Medicare Drug Purchases

I have a difficult time understanding how the Democrats could have failed to take better charge of the debate over the issue of whether or not the US government should be allowed to negotiate for bulk discounts when buying pharmaceuticals for the Medicare program. It's so easy to make the Democratic proposal sound sensible, and to make the Republican position sound ridiculous... yet Democrats were apparently unable to convince five more Republican senators of that.

WASHINGTON, April 18 — A pillar of the Democratic political program tumbled today when Republicans in the Senate blocked a proposal to allow Medicare to negotiate lower drug prices for millions of older Americans, a practice now forbidden by law.

Democrats could not muster the 60 votes needed to take up the legislation in the face of staunch opposition from Republicans, who said that private insurers and their agents, known as pharmacy benefit managers, were already negotiating large discounts for Medicare beneficiaries.

Fifty-five senators, including 6 Republicans, supported a Democratic motion to limit debate and proceed to consideration of the bill, while 42 senators voted against it.

...Republicans framed the issue as a choice between government-run health care and a benefit managed by the private sector. The drug benefit is delivered and administered by private insurers, under contract to Medicare.

Senator John Cornyn, Republican of Texas, denounced the bill as “a step down the road to a single-payer, government-run health care system.”

Democrats said they were merely trying to untie the hands of the secretary of health and human services, so he could negotiate on behalf of 43 million Medicare beneficiaries. “The Department of Veterans Affairs is able to negotiate for lower-priced drugs,” said the Senate majority leader, Harry Reid, Democrat of Nevada. “H.M.O.’s can negotiate. Wal-Mart can negotiate. Why in the world shouldn’t Medicare be able to do that?”

...Mr. Reid said the Democrats fell short today because of “the power of the insurance industry and the pharmaceutical industry” and their close ties to Republicans in Congress.

But the vote also reflected ineffectual advocacy by Democrats, who were slow in responding to criticism from knowledgeable, well-prepared Republican senators like Charles E. Grassley of Iowa.

“Private competition works,” said Mr. Grassley, a principal author of the 2003 Medicare law. “The government has very little experience and a dismal track record figuring out what to pay for drugs.”

I really can think of no general economic benefit of the current rules, which create a fairly straightforward transfer of money from US taxpayers to pharmaceutical companies. It seems to me very similar to an industry subsidy, though a hidden one that is not explicitly on the government's books. Why the pharmaceutical industry needs a government subsidy is unclear to me.

But of course, I suppose that such reasoning does mean that there is substantial economic rationale for the status quo if you're a pharmaceutical company...