Just Say 'No' to Drug Price Attack

Michael Fumento
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Posted: Jul 06, 2006 12:01 AM

Break out the cat food! Seniors are again under attack by Big Pharma. Crushing drug prices under the new Medicare Plan D will not only force grandma and grandpa to steal kitty’s din-din and turn off the heat and A/C, they may be forced to donate their bodies to science – while they’re still alive.

Or so the leftist, self-styled “patient advocacy group” Families USA would have us think with its latest “study,” released in conjunction with an AARP “study” attacking Part D drug prices from a different angle. Actually, both are aimed at getting for the elderly what socialist Samuel Gompers said was the ultimate goal of the U.S. labor movement: “More, more, more.”

The report from Families USA claims insurers participating in the Medicare Part D passed on increases for 19 of the top 20 drugs to program participants, which now number about 33 million. “Part D plans are doing essentially nothing to contain the fast-rising prices by the drug industry,” insists the group’s executive director.

Actually, the way Part D plans are designed will shield most beneficiaries from drug price increases, a Centers for Medicare and Medicaid Services (CMS) spokesman told UPI. “What’s most important to remember is most beneficiaries are enrolled in plans with flat co-payments, so they’re not going to experience changes in the cost of drugs,” he said, noting that 90 percent are enrolled in plans that limit out-of-pocket costs.

According to Medicare chief Mark McClellan, many beneficiaries selected plans in which they pay a fixed amount for a drug, say $20 for a brand-name drug, and that price won't change during the year no matter what wholesale prices do. Moreover, “The poorest of beneficiaries are particularly protected from such increases because their payments are capped at $5 for a brand-name drug” he said.

A CMS analysis of the drug prices Part D beneficiaries are paying, released the day before the Families USA-AARP two-pronged attack, shows they are indeed partly shielded from drug cost increases. On average they will pay $1,100 less this year than they would otherwise. So the plans are negotiating lower prices; Families USA just wants more, more, more.

Further, Medicare eligible seniors “who don’t like Part D can enroll in a Medicare Advantage plan that has better incentives to manage their complete health care profile in a rationale manner,” says University of Southern California professor of pharmaceutical economics Joel Hay.

Over 12 percent of Medicare eligibles so far have enrolled in these, with that number expected to soon rise to 30 percent. “Medicare Advantage plans are available nationwide, and have no doughnut holes or other perverse penalties on beneficiaries,” he says. (The “doughnut hole” is the gap in coverage once recipients reach a certain benefit limit, after which they must pay 100 percent of their drug costs up to point when coverage kicks back in.) Seventy percent of Medicare beneficiaries have access to a Medicare Advantage plan that doesn’t even require paying premiums for their prescription drug coverage.

But Families USA has its own alternative: allow Medicare to directly negotiate with drug companies like the Veterans Administration does. Hay, though, says Congress for once knew what it was doing when it denied Medicare this ability.

“Problem is, Medicare isn’t just an 800-pound gorilla when it comes to drug spending – it burps up 800-pound gorillas after a light snack,” says Hay. “Allow Medicare to negotiate prices, and the market for pharmaceuticals is history. Consider that the CDC [Centers for Disease Control and Prevention] now buys 50 percent of all vaccines and pays less than half the private market prices. Since that happened, the number of American vaccine manufacturers has dropped from 25 to four.”

It’s bad enough that current entitlement programs that transfer wealth from the working young to the non-working old are on the path to destroying the economy. Already, an estimated $70 billion will be spent on Medicare drug costs this year. Over the next 50 years, Part D costs are calculated at an incredible $8.1 trillion even if you foolishly assume that dramatic advances in medical technology won’t tremendously extend human lifespans during that time. Now the activists for America’s wealthiest age group also want to bleed the drug companies dry. The answer must be: “No, no, no.”