July 19, 2019

We recently learned that the White House is asking Senate Democrats to include two proposals in budget negotiations that will surely fail in their stated intent to lower drug prices. They are also likely to make healthcare worse.

RELATED: See CASE’s new TV commercial telling the Senate not to raid Medicare Part D! See ad here:

One of the proposals includes a request by officials inside the administration to institute price caps on Medicare Part D, triggering a rebate (e.g. tax penalty) if prices rise above the rate of inflation. The impulse to control drug costs through Washington is a lot like the impulse to fix a broken window with a hammer; it’s the wrong tool for the job and will make matters worse. Here’s why:

• Medicare Part D is the most successful and cost-effective government entitlement program ever. Unlike every other government program that far exceeds its projected costs, Part D has come in under budget since passed in 2003, up to 40 percent fewer dollars than lawmakers predicted. This has happened precisely because the program is based on market competition that encourages insurers, drug makers and pharmacies to negotiate on price, as well as other cost benefits such as patient rebates and discounts. Rebates alone have saved seniors billions of dollars over the past 15 years. This shortsighted policy proposal would undermine the incentive for the parties to negotiate in an open market, eliminating the very process by which seniors have enjoyed competitive drug prices. Part D, when initially passed, included a “non-interference” clause limiting meddling from Washington. The result speaks for itself, a program with sky-high satisfaction rates among seniors and enormous efficiency and cost savings through market competition.
• Interfering with market negotiations on drug prices will lead to higher prices elsewhere for consumers. Raising costs through taxes on Part D will result in providers seeking to recoup this expense in other ways, perhaps in the private insurance market, or perhaps among patients requiring less costly drugs. It also introduces the incentive for anticipatory price increases for companies that fear a future tax hit. Penalties and the fear of penalties will not only force price increases on consumers but could also reduce access. As it always has in the past, an arbitrary tax hike from Washington will undoubtedly create market distortions and needlessly hurt the consumers who must pay for them.
• This proposal won’t help seniors. As mentioned above, seniors have benefited tremendously from the free-market design of Part D, creating competition that has put downward pressure on drug prices and led to rebates and discounts for scheduled medicines. A tax puts more money into the hands of politicians, not elderly consumers or their families, and will surely be squandered by Washington’s rapacious spending appetite.
• It’s bad economics. This proposal does not take into account, as the US. Chamber of Commerce has noted, that “the growth in the consumer price index for prescription drugs decreased in June 2019 from 12 months prior, which is the lowest 12-month change since January 1968.”

 

There are certainly areas of our healthcare system that require reform, but Medicare Part D is at the bottom of that list. As free-market consumer advocates, CASE joins with numerous other consumer and taxpayer groups representing millions of Americans in strongly OPPOSING a government-imposed penalty in Medicare Part D. This “quick fix” is bad policy, a tired and failed approach that has not worked in the past and will not work now, but will only serve to undermine the very success of Part D. A government-imposed penalty further mimics the policies of nations with government-run health programs that lack the access to medications widely available in the U.S., threatening seniors with reduced access to needed medicines. What Americans need more than ever in helping to reduce drug prices is more free-market competition, not more meddling from Washington.