- - Thursday, November 13, 2014

Thank God the government doesn’t run the cellphone industry. If it did, phones would cost twice as much, be too heavy to carry, have rotary dials on them, and we’d still be paying for “roaming” minutes. We know this from an eternal economic truth: Government control gives us less market competition, leading to lousy products at higher cost. Which leads to the interesting case of Medicare Part D.

Otherwise known as the Medicare prescription-drug program, Part D bucked the trend of government bloat and failure by introducing real consumer choice and competition among providers to keep costs down. Unlike most government programs that underestimate costs, Part D was a revolution. Not only did it come in under budget, but expanded drug treatment helped lessen chronic medical conditions among seniors before necessitating much more expensive treatment.

Much of that progress could be undone if the government does not take swift action to restore real competition and consumer choice to the Medicare prescription-drug program. Politicians and bureaucrats have a tendency to meddle when not called upon, and when you couple their tinkering with unforeseen market developments, you begin to see how the innovations of Part D can quickly be lost, which is bad news both for seniors and taxpayers.

The Part D program is now controlled by a few huge pharmacy-benefit managers, who themselves either control or are controlled by the pharmacies that fill the prescriptions. This has led to anti-competitive practices that, if practiced in any other part of the Medicare system, would be considered illegal Medicare fraud.

When the Medicare prescription-drug program started, the pharmacies and the pharmacy-benefit managers were separate entities, and didn’t collude for market share. Now, two huge pharmacy-benefit managers have either bought out, or been bought out, by big pharmacy chains (Express Scripts and CVS Caremark), and between them cover more than half of all pharmacy benefits in the Medicare program. Add in the next two companies, and that market control climbs to 79 percent.



How did the mega-pharmacy networks corner the Medicare market? By requiring seniors to use the networks’ own mail-order pharmacies, and by cutting kickback deals with drug manufacturers. In fact, the Department of Labor is investigating these anti-competitive practices of the pharmacy networks, such as the pharmacy-benefit managers charging Medicare more than 50 percent above what they reimburse the pharmacy that fills the prescription, pocketing the rest.

We at the 60 Plus Association — a nonpartisan seniors-advocacy group with a free-enterprise, less-government, lower-taxes approach to seniors issues — think real competition can only be restored to Medicare by allowing full access to the small chain, community and independent pharmacies that make up more than a third of all of America’s pharmacies. The government tried to restore such small-business access to the Medicare prescription-drug program earlier this year, but the big pharmacy-benefit managers and their Washington lobbyists were able to kill such common-sense proposals by carpet-bombing Capitol Hill with lobbyists and money.

Every other agency in the federal government is supposed to ensure that at least 36 percent of all federal contracts go to small business. Yet the Medicare prescription-drug program is exempted from that requirement. Why? The only reason we can think of is to protect the big pharmacy-network monopolies, sweetheart deals and windfall profits.

If the election results this month taught Washington anything, it’s that supporting narrow and costly health care choices, aka Obamacare, can be costly to a politician’s career. Seniors were a powerful voting bloc in the political wave, and were forceful in stating they want choice with regard to their health care options and keeping their doctor, a preference that magnifies the importance of getting Part D right. Seniors said “enough” of the meddling and tinkering and “enough” of Washington picking financial winners and losers in the prescription-drug industry.When seniors called their representatives and senators, they were heard because the phone service was not controlled by the government.

Jim Martin is chairman of the 60 Plus Association.

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