Democrats' drug plan questioned

VA price approach might not work for Medicare

November 27, 2006|By Ricardo Alonso-Zaldivar | Ricardo Alonso-Zaldivar,LOS ANGELES TIMES

WASHINGTON -- With millions of seniors facing premium increases for their Medicare prescription plans, Democrats say they have a solution: Use the government's buying power to bargain for rock-bottom drug prices. The Department of Veterans Affairs does it for 5 million patients, they point out, so why not Medicare with its 43 million?

Medicare sets rates for hospitals, doctors and medical equipment such as power wheelchairs -- as well as drugs administered in doctors' offices. It was only the Republicans' ideological commitment to the private sector that led them to bar the government from negotiating discounts with drug companies, Democrats contend.

But the VA model might not be readily adaptable to Medicare, some independent experts say. And policy differences among Democrats, along with the Bush administration's continuing opposition to government price-setting, might complicate the task of reaching a goal Democrats have set for themselves when they take over Congress in January.

Meanwhile, newly announced discounts by drug companies could have an effect on the Democrats' effort before it gets started. At least one major manufacturer is offering assistance to seniors who have trouble paying for their drugs.

"From a rhetorical perspective, Democrats may feel like they gain a lot with this issue, but there are many substantive hurdles that the government faces in trying to negotiate prices," said Dan Mendelson, president of Avalere Health, a consulting enterprise that tracks the Medicare prescription program.

"If you look historically at the government's experience in trying to regulate prices, it's poor."

Although costs for the Medicare drug program are lower than the government originally projected, there is evidence that prices could be lower still. A recent Consumers Union study of the prices charged in South Florida for six widely used drugs found that Veterans Affairs prices were 54 percent lower than the average Medicare prices.

"Medicare is overwhelmingly the largest purchaser, and it's ridiculous for Medicare not to get the best deal of all institutional purchasers," said Ron Pollack, executive director of the advocacy group Families USA. The VA's experience shows what the potential could be, he added.

Yet applying the VA approach to Medicare might prove difficult. For one thing, Medicare is much larger and more diverse.

Equally important, VA officials can negotiate major price discounts because they restrict the number of drugs on their coverage approved list. Instead of seven or eight different drugs for a given medical problem, the VA list might contain only three or four. If a drug company fails to offer a hefty discount, its product won't make the cut.

For example, VA system veterans can get Zocor for high cholesterol, but not Lipitor. In all, the VA covers about 1,300 medications. By comparison, the most popular Medicare plan -- AARP MedicareRx -- covers every medication approved under the program, or about 4,300 drugs.

But VA patients who want drugs that are not on the department's list must go outside the system for them.

So the VA offers lower drug prices but fewer choices.

Mindful of the popularity of the Medicare prescription program, one prominent advocate of government-negotiated prices has had a change of heart. Tommy G. Thompson, President Bush's first secretary of Health and Human Services, once expressed regret he hadn't been given the power to bargain. He no longer feels that way.

"This plan is working much better than ever anticipated," Thompson said in a recent interview. "When you've got a law that is working well in the federal government, why change it?"

Ricardo Alonso-Zaldivar writes for the Los Angeles Times

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