Klobuchar optimistic Medicare will be given some power to negotiate drug prices

A woman speaking.
U.S. Sen. Amy Klobuchar asks questions during a hearing at the U.S. Capitol in April 2021 in Washington, D.C. Klobuchar says she's more optimistic for changes in the law governing Medicare and drug prices.
Pool, Getty Images file

U.S. Sen. Amy Klobuchar said there’s no good reason why Medicare is barred by law from being able to use its clout to negotiate lower prescription drug prices.

The Minnesota Democrat has been calling for a law change since her first campaign for Senate more than 15 years ago.

Now she said lawmakers may be moving closer to giving Medicare leverage in its substantial buying power to lower drug prices for nearly 50 million seniors.

“It's an outrageous problem, and it has to be addressed. And the only reason that it stayed the way it is, is because of the pharmaceutical lobby and their grip on people in Congress,” Klobuchar said in a recent interview.

Unlike Medicare, there is no law preventing the Veterans Administration from negotiating drug prices for millions of people. Last year, the General Accounting Office looked into how the VA lowers its drug costs through negotiations and found in 2017 the VA was paying, on average, around 54 percent of what Medicare was paying for nearly 399 drugs sampled for the study.

Klobuchar said if Medicare could do the same thing, it would save $500 billion over 10 years.

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“This expense doesn't only burden individuals, it burdens taxpayers because taxpayers are going to be paying more and more for these pharmaceuticals as we have more and more people living longer and more seniors,” Klobuchar said.

The pharmaceutical industry group, PhRMA said the proposal would allow the government to set the price of prescription medicine, which it said would threaten patient access to drugs and stifle the development of new treatments. 

PhRMA made its case in a national ad campaign last fall claiming politicians want to “decide which medicines you can and can't get, regardless of what your doctor prescribes.”

Juliette Cubanski, the deputy director of the program on Medicare policy at the Kaiser Family Foundation, said that claim is inaccurate.

“The proposed drug price negotiation program that Congress is discussing right now does not authorize the federal government to decide which medications people on Medicare can and cannot get,” Cubanski said.

The industry ad also claims that allowing Medicare to negotiate drug prices could lead pharmaceutical companies to pull back on efforts to develop new drugs.

Cubanski said that claim could have merit.

University of Minnesota health economist Stephen Parente, who served on former-President Donald Trump’s council of economic advisers, said there’s no disputing that pharmaceutical companies charge U.S. consumers a lot more for most prescription drugs than they charge people in other countries.

The current pricing structure is core to the industry’s revenue strategy and if big profits from U.S. sales erode, drugmakers might rethink their approach to research and development, Parente said.

“The biggest concern is from an innovation perspective … it might reduce the number of drugs that are available, but also potentially lengthen the time to get really innovative drugs to markets,” the professor said.

Klobuchar said she is convinced the industry will continue innovating even with less revenue from U.S. customers.

“So, there's no reason to believe they will be derailed in any way given that their customer base — with people getting older and living longer — has been expanding every year,” Klobuchar said.

Parente said he favors experimenting with allowing Medicare to negotiate drug prices on a limited basis.

Klobuchar said she wants Congress to give the full go ahead but concedes that it’s more likely a phase-in would become law.