The practical challenges of Medicare negotiating drug prices

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Despite presidential candidates promising to reduce the out-of-pocket costs of prescription drugs, a new article from STAT makes the case that the amount of power the government actually has to drive down drug prices on a large scale may not be significant.

As the debate over high drug costs continues to make headlines, some believe that insurers are to blame for skyrocketing prices. Others think that it is manufactures are setting prices too high, and that negotiating prices with Medicare would save the federal government between $15.6 billion and $16 billion annually.

Medicare officials do not have the ability to directly negotiate prices with drug company representatives. Democrats are working diligently to change that, according to STAT, and to open up a channel of communication between insurance providers and drug companies. But they concede that it would be too time-consuming to negotiate the price of every medication. Instead, for drugs where there is more competition, the most likely approach would be to give individual, private drug plans more power to negotiate on their own.

In addition, the reality is that even if Medicare negotiates prices with drugmakers, there are no guarantees it would make any significant difference to most consumers' bottom line, according to the article.

"I don't know of anyone who has thought this through as a realistic policy innovation because it has never been even close to happening," John McDonough, a professor at the Harvard School of Public Health and a former aide to Sen. Edward M. Kennedy, told the publication.

The easiest way to go about the drug price battle, STAT says, is to advocate for rebates similar to the kind Medicaid gets for drug coverage for low-income people. In fact, generic drug rebates could save Medicaid $1.4 billion, if companies were required to provide rebates whenever prices for best-selling generic drugs exceeded the inflation rate, according to a Department of Health and Human Services' Office of the Inspector General.

To learn more:
- here is the STAT article

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