No, it is specifically because of government negotiation:
Plans able to restrict drugs from their formularies have the clout to say no to high prices. This is one, but not the only, reason the VA can purchase drugs at prices 40% below those paid by Medicare Part D plans.
In other words, the ability to restrict drugs matters, but it is not what makes drugs 40% cheaper.
No, it's not like that. And, in fact, that's exactly what the authors controlled for. They still find a significant difference after "monetizing" the "loss of choice," which is dubious at best and for reasons pointed out
in the comments (and not disputed by the author):
This is an interesting economic analysis but it ignores the therapeutic value of the formulary. There is a reason the VA excludes so many drugs from their formulary and it is because these drugs are ineffective or overpriced and can be replaced with cheaper drugs which have the same or better beneficial effect for the patient.
Therefore, the statement that there is a loss of value of $405 to patients is only true in the sense that patients cant buy overpriced and/or ineffective drugs. There is no loss of therapeutic value. If you take into account the fact that patients can be as healthy using the restricted formulary then there is no loss and no need to compensate them for the loss.
To which the author replied:
You bring an additional consideration, which is valid. I do not think we ignore it. Read the conclusion of the paper. However, the paper is economics. We are economists. You or someone equally qualified should write a paper on the point you have made.
This comment also made the same point well:
The important point missed by Frakt et al. in their assessment of value of the more liberal Medicare formulary compared with the VA formulary is efficacy.
Drugs are not like iPads and iPhones. The value of having access to drugs is not so you can buy more expensive drugs and show them off to your friends. The point is to get and stay well. Spending for more expensive drugs is worthless if they do not perform significantly better than competing less expensive drugs.
There are piles of scientific studies showing that VA patients, with their drug access limited to the VA formulary, do not do the same as patients in conventional US health care systems. They do better. Choosing a drug based on characteristics other than efficacy is inappropriate, no matter how heavily the drug is advertised on TV or how heavily it is promoted to doctors, or how much it costs. There are many very expensive drugs that are less useful than much cheaper drugs, and the VA contructs its low priced formulary by relying as much as possible on those drugs, then on buying power and negotiation to obtain discounts on drugs that are more expensive but necessary.
The poster child for this is management of high blood pressure. Scientific research has shown that high blood pressure is most effectively and most safely managed by individual drugs or mixes of drugs that are generic and very very cheap. Costs of from $15 to $125 a year per patient are typical, depending on the mix of drugs needed. There are much more expensive drugs available, but studies show that they are both less effective and less safe. However, many of these drugs are available through Medicare and private insurance formularies and continue to be prescribed by the large fraction of doctors who either do not keep up on scientific literature or who get their information from drug company ads and representatives. This costs tens of billions of dollars each year.
We are fast reaching a point where we can no longer accept this kind of foolishness, and economic articles that ignore the issue of efficacy in discussing the value of health care management only add to the problem.
I do find it ironic that you are using Part D's own self-imposed restrictions in defense of its would-be lower negotiating power compared to the VA. This is only a concession in my favor, because you are conceding additional flaws in Part D: namely, that it requires the government to spend money covering ineffective and overpriced drugs. You should remember that you are supposed to be defending it. Which brings me to my next question. Do you ever stop and wonder why you are defending Medicare Part D? It's indefensible corporate subsidy, and no self-respecting conservative or progressive would defend it.
