House Democrats are pushing a bill to require Medicare to negotiate drug prices. So far, so good. But in what appears to be a bow to the political clout of Big Pharma, the bill does not authorize Medicare to drop from its approved list drugs on which manufacturers fail to offer good deals. This is like Wal-Mart telling its suppliers "we’re going to use our bargaining clout to get from you the lowest prices for our customers – but regardless of what price you offer we’ll still carry your product in our stores." What kind of incentive is that?
The Department of Veterans Affairs gets a 25 percent discount on drug prices for veterans because if a drug company won’t give a big discount, Veterans Affairs won’t include the drug in its plan. Medicare recipients will only get these kinds of savings if Medicare can do the same – walk away from a drug manufacturer that won’t deal.
So the Democrats can make some noise and look clever while keeping the K Street crowd happy. It is past time that we stopped subsidizing Canada and Europe's prescription drugs. We provide the margin that makes developing new drugs worthwhile and many of the innovations brought to market originate (after lots and lots of private investment) from discoveries in our tax-supported labs. I understand and support selling lifesaving drugs at production cost to poor countries, but wealthy Western Democracies don't need a free ride.
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