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Here’s $200 billion in deficit reduction for Boehner and Obama

There’s an easy $200 billion in deficit reduction out there – require CMS to negotiate drug prices with manufacturers, a move that would reduce annual expenditures by over $20 billion – or $200 billion closer to a “cliff”-avoiding deal.

As I’ve noted repeatedly (but unfortunately few in the mass media have), Part D is perhaps the biggest deficit problem we have – the ultimate unfunded liability is now over $20 trillion.  A decade ago the Republican House and Senate  passed the single largest entitlement program since Medicare – the Medicare Part D drug benefit – with no dedicated financing, no offsets and no revenue-generators. Fully three quarters of the total future cost – which is now around sixteen trillion dollars [see page 122] – was simply added to the federal budget deficit. (the rest is paid for by senior’s fees and State transfers).

The cost to taxpayers for Part D in 2011 was $53 billion; over the next ten years, our cost will balloon to $990 billion.

Of course, we could solve the majority of our budget problems by just canceling Part D, but neither the Democrats nor the Republicans will do that.

So, as long as we’re stuck with the damn thing, we ought to make it as inexpensive as possible. The best way to do that is to use the buying power of Part D to negotiate with manufacturers to get the best possible price for drugs that you – the taxpayer – are paying for. Believe it or not, the original Part D legislation expressly forbids negotiation with manufacturers for pricing. 

In a 2006 House analysis, a report “showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and”
Another study indicated “An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004…”
Are there problems with this? Absolutely. Reducing prices may impact R&D expenditures and will affect pharma margins – effects that must be balanced against the nation’s long-term financial viability.

Notably, the President’s public statements on the negotiations haven’t mentioned the long term costs of Part D either. It is puzzling indeed that President Obama has not publicly put this chip on the table.  Perhaps it’s because pharma has already “contributed” to paying for health reform with their $80 billion in

That said, Speaker Boehner’s the real hypocrite here. The Orange One could have been courageous – admitting he and his party made a mistake in refusing to allow CMS to negotiate with pharma, and thereby saving taxpayers $200 billion over the next ten years. Sure, he would’ve taken a hit from older Americans who love Part D, but true statesmen, real leaders, know that tough, unpopular stands are necessary some times.

Like now.

What should we do?

Either a) end Part D or

b) allow the Feds to use their buying power to negotiate with pharma. That alone would save about $20 billion a year.

To recommend either, contact Speaker Boehner here and President Obama here.

Canceling Part D won’t happen; neither party is about to tell seniors they can’t have free medicine. If Boehner, McConnell, Tea Party Congresspeople- and the Administration – were really concerned about the deficit, they’d agree to use the government’s buying power to reduce costs and thus lower the deficit. But of course they won’t; that would alienate big pharma and cut into their campaign contributions.

I’d be remiss if I didn’t acknowledge there are a few on the right as angry as I am about this blatant hypocrisy.

5 thoughts on “Here’s $200 billion in deficit reduction for Boehner and Obama”

  1. I’ve said it before, I will say it again. When things don’t make sense, follow the money.

    Why does our government provide funding for pharmacy R&D when big pharma is earning billions in profits each year? Why would they not negotiate pricing on Medicare Part D? Why are patents extended for no apparent reason keeping cheaper generics off the market? Why are drugs rushed to market without fully exploring potential side effects? Why is the DEA and FDA sitting on the sidelines as prescription opioid addition becomes a national health crisis?

    It doesn’t matter what party they are in. They all do the same thing. There is one thing that matters.

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Joe Paduda is the principal of Health Strategy Associates



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