Bloomberg Opinion (WPNS)
The drug-pricing measure passed by the House of Representatives as part of its big tax-and-spending bill may seem unimpressive. It would initially let Medicare negotiate the prices of only 10 expensive prescription drugs--a fraction of the 250 covered by the Democrats' original plan. It stands to save Medicare about $80 billion over 10 years--less than one-fifth of what was once envisioned.
Even so, this measure would be a game-changer. America's prohibition of any bargaining by Medicare has long kept U.S. drug prices among the highest in the world.
When Congress created the Part D prescription-drug program in 2003, it ruled out negotiation over prices. Private insurers could strike deals with drugmakers, but Medicare couldn't use its enormous leverage--48 million Americans participate in its drug benefit--to hold prices down.
The pharmaceutical industry's defense is that unless drug companies are allowed to charge whatever the market will bear, they will be discouraged from discovering new medicines. In fact, big pharma companies rarely create new drugs, research has shown.
More than 80 percent of Americans--including more than 70 percent of Republicans--say they favor Medicare drug negotiation, a Kaiser Family Foundation poll found.
The compromise measure sets many limits on Medicare bargaining. The secretary of Health and Human Services would create a list of expensive drugs that have no generic competitors and that have been on the market for at least nine years. From that list, the secretary would choose 10 for negotiation in 2025, 15 in each of the next two years, and 20 in the years following.
These limited quantities could make an outsize difference because a small number of medicines account for a large share of spending. Bloomberg Government examined possible candidates for negotiation and found several among Medicare's most expensive. Eylea, a medicine to treat macular degeneration, costs $10,851 per patient. Medicare spent $3 billion on this drug alone in 2019.
Negotiated prices on many such medications would introduce an important new form of cost control in uncompetitive corners of the prescription-drug market. If the spending bill ultimately survives a Senate vote and is signed into law, the drug-price measure will be among its most significant achievements.