Monday, January 8, 2007

More on the Democratic Part D Drug Negotiation Debate

A friend in big pharma responded to my earlier post on Part D disagreeing with me that the Democratic proposal is not a threat to the drug industry.

He made two points:
  • The Dem bill does not prevent the government from requiring each and every plan to prior authorize a medicine for which it is unable to negotiate an "acceptable" price. They see such restrictions as possible because this would not be a formulary.
  • They worry that CMS might, by regulation, decide that to participate a PDP must follow a price schedule. They see this as possible because the Dem bill eliminates the prohibition against a price schedule.
My sense is that the three page Dem bill says nothing about any of this and it might be possible for a future Democratic administration to be expansive in the way it interprets any of this. And maybe not.

However, I still maintain that the real threat to pharma is from the big market share HMOs that do have the market clout and can establish a formulary as well as a co-payment structure that should scare pharma a whole lot more than what a future Democrat CMS administrator might dream up. Any interpretation of this bill falls short of what the HMOs can now do without asking.

In the end, my sense is that pharma is scared, and should be, because of the "camel's nose under the tent" this bill creates more than any short-term risk it creates.

But, pharma should be a lot more afraid of what the big HMOs can already do like the rate of generic take-up that private plans, including PDPs, have been effective in steering.

This three page House Democratic bill is little more than a hollow political proposal. If it were serious, it would be more than three pages long! I can't remember the last time I saw a three page bill (the ones that name a post office are longer).

The House will pass this, the Dems will celebrate, it will go to the Senate, and it will die. If the Dems are really lucky (and the Republicans are stupid) a Republican senator will put a "hold" on the bill and the Democrats can blame the Republicans for siding with the big drug companies and against grandma.
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