Report proposes negotiation between Medicare and drug companies

04/04/07 Brandon Martin
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This week The Institute for America's Future released a report suggesting how the federal government can save billions of dollars for Medicare prescription drug plans. A discussion held today focused on the report as well as a Senate bill also addressing this issue. Brandon Martin reports.

The House of Representatives passed a bill in January that would amend the Medicare Modernization Act of 2003. A provision in this act which prohibited price negotiation with drug companies would be removed. Roger Hickey, co-director of Campaign for America's Future, explained what Senate would be doing by passing this 2007 bill.

"It is essentially reversing a provision  that was written into the original legislation under the influence of pharmaceutical lobbyists. And it now turns out, from this analysis, that that provision in the original bill-that prohibits negotiation-is costing the government $30 billion a year in [Medicare]."

Dr. Dean Baker of the Center of Economic Policy and Research also contributed to the Institute's report.

"Where do we get the $30 billion from? Well, the basic story is not that complicated. We're simply looking at what we're spending on drugs and what the private insurers are spending on presription drugs versus what Veterans Affairs is spending on the same drugs. Or we could look at" [Under Construction]

And studies show that Medicare is paying 70% more for prescription drugs than does the Department of Veterans' Affairs, which currently negotiates drug prices with pharmaceutical companies. Also, the report claims that U.S. consumers pay 52% more than British, 67% more than Canadian, and 92% more than French consumers when comparing the prices of 30 drugs.

Senator Debbie Stabenow of Michigan talked about the many calls she gets


The gap in coverage that she mentioned is a common problem for seniors. Some that do not receive low-income financial assistance may pay their monthly premiums along with copayments and a yearly deductible and still have to pay more out-of-pocket costs. Advocates for Medicare change attribute the coverage gap to high drug prices. Along with lowering those prices, the bill--which is called the Medicare Prescription Drug Price Negotiation Act, could result in money that would help Medicare beneficiaries pay for their medications. Sen. Stabenow on opposers of the bill.


Solutions for the inefficiency of Medicare Plan D drug plans also include shifting from a system of mostly private insurance providers that work with Medicare to Medicare itself providing drug plans. Sen. Stabenow.


The benefits of prescription drug plans provided by Medicare would be a simpler format for enrollment as well as, according to Dr. Baker, about $5 billion dollars in savings. This would be due to unnecessary administering of plans along with advertising and profits.

Roger Hickey of Campaign for America's Future again spoke about the importance of the bill, now up for discussion in the Senate.


The report can be found on Campaign for America's Future's website at

For WMNF, this is Brandon Martin.

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