May 10, 2000: Senator Byron Dorgan co-sponsors the following amendment:
“NONINTERFERENCE. — In administering the prescription drug benefit program established under this part, the Secretary may not — (1) require a particular formulary or institute a price structure for benefits; (2) interfere in any way with negotiations between private entities and drug manufacturers, or wholesalers; or (3) otherwise interfere with the competitive nature of providing a prescription drug benefit through private entities.”
Six years and 180 degrees later …
July 2006: Senator Byron Dorgan plans to offer the following amendment:
“REQUIREMENT TO NEGOTIATE PRICES WITH MANUFACTURERS. — In order to ensure that each Part D individual who is enrolled under a prescription drug plan or an MA-PD plan pays the lowest possible price for covered Part D drugs, the Secretary shall negotiate contracts with manufacturers of covered Part D drugs, consistent with the requirements of this part and in furtherance of the goals of providing quality health care and containing costs under this part.”
Yep — Senator Dorgan was for it before he was against it.
As Lord Byron wrote, “I’ll publish right or wrong. Fools are my theme, let satire be my song.”
Here are the facts behind the posturing:
The CMS chief actuary has already rejected the idea that Federal “interference” will save money:
“In considering these issues, we believe that direct price negotiation by the Secretary would be unlikely to achieve prescription drug discounts of greater magnitude than those negotiated by Medicare prescription drug plans responding to competitive forces.”
And the CBO has made a similar determination:
“We estimate that striking [the non-interference] provision would have a negligible effect on federal spending because CBO estimates that substantial savings will be obtained by the private plans and that the Secretary would not be able to negotiate prices that further reduce federal spending to a significant degree.”
The fact is that robust competition among Medicare Drug Plans continues to drive down costs for beneficiaries and taxpayers, while stimulating enrollment.
* According to CMS, the net total cost of the drug benefit to the federal government over the next decade is about 20% (or $180 billion) lower than the total cost estimated last year.
* The vast majority of this reduction is the result of lower-than-expected drug costs and higher-than-expected price breaks negotiated by Medicare drug plans. According to CMS, data from Part D plans demonstrate that rebates and discounts on drugs are much larger than originally projected.
When’s the last time a government-negotiated program delivered such numbers?
According to government experts, eliminating “noninterference” won’t save money, but it will lead to government price controls and a government controlled benefit.
CBO has found that multiple, competing private sector plans contain costs more effectively than a government-controlled benefit through competition and plans’ use of price discounts, rebates, and other tools. (Surprise! Everything you learned in Econ 101 was right.) The noninterference provision protects this approach by preventing government bureaucrats from getting in the way of these negotiations.
Repeal of the noninterference provision would also repeal the prohibition on the government setting a national, one-size fits all, formulary. Yikes!
According to CBO, allowing the government to negotiate prices may not result in current VA prices for Medicare Part D — The VA Health Care System is a public health system with statutory price controls and other special arrangements representing a very small share of the market.
For more on why VA is not a better way, please see my previous blog (“VA is not the way,” 3/13/06).
Bottom line? The Medicare Drug Benefit gives Medicare beneficiaries the same negotiating power that works for Members of Congress and 190 million other Americans.
Federal interference was a bad idea when Senator Dorgan was against it in 2000. And it is still a bad idea now that he is for it in 2006.
Competition works. Politics gets in the way.
To once again quote Lord Byron, “Always laugh when you can. It is cheap medicine.”
And, methinks, Lord outranks Senator.