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222 IRET Congressional Advisory 1 (2007)

handle is hein.taxfoundation/iretcgadv0219 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. April 17, 2007 Advisory No. 222 MEDICARE PART D AND PRESCRIPTION DRUG PRICES The Senate is about to vote on S.3, a Medicare reform measure. One key provision would remove the current law provision prohibiting the Secretary of HHS from interfering in negotiations between drug manufacturers, pharmacies, and prescription drug plan providers. The bill would not, however, repeal the current law provision prohibiting the Secretary from establishing a specific formulary or a price structure. It would not prevent private Part D drug plans from negotiating lower prices than the Secretary might obtain. The Congressional Budget Office report to the Finance Committee on April 16th is skeptical that the removal of the noninterference provision would obtain a better deal for seniors than the private plans. (See http://www.cbo.gov/ftpdoc.cfm?index=8OO6&type=l.) It states: CBO estimates that modifying the noninterference provision would have a negligible effect on federal spending because we anticipate that under the bill the Secretary would lack the leverage to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs [prescription drug plans] under current law. Without the authority to establish a formulary or other tools to reduce drug prices, we believe that the Secretary would not obtain significant discounts from drug manufacturers across a broad range of drugs. That is, without taking the dangerous and undesirable step of limiting access to drugs, HHS is not likely to obtain lower prices than the private plans competing to attract participants by offering the greatest choices at the best prices that they can negotiate. The attached fact sheet* examines how the current competition among private drug plans has fared, and how a mandate for government negotiation of prescription prices might affect prices, drug availability, and consumer choice. It contains links to valuable sources of information on these issues. Stephen J. Entin President and Executive Director * The fact sheet was jointly prepared by scholars from the American Enterprise Institute, the Center for Medicine in the Public Interest, the Galen Institute, the Heritage Foundation, the Institute for Policy Innovation, the Institute for Research on the Economics of Taxation, the National Center for Policy Analysis, and the Pacific Research Institute.