The Price of Medicine in the US

In 2003, the “Medicare Prescription Drug, Improvement, and Modernization Act” (MMA) was signed into law by President George W. Bush.  The vote was almost perfectly split: republicans for and democrats against.  This act significantly changed Medicare; in particular, it provided Medicare users with prescription drug cost coverage [1].

One might imagine that Medicare, with its large customer base, buys a lot of drugs with this new coverage, and indeed it does.  The estimated cost of Medicare spending on medicine when the bill was passed was $40B per year.  But in 2015 alone, Medicare spent $324.6B on medicine [2].  With that much demand, one would think that Medicare could use its influence to bargain for reduced prices on medicine, but it doesn’t.  Why not?  The MMA explicitly prohibits the federal government from negotiating for lower prices [3].  How much would the difference be?  The Veteran’s Affairs office, which is permitted to bargain in bulk, pays 60% of the Medicare price for the 20 most popular medicines [4].

This is all the result of the $100M per year investment of the pharmaceutical industry into lobbyists [4].  Additionally, the industry regularly hires former congressmen as lobbyists (as a way to reward them and to encourage future congressman to do their bidding).  At least five former members of congress, including the former minority leader, were lobbyists working to push through MMA [4].  And at least 15 congressmen and federal officials who worked on MMA became lobbyists for the pharmaceutical industry after it was passed [4].

Notably, the ability for Medicare to negotiate for lower prices was not changed with the Affordable Care Act (commonly known as Obamacare), where the pharmaceutical industry once again lobbied heavily [5].

Other nations have not succumbed to this pressure and have maintained the ability to bargain in bulk.  In particular, Canada and the U.K. permit their national healthcare systems to bargain in bulk for medicines, and pay much cheaper prices as a result [6].  However, it is currently illegal to import drugs from those countries [7].  So a pill of Viagara, which costs approximately $2 per pill in Canada or the U.K., costs $60 in the U.S.

On Thursday (1/12/2017), Bernie Sanders introduced an amendment which would permit Americans to import medicine from Canada.  Sanders made the argument that we are permitted to import tomatoes, celery, and other food items from Canada, but not medicine.  The Amendment failed in the senate with a vote of 52-46.  The vote is no longer along party lines.  As an example, senator Cory Booker (a hopeful democratic 2020 presidential candidate) voted against the bill after receiving almost $300k in funding from the pharmaceutical industry.  The vote was 46-52 with 13 democrats voting against.

The Pharmaceutical industry is winning.

 

[1]  https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Improvement,_and_Modernization_Act#Prescription_drug_benefits

[2]  https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html

[3]  http://www.motherjones.com/politics/2016/10/drug-industry-pharmaceutical-lobbyists-medicare-part-d-prices

[4]  “Under the Influence”, 60 Minutes, https://www.youtube.com/watch?v=LUVoYMxlCJk

[5]  http://www.politico.com/story/2016/07/obamacare-prescription-drugs-pharma-225444

[6]  http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/

[7]  http://www.fda.gov/AboutFDA/Transparency/Basics/ucm194904.htm

[8]  https://theintercept.com/2017/01/12/cory-booker-joins-senate-republicans-to-kill-measure-to-import-cheaper-medicine-from-canada/

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