Taxpayer groups oppose changes to 'process by which drug prices are negotiated for Medicare Part D'

In a letter sent to the U.S. House of Representatives, leaders from Americans for Tax Reform, Citizens Against Government Waste, and the National Taxpayers Union, urged congressional members to "oppose any attempts to change the successful and cost-saving process by which drug prices are negotiated for Medicare Part D."

The letter was signed by Grover Norquist, president, Americans for Tax Reform; Tom Schatz, president, Council for Citizens Against Government Waste; and, Pete Sepp, president, National Taxpayers Union.

"When Congress created Part D, a non-interference clause was included to prevent the secretary of Health and Human Services (HHS) from interfering with the robust private-sector negotiations that occur among pharmacy benefit managers (PBMs), pharmaceutical manufacturers, and pharmacies," notes the letter. "PBMs use a variety of methods, such as acquiring price concessions from both brand-name and generic drug manufacturers, rebates, and networks of more affordable pharmacies to lower drug costs for beneficiaries. PBMs also work with patients on drug adherence to keep them out of hospitals and doctors’ offices, which also helps to reduce healthcare costs."

The letter adds, "These competitive, private-sector negotiations have been instrumental in making Medicare Part D an all-too-rare example of a government-created program whose expenditures have been significantly less than projected."

The taxpayer groups point out that, despite a 2005 estimate by the Congressional Budget Office that the program would cost $172 billion, the cost was much lower at $75 billion.

The letter comes one day after Tom Scully, former Administrator of the Centers for Medicare and Medicaid Services (CMS) told CNBC interviewers that allowing the federal government to negotiate drug prices is actually akin to "price-fixing." 

"There are many ways you can drive down drug prices, but having the government negotiate down drug prices — which means "fixing" prices — is a really bad idea," said Scully, who served as CMS Administrator from 2001 to 2003 under President George W. Bush, and oversaw the enactment of the Medicare Part D program.

In his CNBC interview, Scully explained that negotiations already occur at the hands of the pharmacy benefit managers (PBMs) that administer drug benefits in Medicare Part D.

"They (the PBMs) are the ones who have driven down prices," said Scully. "So Part D has been flat, price-wise, for almost ten years, it's worked well, it's driven prices down."