12 Jan 2007 Health Care Expert Condemns New Liberal Report on Medicare Drug Prices

Washington, D.C. – Research used in a new report by the left-of-center group Families USA, apparently meant to bolster House Speaker Nancy Pelosi’s effort to give government employees the power to “negotiate” drug prices under Medicare Part D, is being called deceptive by a health care expert from the National Center for Public Policy Research.

“The Families USA report proves the wisdom behind Mark Twain’s quip ‘There are lies, damned lies and statistics,'” said National Center senior policy analyst David Hogberg, Ph.D.

Families USA’s “No Bargain: Medicare Drug Plans Deliver High Prices” purports to compare the drug prices paid by the insurance plans that administer Medicare Part D to those paid by the Veteran’s Administration.  It claims that drug prices paid under Medicare Part D are much higher than those paid by the VA, in some cases, over 1,000 percent higher. 

However, says Hogberg, the report draws its Medicare drug price data from nonrepresentative sources.

As an example of the flawed nature of the Families USA report, Hogberg notes that the Medicare drug price data used in the report to compare Medicare drug costs to the VA’s drug costs come from only two counties – Montgomery County, Maryland and Hamilton County, Ohio.  Based on median household income, both counties are above the national average.  Montgomery County, for instance, is the fourth-richest county in the nation.  Since wealthier areas, on average, tend to pay higher prices, Families USA’s use of these counties as the source of their sample data all but guarantees that the Medicare drug prices data in their study will be exaggeratedly high.

“I call that cooking the data, pure and simple,” Hogberg said.  “You also have to dig deep into the Families USA study to learn the VA doesn’t ‘negotiate’ drug prices.  The VA pays only 76 percent of the nonfederal average manufacturer price of a drug.  That’s not a ‘negotiation,’ that’s a price control.  So, Families USA has skewed its results by using Medicare data only from wealthy counties and comparing it to prices obtained nationally by the VA, which was imposing price controls.”

“I trust that sensible members of Congress and the media will dismiss this study for the nonsense that it is,” Hogberg said.

In conclusion, Hogberg added, “In 2003, President George W. Bush signed into law a prescription drug program for Medicare, known now as Medicare Part D, that is administered by private drug companies.  It bans Medicare from ‘negotiating’ directly with pharmaceutical companies.  Proponents of government-run health care have long sought to remove this prohibition, but supporters of the ban believe that such ‘negotiations’ are akin to imposing government price controls, which all-but-inevitably lead to rationing, shortages, and a decline in health care quality.”

Hogberg is the author of The National Center for Public Policy Research National Policy Analysis paper, “Letting Medicare “Negotiate” Drug Prices:  Myths vs. Reality.”  The paper is available online at www.nationalcenter.org/NPA550MedicareDrugPrices.html.

The National Center for Public Policy Research is a non-partisan, non-profit educational foundation established in 1982 and based in Washington, D.C.

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