Ruth Marcus Blames Private Medicare Insurers for the Lack of Innovation in the Pharmaceutical Industry

Wednesday, 01 June 2011 07:15

Of course she probably did not know that this is what she is doing in her hypothetical conversation between "Paul" and "Barack," but that is exactly what she is doing when she touts the lower than expected cost of the Medicare drug benefit. The main reason that the drug benefit cost less than expected is that drug prices in general have gone up less than expected. And, the reason that drug prices have gone up less than expected is that there have been very few new blockbuster drugs in last decade.

This means that even though the industry claims that it is spending more than ever on research, it has much less to show in the form of new drugs than it did 20 years ago. It seems a stretch to blame this lack of innovation on the private insurers offering the Medicare drug benefit, but we can't question a very serious person with a regular column in the Washington Post.

The rest of this hypothetical discussion is equally confused. Contrary to what it asserts, the vast majority of Democrats did not think it was okay to have just private insurers in the exchanges set up under the Obama plan. They pushed hard to include a good public option. However, they did not have the 60 votes to get a public option through the Senate.

And the comparison of the cost of the Ryan plan to the existing Medicare plan is not a hypothetical. The additional $34 trillion cost that CBO projected for buying Medicare equivalent policies is based on the actual history with Medicare Plus Choice and Medicare Advantage. How many times must this experiment be repeated before its results are accepted?

It is worth noting that there is a simple mechanism for saving large amounts of money under the Medicare system. The government could give beneficiaries a voucher that would allow them to buy into the health care systems of other countries with longer life expectancies than the United States. The beneficiary and the government could split the tens of thousands of dollars in projected annual savings. If the Post was not such an ardently protectionist paper it would support this program