Formularies needed to reduce medication prices under Medicare prescription drug benefit

Feb 13 2007

A bill passed last month by the House that would require the HHS secretary to negotiate prices directly with pharmaceutical companies under the Medicare prescription drug benefit "would have very little effect" on prices "because it forbids Medicare from excluding drugs from coverage -- and thereby denies it the leverage needed for bargaining," Marcia Angell, a senior lecturer at Harvard Medical School, writes in a Boston Globe opinion piece.

"The ostensible reason for not permitting Medicare to use these lists, or formularies, is that beneficiaries would not stand for any limitation on their choice of drugs -- a self-serving claim by the pharmaceutical industry and its acolytes," Angell writes.

Most "new drugs are not advances over old ones but minor variations with new patents and higher prices," Angell writes, adding, "If more people understood this, resistance to a Medicare formulary would disappear, as long as the list included at least one drug from each class."

In addition, although pharmaceutical companies "protest that lower prices would stifle research," that "argument can't be taken very seriously" because companies "spend over twice as much on marketing and administration as on research and development -- and have more left as profits," Angell writes.

Medicare needs a prescription drug benefit that is "directly administered, with negotiated prices and without a requirement for intermediate businesses to feed at the public trough," but, "to have any real leverage, it must be able to use lists of covered drugs based on their cost-effectiveness," she concludes (Angell, Boston Globe, 2/12).