Drug cost tradeoffs

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Authorizing the government to negotiate lower prescription drug prices for seniors is one of the first tasks on the Democrats' to-do list when Congress reconvenes in January. Eliminating barriers to such bargaining was a staple of the party's stump speeches in last month's election campaigns and a centerpiece of their "first 100 hours" legislative agenda. And at first blush, the new majority's interest in pursuing this policy change appears well-founded. Public polls show overwhelming support on for the government negotiating lower drug prices. A recent Kaiser Family Foundation survey, for example, shows 85 percent of adults favor allowing the government to negotiate drug prices for the Medicare program.

Yet, like many public-policy issues, this one is a little more complicated than it seems. Once voters learn more about the potential trade-offs associated with the proposal, support drops precipitously. In other words, voter attitudes about government negotiation of drug prices are volatile, fluctuating based on how the question is framed and the trade-offs presented. Opponents of authorizing such negotiations can substantially reduce enthusiasm and support among voters by demonstrating that such government action limits choices of prescription drugs.

There is no doubt this central Democratic campaign theme — allowing the government to negotiate directly with pharmaceutical companies for lower drug prices — is a popular concept. Like the Kaiser poll, the most recent American Survey (805 registered voters, conducted November 17-20, 2006) demonstrates strong initial support for government negotiations when the question is framed only in terms of the prospect of lower drug prices. We asked, "Some have proposed allowing the government to negotiate directly with pharmaceutical companies to get lower Medicare prescription drug prices. What about you, would you favor or oppose having the government negotiate for lower prices?" Seventy-five percent favored the proposal, while only 22 said they opposed it. Moreover, support for the concept was strong across all political, ideological, age and income groups — with over 70 percent favoring the idea in every category analyzed. And why not? Who doesn't support lower drug prices? As a well-known political consultant told me, one of the most powerful narratives in American politics is the concept of "more free stuff." And "negotiating" almost always sounds reasonable.

Yet according to many experts, the government can only negotiate lower prices by also limiting the number of choices, and that's where support declines — as one Republican health care lobbyist told me, "It's like saying people support the FCC negotiating lower cable rates, until they find out you get lower prices, but you lose ESPN." Writing in a recent research paper for the National Center for Policy Analysis, Alain Enthoven and Kyna Fong agree, "Empowering the government to negotiate with pharmaceutical companies is not necessarily equivalent to achieving lower drug prices," they argue. "In fact, neither economic theory nor historical experience suggests that will be the outcome."

And when voters are confronted with the real possibility that the result of government negotiations means more restricted choices due to a more limited government-determined drug formulary, support for negotiations plummets. When we asked respondents, "What if you knew that this proposal would mean you would only be able to choose from a limited list of government-approved prescription drugs?" support drops to just 30 percent, and opposition climbs to 65 percent. How the Democrats' centerpiece healthcare proposal is ultimately framed and understood by voters — as an antidote to high drug prices or a tourniquet on drug options — will shape voter judgment on this issue. Support for their initially popular idea aimed at lower drug prices might sink precipitously once voters learn a little more about the proposal's impact on their choices of medicines.

Gary Andres is vice chairman of Research and Policy for Dutko Worldwide. The firm's clients include pharmaceutical and managed care companies.