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Commentary

Call 'Negotiated' Drug Prices What They Really Are: Price Controls
Benjamin Zycher, Ph.D., Los Angeles Times, 1-21-05

Should the government negotiate with drug manufacturers for better prices for America’s seniors? What could possibly be wrong with negotiation?

Well, try negotiating with an 800 pound gorilla that will roll right over you if you don’t “negotiate” with it. Zycher points out that “under the 1992 Veterans Health Care Act, two price constraints are imposed upon pharmaceutical manufacturers in dealing with the [Department of Veterans Affairs]: There is a minimum 24% discount off the ‘non-federal average manufacturer price.’ And there also is the Federal Supply Schedule, or FSS, requirement that the pharmaceutical producers sell drugs to the VA at the ‘best price’ offered to private sector buyers.”

In other words, the government largely tilts the playing field to its advantage; sellers have play ball unless they want to lose a very big chunk of their market share. The VA system has drug price controls – they just call it negotiation. And study after study confirms that price controls reduce R&D, leading to fewer new medicines for future patients. This means that future cancer, Alzheimer’s, and AIDS patients lose out because they aren’t here yet to object to how the government “negotiates” with drug companies.



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