Right after the election a friend of mine who covers medical issues an author and journalist e-mailed me and said she was convinced that not only would lobbyists kill the chance of real Medicare D reform (allowing Medicare to offer its own plan) but also that they would probably even stop Medicare from being allowed to negotiate prices. I was skeptical - Dems had campaigned at least on the negotiation part, it was popular with Americans, and I was sure they'd do it.

I was wrong, and she was right. As another friend put it, every period, comma and "if", "and", or "but" in Medicare "D" is sacred to the insurance and drug companies and their lobbyists already have their spin machines up and running. This LA Times piece is a classic. Let's walk through it.

In addition, newly announced discounts by drug companies could have an impact on the Democrats' effort before it gets started. At least one major manufacturer is offering help to seniors who have trouble paying for their drugs.

Well yes. Since they know they're under the gun, they're making nice. As the spokesmen says, the timing is just coincidental. And as soon as they think the issue is off the table such discounts becoming unaffordable will be coincidental as well, I'm sure.

More After the Jump

"From a rhetorical perspective, Democrats may feel like they gain a lot with this issue, but there are many substantive hurdles that the government faces in trying to negotiate prices," said Dan Mendelson, president of Avalere Health, a consulting firm that tracks the Medicare prescription program.

"If you look historically at the government's experience in trying to regulate prices, it's poor."

Historically, if you look at the US government's experience trying to regulate drug prices, it's practically non existent - outside of wartime serious efforts to regulate prices haven't been made (the legislation on generic drugs is so generous in the amount of patent protection it offers that I don't consider it a countervailing example). Nor is absolute price fixing intended, though a possible "price cap" is being considered, they're going to "bargain" rather than just accept the price that's given to them. Bargaining is what every major retailer in the country does with their suppliers, but somehow government isn't supposed to do it? And when you look at other government's ability to bargain prices with the pharmaceutical companies what you find is that, in fact, it's good, very good. And even within the US the VA does very well, getting lower prices than any of the other major US purchasers.

Although costs for the Medicare drug program are lower than the government originally projected, there is evidence that prices could be lower still. A recent Consumers Union study of the prices charged in South Florida for six widely used drugs found that the Veterans Administration's average prices were 54% lower than Medicare's...

...Yet applying the VA approach to Medicare may prove difficult. For one thing, Medicare is much larger and more diverse.

VA officials can negotiate major price discounts because they restrict the number of drugs on their coverage list. Instead of seven or eight drugs for a given medical problem, the VA list may contain three or four. If a drug company fails to offer a hefty discount, its product may not make the cut.

For example, VA beneficiaries can get Zocor for high cholesterol, but not Lipitor. In all, the VA covers about 1,300 medications. By comparison, the most popular Medicare plan — AARP MedicareRx — covers about 4,300.

But VA patients who want drugs that are not on the department's list must go outside the system.

In other words, the VA offers lower drug prices, but fewer choices.

That's because they look at a drug like Lipitor, compare it to Zocor, and decide that Zocor is as good and costs less. Often they decide that one drug costs less - and has less side effects. Most of them major drug companies have created "me too" drugs - drugs that do the same thing, the same way as their competitor's drugs, with minor changes. The VA takes advantage of this:

According to the Journal, the "rivalry is often hot even in cases where generics are either unavailable or not used widely." For example, after VA pharmacists declared last year that the brand-name impotence drugs Viagra, Cialis and Levitra were equally safe and effective, the VA negotiated a deal in which it pays $2.58 per Levitra tablet, compared with about $4.90 it had been paying per Viagra tablet. The VA -- which provides health care to more than five million veterans -- made Levitra its preferred impotence drug, and the treatment's share of total impotence pills dispensed increased from 1.5% before the change to 89% in April.

Back to the LA Times article:

Democrats haven't spelled out a specific proposal, and Stark said there were at least two possibilities.

One would repeal the prohibition on negotiating and order Medicare to set a top price for each drug available under the program. Private insurers would still be free to bargain for even lower prices.

Such an approach would be similar to how Canada and European countries control prescription drug prices. Canadian prices are 30% to 60% lower than in the U.S. Some critics say Canadian price controls mean that patients there are not always able to get the latest medications.

The other possibility is to set up a Medicare-run plan to compete against the private plans. That is, Medicare would set up a plan using drug prices it negotiated with manufacturers. The plan, available nationwide, would compete with the privately operated plans — encouraging private plans to bargain harder for lower prices.

The two approaches aren't mutually exclusive, Stark said.

The two approaches should be used together, and Stark should be commended for realizing it. And, um, Canadians not being able to get the latest drugs? Probably true, so what? Those drugs are almost certainly the ones that are most expensive for the least benefit, which is why Canada declines to pay. However the Canadian market is tiny compared to the Medicare market. If drug companies decide not to offer to Medicare, they will be limiting their profits. They aren't stupid. The way drug profits work is simple - once you know how to make a drug, the cost of making it is infintesimal - every pill is profit, which is why drug companies do sell cheaper outside the US, becuase profit is profit.

But Stark's only one side of this, there's still the Senate:

As chairman of the finance committee, Sen. Max Baucus of Montana will have jurisdiction over Medicare. This year he was one of only two Democrats to vote against allowing Medicare to negotiate drug prices.

A spokeswoman said Baucus planned to hold hearings next year but had not made up his mind on the issue.

The drug industry hopes that even if it loses the first high-profile battle in the House, it can still win the legislative war.

"We fully expect that Speaker-elect Nancy Pelosi will deliver on her political promise, but after that we are equally confident that we will have an opportunity to educate both the members of Congress and beneficiaries across America about the benefits of the current program," said Ken Johnson, senior vice president of communications at the Pharmaceutical Research and Manufacturers of America.

Baucus and the Senate are going to be key. Pelosi will get this through the House, but it risks being one of the first high profile losses in the Senate.

Not only is this a bill that shoul be passed on the merits, but if Democrats are foolish enough to defeat it on bipartisan terms in the Senate, they will make it harder to go to Americans in 2008 and say "we need more Senators to do your will in Washington."

Over Max Baucus's career insurance companies (the people who care most about this bill) have been his 3rd largest donor. Health professionals number 4, and drug companies number 8. I understand that Max feels he needs to be there for those who were there for him, but I hope he remembers his first loyalty is to the people of his state - who need to be able to afford drugs; his second loyalty is to Americans as a whole; his third loyalty is to his party, and only his fourth and last loyalty is to those who have given him money. Allowing medicare to negotiate drug prices has over 90% support - failure to do so will have consequences.

Once more - the thing that is scariest about the US isn't the volatility of the mob (what mob?) it's the way that elected representatives are so insulated from responsibility to their electorate that they can seriously consider not implementing something with over 90% approval.