A report released by Public Citizen and Carleton University urges Congress to allow Medicare to negotiate innovator drug prices and introduce mandatory generic substitution for all Medicare Part D plans. And Sen. Bernie Sanders (I-Vt.) has called for “wartime powers” to break the patents on drugs.
First off, allowing the feds to negotiate Part D drug prices would result in prices going up and patient choices going down. The Congressional Budget Office found that between 2004 and 2013, Part D costs were 45% less than what was initially estimated and premiums for the program are roughly half the government’s original projections. These results are largely due to Part D’s market-based structure. In fact, the CBO has observed that Part D plans have “secured rebates somewhat larger than the average rebates observed in commercial health plans.” What’s more, the CBO has said direct federal negotiations “would have a negligible effect on federal spending” but would result in narrower formularies akin to the Veterans Affairs model.
As for Sen. Sanders’s call for “wartime powers” to break patents, there is no such thing as a free lunch. While opaque and seemingly arbitrary drug pricing deserves immediate attention, the value of innovation must not be ignored. As any medical scientist will tell you, there are few eureka moments in health research. Progress comes step by step, one incremental innovation at a time. It doesn’t come easy or on the cheap.
And mandatory generic substitution, from a therapeutic perspective, often has a deleterious impact on patient care. A study by the National Consumers League demonstrated that 40% of patients said the “switched” medications were not as effective as the original, and 30% experienced more side effects following substitutions. Skimping on a more expensive medicine today but paying for an avoidable hospital stay later is a fool’s errand.