Unintended Consequences of the Medicare Drug Benefit
The retail prices for some of the most popular brand-name drugs sold to seniors increased 41.5% over the last five years, while the consumer price index rose only 13.3%.
Seniors are overusing antibiotics, including newer, more expensive ones.
Once again, evidence that economic incentives matter.
The drug companies got off scott free in the health reform legislation. They are probably laughing all the way to the bank.
I noticed that some of the most widely-used drugs by seniors, which AARP worries have risen in price excessively, have reasonably good substitutes that are either generic or over the counter. Three of the drugs mentioned were for serious heartburn from a class known as PPIs. At about $5 per tablet they are pricy. Prilosec is a drug from the PPI class and sells for $0.62 per day.
PHRMA did its deal with the devil. The drug companies will reap huge profits. They will spend millions to help Democrats get reelected. Then, when the Democrats get a chance, they stab the drug companies in the back.
They deserve each other.
Seniors and antibiotics: I can’t tell you how many times I’ve had this exact conversation with my mother or other senior:
Virginia: Antibiotics won’t cure a cold because a cold is a virus.
Senior: Yes they do!
Virginia: No, they don’t. Antibiotics kill bacteria, which don’t cause the common cold. (looks it up on her IPhone)
Senior: (seeing proof, but refusing to believe the punk kid) Even if they don’t cure my cold, they make it to where I don’t get another infection while I’m sick.
Virginia: So what you’re saying is that you would rather die from a rampant bacterial infection in 5 years than suffer momentary discomfort right now?
Now that I read that, I’m thinking that my PR skills are lacking. But, still, I think there’s a virtue in being right ; )
Why do so few people commenting here have any memory? These drug price increases look back five years, before the new health care law, before Obama was even nominated. This has NOTHING to do with any negotiations between the current administration and Pharma. It a direct byproduct of the way the Bush administration went out of their way to shield Pharma from any pricing pressure in Medicare Part D. This problem is easy to solve, every PBM negotiates prices, give Medicare Part D the same negotiating power.
Art, it’s not that easy. As Alain Enthoven and Kyna Fong explained in a December 2006 brief analysis, the only power a PBM has to drive drug prices lower is the power to say “no” and decline to include a drug in its formulary (see findings here). Knowing its drugs can be excluded from the preferred drug list on a formulary, drug makers have an incentive to bid as low as possible to become the near-exclusive supplier for a given drug class in a drug plan.
Enthoven argued that the federal government would not have the political will to exclude drugs like a PBM. For example, would it be politically feasible to tell AstraZeneca, Novartis, Bristol-Myers Squibb and Merck/Schering-Plough that Pfizer’s drug Lipitor would be the preferred cholesterol drug on the Medicare Part D drug plan formulary and the cholesterol medications Crestor, Lescol, Vytorin and Pravachol were not? I doubt it.
This is why many economists fear the idea that HHS should “negotiate” Medicare Part D drugs is really just an argument to impose arbitrary price controls.