Senator Richard Blumenthal recently renewed his call for an end to the ban on Medicare’s ability to directly negotiate prescription drug prices with pharmaceutical companies during a hearing of the Special Committee on Aging that included medical experts and industry representatives. The hearing was held to identify policy proposals that can be pursued to reduce the cost of prescription drugs for seniors.
“Banning better drug bargains makes no sense – and should be stopped so we can save seniors and taxpayers billions of dollars,” said Blumenthal. “As prescription drug prices spiral upward, the ban on Medicare drug negotiations simply adds to the crushing burden of rising health care costs. We must end the Medicare straightjacket and enable the program to negotiate lower prices.”
According to testimony provided to the Special Committee on Aging by the Organization for Economic Cooperation and Development (OECD) in 2009, “the average price of 181 pharmaceutical drugs in the United States in 2005 was 30 percent higher than the average in other OECD countries.” Other studies (e.g. McKinsey Global Institute, 2008) suggest that this is an underestimate, and the true difference in price is as much as 50 percent.”
The U.S. spent $250 billion on prescription drugs in 2009, according to the Centers for Medicare and Medicaid Services (CMS) including $29.7 billion on cardiac drugs alone. Drug prices have outpaced the rate of inflation by 44 percent—averaging 3.6 percent growth per year between 2000 and 2009. It is projected that under the current policies, due to rising costs and the increases in the number of older Americans, spending on prescription drugs will nearly double in the U.S. over the next 10 years.
Currently, Medicare is the largest public payer of prescription drugs, accounting for 60 percent of all the public payments. Last year, Medicare spent $61.7 billion on prescription drugs. Enabling the Secretary of HHS to use the bargaining power of Medicare’s 47 million beneficiaries to negotiate for lower prescription drug prices could save the Medicare program up to $24 billion annually.