The Medicare Part D Prescription Drug Scandal

george w. bush
George W. Bush (Wikipedia)

One of the worst things the George W. Bush administration inflicted upon the American people, second only to the debacle in Iraq, was the sweetheart deal for drug companies that was included in the 2003 Medicare Prescription Drug, Improvement, and Modernization Act (also called the Medicare Modernization Act or MMA). The primary feature of the MMA was the creation of a prescription drug benefit for Medicare beneficiaries, now called Medicare Part D. While prescription drug coverage, of course, is vital to many senior citizens, the way the Part D program was implemented is disgraceful.

Speaker Dennis Hastert introduced the MMA, with Bush’s support, in the Republican controlled U.S. House of Representatives in June of 2003. While Congress was debating the bill, Thomas Scully, the Bush administration’s head of the Centers for Medicare and Medicaid Services (CMS), lied to Congress about the projected cost of implementing the Part D benefit. Scully also threatened to fire Medicare’s chief actuary, Richard Foster, if he revealed that the true estimated cost of the Part D program was $500-$600 billion over 10 years, instead of the $400 billion that the White House was telling Congress. (A subsequent report by the Congressional Research Service found that the Bush administration broke federal law by withholding this information from Congress.)

A Sweetheart Deal for the Drug Companies

Congress finally approved the MMA in November after some close and suspicious votes. The drug industry lobby, the biggest lobby in Washington, D.C., undoubtedly paid a major role in its passage. The new law, for example, didn’t include any significant cost-control provisions. In fact, it specifically prohibited Medicare from establishing a drug formulary or from negotiating prices with drug companies. Also, after the bill’s passage, former Congressman Billy Tauzin, R-LA, who steered the bill through the House, retired and took a $2 million a year job as president of Pharmaceutical Research and Manufacturers of America (PhRMA), the main drug industry lobbying group. Furthermore, Thomas Scully was found to have been looking for a new job as a pharmaceutical lobbyist while the bill was still working its way through Congress. And a total of 14 congressional aides went to work for the drug and medical lobbies after the bill’s passage. Subsequently, according to a 2013 CMS report, the Medicare Part D program added about $318 billion to the national debt through 2012, and is projected to add $852 billion over the next 10 years.

The social service agencies of most foreign governments negotiate for volume discounts with drug companies. The U.S. Department of Veterans Affairs is allowed to do it, and it’s been estimated that the VA pays between 40% and 58% less for drugs, on average, than Medicare Part D. Economist Dean Baker estimated in 2012 that Medicare could have saved taxpayers at least $332 billion and possibly as much as $563 billion if the agency wasn’t required by the MMA rules to pay whatever prices the drug companies want.

Allowing Medicare to negotiate drug prices would obviously be fair way to significantly cut government spending and reduce the federal budget deficit. But that would reduce the profits of drug companies, and most Republicans believe drug company profits are more important.

Updates

On May 11, 2018, President Donald Trump announced his plan to lower drug prices for Americans. During the 2016 presidential election campaign Trump had promised to allow Medicare to negotiate volume discount prices for the drugs it buys. But Trump’s proposal failed to include that measure. The stock prices of drug companies rose after his speech.

On May 17, 2018, the FDA released a list of 52 drugs it said faced delays in getting generic versions on the market because of “gaming” by drugmakers.

On June 5, 2018, the U.S. government’s annual report on Medicare and Social Security said that, unless some changes are made, Medicare will become insolvent in 2026.

On January 18, 2019, the Trump administration announced a new plan to lower prescription drug prices for Medicare patients. The plan, however, still failed to propose to allow the government to negotiate discounts for large volume Medicare drug purchases, and was widely criticized for allowing medical insurance companies to police pharmaceutical costs, which could allow companies to refuse to cover medications they consider too expensive.

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