Allowing Medicare to Negotiate Drug Prices Is A Popular Idea But May Not Produce Substantial Savings

In response to rising drug costs, some policymakers and presidential candidates, including Republican Donald Trump and Democrats Hillary Clinton and Bernie Sanders, have proposed allowing Medicare to negotiate directly with pharmaceutical companies over the price of prescription drugs, in contrast to the current approach under Medicare Part D drug where private plans do the negotiating.  A version of this proposal was also included in the Obama Administration’s FY 2016 and FY 2017 budgets.

While the idea wins majority support among the public overall and also among both Democrats and Republicans, the Congressional Budget Office has estimated that such proposals would have a “negligible” impact on federal spending without stronger enforcement tools. The brief, Searching for Savings in Medicare Drug Price Negotiations, offers a short history of the concept of Medicare drug price negotiations, describes various policy approaches to the idea and summarizes the CBO’s assessments of their potential savings, and examines the prospects for a proposal of this type to take hold.