Should Medicare Be Allowed To Negotiate The Price Of Drugs?

As part of his annual budget proposal to Congress, President Obama’s has requested that, for the first time, Medicare should be allowed to negotiate the prices of pharmaceuticals. Currently, such price negotiation is against the law. But, that law could change if the President’s proposal is approved by Congress.
As something of a deal sweetener, The President also proposes a major new initiative to develop drugs that are specifically tailored to the genetic make-up of patients. However, he acknowledges concern about the costs of such specialized pharmaceuticals and what they would cost the federal Medicare program. Therein comes his justification for his proposed new business relationship between Medicare and Big Pharma.

The prices of new patented pharmaceuticals have skyrocketed in recent years, mostly in connection to the cost of their development. For example, the list price for a one-year supply of Kalydeco, is $311,000, according to its manufacturer, Vertex Pharmaceuticals. Other drugs for diseases such as cancer and cystic fibrosis cost tens of thousands of dollars. Prices over $50,000 or $100,000 a year are not unusual.

“The possibilities are boundless,” Mr. Obama said at a recent White House event. Precision medicine “gives us one of the greatest opportunities for new medical breakthroughs that we have ever seen,” he said.

“Long term,” Dr. Collins said, “it’s likely that this approach can reduce health care costs by providing a more effective way to treat disease in an individualized way, so that treatments are more likely to work for a subset of individuals who have a particular form of a disease or disorder.” “However”, he went on, “I’d be reluctant to say that in the short term those kinds of rewards are going to occur. I’d love it if they did.”

“Planning for the precision medicine initiative is going like gangbusters,” said Sharon F. Terry, chief executive of the Genetic Alliance, an advocacy group for patients. “But I have grave concerns about the cost of medicines that will be developed. The prices that we’ve been seeing for these treatments are just not sustainable.”

For these and other reasons, Obama has suggested that it is important that Medicare officials be allowed to negotiate drug prices with pharmaceutical companies. Currently, every month it seems there are reports of newly discovered genetic factors that appear to increase the chances that a person might develop some type of cancer or other disease. Just as often, we hear from consumer groups that doctors, insurance companies, and government officials are expressing alarm or concern about the skyrocketing price of specialty drugs.

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