To our readers:

In a recent NextSteps column, we opined that one reason seniors’ health care costs are escalating so quickly is that Medicare is forbidden to negotiate the prices of prescription drugs on behalf of recipients. By contrast, the Veterans Administration and Medicaid can negotiate – with good results for consumers.

The non-negotiation clause was inserted by the Bush administration into the Medicare Prescription Drug, Improvement, and Modernization Act (also called Medicare Part D) that went into effect in January 2006. A Pennsylvania reader disagrees with our earlier column, saying that “if the Feds negotiate, then some bureaucracy decides what is in the formulary [the list of drugs covered by the insurance plan that the Medicare recipient chooses]. This is the case in the VA formulary. My friends who use the VA for drugs tell me that many of the most modern and effective drugs are not in the formulary. Instead, they will mandate what they believe to be the best for you instead of what your doctor thinks.”

This reader, age 69, says he wants to control his drugs “and not relinquish my selection to some bureaucrat or politician whom I cannot influence because I am not a billionaire able to contribute large sums.”

In light of our reader’s letter, we took a second look at the issue of negotiating prescription drug prices. Here’s what we have concluded: (1) On the basis of experience by the VA and Medicaid – not to mention most European countries and Canada – it’s likely that prescription drug prices in the U.S. will drop if the government is allowed to negotiate with pharmaceutical companies. So we stand by our earlier statement. (2) The second issue is more complicated. Who should be able to decide what drugs are in the formulary: the government or private insurers?

First, more details about Number 1: In 1999, a representative year, the VA paid, on average, half as much for prescription drugs as did Medicare beneficiaries. For example, the VA bought Prilosec for $59.10 and Zoloft for $115.70; for the same prescription, an average Medicare recipient paid $114.56 and $220.45, respectively. A more recent survey done by the House Government Reform Committee, of 10 popular drugs offered to Medicare recipients through 10 well-known insurance plans, reported that they paid average prices 80 percent higher than VA-negotiated prices.

Even the American Medical Association, often viewed as a conservative voice for organized medicine, has come out in favor of the federal government negotiating drug prices. By using the market power of roughly 41 million Medicare beneficiaries, we think it stands to reason that pharmaceutical companies (big financial supporters of President Bush and many of his Republican colleagues in Congress) would have to provide deep discounts to the federal government in order to prevent the loss of a significant portion of their market.

According to a 2004 article in The New England Journal of Medicine, prices for brand-name prescription drugs are 35 to 55 percent lower in other industrialized countries than in the United States. The “central reason for these price differentials is that Canada and most European countries… directly regulate the prices of prescription drugs,” says the Journal.

Now for Number 2: Who should decide which drugs are included – and at what pricing tier – in the formulary? Private insurance companies don’t necessarily include in their formulary all FDA-approved drugs. In fact, according to a recent Kaiser Family Foundation study about Medicare Part D, 67 percent of pharmacists say their customers have left the pharmacy without a medication because the prescribed drug was not on their Medicare drug plan’s formulary.

It’s true there are dozens of Medicare prescription drug plans available today, and conceivably, Medicare recipients could make many phone calls or go online to find a plan that does include the patient’s needed drug. Perhaps that would be preferable to having a government bureaucrat decide what drugs are in the formulary. But that puts Medicare recipients between a rock and a hard place: Whom do you trust more to look out for your interests -- the federal government or the big pharmaceutical companies? Neither, you say?

In any case, after nearly a year in existence, it’s pretty obvious that the Medicare Part D law is flawed and needs to be reworked. Let’s hope that the new Congress convening in January 2007 does just that.