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Let Medicare negotiate a better deal on drugs

Instead of the public drubbing he’s received, maybe Martin Shkreli deserves a thank you. Shkreli, chief executive of Turing Pharmaceuticals, became a pariah in September by raising the price of an obscure treatment for a parasitic infection from $13.50 to $700 a pill. In making himself a soft target for drug industry skeptics, Shkreli also fueled public ire over the high cost of prescription medications. So much so, a new poll suggests, that many Americans are now willing to consider some form of government intervention as a way to moderate the upward slope of drug prices.

Nearly everyone who responded to the poll, conducted by the Harvard T.H. Chan School of Public Health and STAT — Boston Globe Media's online health and life-sciences publication — characterized Turing's 5,000 percent price hike as "unreasonable," and about three-quarters applied that label to the cost of brand-name drugs in general. Those findings are not surprising — under what circumstances would a 5,000 percent markup be okay? — but the Harvard/STAT survey also found that 69 percent of Americans want Medicare to negotiate drug prices with manufacturers. The federal insurance plan for seniors and the disabled is the nation's largest health care payer, covering about 55 million people. The Congressional Budget Office estimates spending on Medicare Part D — the prescription-drug benefit — will reach $88 billion in 2016, and it could double over the next decade as baby boomers grow older. In Massachusetts alone, drug spending last year increased by 13 percent compared with 2013.


Medicare already sets payment rates for procedures and tests, from MRIs to surgeries to routine checkups. Its enormous size theoretically gives the agency unprecedented clout to similarly negotiate drug prices. Under federal law, however, the cost of drugs must be worked out between manufacturers and individual insurance companies or benefits managers, negating the government’s leverage. The restriction was lobbied for by the pharmaceutical industry, says Aaron Kesselheim, an associate professor of medicine at Harvard Medical School. Drug makers argue that negotiated prices would deplete research dollars, leading to fewer breakthrough discoveries, but they often fail to mention that much of the most cutting-edge research is done by small biotechs, universities, and the National Institutes of Health. Yes, drug development carries major risks — only about 1 in 5,000 experimental medicines makes it to pharmacies — and companies deserve to be rewarded for finding treatments that extend and save lives. But the industry has done a poor job of justifying its pricing structures. In the Harvard/STAT poll, 53 percent of Americans said they believe profits are the primary reason why medicine costs so much.

The prohibition on Medicare negotiations is also inexplicably at odds with the relationship another federal-state insurance program, Medicaid, has with drug makers. Medicaid, which covers low-income people, recoups billions of dollars in rebates from companies that sell the top 100 brand-name treatments, according to the Office of Inspector General. A Carleton University-Public Citizen study published in July found that if Medicare were allowed to do the same for Part D, it could save at least $15 billion.

Medicare, and the taxpayers who fund it, are owed a better deal on prescription drugs. It’s time to stop paying the sticker price.