Medicare Won’t Benefit from Democrats’ Reform

As the House this week takes up the Democrats’ legislation requiring government price negotiations for Medicare Part D, it is useful to consider a point that they have not wanted to address: namely, the fact that we cannot have government drug price negotiation without a formulary.

The Democrats continue to use the Department of Veterans Affairs’ (VA) drug plan as their vision for Medicare Part D.  Unfortunately for America’s seniors, they fail to point out that the fundamental tool that goes hand-in-hand with VA price negotiation is a formulary which limits the number of drugs available.

Why?  When the government grows unsatisfied with price negotiations, it simply removes that drug from the formulary.  Although H.R. 4 does not call for a formulary, the New York Times reported on January 7 that economists and health policy experts believe the only way for the government to achieve savings is to steer patients toward certain preferred drugs.  A formulary is the logical outcome of such a process.

The VA’s formulary illustrates why we should be concerned.  According to a study published by the Manhattan Institute, of the drugs approved by the Food and Drug Administration (FDA) in the 1990s, just 38 percent are on the VA formulary.  Of drugs that received FDA approval since 2000, only 19 percent are available to VA beneficiaries.  Perhaps that’s why one million of the 3.8 million Medicare-age beneficiaries enrolled for VA health benefits chose to enroll in Medicare Part D when it became available.

According the a Public Opinion Strategies Poll, in just the first year of the Part D benefit seniors have already seen their drug costs decrease by 54 percent.  Medicare Part D has been successful in using the power of the marketplace to lower costs and keep options open to seniors and their doctors.  According to the Congressional Budget Office, H.R. 4 would have a negligible impact in terms of reducing federal spending.  Consequently, government price negotiation stands only to decrease choices for seniors, many of them low-income, who have gained prescription drug coverage and seen dramatic decreases in their drug costs as a result of Medicare Part D.