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> No, it’s not. Medicare is legally restricted from negotiating drug prices. Yes, that’s a ridiculous law.

This misleading misconception gets brought out on nearly every discussion of pharmaceuticals on Hacker News.

Medicare doesn't negotiate rates; the insurers who provide Medicare coverage for pharmaceuticals negotiate rates. This makes sense, because Medicare doesn't provide coverage for pharmaceuticals, so it would be a misalignment of incentives to have them "negotiate" rates that they're not paying. The insurers, on the other hand, have the incentive to drive the prices as low as possible, because pharmaceuticals are fungible goods and the lower the price, the more money they can make.




It's not misleading at all. Prior to the 2003 Medicare Prescription Drug, Improvement, and Modernization Act the federal government did negotiate drug prices. Although it had less skin in the game than Part D pharma plans, it had far more market power, and the resultant leverage made it much more potent. Additionally, it's outright incorrect to suggest it doesn't have skin in the game - it not only covers the most expensive (and biggest growth sector) in pharmaceuticals, those administered in infusions and inpatient centers (the biologicals; chemo), but they also pick up a chunk of the Medicaid spending, which covers pretty much everything.

It wasn't pharma benefit managers (PBMs) that surpassed all other industry groups in lobbyingfor the final form of the 2003 Act - it was pharma companies (Ceci Connolly, Drugmakers Protect Their Turf: Medicare Bill Represents Successfor Pharmaceutical Lobby, WASH. POST, Nov. 21, 2003). They hadn't lost track of their own interests and accidentally lobbied against their own profits, and it's always kind of ridiculous when people imply they did.


Holy shit I never even realized that.




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