Sunday, February 7, 2016

Why do Medicare, Medicaid and Veterans Affairs deal with drug costs differently?

U.S. drug costs going higher and pricing system getting foggier, studies say.

Why do Medicare, Medicaid and Veterans Affairs deal with drug costs differently?


Countries sometimes do things differently from other countries or gain reputations for doing certain things well or poorly.

But within a country, within the same federal government, does it make sense to do things differently among departments or programs that are providing essentially the same service?

To that point, does it make any sense that Medicare, Medicaid, the Department of Veterans Affairs and the Department of Defense (whose Tricare health plan costs big bucks) buy pharmaceuticals and negotiate the prices in different ways?

"No, there is absolutely no legitimate reason - economic or ethical - for why we have benefits programs with multiple negotiators within the government," said Prof. Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins University and a coauthor of one of the studies on drug pricing published Monday in the journal Health Affairs.

A link to Tuesday's Inquirer story is here. A link to the Health Affairs study that Anderson helped write is here.

But before you automatically blame all career government staff members for protecting their jobs and not caring about how taxpayer dollars are spent, consider a couple of other things.

For example, Congress passed particular laws related to Medicare and how it can -- or mostly can't -- clamp down on prices paid to drug companies. Some members of Congress might complain loudly about entitlement spending, but some also take campaign money from pharmaceutical companies to help push such laws.

When Medicare Part D was pushed and passed under Republican George W. Bush, it had no funding mechanism behind it, meaning no taxes raised to pay for it. Seniors and drug companies like the program, but it is a cost to taxpayers.

Also, and this is true of most of the U.S. healthcare system, one person's "waste" is another person's job. For better or for worse, there are thousands of people employed in the private sector whose job is to sort through the drug pricing system. Likewise, people tend to want to cut costs for others.

"Does that guy over there really need that expensive drug? I do, of course, but I'm not sure about that guy over there. And raise his fees and taxes, but not mine."

Still, having Veterans Affairs negotiate with drug manufacturers directly and Medicare negotiate no at all gives some reason to pause.

"A drug is just as valuable to a veteran as it is an active duty soldier in the army as it is to a Medicare beneficiary," Anderson said.

Staff Writer
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About this blog
David Sell blogs about the region's pharmaceutical industry. Follow him on Facebook.

Portions of this blog may also be found in the Inquirer's Sunday Health Section.

Reach David at or 215-854-4506.

David Sell Staff Writer
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