When the Medicare prescription drug legislation was being developed by Congress and the Bush Administration, a controversial decision was made about how to cope with the problem of high drug prices. Specifically, the legislation prohibited the Medicare program from bargaining with the pharmaceutical companies to secure lower drug prices, a process that the Department of Veterans Affairs (VA) has used quite successfully for many years. The legislation took the responsibility for moderating drug prices out of the hands of the Medicare program and, instead, placed it in the hands of private plans. This decision was based on the presumption that private plans—through marketplace competition—would secure cheaper drug prices.
The results of this approach are critically important both to America’s seniors and to taxpayers. Drug prices set by the plans that participate in the Medicare prescription drug program, known as Part D, significantly affect the size of the premiums and how much a beneficiary will end up paying out of pocket overall. These drug prices also have a direct effect on the burden borne by taxpayers, who pay approximately three-fourths of the costs of the program.
For this reason, Families USA periodically analyzes the drug prices that Part D plans charge for the 20 drugs most frequently prescribed to seniors. This study analyzes price information reported by Part D plans for those drugs. We collected prices from the week of November 15, 2005 (when enrollment in Part D plans began) and the week of April 17, 2006.
The report asks two key questions: 1) What has happened to Part D prices for the most frequently prescribed drugs from November 2005 to April 2006?; and 2) How do Part D drug prices now compare to the prices secured by the VA?
The answers to these questions are both clear and disappointing: 1) Virtually all of the Part D plans raised their prices for the majority of the top 20 drugs in this study. From November 2005 to April 2006, the median price increase among Part D plans for the top 20 drugs prescribed to seniors was 3.7 percent. 2) For all of the top 20 drugs prescribed to seniors, VA prices in April were lower than the lowest prices charged by Part D plans. The median price difference was 46 percent. In other words, for half of the 20 drugs, the lowest price charged by any Part D plan was at least 46 percent higher than the lowest price secured by the V A.
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