Big Pharma doesn’t have many friends these days. The pharmaceutical companies have acquired a reputation for price-gouging and unscrupulous marketing practices, such as pushing highly addictive painkillers as a suitable treatment for chronic pain.
Even those Americans who aren’t incensed about the opioid epidemic are not happy with how much many brand-name drugs cost. The astronomical price tag for these medications is helping to drive up the cost of health care, which, in turn, increases private health insurance premiums and government outlays.
For years, Congress has been talking about trying to get drug costs down, and President Donald Trump has said it’s a priority for his administration, although he’s done little to effect any change.
Last month, the Democratic-controlled House of Representatives passed a bill called the Lower Drug Costs Now Act. A major provision of that bill is that it would allow Medicare to use its considerable buying power to negotiate lower drug prices. These anticipated savings would not only benefit seniors. The lower prices also would be passed on to those covered by private insurance or Medicaid.
The president and the Republican Senate are unlikely to go along. They argue that cutting drugmakers’ profits will cause them to invest less in the research and development of new beneficial drugs, the end result of which will be much more costly than the savings that price negotiation would produce. The president’s Council of Economic Advisers has estimated that if the bill becomes law, its purported $34.5 billion a year in savings will be drowned out by $375 billion to $1 trillion a year in higher costs as a result of people dying sooner or suffering more than they otherwise would have.
That comparison is probably exaggerated, and the projected savings from the bill’s backers may be as well. If there are, however, true savings to be had from price negotiation on drugs, the bill has the wrong idea of what to do with the money. It would create new dental, hearing and vision benefits covered by Medicare.
The Medicare program, even with an extra $34.5 billion a year, can’t afford to add new benefits. That’s what got it into its current financial pickle.
Fourteen years ago, during the George W. Bush administration, prescription drugs were added to Medicare benefits without a sustainable way to pay for them. As a result, the program has been speeding even faster toward insolvency. Current projections are that in just six years, Medicare will not have enough money to cover all of its claims. Either providers, already screaming about declining Medicare reimbursements, will have to take even less, or beneficiaries will have to cover more of the cost of their medical treatment.
Any savings to be had from negotiating drug prices needs to be used to cover the existing costs for doctors, hospitals and medicine rather than adding new layers of them.
Americans must face demographic reality. As our population ages, there are too few workers paying into Medicare to cover what retirees are drawing out. If anything, the situation calls for benefit cutbacks, not expansions.