Study: Medicare should negotiate Rx prices

WASHINGTON, Jan. 19 (UPI) -- Medicare would pay less for prescription drugs if it negotiated directly with the drug industry, says a new repott.

The report -- released Wednesday by the Center for Economic and Policy Research -- says that the drug benefit is far more costly than necessary because Congress did not make efficiency a top priority when it created the Medicare Part D drug plan.

Instead, the new drug plan ensures that private insurance companies provide the benefit and play an expanded role in the Medicare program, the authors say. Under the Part D plan, Medicare negotiates drug prices with the health insurance companies.

"If Medicare could negotiate directly with drug companies it could save the federal and state governments hundred of billions of dollars and cut insurance premiums," said economist Dean Baker, the center's co-director and author of the report.

The study projects the potential savings that would result if Medicare could pay the same prices for drugs as countries like Australia and the program was administered in a more efficient manner.

The savings of such policies would be large enough that the current projected budget for the program would be enough to fully finance the benefit without a contribution from the beneficiaries and would still leave a surplus of $40 billion over the years 2006-2013, which could be divided between savings to the state and federal governments, the report said.