Saving on drugs

Legislators wondering why they will consider a half dozen bills this session on extending prescription-drug benefits to the elderly need only read a report prepared for U.S. Rep. Tom Allen to understand the problem. The lack of Medicare drug coverage affects seniors nationally, but reform in Washington could be helped by support at the state level.

Rep. Allen, who is trying to pass legislation that would provide drug discounts for Medicare recipients, had the staff on the House’s Committee on Government Reform and Oversight compare drug prices internationally, among states and within Maine’s First District. The reports show wide disparities in costs for identical drugs and offer vivid accounts of the struggle some seniors have to afford both prescription drugs and food. Their general conclusion was summarized as follows:

“It appears that drug companies are engaged in a form of `discriminatory’ pricing that victimizes those who are least able to afford it. Large corporate and institutional customers with market power are able to buy their drugs at discounted prices. Drug companies then raise prices for sales to seniors and others who pay for drugs themselves to compensate for these discounts to their favored customers.”

This cost-shifting affects approximately one-third of Medicare recipients, who pay all drug costs themselves. Others use Medigap or have private insurance to help cover the cost. Rep. Allen’s proposal says simply that if drug companies can negotiate lower prices with large customers based on volume, Medicare ought to be big enough to qualify for the discounts, too. That would, of course, leave fewer people for drug companies to shift costs to, reducing profits to the companies.

The incentive for Medicare to try to get the lower price is huge. As drug therapy becomes more and more common, the disparity in prices for drugs has grown. The diabetes drug Micronase costs $10.05 for preferred customers and $46 for everyone else; Synthroid hormone treatment costs $1.75 for the favored and $27 the rest of us; for the anti-cholesterol drug Zocor, it’s 442.95 vs. $104. These differences can cost a Maine senior thousands of dollars annualy — it can eat up a retirement nest egg in a matter of years.

Maine lawmakers are expected to start hearing prescription-drug bills tomorrow. Despite the variety of approaches in the bills to be presented, several follow the same theme: tap into the drug wholesale market. One, LD 170, would do it directing the state to join with other states in a consortium to increase its purchasing power. Get enough states together and Rep. Allen’s congressional bill is more or less fulfilled.

Count on drug-industry lobbyists at the hearing Wednesday to describe the horrors of government price controls, but there is no good reason for the industry to give discounts to some large buyers but not to others — even if those others are state or federal government.