Disappointing Democrats: Medicare Part D Reform
Greg Mankiw compares the words of House Energy and Commerce Committee Chairman John Dingell to an analysis from the CBO:
CBO estimates that H.R. 4 would have a negligible effect on federal spending because we anticipate that the Secretary would be unable to negotiate prices across the broad range of covered Part D drugs that are more favorable than those obtained by PDPs under current law.
Greg then gives the microphone to Robert Reich:
House Democrats are pushing a bill to require Medicare to negotiate drug prices. So far, so good. But in what appears to be a bow to the political clout of Big Pharma, the bill does not authorize Medicare to drop from its approved list drugs on which manufacturers fail to offer good deals. This is like Wal-Mart telling its suppliers “we’re going to use our bargaining clout to get from you the lowest prices for our customers – but regardless of what price you offer we’ll still carry your product in our stores.” What kind of incentive is that? … The current Democratic bill is calculated to make everyone happy. It allows Democrats to tell seniors and the all-important AARP that they’re forcing Medicare to negotiate with drug companies. And it also allows Democrats to turn around and tell Big Pharma not to worry because the negotiations won’t have any real teeth in them. Their drugs will still be approved, regardless of price.
I guess a free market type might argue that the Democratic campaign theme during the 2006 campaign that a new Congress would put some real teeth in price negotiations was bad economics. But the Democrats ran on this theme and it looks like they are planning to disappoint those who voted for Democrats based on this issue.