Background
The government is prohibited from directly negotiating drug prices for Medicare Part D, resulting in substantial policy debate.
However, the government has an established mechanism for setting prices with pharmaceutical manufacturers for certain other
federal programs - the Federal Supply Schedule (FSS).
Objective
To estimate how much could be saved nationwide if prices equivalent to the 2006 FSS were achieved for the top 200 drug formulations
dispensed to seniors.
Design/Setting
Cross-sectional analysis of drug utilization patterns and costs from the nationally representative Medical Expenditure Panel
Surveys (MEPS), 2003–2004, and the 2006 FSS.
Participants
Seniors who filled a prescription for any of these common drugs (n = 6,135 individuals).
Measures
Prescription expenditures were obtained from MEPS, and a price/unit was calculated in 2006 dollars. This price/unit was compared
to the 2006 FSS, and a savings/unit was calculated and summed across the observed units dispensed in MEPS.
Results
The potential annual savings with FSS prices would be $21.9 billion [95% confidence interval (CI), $21.9 billion [95% confidence interval (CI), 21.1 billion to 22.8 billion]. If FSS prices were substituted for only the top ten drugs, the annual savings would be22.8
billion]. If FSS prices were substituted for only the top ten drugs, the annual savings would be 5.9 billion (95% CI, 5.7 billion,5.7
billion, 6.1 billion).
Conclusions
Extension of existing price setting mechanisms to Medicare could save tens of billions of dollars if prices similar to those
already achieved by other federal programs could be reached. Whether or not this is a political or economic possibility, the
magnitude of these savings cannot be ignored.
KEY WORDS medicare - pharmaceuticals - costs of care