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Advocacy Groups Say Medicare Should Negotiate With Drugmakers

Medicare could save billions if Congress overcame its reluctance to anger the drug industry and allowed the program to demand rebates or negotiate prices, Rep. Henry Waxman, D-Calif., said Wednesday. He added that’s something polls show many Americans support.

Rep. Waxman (Photo by Jason Merritt/Getty Images for UCLA)

Expensive new blockbuster drugs, such as a $1,000-a-pill hepatitis C treatment called Sovaldi, highlight the need to do something soon, the California Democrat said, backing recommendations made in a report released Wednesday by two advocacy groups, the Medicare Rights Center and Social Security Works.

“We could save money, lower the deficit and not ask seniors to pay more,” said Waxman, a long-standing drug industry critic who is retiring at the end of this session. “The only opposition is from drug companies because they will make a little less money if they have someone negotiating prices with them.”

He spoke just hours before the maker of Sovaldi — Gilead Sciences — reported record sales of $5.7 billion in the first six months of the year.

The drug industry has long opposed price controls, or allowing the government to negotiate for Medicare drug prices.

Imposing price controls on Medicare could hurt seniors by altering “the competitive nature of the program” and “could increase beneficiary premiums, cause job loss, and reduce incentives for innovation,” said Robert Zirkelbach, a senior vice president at  the Pharmaceutical Research and Manufacturers of America.

The advocacy groups suggested four ways Medicare could save on drug costs, including the passage of legislation introduced last year by Waxman and Sen. Jay Rockefeller, D-W.V., to require drugmakers to offer discounts similar to those they make in the Medicaid program,  for  people who are enrolled in that program as well as in Medicare, often referred to as “dual eligibles.”

Such rebates would save an estimated $141 billion over 10 years, the groups said.

The other recommendations include:

— Allow Medicare to create its own “public” drug insurance plan that could directly negotiate drug prices, as Veterans Affairs does now. Under current law, private insurers that offer Medicare drug insurance to enrollees negotiate with drugmakers, but the main Medicare program is prohibited from doing so.
— Get bigger discounts from manufacturers to eliminate the Medicare Part D “doughnut hole” – the period in which enrollees pay the full cost of their drugs – in 2016, rather than in 2020.
— Reduce the reimbursements to doctors, hospitals and others who administer some Medicare drugs from 6 percent over the sales price to 3 percent.

None of the ideas are new and all will be controversial. Doctors and oncology centers, for example, oppose cutting reimbursements, saying the additional funds help them pay for office overhead, staff and patient services. Private insurers oppose drug plans run by the government. And drugmakers fight price setting or additional controls.

Still, the price of Sovaldi — and other blockbuster drugs in the pipeline — “should be a wake-up call for legislators who have not been focused on this issue,” said Joe Baker, president of the Medicare Rights Center. “This is an expensive drug – and an effective one, but it is price-prohibitive.”

The drug went on the market late last year, touted as an improvement over older drug regimens. But, with an estimated 3 million Americans infected with the virus, the per-treatment cost of at least $84,000 is a big worry for insurers, including government programs.

Gilead has defended the price, saying the drug cures many people, thus reducing future medical costs.

Despite the backlash over Sovaldi’s price, Waxman says Congress is unlikely to take any action this session to grant Medicare power to negotiate or demand rebates.

“Republicans, but even a lot of Democrats, are looking to the drug companies for campaign support,” he said.

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