Or will it?
Bloomberg is reporting that direct price negotiations would save the U.S. over $30 billion, according to a new report released by Senator Debbie Stabenow (D-MI), who is back from her Generic Pharmaceuticals Association (GPhA) junket to the golf and spa resort in Arizona.
I personally have doubts that this will save money based on the government’s historic inability to effective negotiate anything. Former CMS head McClellan has said that this an “apples to oranges” comparison because the VA relies on mail order and tight formularies compared to a retail-based approach in Medicare. At any rate, let’s assume that the two systems are analogous and that it will save money. At least initially.
The first issue is that the VA formulary is restrictive. The Institute of Medicine has been quoted as saying that the VA formulary is “not overly restrictive.” Which is a good thing, especially if it “almost covers drugs that might save your life.” It’s only “not overly restrictive” if its not your parent or grandparent who can’t get the medicine she needs because of “formulary restrictions.” Did we not learn anything from the HMO debacle of the 1990s?
Of the 77-priority reviewed drugs from 1997-2005, only 22% were on the VA formulary. This restrictive formulary has meant that new and innovative treatments for HIV/AIDS and other chronic medical conditions are often delayed on the VA formulary or never included.
So I contend that direct negotiations might save some money initially (given the overly optimistic assumption that government negotiations are effective). However, as seniors (and AARP) realize that life-improving and life-saving medications are being delayed from reaching them, they will begin lobbying Congress to expand the formulary, thereby diluting/eliminating any potential cost savings.
