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Commentary

Medicine and Markets
Dr. Scott Gottlieb, Forbes, 3-12-07

Gottlieb warns that Congress' attempts to publicize (and politicize) the prices that pharmaceutical benefit managers are getting for seniors in the Medicare drug benefit will have the perverse effect of eroding those discounts and reducing taxpayers savings in the program.

A series of sharply worded letters fired off by a California congressman to health insurance companies, demanding that they disclose proprietary price data on what they pay for drugs they dispense to Medicare members, could undermine the government's new drug benefit—a program that by all measures is working.

Medicare's new program relies on networks of private drug plans, all competing to offer attractive benefits and discounted drugs in order to sign up new members. Most of the health plans have enrolled millions of members, and they have used this purchasing clout to extract deep discounts from the drug makers, translating into cheaper health coverage for Medicare members.

But even a successful program, so long as it relies on elements of the private market, is anathema to politicians if the political aim is health care run solely by Washington.

Enter Rep. Henry Waxman, D–Calif., the new head of the House Committee on Oversight and Government Reform. Under the guise of "oversight," Waxman sent letters to the 12 largest prescription drug plans, including Aetna, Humana and Wellpoint.

He demanded that they divulge data on the prices that they are paying for the drugs they offer beneficiaries, along with their administrative costs, negotiated price discounts and other price concessions obtained from drug makers. Waxman said he wants to determine how profitable they are and how much of the savings they negotiate is passed on to Medicare beneficiaries.

Rest assured, the Waxman dispatches won't push the plans off the cliff, so do not expect near–term impacts. But disclosing this commercial and confidential data could slowly erode the competitive activities that enable the Part D plans to save consumers' money and the new benefit program to lower drug costs.



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