Negotiate, But Without Bargaining Power

As part of its first "100 Hours" campaign, the Democrats plan to give Medicare the right to negotiate lower drug prices. But, as Robert Pear points out in today's New York Times, the legislation is mere symbolism unless Congress simultaneously requires Medicare to adopt strict formularies.

A formulary is a list of what drugs doctors can prescribe. When there are two or more drugs in a class for treating the same condition, and they all work just about as well, then it is perfectly legitimate for payers like Medicare to demand that doctors prescribe the cheapest one. They do that by putting only that one on the formulary. Medicare can then force suppliers to offer lower prices in negotiations as the price of getting on the formulary.

Ergo, no formulary, no meaningful price negotiations. It will be interesting to see how the Democrats handle it.