President Obama wants to severely wound the most successful government entitlement program and thereby undermine freedom of choice while putting at risk new biopharmaceutical research.
Even though he and many Democrats won’t face the reality of the foreboding bankruptcy of Medicare and Social Security entitlement behemoths, Obama wants to make mincemeat of the prescription drug plan for seniors. That plan is known as Medicare Part D. What makes it so noxious to ultra-liberals is that it employs the power of the marketplace, “not top-down central planning,” as Grace-Maria Turner, president of the Galen Institute, puts it.
Another reason the prescription drug program gets under Obama’s thin skin is that it was George W. Bush’s idea and was enacted in 2003 under the Bush administration. It is so irritating to lefties because it “is providing unprecedented access and cost savings on medicines to over 29 million Medicare beneficiaries,” according to a July 2011 analysis by the Battelle Memorial Institute. Battelle is the largest international research and development organization. It is based in Cincinnati.
“Enrollees are overwhelmingly satisfied with their coverage” with an 84 percent satisfaction rate. However, the Part D plan was controversial when first enacted – It was feared its costs would exceed early estimates as is typical of federal government programs. Instead “average beneficiary Part D premiums in 2011 are 43 percent below original projections. The average monthly Part D coverage will be $30 in 2011, far below the $53 forecast originally, and an increase of only $1 over the 2010 average premium of $29,” said the Battelle study. A fact almost unheard of in these times of soaring health costs.
Medicare Part D offers subsidies to seniors which they can use to buy prescription plans from private companies, which compete for their business. The private plans have varying costs and work in ways from which seniors can choose. And they cover a large number of different drugs as needed by seniors. “The competition,” Turner explains, “create more choices for seniors with plans constantly forced to balance costs with providing the broadest coverge possible.”
The number of people enrolled in Part D has been rising steadily, from 11.6 million in 2005 to 27.6 million last year. Typically, the insurance companies offering prescription drug coverge plans negotiate with drug companies and pharmacies for the lowest prices. By getting bulk discounts, they can get lower prices for the drugs.
Price controls on medications is a public-policy threat, according to Kenneth C. Frazier, president and CEO of Merck & Co, pharmaceutical company. In an opinion piece in the Wall Street Journal July 13, he wrote Part D “is a successful program” which has allowed seniors “to have comprehensive drug coverage at a cost that is 50 percent below initial projections.” He cites the Battelle study showing that each job in the biopharmaceutical industry supports about 5.95 additional jobs in the economy. So each job lost has a large impact. He said the policy proposed by the Administration and some in Congress would result in 130,000 to 260,000 lost jobs, as cited in the Battelle analysis.
Beyond direct unemployment in biopharmaceutical companies, the Battelle analysis declared, “the biopharmaceutical sector is the foundation upon which one of the United States’ most dynamic innovation and business ecosystems is built…and acts as the funnel and distribution engine for getting life-saving and quality-of-life therapeutics to the marketplace,” Battelle added.
A Congressional Budget Office (CBO) report said such a policy as proposed for Part D “could reduce the amount of funds manufacturers invest in research nd development of new products. Reducing investment in research will slow medical progress in Alzheimer’s, cancer and other conditions.”
Part D, it said, has avoided the type of government-imposed access restrictions common in Medicaid. Beneficiary choice among plans and the availability of a range of affordable options are key components of Part D, promoting both affordability and access to medicines.
A Lewin Group study found that in 2011 the Part D plans with the highest and second highest enrollment covered 99 percent and 94 percent, respectively, of the drugs most often prescribed to those 65 or older. So said the health research organization.
“In short,” wrote Grace-Maria Turner in Forbes, “the President’s plan will cut investment in research and development. In the longer term, the diminished incentive for success will have companies thinking hard about whether it’s worth it to invest $1.2 billion to bring a new drug to market when the government may set prices below their costs of development and production.”
Part D enrollees are permitted to change drug plans annually so they can maintain prescription drug coverage that fits their medical needs and pocketbook. Those who are eligible for both Medicare and Medicaid—about 9 million seniors—may change plans any time, unlike Medicaid where beneficiaries typically are restricted to the particular state’s preferred drug list. Imposing Medicaid-like price controls on Part D could raise cost for seniors–the same effect as a tax hike. Applying the Medicaid rebate rule to Medicare Part D would also likely mean higher prices for consumers at large, some economists predict.
A policy that threatens big job losses as well as Medicare beneficiaries’ access to life-saving drugs should be dismissed outright.
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