Hillary Clinton Wrong on Prescription Drug Price Controls

In 2003, Congress was negotiating the Medicare Modernization Act, which established the Part D prescription drug benefit.

Republicans had insisted on what came to be known as the non-interference clause it because it explicitly denied the federal government permission to participate in negotiations of drug prices. It was part of a series of measures designed to provide the benefit but not create another wasteful, inflexible federal giveaway program.

Republicans controlled Congress then, but two of the leading liberals in the House, Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., pushed for an amendment to the MMA that would set Part D premiums at $41 per month. Convinced this was too high, Republicans defeated the amendment.

And it’s a good thing they did.

Because government has not been allowed to participate in the negotiations, prices are still in the $30-$35 range per month. The Centers for Medicare and Medicaid Services projected premiums would open at $37 per month and rise steadily. Instead, they opened in the mid-20s and actually fell for a while, bottoming out for typical plans at just about $20 per month.

The costs for the entire program began to fall substantially, and within two years, CMS was downsizing its 10-year projections for Part D costs by 30 percent or more and attributing nearly all the decrease to the non-interference clause.

People were saving money — $1,200 annually on drug costs in the early years, still more than $1,000 – as was the government, to the tune of nearly $190 billion over the program’s first 10 years. They had real choice—more than 1,500 plans are available across the country, and consumers have on average more than 40 to choose from regardless of where they live.

The government saved as well. According to Grace-Marie Turner, president of the Galen Institute, a leading free-market healthcare think tank in Washington, the Congressional Budget Office predicted Part D would cost $99 billion in 2013. It came in at $50 billion.

This happens to be one area where government intervention would have led to higher, not lower, prices. Medicare negotiated on behalf of about 30 million people. Three different pharmacy benefit managers negotiated on behalf of 70 million or more. Government wasn’t the biggest player, and its aims – lots of the oldest, cheapest drugs, bought in bulk at the lowest possible prices – were not shared by program users or the other PBMs.

But Hillary Clinton, who lost the race to Barack Obama not only for president in 2008 but also to establishing nationalized health care, is at it again. With more than half of Americans now on prescription drugs and 60 percent – including a slight majority of Republicans – saying they would support government action to keep down drug costs, she thinks she sees an issue where she can connect.

She raises the false notion that the government has the most negotiating power. And she is careful not to refer to any of this as establishing price controls, opting instead for terms such as “premium caps,” “cost caps” and “spending control.”

But just like in 1993 during Hillarycare and in 2005 during the MMA negotiations, she and the Democrats are wrong on the policy.

This is not the Veterans Administration and, again, it’s a good thing. The VA uses a closed network of doctors, hospitals, pharmacies and a national formulary. It bases prescriptions for those who served our country on the fail-first model – vets receive the cheapest, usually oldest drugs for any given treatment and must fail first on them before receiving drugs more likely to address their needs.

The government says only 4 percent of prescriptions filled by the VA are off-formulary, but interviews with VA hospital workers and others reveal the figure is considerably higher.

And yes, people are in favor of government helping keep down drug costs. But explain the choices – government intervention means everyone, not just veterans, go on the fail-first policy that emphasizes older, cheaper, less-effective drugs, and support plummets below 30 percent.

In the pre-Part D days, Medicare offered a maximum of two drugs in each class; now, in the age of customized medicine, Part D plans must offer at least two drugs, and most plans go all the way and offer all drugs in a class. What they have found is their customers want all drugs offered, not a top-down Washington solution.

And in the early days of Part D, we had a perfect test case. So-called dual-eligibles – people eligible for Medicare and Medicaid who thus had experience with the all-government approach and the approach offered by Part D, overwhelmingly chose the provisions of Part D. More than 90 percent said they liked the new approach better, and 98 percent said the Part D coverage “worked well for them.”

Interestingly, independent experts who have looked at this, such as those from the Congressional Budget Office to the CMS, have never concluded Clinton’s approach would improve things for seniors or the government’s bottom line.

So what drives it? Why change to something proven not to work? It’s that itch for control, that sense that only government can get things right.

One would think the evidence against that is overwhelming. But then one is not a Democrat running for president.