The review of Steven Brill’s “What Ails Us” (NYT Book Review, January 11, 2015), refers to the pharmaceutical industry’s back-room negotiations to "gut" comparative effectiveness under Obamacare. The truth is that the Recovery Act of 2009 provided $1.1 billion for patient-centered health research (also known as comparative effectiveness research) – and that’s only part of the story.
What Mr. Brill is actually referring to is the administration’s “deal” with the pharmaceutical industry to leave in place what is known as “the Non-Interference Clause,” which prohibits the Federal government from negotiating drug prices for (among other things) the highly successful Medicare Part D drug program. It’s important to note that the Non-Interference Clause was the brainchild (during the Clinton years) of Senators Tom Daschle and Ted Kennedy – hardly candidates for the Tea Party Hall of Fame.
According to the Congressional Budget Office (in 2004), revoking the Kennedy/Daschle Non-Interference Clause, “would have a negligible effect on federal spending because CBO estimates that substantial savings will be obtained by the private plans and that the Secretary would not be able to negotiate prices that further reduce federal spending to a significant degree. Because they will be at substantial financial risk, private plans will have strong incentives to negotiate price discounts, both to control their own costs in providing the drug benefit and to attract enrollees with low premiums and cost-sharing requirements.”
In 2009 the CBO reiterated its previous views, stating that they, “still believe that granting the Secretary of HHS additional authority to negotiate for lower drug prices would have little, if any, effect on prices for the same reason that my predecessors have explained, which is that…private drug plans are already negotiating drug prices.” Unlike other healthcare benefits, Part D is also cost-effective for taxpayers. In 2014 the CBO reported Part D drug spending was 45 percent below original cost projections.
Importantly, the CBO says that no further savings are possible unless the government restricts beneficiary access to medicines or establishes market-distorting price interventions. In other words, price controls lead to choice controls.
