Fact Checking FactCheck on Medicare Drug Negotiation Proposal

FactCheck.org ran analysis of the Medicare prescription drug bill (the one that would permit Medicare to negotiate prices with the pharmaceutical industry) the other day that included some criticism of claims made by both parties. I asked the National Center���������s Senior Policy Analyst, David Hogberg, if FactCheck knows what it is talking about.

Here���������s what David said:

Overall, this FactCheck from Annenberg is quite accurate. It is true that the Medicare bill that would allow the federal government to negotiate drug prices is pretty weak. The reason is that the bill does not permit Medicare to create a “formulary.” A formulary is also known as a “preferred-drug list,” a list of approved drugs that Medicare would pay for. If a drug is not on the list, then Medicare wouldn’t pay for it. A formulary would give Medicare far more negotiating power in that it could threaten to not include a pharmaceutical company’s drug on the formulary if the company didn’t come down on price.

What the FactCheck doesn’t reveal is why the Democrats left a formulary out of the bill. With a formulary, there exists the very real possibility that a drug that is popular among seniors would not end up on the formulary. Going into an election facing a bunch of angry seniors is something that scares the heck out of the Democrats (and, in fairness, probably would do much the same to Republicans.) See Rich Lowry for more.

One thing that I think the FactCheck underplays is the ability of the Secretary of Health and Human Services to use the bully pulpit. No drug company is going to want to be singled out by the Secretary as selling a drug that is overpriced. Should the Secretary hold a press conference criticizing the cost of a particular drug, the maker of that drug would have a big incentive to lower the cost. Otherwise, the company might face hearings in Congress or investigations by the Justice Department.

Of course, that would all depend on who was Secretary. Yet it is best never to underestimate the effectiveness of press hungry politicians.

For more on the proposal to let Medicare negotiate drug prices, please see “Letting Medicare “Negotiate” Drug Prices: Myths vs. Reality,” by David Hogberg, Ph.D., published by the National Center earlier this month.

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