Unit 8 - Unit 8 1. Why does Dean Baker see as two mistakes...

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Unit 8 1. Why does Dean Baker see as two mistakes of the New Medicare Prescription Drug Program that have kept the costs higher? In Dean Baker’s article, “The Corporate beneficiaries of the Medicare Drug Benefit,” he describes of the rising costs of Medicare. In adopting the Medicare drug benefit, congress stipulated that Medicare could not directly negotiate price discounts with drug manufactures, as is done by the Veterans Administration and the Healthcare systems is most other wealthy countries. As a result, prescription drugs cost far more under the Medicare drug benefit plan than is necessary. In the case of many drugs, the prices paid by insurers participating in the plan are more than twice as high as the prices paid by the VA. Since the industry is already making profit at the price for which it sells drugs to the VA, the higher price paid by the private insurers participating in the Medicare drug benefit is pure profit for the drug industry. PhRMA’s key change was that the VA system undermines patient choice, by redistricting patients to drugs that appears on a formulary. The power to refuse to list drugs on the formulary, the industry group charged, is what gives the VA its negotiating power. They ignore two crucial facts: first the success of the Medicare drug program relies on private sector competition to contain medicine costs. Private plans are already achieving significant savings from pharmaceutical makers. Second, when governments set drug prices, patient choice vanishes. Allowing the federal government to negotiate drug prices would, according to experts, lead to restrictive formularies and keep patients from getting the medicines their doctors prescribe. 2. Why do many people believe the U.S. Government should legalize the practice of importing drugs from foreign countries? There are thousands of different types of drugs, dosages and delivery mechanisms, which in nearly all cases cost more than necessary to under the Medicare drug plan, because Congress prohibited Medicare from directly negotiating drug prices with the pharmaceutical industry. If Medicare had been allowed to negotiate in the same way as the Veteran’s Administration, the savings would have been enough to eliminate the doughnut hole gap in coverage, even using conservative assumptions. The Congressional Budget Office has found that drug prices in other industrialized countries are 35 to 55 percent lower than in the United States. Those countries also do a better job than the United States at controlling drug price inflation. These countries use various mechanisms to control price, but they ultimately reflect the countries bargaining power—drug companies are always free not to sell, if they don’t like the price. Medicare would be a larger buyer than any one country, so it is reasonable to assume it could at least match, and likely undercut, the prices available in other countries. If Medicare as a negotiator were to do only as well as the most expensive
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This note was uploaded on 06/27/2009 for the course GERO 101 taught by Professor Yaghmaee during the Fall '08 term at San Diego State.

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Unit 8 - Unit 8 1. Why does Dean Baker see as two mistakes...

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