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Comment by vowelless | Hacker News Reader

> And it is illegal for Medicare to negotiate with drug companies

Why is this the case ?

Also, this is from September 2016.

It was politics from a couple decades ago. Medicare historically didn't cover prescription drugs, until Part D was enacted during the Clinton administration.

A tactic to get Republicans to support the measure was to pledge that Medicare wouldn't interfere in the drug market by developing its own formulary – Medicare Part D plan providers would compete for members and negotiate with pharmaceutical companies themselves.

There has been a bunch of talk over the last decade about repealing that particular restriction, but it's never made it over the finish line.

> until Part D was enacted during the Clinton administration.

???? Medicare Part D came into being in 2003, well into Bush's administration. The whole rest of your post is based around the notion that it was proposed by Clinton, when it was Bush....

Totally, and thanks. I was quick to write and submit my answer and was remembering some debate during the Clinton era.

But the noninterference provision was indeed targeted at market-oriented Republicans to get them on board. There were plenty who wanted to ensure that Medicare wasn't going to be eroding the businesses of established payers.

The support in the House of Representatives was also mostly Republican:

http://clerk.house.gov/evs/2003/roll332.xml

This history of Part D is so polically distorted it is almost exactly backwards.

https://mobile.nytimes.com/2003/03/05/us/bush-medicare-propo...

It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians:

https://en.wikipedia.org/wiki/Medicare_Part_D#Criticisms

https://en.wikipedia.org/wiki/Medicare_Prescription_Drug,_Im...

> It was part of the Medicare part D program - and likely put in via lobbying of Drug companies to politicians:

The prices are still negotiated. They're negotiated by the plans that provide Medicare Part D, rather than determined unilaterally by Medicare itself (which is what happens for Medicare A and B reimbursement rates).

Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away, the drugs will just flow through another private drug body. The drug makers have no reason to give a discount if the drugs will be sold under plan distributor B vs distributor A.

When you compare prices in the US vs nations with governmental bodies controlling drug prices, you can validate that the US way is ineffectual for controlling drug prices.

Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market.

That's absolutely not true. Look at the HCV treatments. The average discount for private insurers is 40%+. And that's just one example. They are tons of drug classes that are very heavily discounts to private payers.

Members of a health plan can't just move from one plan to another whenever they want. There is annual enrollment. Members are somewhat captive.

But when you look at data, this scheme does not result in better drug prices than national negotiation.

Do you have data that shows that? HCV net prices are lower in the US than in the EU.

> Any private drug negotiator is going to be in a terrible position because they don't have 100% of the market. They can't walk away,

Having 100% of the market is the definition of a monopsony. That's bad for both patients (in the long run) and pharmaceutical companies (in the short run).

In any case, even an ostensible monopsony pharmaceutical purchaser can't really just "walk away", because so so many of the drugs that they're purchasing are deemed essential. Let's say the government just said, "sorry, you've been taking this critical blood-pressure medication since it was released seven years ago, but now we're not going to pay for it, because we're taking a hard-line stance in our negotiation with Pfizer".

At that point, there are two possibilities:

1) Patients stop taking the drug, and they die

2) Patients pay for the drug out-of-pocket (if they can afford it), and the remaining patients die.

#1 is possible, but a political disaster. #2 is a no longer a monopsony, which defeats the whole premise of "having 100% of the market".

The balance of patients dieing vs not buying the drug at all is there regardless of what price negotiating scheme you implement. The cost is what varys in the end.

So when you look at data, a single government representative body can determine efficacy and balance the cost in a way that multiple private bodies have not demonstrated in US drug cost data vs drug costs in nations which implement governmental drug controls.

>Having 100% of the market is the definition of a monopsony. That's bad for both patients

That's how the rest of the developed world does it.

> That's how the rest of the developed world does it.

No, very few countries - even those which regulate prescription prices - have monopsony pharmecutical purchasers. Germany does not. Canada does not. The Netherlands does not. Even France does not. Technically the UK doesn't either, because each England/Wales/Scotland/Northern Ireland are operated separately.

And as explained in the article, these systems only work because the US picks up the tab in funding research and development, even for pharmaceutical companies based in Europe. If the US weren't far and away larger than all the countries which do have monopsony purchasers, that setup wouldn't work, because nobody would be funding the development of those drugs in the first place.

This has background:

http://kff.org/medicare/issue-brief/searching-for-savings-in...

A summary is that when the coverage was established, the law was written so that Health and Human Services is prevented from participating in price discussions, it's left to the private companies that underwrite the policies.

You can bet that if Medicare did establish a formulary, we'd be talking about the problems with that instead.

This is the most accurate answer. Medicare doesn't negotiation on drug prices. The private insurers who manage the Part D plans do the negotiations and yes, they get significant price concessions (sometimes higher than for commercial patients).

When these private plans negotiation lower prices, they can in turn cover more patients for fewer dollars. That's why Part D has actually come in well under projected costs.

Because Medicare has, in a sense, too much market power and could unreasonably distort the market in favor of the short term incentive of getting the best possible price (the marginal cost of production) and against the long term goal of profitable drug companies that produce new drugs in the future.

Now, there are plenty of people that don't find this reason compelling and thing that the US gov't should do otherwise. But that's the reason.

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