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What about the negotiated drug discounts?

Posted by medconsumers on September 11, 2009

President Obama just gave a powerful speech about health care reform, but notably absent was something crucial to people on Medicare—that is, giving the government the power to negotiate discounts for prescription drugs. Other industrialized countries use the power of numbers to reduce their drug costs. In our case, it would be the 44 million Medicare enrollees. The U.S. pharmaceutical industry would have us believe that the European countries are getting a free ride because our high drug costs are paying for innovation in new drugs, something that supposedly occurs only in the U.S. This view has gone unchallenged by the mainstream media.

Donald Light,
PhD, the Lokey visiting professor in comparative health care at Stanford University, has recently taken up this issue in the academic journal Health Affairs. He analyzed the new drugs discovered between 1982 and 1992 and concludes that Europeans have discovered more important new drugs, dollar for dollar, than Americans. When Dr. Light was asked to elaborate by e-mail, he said that the greater share of U.S. research funds go to what’s called me-too drugs or drugs that offer little or no advantage over existing ones. “Only 1 in 7 new drugs offer significant clinical advantages for patients,” he added.

Unfortunately, only excerpts are available from the subscription-only Health Affairs analysis and the recent Lancet editorial that supported Dr. Light’s findings. You may, however, read the entire 2005 article on the same topic, co-authored by Dr. Light, “Foreign free riders and the high cost of U.S. medicines.” Read also the pharmaceutical industry’s rebuttal and the authors’ reply in the Rapid Responses at the end of the article.

Why no mention of drug discounts in President Obama’s speech? Representative Henry A. Waxman (D-CA) answered the question before the speech in an interview with our local public radio station. “The White House made a deal with the pharmaceutical industry that is not in the interest of senior citizens,” said Waxman. “The drug manufacturers poured money into an ad campaign promoting health care reform in return for not allowing Medicare to negotiate drug discounts. The industry anticipates windfall profits from the 47 million new customers [the formerly uninsured]. ” He went on to explain the deal industry made with the White House and one of the key Congressional committees [the one headed by Senator Max Baucus] regarding the “doughnut hole,” which is the $2,700 point where Medicare stops paying for drug coverage and people must pay out of pocket for the next $4,000 until coverage kicks in again. The drug industry agreed to give discounts, but here’s the catch…only for the brand name drugs, i.e., the most expensive drugs. “The pharmaceutical industry got just what it wanted,” said Waxman.

Maryann Napoli, Center for Medical Consumers(c)

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