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Amy Klobuchar: The Best Prescription: Allow the Government to Negotiate for Lower Drug Prices (Rochester Post Bulletin)

January 26, 2007

The Best Prescription: Allow the Government to Negotiate for Lower Drug Prices

By U.S. Senator Amy Klobuchar (D-MN)

When Congress passes a law, the American people have every right to expect that their elected representatives will do what's best for them. But the country did not get a fair deal in 2003 when Congress passed the Medicare Part D prescription drug program. By banning the government from negotiating discounts, Congress saddled seniors with inflated drug prices while handing a huge financial windfall to the pharmaceutical industry. As I campaigned for the U.S. Senate last year, citizens told me repeatedly that they wanted Medicare to use every possible tool to get the best prices. It is a simple principle of economics that consumers strike better deals when they band together and exercise the bargaining muscle of many rather than the limited leverage of few. Congress rejected this principle when it barred the federal government from negotiating lower prices. That was wrong. When appropriate, the government should be empowered to harness the collective bargaining power of 43 million Americans on Medicare to deliver low-cost drugs to seniors. The new Congress is now poised to give the government the power to negotiate. The House has passed a measure to do so, and the Senate is thoughtfully debating how best to accomplish this goal. This is a matter of fairness for our seniors, who deserve affordable prices for their prescription drugs, and for taxpayers, who foot part of the bill. Under current law, only individual insurance companies can negotiate Medicare drug prices. Americans were told this would produce the lowest prices because these companies would compete with one another. This explanation is unconvincing. First, experience tells us that the present system often doesn't produce the fairest prices. Numerous studies show that Part D prices are significantly higher than prices for drugs in programs where negotiation is permitted. And an October 2006 review of drug prices in Florida reported that the lowest retail price - the price you get by just shopping around - is usually cheaper than the Medicare price for popular drugs. The drug companies like to say that Part D program costs are lower than projected, but beating artificial projections has not resulted in lower prices.

Second, the government can often negotiate bigger discounts than insurance companies, which represent smaller numbers of seniors. There is no good reason to arbitrarily foreclose this opportunity for gaining a price cut. For example, the Congressional Budget Office agrees that the government can be more effective than private plans in negotiating prices for brand-name drugs that have no competition. Even limited savings on popular drugs could translate into billions of dollars each year. That would mean cheaper drugs for seniors, a better deal for taxpayers, and less government spending. The only real winners from a prohibition on negotiation are the pharmaceutical companies that vigorously lobbied for it, knowing it would boost their profits while denying fair prices to seniors and taxpayers. Now the pharmaceutical industry has fired up its lobbying machine to oppose efforts to lift the ban. They use scare words like "rationing" and "price controls." They ignore promising negotiation approaches that don't limit the drugs available to seniors and don't involve price setting. I have dealt with this before. During my campaign, I was accused of trying to ration Lipitor. That simply isn't so. My mom takes Lipitor. If people think I would advance a proposal that would take her drugs away, they don't know my mom. Allowing negotiation won't mean rationing.

In lifting the ban, we will give seniors access to the drugs they need and the same broad range of plans. The difference is that the federal government, representing all 43 million Medicare beneficiaries, will also be at the bargaining table. And the outcome will be a fair, common-sense approach to delivering affordable drugs to our seniors.