Protecting drug profits

November 30, 2006

Not by accident has the pharmaceutical industry earned a reputation as one of the most powerful and effective lobbies on Capitol Hill. It's big, it's well connected and it's clever.

So it should come as no surprise that the drug lobby is throwing up barriers to block Democrats from honoring their promise to use Medicare's purchasing power to negotiate lower prescription prices for retirees. What's intriguing is the industry tactic of claiming the Medicare prescription drug program is working too well to be touched.

That the program works at all is a marvel considering the tribulations of its shakedown-cruise year. But that's no justification for blocking the agency from seeking the shrewdest possible bargain from drug manufacturers. Lawmakers in both parties should ignore this smokescreen.

House Democrats promised to lift the ban on Medicare negotiations for drug prices within 100 hours after they take control of Congress in January. It will likely take much longer to design a plan for incorporating a new Medicare negotiated benefit within the Part D program, and perhaps longer still to win support from a balky Senate.

This cost-saving step - for the government as well as beneficiaries - could well be, though, the Democrats' signature domestic program of the next Congress. The only real threat is to drug-maker profits, which are among the fattest of any industry.

After a disastrous start last year characterized by bureaucratic chaos, the Medicare drug program has exceeded expectations. Many more private pharmaceutical benefit managers took part than anticipated, offering beneficiaries a dizzying array of choices. The premiums are generally lower than had been projected. Plus, the cost to the government so far is lower than earlier estimates.

Polls also report general satisfaction with the program among its 22.5 million subscribers, despite huge gaps in coverage known as doughnut holes. And participation is relatively high, though there are some potential beneficiaries among the elderly poor that the program has not been able to reach.

But there's no reason why a partial redesign that allows for price bargaining with drug makers can't make a good program better and more sustainable for the long term.

Critics say Medicare is so huge its negotiations will amount to price-fixing, throwing the benefits of a competitive market out of whack. But one Democratic proposal would preserve competition by setting a maximum price for specific drugs, then allowing companies to underbid that price to win customers. Another proposal would create a complete Medicare-negotiated drug insurance plan against which the private plans could compete with varying prices and benefits.

So, don't listen to any of that sky-is-falling stuff from the pharmaceutical lobby. If the redesign is done well, all that may fall are drug prices.

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