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Searching for Savings in Medicare Drug Price Negotiations

Issue Brief
  1. Kaiser Family Foundation analysis of National Health Expenditure Account data from the Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group, “Table 16, Retail Prescription Drugs Expenditures; Levels, Percent Change, and Percent Distribution, by Source of Funds: Selected Calendar Years 1970-2015.”

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  2. 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, June 2015, Table V.D1, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/TR2016.pdf.

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  3. Kaiser Family Foundation Health Tracking Poll, September 2016, available at http://kff.org/health-reform/report/kaiser-health-tracking-poll-september-2016/.

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  4. “Donald Trump on Russia, Advice from Barack Obama and How He Will Lead,” TIME, December 7, 2016, available at http://time.com/4591183/time-person-of-the-year-2016-donald-trump-interview/.

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  5. Glenn Kessler, “Trump’s truly absurd claim he would save $300 billion a year on prescription drugs,” The Washington Post, February 18, 2016, available at https://www.washingtonpost.com/news/fact-checker/wp/2016/02/18/trumps-truly-absurd-claim-he-would-save-300-billion-a-year-on-prescription-drugs/?utm_term=.349568ac59df; Robert Costa and Amy Goldstein, “Trump vows insurance for everybody in Obamacare replacement plan,” The Washington Post, January 15, 2017, available at https://www.washingtonpost.com/politics/trump-vows-insurance-for-everybody-in-obamacare-replacement-plan/2017/01/15/5f2b1e18-db5d-11e6-ad42-f3375f271c9c_story.html?utm_term=.b50512b48739.

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  6. Transcript of news conference of Donald J. Trump, January 11, 2017, available at https://www.nytimes.com/2017/01/11/us/politics/trump-press-conference-transcript.html.

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  7. Gretchen Jacobson, Shannon Griffin, Cristina Boccuti, and Juliette Cubanski, “Comparison of Medicare Provisions in Recent Bills and Proposals to Repeal and Replace the Affordable Care Act,” Kaiser Family Foundation, January 2017, available at http://kff.org/medicare/issue-brief/comparison-of-medicare-provisions-in-recent-bills-and-proposals-to-repeal-and-replace-the-affordable-care-act/.

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  8. Social Security Act Section 1860D-11(i), available at https://www.ssa.gov/OP_Home/ssact/title18/1860D-11.htm.

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  9. Kaiser Family Foundation, "Public's Health Care Agenda for the New Congress and Presidential Campaign," December 2006, available at http://kff.org/health-costs/poll-finding/the-publics-health-care-agenda-for-the/.

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  10. An example of this approach introduced in the 115th Congress is S.41/H.R.242, "Medicare Prescription Drug Price Negotiation Act of 2017," available at https://www.congress.gov/115/bills/s41/BILLS-115s41is.pdf, https://www.congress.gov/115/bills/hr242/BILLS-115hr242ih.pdf.

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  11. An example of this approach introduced in the 114th Congress is S.1884/H.R.3261, "Medicare Prescription Drug Savings and Choice Act of 2013," available at https://www.congress.gov/114/bills/s1884/BILLS-114s1884is.pdf and https://www.congress.gov/114/bills/hr3261/BILLS-114hr3261ih.pdf.

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  12. A variation of this approach as proposed by Richard Frank and Joseph Newhouse would establish a system of binding arbitration between the federal government and pharmaceutical companies to determine a set of temporary administered prices for unique drugs, until such time when competitor products became available; see Richard Frank and Joe Newhouse, "Should Drug Prices Be Negotiated Under Part D of Medicare?" Health Affairs 2008; Richard Frank, "Prescription Drug Procurement and the Federal Budget," Kaiser Family Foundation, May 2012, available at http://kff.org/health-costs/issue-brief/prescription-drug-procurement-and-the-federal-budget/.

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  13. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2016 and Fiscal Year 2017.

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  14. Congressional Budget Office, Letter to the Honorable William H. Frist, M.D., January 23, 2004, available at https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/reports/fristletter.pdf. See also Congressional Budget Office, Letter to the Honorable Ron Wyden, April 10, 2007, available at https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/drugpricenegotiation.pdf.

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  15. Congressional Budget Office, "A Detailed Description of CBO’s Cost Estimate for the Medicare Prescription Drug Benefit," July 2004, available at https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/reports/07-21-medicare.pdf.

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  16. The Center for Economic Policy Research produced an estimate of federal savings ranging from $230 billion to $541 billion over 10 years if Medicare paid the same prices as in selected other countries where prices are set administratively; drug prices in Canada and Denmark were used as benchmarks; see "Reducing Waste with an Efficient Medicare Prescription Drug Benefit," January 2013. A more recent paper estimated annual savings of around $15 billion per year if Medicare paid the same prices as in Medicaid and the VA; see Carleton University/Public Citizen, "Mirror, Mirror on the Wall," July 2015.

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  17. Congressional Budget Office, Letter to the Honorable Ron Wyden, April 10, 2007, available at https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/drugpricenegotiation.pdf; Congressional Budget Office, Letter to the Honorable Ron Wyden, March 3, 2004, available at https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/reports/03-03-wyden.pdf.

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  18. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2017, Summary Tables, available at https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/tables.pdf; and Fiscal Year 2016, Summary Tables, available at: https://www.gpo.gov/fdsys/pkg/BUDGET-2016-BUD/pdf/BUDGET-2016-BUD-6.pdf. Congressional Budget Office, Proposals for Health Care Programs—CBO’s Estimate of the President’s Fiscal Year 2016 Budget, available at https://www.cbo.gov/publication/50013. The Congressional Budget Office has not yet released estimates for the President's Fiscal Year 2017 budget.

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  19. See Health-Option 11 in Congressional Budget Office, Options for Reducing the Deficit: 2017 to 2026, Chapter 5, Health Options, December 2016, available at https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/reports/52142-breakout-chapter5.pdf.

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