Medicare pays about 70 percent more than Medicaid and the Department of Veterans Affairs for brand-name drugs, according to a study that calls for giving the program the power to negotiate lower prices.
The study conducted by Carleton University and the advocacy group Public Citizen focuses on an issue of growing public sentiment. A recent poll showed that more Americans want Medicare, the federal-state insurance program for seniors, to have the ability to negotiate with companies for lower prices of drugs covered under the program.
The study released Thursday noted that Medicare Part D, the program's prescription drug section, would save up to $16 billion a year if it could secure the same prices as Medicaid and the VA on brand-name products.
Medicare plans can get a rebate from both drug companies and the pharmacy, but lack the power to negotiate for a lower overall price, the study said.
It added that the Centers for Medicare and Medicaid Services are prohibited from asking for additional rebates or discounts without first getting congressional approval.
Medicaid, on the other hand, has a basic rebate and an inflation rebate imposed if the average manufacturer's price for a drug rises faster than general inflation. At the VA, drug companies can sell products at no more than 76 percent of the federal average manufacturer's price minus any discounts.
The study's figures were based on previously unpublished data and compared prices for a group of brand-name drugs.
The study also looked at drug prices for 30 other countries and found that 27 of them were able to purchase medications at 50 percent less than the U.S. purchase price.
In Europe, for example, most countries have a single-payer health system that enables the country to negotiate lower prices in exchange for covering the drug.
However, drug companies counter that such negotiation powers could hamper further innovation and research and development of new cures.
Giving Medicare the power to negotiate lower prices has picked up steam among Americans. A recent poll found that more than 80 percent of Americans favor negotiating power for Medicare, according to a recent poll from the Kaiser Family Foundation.
President Obama called for such powers in his latest budget but the proposal has not gone anywhere in Congress.