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Commentary

Medicare and the Market: Government Shouldn’t Be Negotiating Prescription Prices
Mike Leavitt, Washington Post, 1-11-07

Leavitt, secretary of health and human services, explains why the government shouldn't become the nation's drug-negotiator in chief.

The success of the Medicare prescription drug benefit provides strong evidence that competition among private drug plans has contributed significantly to lowering costs. The average monthly premium has dropped by 42 percent, from an estimated $38 to $22—and there is a plan available for less than $20 a month in every state. The net Medicare cost of the drug program has fallen by close to $200 billion since its passage in 2003.

Seniors and people with disabilities like the benefit. Studies consistently show that three-quarters of Medicare beneficiaries are satisfied with their coverage.

Individuals like being able to choose the plan that best fits their needs. A single, one-size-fits-all drug plan would have made the choice easier, and Congress did create a standard plan. But fewer than 15 percent of enrollees have selected that standard plan—opting instead for plans with lower premiums, no deductibles and enhanced coverage.

Despite the success of the benefit, some people believe government can do a better job of lowering prices than a competitive marketplace. Legislation under consideration would require the secretary of health and human services to negotiate and set the prices of drugs. In effect, one government official would set more than 4,400 prices for different drugs, making decisions that would be better made by millions of individual consumers.

There is also the danger that government price setting would limit drug choices. Medicare provides access to the broadest array of prescription drugs, including the newest drugs. But price negotiation inevitably results in the withholding of access to some drugs to get manufacturers to lower prices.



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