One of the features of the Inflation Reduction Act of 2022 is that it authorizes Medicare to negotiate drug prices. The descriptions of this feature differ so drastically depending on whether the speaker is a Democrat or a Republican as to sound like two completely different bills. For Democrats is a cost/inflation control mechanism; for Republicans it increase the prices of drugs for seniors or make them entirely unavailable and it will reduce spending on R&D.
Who is right? Democrats? Republicans? Both?
I take a jaundiced view of pharmaceutical R&D, possibly because I know too much about it. I think that much of what’s called R&D isn’t R&D at all and the relationship between revenue and R&D is hard to ferret out but it certainly doesn’t increase in proportion to revenue. Oversimplifying a great deal it increases with inflation; marketing spending increases with revenue.
I also find it ironic that purported free traders defend one of the most highly subsidized sectors in the economy. However, I’m prepared to believe that if you spend, say, three times as much as would be the case without the subsidies that there will be some beneficial results achieved.
But in this post I’m looking for advice on whether to believe the Republicans, Democrats, both, or neither about the effectiveness of Medicare negotiating drug prices.
My view is that Medicare “negotiating drug prices” is a politically effective but inaccurate description. It conjures up images of the government haggling with pharmaceutical companies for the best deal, but it’s very unlikely that’s what will happen not least because many drugs are under patent.
Offhand, I can’t think of anything the government negotiates prices for. The closest is competitive bidding for contracts in which cost is only one factor. And even there the track record isn’t great – see any IT or defense contract.
Have medicare/medicaid fee negotiations reduced the price of health care? Have pharmacy benefit managers reduced the prices they pay?
Maybe overly cynical but regulatory capture, lobbying, and all the other joys of governing apply apply here just as they in the price of roadway gravel.
It is how this is implemented and managed that will determine it.
Careful implementation with rigorous oversight and this could save a handsome sum of money. Woeful implementation and neglectful oversight; and one could see shortages, and not of a lot of money saved.
@Andy
The VA negotiates drug prices, and the pharmacy is in-house. (I believe this is to further reduce costs.) Most of the medications are generic, but a few are still under patent. Anything not on the list needs to get authorization.
For Medicare, I would expect something similar. The medication is available, but the brand is not.