Patching the bargaining hole in Part D is worth a look

No senior citizen wants to jeop- ardize Medicare Part D, the prescription payment plan that was enacted during a marathon House session in 2003, but in these days of deficit spending there are parts of the plan that deserve a second look.

One of the main parts is that which made Part D’s passage so controversial in 2003, and that is the provision that prohibits the government from bargaining for Medicare drugs in ways that it already does for drugs provided for patients on Medicaid or under coverage through the Veterans Administration.

Medicare should be making the kind of high-volume deals that others, including large health care plans, pursue.

A small part of President’s Barack Obama’s economic growth and deficit reduction plan that he submitted to the Joint Select Committee on Deficit Reduction’s (Super Committee) last week addresses a number of ways in which Medicaid and Medicare can reduce costs by addressing inefficiencies and waste. One of those provisions would revisit the ban against Medicare bargaining for the best price for the drugs for which it pays.

As undeniably popular as Part D is today, its inception was steeped in controversy, in part because of the partisan hardball that was used to keep bargaining out of the bill. The House tally was held open for hours while arms were twisted and votes were changed to win passage. It did not go unnoticed that the bill’s manager, former Congressman Billy Tauzin, R-La., retired from Congress and took a $2 million a year job as president of the Pharmaceutical Research and Manufacturers of America.

Ohioans will also remember that former GOP Sen. George Voinovich said he would not have supported passage if he had known President George W. Bush’s administration fudged the projected cost at the time.

As it turns out, the cost has been somewhat less than estimated, and millions of senior citizens have access to drugs today that they would not have had just a few years ago.

Tread carefully

Any tinkering with Medicare Part D should be done carefully, because clearly the program is popular — and it works. PhRMA notes that Harvard researchers found Medicare saves about $1,200 per year in hospital, nursing home and other costs for each senior who previously lacked comprehensive prescription drug coverage. That could add up to about $12 billion per year in savings across Medicare.

PhRMA also warns that there are other societal costs to cutting the amount that Medicare pays for drugs. It cites a paper from the Battelle Technology Partnership Practice that estimates that a $20 billion reduction in biopharmaceutical sector revenue would result in 260,000 permanent job losses across the U.S. economy.

The possible loss of any jobs is certainly a sobering thought, but it is not the purpose of Medicare to create jobs. If it were, Medicare could take that $20 billion and create about 500,000 jobs for home health care workers assigned to help senior citizens to stave off going to a nursing home. That would not only create jobs, but it could probably save many billions in the long run.

Pharmaceutical companies do important work, but it is not Medicare’s job to subsidize them.

Government already subsidizes drug development in any number of ways, and large pharmaceutical companies are not the only source of new drugs. The New York Times reports that a study in Nature Reviews: Drug Discovery, showed that of 252 drugs approved by the FDA between 1997 and 2008, drugmakers were responsible for less than half of the innovative medications. Small biotech firms and academic labs were the source of the balance.

The bottom line in this debate is the bottom line. Medicare should not be paying more for drugs than it has to, and certainly not more than other government agencies or private insurers do.