Americans have access to the medicines they need and deserve. Without it, millions of Americans will be set adrift — most of them seniors.
