This is pretty interesting, and it relates to real wonkery AND to more stretching of the truth by my favorite health plan lobbyist, Karen Ignagni. In the article Drug firms to get profits windfall, a Univ of Minnesota Professor estimates that because the dual eligibles are no longer in Medicaid — they’re the ones that have been automatically moved to Medicare — and therefore they don’t have to offer "best price", they can charge higher prices to the taxpayer for their drugs.
The boost in profits comes from a shift in the drug coverage of 6.4 million poor and elderly people from Medicaid to the new Medicare drug benefit. Unlike Medicaid, which requires drug companies to charge their lowest or "best price" for medications, the Medicare program relies on competition among private drug plans to keep prices low.By eliminating the need to discount drugs for the government, the industry can now pocket the savings. "The net effect over 10 years is probably closer to $40 billion in extra profit," said Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota. A little-known study by the Prudential Equity Group from June 2005 estimated that the makers of three anti-psychotic medications stand to benefit most from the change, taking in roughly $1.1 billion in new profits on products used by the 6.4 million who are Medicare’s most poor and frail patients.Experts say drug prices in the Medicare program will be higher this year than prices under Medicaid because the private Medicare drug plans won’t likely match the price discounts achieved by Medicaid, the joint state and federal health program for the poor.
Now hang on a second. This raises two key points. Not one week ago, Karen Ignagni said that the exact opposite was true. State medicaid directors were apparently telling her that they were getting worse deals than the private plans she represents. So which is true? Well guess who I’m more likely to believe. After all, did PhRMA pay all those political contributions to end up losing money
And then one thing that I just don’t know. Suspend your disbelief and pretend that at least in some cases for some drugs, Ignagni is telling the truth. Presumably best price still applies to the rest of the Medicaid program. Are deals between Pharma and Medicare Part D PDPs exempt from Medicaid best price? Anyone know?