Friday, January 5, 2007

The Democrats' Hollow Part D Proposal

The House Democrats have announced the form their Part D prescription drug legislation will take.

Throughout the 2006 campaign, they had pledged to lower senior prescription drug prices by requiring the federal government to negotiate directly with the drug companies--something the 2003 Medicare Act specifically prohibited. The Democrats went further saying that these negotiations would make it possible to close the "donut hole," or coverage "gap," that now exists in the senior drug program.

That all had a great ring to it on the campaign trail. But guess what? The Democrats won the election and now they have to follow through on the pledge.

The problem is that when they got back to Washington they couldn't figure out a way to make their pledge work! It became clear that there weren't the savings in drug negotiation they had hoped for--so forget eliminating the gap.

More, they found out that the way you get real savings from negotiation is that you tell the drug companies if they don't give the Part D plans a great price they will be excluded from being offered--they won't be on the formulary.

All last year Democrats were critical of the Republican Part D plan for limiting benefits in one way or another. Now Democrats find out that if you really want to cut costs you have to limit benefits to do it. Yikes!!!

So what do the Democrats propose for their "first 100 hours" approach to limiting drug costs?

They propose something hollow and nothing more than a political charade.

The Democrats propose to require the Department of Health and Human Services (HHS) to negotiate drug prices with the drug companies (tough language there). BUT, they don't give the feds any leverage to get a lower price.

The Democrats would require the negotiations but they put HHS in the position of having to tell the other side that they also have no leverage--negotiate with us but you are going to get offered in all the health plans anyway.

The Democrat proposal also says that the Part D drug plans (the PDPs) are free to negotiate better prices than the government gets.

So, where are we at the end of the day?

The PDPs will do what they do now. The big guys, who have the market clout, can exclude drug companies from their formulary, and give incentives to use generic drugs, will have more clout than the the feds who have none because they can't exclude anybody.

So, the Democrats pass their hollow and meaningless Part D negotiation law in the "first 100 hours," likely watch it die in the Senate (if not incur a Bush veto), declare a political victory, and move on.

The market keeps doing what it has and the Democratic proposal, if it were to become law, wouldn't make any difference.

Being in the opposition was a lot easier than governing!

January 7 LA Times Related Story

January 7 Washington Post Related Story
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