Just the Facts on Drug Negotiation

Congressional hearings often serve as elaborate theatrical productions. Members ask pre-written questions, receive formulaic answers, and in many cases use witnesses as props to engage in rhetorical grandstanding. The grandstanding element was on full display Tuesday during the confirmation hearing for Alex Azar, the Health and Human Services Secretary-designee. Sen. Claire McCaskill (D-MO) wanted to beat up on “evil” drug companies, and she wasn’t going to let facts get in her way.

McCaskill spent two minutes attacking pharmaceutical advertisements, including a reference to “the one for erectile dysfunction where they have them in two bathtubs,” before she tackled the issue of Medicare “negotiating” prices with drug companies. At this point she demonstrated ignorance on several issues.

Second, McCaskill failed to grasp that Medicare drug plans already negotiate with pharmaceutical companies, and that the discounts they obtain have helped keep overall premiums for the prescription drug Part D plan low. It may sound radical to McCaskill, who has spent practically her entire adult life working in government, but the private sector can negotiate just like the government, and probably do so more effectively than a government entity.

Third, McCaskill refused to believe that getting the government involved in “negotiating” drug prices would not save money. When Azar explained that removing a provision prohibiting federal bureaucrats from “negotiating” prices wouldn’t save money, McCaskill called his explanation “just crazy” and “nuts.”

It isn’t nuts, it’s economics. Even though McCaskill tried to lecture Azar on economics and markets at the beginning of her questioning, her queries themselves showed very little understanding of either concept. In a negotiation, the ability to drive a hard bargain ultimately derives from the ability to seek out other options. If Medicare must cover all or most prescription drugs, such that it can’t walk away from the proverbial bargaining table, it will by definition be limited in its ability to put downward pressure on prices.

But don’t take my word for it. As Azar pointed out to McCaskill, none other than Peter Orszag, who directed the Office of Management and Budget (OMB) under President Obama — said as much in an April 2007 Congressional Budget Office letter:

By itself, giving the Secretary broad authority to negotiate drug prices would not provide the leverage necessary to generate lower prices than those obtained by PDPs and thus would have a negligible effect on Medicare drug spending. Negotiation is likely to be effective only if it is accompanied by some source of pressure on drug manufacturers to secure price concessions. The authority to establish a formulary, set prices administratively, or take other regulatory actions against firms failing to offer price reductions could give the Secretary the ability to obtain significant discounts in negotiations with drug manufacturers.

Only the ability to limit access to drugs by setting a formulary or imposing  administrative prices, i.e. “negotiating” by dictating prices to drug companies, would have any meaningful impact on pricing levels. But this truth proved inconvenient to McCaskill, who admitted she “refuse[d] to acknowledge it.”

Instead, McCaskill continued haranguing him about the evils of drug companies. She pointed out that one congressman who helped negotiate the prescription drug benefit, Rep. Billy Tauzin (R-LA), “went to run PhRMA after he finished getting it through.”

Indeed he did. And as the head of PhRMA, he bragged about the “rock-solid deal” he cut with the Obama administration to help his industry. Big Pharma’s “deal” as part of Obamacare encouraged seniors to purchase costlier brand-name drugs instead of cheaper generics, which the CBO concluded would raise Part D premiums by nearly 10 percent. And who voted for that “rock-solid deal?” None other than Claire McCaskill.

As the old saying goes: If you have the facts on your side, pound the facts. But if you don’t, pound the table.

The facts indicate that McCaskill voted for a “rock-solid deal” with Big Pharma that raised premiums on millions of seniors, which actually makes her part of the problem, not part of the solution. Of course, that also makes her willingness to grandstand at Tuesday’s hearing, and her unwillingness to face facts she now finds politically inconvenient, less “crazy” than it first seemed.

This post was originally published at The Federalist.

Gov. Jindal Op-Ed: Yes, We Can Still Repeal Obamacare

According to those in the elite salons of Washington, Obamacare cannot be repealed. The conventional wisdom on the cocktail circuit contends that once you mandate health insurance for millions, you cannot unmandate it.  This theoretical belief has become accepted in Washington as a dogmatic article of faith.  And the Obamacrats and most of the press believe that repeating this mantra often enough will make it so.

Of course, many Beltway insiders claim that Obamacare cannot be repealed because they wish to preserve the financial windfalls the law has brought them.

From the Big Pharma CEO bragging about the “rock-solid deal” benefitting his industry, to the health insurers who have a captive audience of Americans now required to purchase their products, to the lobbyists seeking preferential treatment in regulations, Obamacare has become big business to the K Street crowd.  No wonder so many view repeal of the law as fantastical—it would take away their gravy train.

But even many conservative “thinkers” in Washington have given in to Obamacare fatalism.  They may not say so in public, but they fully believe that talk of the law’s repeal exists only in the land of unsophisticated rubes.

The country that won two world wars and put a man on the moon cannot, it is believed, repeal a disastrous public policy. Says who? Why not?

I know a little bit about health care policy, having spent most of my adult life analyzing and implementing policy changes on the state and federal levels.  And based on my decades of experience, the idea that Obamacare cannot be repealed defies both logic and real world justification, on multiple levels.

First, the fact that the federal government has by force of law and under pain of taxation forced millions to sign up does not constitute “success” or “progress.”  In fact, I bet the administration could have raised their enrollment totals even higher if friendly IRS agents had paid personal visits to all Americans “encouraging” them to enroll.

The real “progress” thus far from Obamacare? Health care premiums have gone up, health care costs continue to escalate, and millions of consumers are losing their plans and finding that they may not be able to see their doctors any longer.

Let’s remember, too, that Obamacare was sold on a series of deceptions – if you like your plan you can keep your plan, you can keep your doctor, and premiums will decrease on average $2,500 per year.

To pass Obamacare in the first place, the American people were sold a bill of goods that would make even P.T. Barnum blush.

In one sense, the smart guys are correct. Conservatives do need to articulate alternatives to Obamacare—because the American people need relief from premiums that continue to skyrocket.

The plan I endorsed last month would do just that—focus like a laser beam on reducing costs. The Congressional Budget Office previously analyzed many of the policies included in our plan, and concluded they could reduce premiums by thousands of dollars compared to Obamacare’s surging costs.

Many families struggling with rising premiums and co-payments might believe that they will never see relief. But the notion that we can’t slow the growth of health spending is just as fanciful as the idea that Obamacare cannot be repealed.  The only reason we can’t accomplish both objectives is political will—because Washington needs a Beltway-sized reality check.

Fortunately, there’s a big country out there. We don’t care what they think in Washington, and we are not willing to quit on the idea of America.

This post was originally published at Fox News.