Letting Medicare negotiate drug prices could save nearly $3 billion: Democratic report

Giving Medicare the power to negotiate directly with drug makers to lower prices could save the federal government $2.8 billion a year for the most commonly prescribed drugs, according to a new report from Sen. Claire McCaskill, D-Mo.

McCaskill’s report, released Wednesday, comes after the Trump administration declined to endorse the reform in its drug pricing blueprint released in May.

“Getting bulk discounts is something every business does, and the fact that the federal government is prohibited from doing it for Medicare is unconscionable,” said McCaskill, one of the most vulnerable Democrats up for re-election this fall.

Currently, private plans can negotiate with drug makers for lower prices for Medicare Part D, the program’s prescription drug plan. However, Medicare itself is prohibited from bargaining with manufacturers.

McCaskill’s report looked at 2015 spending on the 20 most commonly prescribed brand name drugs on Medicare. It compared the price Medicare paid for those drugs to the price paid by the Department of Veterans Affairs, which has the power to negotiate directly with drug makers.

Based on the analysis, Medicare would save $2.8 billion in a single year even after taking into account rebates that drug makers provide for products covered under Part D.

But the Trump administration has not embraced giving Medicare direct negotiating power. Health and Human Services Secretary Alex Azar, in May, cited a 2007 report from the nonpartisan Congressional Budget Office that found that negotiation wouldn’t generate any savings because private insurance plans already do negotiate.

The only way direct negotiation could save money is if Medicare denies access to beneficiaries or sets prices “by government fiat,” Azar said in a speech back in May on the drug price blueprint.