CBO Says: Free Market Can Negotiate Better Drug Prices than Government

Mpls./St.Paul, Minnesota -- The federal government today released a refreshing endorsement of the free market in health care, reports Citizens' Council on Health Care.

“The Congressional Budget Office recognizes the inherent strength of the free market and has essentially told Congress that markets can negotiate better drug prices than governments,” says Twila Brase, president of CCHC.

The CBO was responding to a request from U.S. Rep. John Dingell, Chairman of the House Committee on Energy and Commerce, to review H.R. 4, the Medicare Prescription Drug Price Negotiation Act of 2007 which was introduced last week.

In a letter to Rep. Dingell, dated yesterday, the CBO expresses doubt that the U.S. Secretary of Health and Human Services would be able to negotiate prices more favorable than those obtained by sponsors of prescription drug plans.

The CBO concludes the letter with the following statement:

“The [sponsors of prescription drug plans]...bear substantial financial risk and therefore have strong incentives to negotiate price discounts in order to control their costs and offer coverage that attracts enrollees through features such as low premiums and cost-sharing requirements. Therefore, the [sponsors of prescription drug plans] have both the incentives and the tools to negotiate drug prices that the government, under the legislation, would not have.”

“While a more fully engaged free market would likely produce even lower drug prices for patients than those achieved by private sponsors of Medicare drug plans, it is refreshing to hear government officials acknowledge the advantages and price-sensitivity of market negotiations,” says Brase.

CBO LETTER: click here

Media Contact:

Twila Brase, President
Phone: 651-646-8935 (office)