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Medicare ‘negotiations’ are a bad bargain for seniors

Michelle RayMay 17, 2019

Congressman Lloyd Doggett just introduced a bill to drastically alter Medicare’s prescription drug benefit.

The legislation would limit Americans’ access to lifesaving medications. It would also deter drug companies from investing in new research, potentially dooming scientists’ efforts to cure cancer, Alzheimer’s, and other fatal scourges.

Medicare’s Part D drug benefit has been extraordinarily successful since Congress created it. Part D plans are sold by private insurance companies but subsidized by the government. Insurers offer a variety of plans with different benefits and premiums. In 2019, insurers sponsored over 900 plans nationwide. Some featured premiums as low as $10.40 a month.

With so many plans on the market, Medicare enrollees can find coverage that meets their needs. This competition also forces insurers to bargain with drug companies to obtain discounted medicines. Insurers use these discounts to offer cheaper premiums and attract enrollees.

Rep. Doggett’s bill would allow government officials to negotiate drug prices on behalf of insurers in the Part D program. He claims the government could use its bulk purchasing power to reduce drug prices.

Congress has long considered similar proposals. But the non-partisan Congressional Budget Office explains that allowing federal officials to negotiate prices “would have a negligible effect on federal spending.”

There is, however, one way for government officials to extract bigger discounts. They could threaten to ban all Part D plans from covering certain drugs. Rep. Doggett’s bill would give officials that authority. Pharmaceutical companies would have to choose between slashing prices and not selling to Medicare drug plans at all.

That’s not a negotiation — it’s a shakedown.

The bill goes even further. It would allow the Secretary of Health and Human Services to take away companies’ drug patents if those firms refuse to meet the government’s price demands. The government would then give the patents to generic drug companies, who would manufacture copycat versions of the medicines, a practice known as “compulsory licensing.”

Compulsory licensing would destroy the system of intellectual property protections that makes drug innovation possible. It takes an average of $2.6 billion, and a decade of work to bring one new medicine to market.

Thanks to strong patent laws, America leads the world in drug innovation. Between 1997 and 2016, the United States developed more new drugs than any other nation.

If the government could simply issue compulsory licenses, companies would scale back research efforts. Funding for Alzheimer’s, cancer, and heart disease would dry up as investors pivoted to less risky business opportunities. Over time, medical progress would grind to a halt, depriving future generations of lifesaving medicines.

Medicare Part D has made prescription drugs affordable for tens of millions of seniors. Rep. Doggett’s bill would gut the program, jeopardizing patients’ access to medicines now and far into the future.

Michelle Ray is Publishing Editor at the Independent Journal-Review. The Austin resident also hosts “In Deep with Michelle Ray” on FTR Radio.

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