Report: New Medicare Drug
Plans Fail to Provide Meaningful Drug Discounts
Drug prices offered by ten leading Medicare drug plans are
over 80% higher than federally negotiated prices and over
60% higher than Canadian prices...Even with mandatory
enrollment fees, seniors save 42 %with purchases from
Canadian pharmacies
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By: Committee on Government Reform Minority Office
Published: November 22, 2005 at 08:33 |
Republican leaders and Bush Administration officials have repeatedly
promised that the new prescription drug benefit being
offered through Medicare Part D would benefit seniors and
protect federal taxpayers by keeping drug costs down.
According to former Health and Human Services Secretary
Tommy Thompson, the health insurance companies sponsoring
the Medicare drug plans "are going to be able to purchase in
bulk with the pharmaceutical companies and hold down
prices." When Democrats argued that Medicare should be
authorized to negotiate directly with drug companies for low
prices, Senate Majority Leader Bill Frist rejected the
proposal, claiming that "competition through the private
sector, through bulk purchasing and negotiation, is a more
effective means to hold down prices."
At the request of Rep. Henry A. Waxman, this report examines
whether the Republican promises of low drug prices have been
achieved. The analysis in the report is based on a
comparison of the drug prices offered by ten leading
Medicare drug plans with four benchmarks: (1) the drug
prices negotiated by the federal government and available on
the Federal Supply Schedule; (2) the drug prices paid by
consumers in Canada; (3) the drug prices currently available
on-line through Drugstore.com; and (4) the drug prices
currently available at Costco stores. The drugs whose prices
are evaluated in the report are the ten best-selling drugs
among seniors in 2004.
The report finds that the complicated Medicare drug benefit
now being offered to seniors has not succeeded in reducing
drug prices. The average drug prices offered by the ten
leading Medicare drug plans are higher than each of the four
benchmark prices. Specifically, the report finds that the
drug prices offered by the Medicare drug plans are:
• Over 80% higher than the prices negotiated by the federal
government.
• Over 60% higher than the prices available to consumers in
Canada, and even with payment of a minimum Part D premium of
$20, still 42 % higher.
• Over 3% higher than the prices available on Drugstore.com.
• Almost 3% higher than the prices available at Costco.
These findings have significant implications for seniors,
federal taxpayers, and the design of the Medicare drug
benefit. For seniors, high drug prices increase
out-of-pocket costs and reduce purchasing power, especially
for those whose drug spending falls within the "donut hole,"
where seniors are responsible for paying 100% of their drug
bills. For taxpayers, high drug prices increase the costs of
funding the Medicare drug benefit. And for the program
itself, high drug prices call into question whether the vast
complications injected into Medicare Part D by allowing
private insurers to offer competing drug plans are providing
any tangible benefits to anyone but drug manufacturers and
the insurers themselves.
Comparison of Medicare Drug Plan
Prices to Federally Negotiated Prices
The prices offered by the ten Medicare drug plans are
substantially higher than the prices negotiated by the
federal government. For the ten Medicare drug plans, the
average price for a one-month supply of each of the ten
drugs is $1,158. In comparison, the price negotiated by the
federal government for the same drugs is just $630. In
percentage terms, the prices offered by the Medicare drug
plans are 84% higher than the federally negotiated prices.
Figure 1.
For some plans, the price differences are even greater. Of
the ten Medicare plans analyzed, the Advantra Rx Premier
plan, offered by Coventry Healthcare, has the highest prices
for the ten drugs. The prices offered by this plan for the
ten drugs ($1,241) are 97% higher than the federally
negotiated prices.
For specific drugs, the price differences can exceed or
approach 100%. The Medicare drug plans offer an average
price of $113 for a one-month supply of Protonix, the
heartburn medication manufactured by Wyeth. This is 437%
higher than the $21 price negotiated by the federal
government. The Medicare drug plans offer an average price
of $132 for a one-month supply of Zocor, the hypertension
medication manufactured by Merck. This is 90% higher than
the $69 price negotiated by the federal government.
Comparison of Medicare Drug Plan
Prices to Canadian Prices
The prices offered by the ten Medicare drug plans are
substantially higher than the prices paid by consumers in
Canada. For the ten
Medicare drug plans, the average price for a one-month
supply of each of the ten drugs is $1,158. The Canadian
price for the same drugs is $717. In percentage terms, the
prices offered by the Medicare drug plans are 61% higher
than the Canadian prices. Figure 2.
For some plans, the price differences are even greater. Of
the ten Medicare plans analyzed, the Advantra Rx Premier
plan has the highest prices for the ten drugs. The prices
negotiated by this plan for the ten drugs ($1,241) are 73%
higher than the Canadian prices.
For specific drugs, the price differences can exceed or
approach 100%. The Medicare drug plans negotiated an average
price of $135 for a one-month supply of Prevacid, the ulcer
medication manufactured by Tap Pharmaceuticals. This is 114%
higher than the $63 Canadian price. The Medicare drug plans
negotiated an average price of $85 for a one-month supply of
Celebrex, the arthritis medication manufactured by
Pharmacia. This is 91% higher than the $45 Canadian price.
