It's a well worn, but still accurate, mantra that we in the US pay the highest prices in the OEDC for brand-name medications (non-generics). And the most often offered opinion is that we do that because, unlike other OEDCs, our federal government doesn't negotiate price for Medicare. (It does for other federally funded programs like the VA, DoD, PHS, IHS and the Coast Guard.) If that's the case - that we could pay rest-of-world prices if only the Feds could negotiate directly with Big Pharm - then the solution would seem pretty simple...let the Secretary of HHS negotiate on behalf of Medicare recipients.
For a detailed explanation on why simple maybe wrong please read what the Congressional Research Service had to say on the Pros and Cons of Medicare negotiations. (Spoiler alert - "The Congressional Budget Office (CBO), at the request of congressional leaders, examined the effect of striking the “noninterference” provision and estimated that it would have a negligible effect on federal spending. Similarly, the Chief Actuary at the Centers for Medicare and Medicaid Services (CMS) concluded that giving the Secretary the ability to directly negotiate prescription drug prices might not produce additional savings over what private plans negotiate.")
Here's another option - tax the exports.
Allow the HHS to negotiate, on behalf of ALL government agencies, price with manufactures. That is the federal government will negotiate with pharma for a set price for their medications, and that price would be the same in all situations in which the federal government is the majority payer. In exchange, the federal government would impose a tariff on these same brand name medications to the extent needed to guarantee the foreign purchase price would be the "federal price" + 5%. The manufacturer would get 100% of the 'up charge'. The 5% would be split evenly between the manufacturer and the feds as a way to offset administration costs of the program, and the export costs incurred by the manufacturer. If the manufacturer decides to sell abroad for a lower price in certain countries (poorer ones that can't afford the "federal price +5"), that's fine, it's up to them. In fact, their participation in the program is completely voluntary. If a producer doesn't want to be subject to any government pricing, that's their right. They don't have to. They can continue to negotiate directly with the various government agencies...assuming the agency wants to work with them. And, given that there is a constant supply of new and innovative medications in the market every year, some manufacturers may feel they have more leverage going it alone. More power to them.
This approach gets at one of the less discussed dynamics driving our high prices...because foreign governments effectivley demand low pricing, American tax-payers, consumers and companies are subsiding those discounts. We're paying too much for our meds because citizens in other countries are paying too little for theirs. And that seems wrong to me.
For a detailed explanation on why simple maybe wrong please read what the Congressional Research Service had to say on the Pros and Cons of Medicare negotiations. (Spoiler alert - "The Congressional Budget Office (CBO), at the request of congressional leaders, examined the effect of striking the “noninterference” provision and estimated that it would have a negligible effect on federal spending. Similarly, the Chief Actuary at the Centers for Medicare and Medicaid Services (CMS) concluded that giving the Secretary the ability to directly negotiate prescription drug prices might not produce additional savings over what private plans negotiate.")
Here's another option - tax the exports.
Allow the HHS to negotiate, on behalf of ALL government agencies, price with manufactures. That is the federal government will negotiate with pharma for a set price for their medications, and that price would be the same in all situations in which the federal government is the majority payer. In exchange, the federal government would impose a tariff on these same brand name medications to the extent needed to guarantee the foreign purchase price would be the "federal price" + 5%. The manufacturer would get 100% of the 'up charge'. The 5% would be split evenly between the manufacturer and the feds as a way to offset administration costs of the program, and the export costs incurred by the manufacturer. If the manufacturer decides to sell abroad for a lower price in certain countries (poorer ones that can't afford the "federal price +5"), that's fine, it's up to them. In fact, their participation in the program is completely voluntary. If a producer doesn't want to be subject to any government pricing, that's their right. They don't have to. They can continue to negotiate directly with the various government agencies...assuming the agency wants to work with them. And, given that there is a constant supply of new and innovative medications in the market every year, some manufacturers may feel they have more leverage going it alone. More power to them.
This approach gets at one of the less discussed dynamics driving our high prices...because foreign governments effectivley demand low pricing, American tax-payers, consumers and companies are subsiding those discounts. We're paying too much for our meds because citizens in other countries are paying too little for theirs. And that seems wrong to me.
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