Prescribing Part D Sense To Democrats

Senate minority leader Mitch McConnell lauded yesterday’s failure by the Democrats in the Senate to scuttle the successful arrangements of the Part D Medicare prescription benefit:

“Today the Senate protected healthcare access for tens of millions of seniors as well as price negotiations to ensure they pay the least amount of money for the prescription drugs they need,” Senate Minority Leader Mitch McConnell (R-Ky.) said.
He added that the bill would do “nothing” to provide seniors with a better drug benefit.

Wall Street Journal editor Kimberley Strassel writes about what is at stake:

Republicans won a big victory this week, shooting down a Democratic plan for more government-run health care….

…That was a top Democratic promise this last election, as the party sought to play off public anger over health-care costs. Liberals saw it as an important step toward their all-government, health-care nirvana. Nancy Pelosi and Harry Reid also felt this was an issue on which they could once again roll Republicans, by flashing the impoverished-senior-citizens card.

Instead, Dr. McClellan's new model came online and wowed the older class. Private companies have flocked to offer a drug benefit, giving most seniors a choice of 50 innovative plans. The competitive jockeying has slashed prices from an expected $37-a-month premium to an average $22. The cost of Medicare Part D for taxpayers was 30% below expectations its first year--unheard of in government. And Medicare Advantage, which allows seniors to choose between private insurers, has grown to encompass nearly one in five beneficiaries.

However:

Good things or no, the reforms are still at risk. There was a time when Democrats believed in Medicare reform, but now most prefer it as a political stick to beat President Bush. There are also liberals--Henry Waxman, Pete Stark--who understand this is a crucial moment in the national debate over government-versus-private health care, and will do what they can to sabotage the reforms.

Expect, therefore, more votes over Medicare's right to price-fix. If a broad bill can't pass, liberal politicians will instead target individual, high-cost drugs, arguing that since Medicare foots most of the bill for these products, it should have the right to "negotiate." The real goal will be to get any foot in the price-setting door, making it harder for private companies to craft flexible drug packages, and laying the groundwork for more price-setting down the road.

Expect, too, a push to starve the competitive programs of cash. Critics know how effective this is, having siphoned dollars out of the old Medicare Advantage program in the 1990s, causing private plans to drop out, and giving the program a bad name. Dr. McClellan's reforms, and a Republican Congress, have re-energized the program, but the key to future success is in the budget. Republicans would do well to spend more time touting the competition successes of the reform, rather than the drug giveaway.

One of the major arguments raised by Democrats is that the Veterans Administration already negotiates drug pricing. What they fail to mention is that the VA does this by severely restricting the range of prescriptions available.

The Lewin Group analyzed the difference from the VA formulary to the privately negotiated formulary of a Part D plan:

Based on the data contained in the November 2006 VA National Drug File (NDF), the VANF includes 581 unique chemical compounds that are used in prescription drugs….In contrast, the formulary used by the Part D prescription drug plan (PDP) with the highest enrollment includes 1,003 such compounds – 422 (73%) more….

This comparison is consistent with a recent study by the Lewin Group that focused on VANF and Part D coverage of the 300 drugs with the highest prescription volume among individuals aged 65 and older. That study found that coverage of these drugs by the highest-enrollment Part D PDP’s (averaging 282 drugs, or 94%) was substantially better than VANF coverage (193 drugs or only 65%).