Because Medicare is by far the largest single purchaser of pharmaceuticals in the market, "leveraging" its "purchasing power" is merely euphemistic language for "we will dictate drug prices."Furthermore, reducing the profit motive for drug companies will reduce (and ultimately kill) innovation in future drugs.
Like all price-control schemes, this would inevitably lead to shortages. If Medicare forces the drug companies to sell their products at rates that fail to cover costs, these companies will simply stop manufacturing those drugs. To counter this inconvenient reality, the supporters of Obama's approach to "cost control" point to the Veterans Health Administration (VA), which has negotiated directly with pharmaceutical companies for years. What such people usually fail to mention is that the VA covers far fewer drugs than does Medicare...
On this point, Catron notes:
This point is dismissed by progressive "experts" like Maggie Mahar, who sneers, "[This] is an old argument. Innovation is already slowing at drug companies as fewer new 'game-changing' drugs are approved each year." That this reduction in approvals may say more about bureaucratic inertia at the FDA than drug company creativity seems not to have occurred to her.(Read the full text of "Obama On Drugs".)
Ironically, one of the most eloquent rebuttals to this progressive talking point has been made by fanatical Obamacare supporter Andrew Sullivan, who credits profit-driven innovation for saving his life: "I was told in 1993 that I had a few years to live. I write this 16 years later with a stronger immune system than I have ever measured before."
Sullivan is, of course, referring to the discovery that he was HIV positive. Yet, despite his affinity with the positions of people like Mahar, Sullivan readily understands what saved him: "America's much-maligned healthcare system did this. Without this vast and free market in medical care and pharmaceuticals, without the potential for making large amounts of money... the innovation of treatments and regimens would never have occurred at the pace it did."
During the 2009-2010 health care debates, the drug industry wanted a "seat at the table" to help influence legislation in their favor. Instead, like with the medical device industry, they found that they got served as one of the courses.
That kind of political betrayal is the predictable consequence of trying to make deals with the devil, rather than standing up in a principled fashion for one's right to produce and trade free from government interference.
(David Catron also blogs regularly at HealthCareBS.)