Medicare Fair Drug Pricing Act

Column by Dr. Raj K. Gandhi

The Medicare Fair Drug Pricing Act (MFDPA) must replace the Medicare Drug Improvement and Modernization Act (MMA) of 2003. Ever since MMA went into effect in 2006 it has cost an additional $40 billion to $75 billion annually and helped the already rich pharmaceutical and insurance industries get even richer at the expense of U.S. taxpayers. This cost will go up further when the doughnut hole is repaired.

The MFDPA should consist of three components: (1) requiring all drug makers and pharmacies to bring down the cost of prescription drugs for Medicare beneficiaries to the same level as the average prices of these medicines in other G-7 countries, (2) prohibition of direct to consumer advertising of prescription medicines, and (3) issuing drug discount cards to seniors whose incomes are below the median income.

The drug companies argue that a higher price is justified in the U.S. to pay for the cost of research and development of new drugs. They hide the fact that a major portion of this cost is paid for by the taxpayer money supporting the National Institutes of Health where most of this research takes place. Moreover, it is not only the U.S. consumers who benefit from this research. Other countries benefit just as much. Why should they, especially the rich and developed countries like Canada, Germany, Japan, France, Switzerland, Italy, England and other Western European countries get a free ride? It is only fair that they share this cost. As the drug prices come down in the U.S, they will slightly go up in other countries to make up for the difference. Thus the capacity of U.S. pharmaceuticals for profit and research will not be adversely affected.

Direct to consumer advertising does not help the patient, causes unnecessary hassle for the doctor and increases overall healthcare expenditure. It helps improve the bottom line of drug companies, which use this extra profit to fatten the salaries and bonuses of the executive officers on the one hand and engage highly paid lobbyists to do their bidding in Washington on the other. Over the years they have virtually become sacred cows. They enjoy this status and leave no stone unturned to maintain it. For example, in 2003 when MMA was being passed they hired 952 individual lobbyists and spent nearly $141 million to make sure that Medicare Part D would be administered by private companies and that Medicare would not be allowed to negotiate or bargain the prices, nor would it be allowed to import drugs for seniors from Canada or other countries where medicines are just as safe as here but much less expensive. About one-half of these lobbyists had easy access to the U.S. Congress or the White House because of their prior job-related connections. $4 billion to $6 billion spent on direct to consumer advertising annually will be much more useful for research and development of new drugs and in the long run, will produce rewards of much greater value to the public as well as the drug companies.

The third component of the MFDPA is drug discount cards for seniors whose incomes are less than the median income. Those who make between one-fourth and one-half of median income should qualify for a discount of 75 percent, those with incomes between one-half and three-fourths for a discount of 50 percent, and those making between three-fourths and the median income should qualify for a discount of 25 percent. Seniors making less than 25 percent of median income would qualify for Medicaid and get prescription drugs free. The drug discount (DD) card will be simple and indicate the percentage amount qualified for discount, like “Medicare DD-50”, “Medicare DD-25” or “Medicare DD-75”. A beneficiary with DD-50 will be charged 50 percent and the retail pharmacy will collect the other half from Medicare, and so on. The transaction at the drug store and the process for filing the claim will be easy, almost along the lines of credit card processing, which businesses and consumers are used to. Funding for all this will be equally simple. Medicare beneficiaries pay for Medicare Part B a monthly premium of about $100. To this will be added 5 percent of this amount the first year. If it is not enough, this percentage will be gradually increased to 10 percent. Beneficiaries without DD cards will obviously be those whose annual earnings exceed the level of median income. They will also benefit from MFDPA since all prescription drug prices will come down to average G-7 countries’ prices which are in many cases one-third to one-half of the U.S. prices.

MFDPA will save a lot of money for seniors on prescription drugs. It will save Medicare $40 to $75 billion a year. I urge the U.S. Congress to pass it in 2010 and make it effective in two years.

Dr. Raj K Gandhi, thoracic surgeon, was born and raised in India. After graduating from SMS Medical College, Jaipur, he spent six years in residency training and postgraduate studies in India, followed by four years of training in England at the Royal College of Surgeons. He came to the U.S. in 1970 for a fellowship and made it his permanent home. The study of three countries very different healthcare practices gave Dr. Gandhi the impetus to do an in-depth study of the matter. Dr. Gandhi has practiced thoracic surgery in community hospitals in Atlanta since 1977. For more information on the author, please visit: www.sodhealthcare.com.