May 26, 2004 | News Releases on Health Care
WASHINGTON, MAY 26, 2004-Cost projections for
the new Medicare drug entitlement are soaring, causing some
lawmakers to press the government to use its "enormous market
clout" to set drug prices. But that's a bad idea, according to a
new paper from The Heritage Foundation.
"If the government decides-based mainly on price-which drugs to buy for 41 million Medicare enrollees, it may very well limit what it spends on drugs. But it will do so at the expense of treating some patients' illnesses," writes Edward Haislmaier, a visiting fellow in Heritage's Center for Health Policy Studies.
There are numerous problems with the Medicare law Congress passed last fall. But, Haislmaier writes, one good feature is its reliance on tested private sector systems for drug pricing and delivery.
Lawmakers realized how difficult it is for any single benefit plan to strike the correct balance between drug prices and drug availability for most seniors. That's why, he says, they specifically left that job in the hands of those with the most experience-private insurers and pharmacy benefit managers (PBMs).
After all, drugs are not a commodity, and the drugs available to treat a given condition aren't necessarily interchangeable, Haislmaier notes. Some drugs work better for some patients than others. And some drugs are available in generic forms, while others are patent-protected.
Private PBMs have decades' worth of experience buying prescription drugs at affordable prices, and each of the three largest PBMs today has more members than Medicare. In contrast, "Medicare's managers have no previous experience buying outpatient prescription drugs and are notorious for inefficient bureaucracy," Haislmaier writes.
In fact, the only methods the government could use to hold down prices are harmful ones, the analyst writes. The government could: