How Medicare Could Get Better Prices On Prescription Drugs

Congress may reform drug pricing policies under Medicare Part D as part of a larger health reform effort. Currently, the "noninterference" provision prevents the government from negotiating drug prices on behalf of Medicare Part D prescription drug plans. Commonly considered reform proposals borrow ideas from Medicaid, either through returning dual eligibles to Medicaid drug pricing or by imposing mandatory rebates across the Part D population. We examine a menu of other options, including value-based pricing; expansion of generic and therapeutically equivalent substitution; increased formulary diversity; importation; and limited antitrust waivers. These latter options may reduce federal spending without direct government price negotiations. [Health Aff (Millwood) 2009; 28(5): w832-41 (published online 30 July 2009; 10.1377/hlthaff.28.5.w832)]