Government is runaway victor over private sector in obtaining lower drug prices

Higher Rebates for Brand-Name Drugs Result in Lower Costs for Medicaid Compared to Medicare Part D

Office of the Inspector General
Department of Health and Human Services, August 2011


We are inundated with nonsense about how private health insurance competition in the marketplace brings us higher quality at lower costs when compared with government-administered programs. This study by the Inspector General of Health and Human Services provides an enlightening test of that theory by controlling for quality while measuring the differences in cost. Both Medicaid (government) and Medicare Part D (private) use the same brand-name drugs with identical quality, so cost becomes the sole variable.

Our government-run Medicaid program has been able to negotiate a 45 percent discount on these brand-name drugs, whereas the private Medicare Part D sponsors or contractors have been able to extract only a 19 percent discount on these same drugs. Clearly, when quality is controlled, the private sector brings us much higher prices than does the government.

Under a single payer national health program – an improved Medicare for All – these highly wasteful middlemen would be eliminated and the government would use its monopsonistic buying power to get the prices right. Payment would be based on actual costs, including legitimate research, plus fair profits.

Having to change the rhetorical framing of the dialog from “markets and competition” to “social solidarity” is a small price to pay for achieving the efficient use of our health care dollars. Thinking about that, being able to dump the ideology behind the intrusive, wasteful middlemen is not a price that we would be paying, but a superb benefit that we would be gaining.

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  1. diegueno posted this

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