Report: The Oregon state government could save as much as $766 million over 10 years if the federal government were allowed to negotiate Medicare drug costs in the same way as every other wealthy nation, according to a new economic analysis by the Center for Economic Policy and Research (CEPR) that was released in Oregon this week by Oregon Action.
Congress should lift the 10-year-old prohibition on price negotiation between Medicare, on behalf of nearly 50 million enrollees, many on fixed incomes, and the drug industry, considered one of the nation’s most profitable industries. No other country pays as much for prescription drugs as the United States. The reason people in other countries spend so much less is that their governments negotiate prices with the pharmaceutical industry, said the report’s co-authors, Nicole Woo and Dr. Dean Baker of CEPR in Washington, D.C.
“Many in Washington want to cut Medicare benefits and make retirees pay more out of their pockets for health care, but the solution is exactly the opposite,” said Ron Williams, Executive Director of Oregon Action. “Instead of punishing the folks who count on Medicare, we should start with commonsense reforms, like letting Medicare use its buying power to bargain for discounts for prescription drugs. The Department of Veterans Affairs and the state Medicaid programs already do this and pay far less for the same drugs.”
State governments could save as much as $73 billion over the next ten years, said CEPR. That’s on top of huge savings that would accrue to the Medicare program. The center previously estimated that Medicare drug-price negotiations could save the federal government as much as $541 billion over the next 10 years. As policy makers and elected officials in Oregon and across the nation consider how to adjust state and federal budgets, they and the American public should be made aware of these significant potential savings, Woo said. Sen. Jay Rockefeller (D-W.Va.) and Rep. Henry Waxman (D-Calif.) plan to re-introduce their Medicare Drug Savings Act in the coming weeks to make this happen, and Oregon Senator Jeff Merkley will co-sponsor. This proposal has been supported by President Obama and is in the House Democrats’ budget plan.
Each state government’s individual substantial savings are cataloged in State Savings With an Efficient Medicare Prescription Drug Benefit. “The United States was projected to spend more than $880 per person on prescription drugs in 2012,” said Nicole Woo, “Other nations spend significantly less, ranging from around 70 cents in Canada for each U.S. dollar to 35 cents per dollar in Denmark.” Applying both a high- and low- savings scenario that mirrors the savings on prescription drug spending in Canada and Denmark, the authors show that Oregon would hold onto tens of millions of dollars over the next decade.
“The savings to beneficiaries could prove to be even more substantial,” said Dr. Baker. “Medicare beneficiaries in Oregon could save from $503 million to $1.3 billion over the next ten years through the negotiation of prescription drug prices.”
Here in Oregon, State Representative Peter Buckley (D-Ashland) has submitted a joint resolution urging Congress to enact legislation permitting negotiation of drug prices and rebates on behalf of Medicare recipients. The hearing for House Joint Memorial 14 will be held on April 12th by the House Health Care Committee.