Published in:
01-09-2008 | Original Article
What if the Federal Government Negotiated Pharmaceutical Prices for Seniors? An Estimate of National Savings
Published in: Journal of General Internal Medicine | Issue 9/2008
Login to get accessABSTRACT
Background
The government is prohibited from directly negotiating drug prices for Medicare Part D, resulting in substantial policy debate. However, the government has an established mechanism for setting prices with pharmaceutical manufacturers for certain other federal programs - the Federal Supply Schedule (FSS).
Objective
To estimate how much could be saved nationwide if prices equivalent to the 2006 FSS were achieved for the top 200 drug formulations dispensed to seniors.
Design/Setting
Cross-sectional analysis of drug utilization patterns and costs from the nationally representative Medical Expenditure Panel Surveys (MEPS), 2003–2004, and the 2006 FSS.
Participants
Seniors who filled a prescription for any of these common drugs (n = 6,135 individuals).
Measures
Prescription expenditures were obtained from MEPS, and a price/unit was calculated in 2006 dollars. This price/unit was compared to the 2006 FSS, and a savings/unit was calculated and summed across the observed units dispensed in MEPS.
Results
The potential annual savings with FSS prices would be $21.9 billion [95% confidence interval (CI), $21.1 billion to $22.8 billion]. If FSS prices were substituted for only the top ten drugs, the annual savings would be $5.9 billion (95% CI, $5.7 billion, $6.1 billion).
Conclusions
Extension of existing price setting mechanisms to Medicare could save tens of billions of dollars if prices similar to those already achieved by other federal programs could be reached. Whether or not this is a political or economic possibility, the magnitude of these savings cannot be ignored.