Fact Checker

Fact Checker: Klobuchar says it's against the law for Medicare to negotiate lower drug prices. Is it?

Democratic presidential candidate U.S. Sen. Amy Klobuchar (left) is greeted Oct. 20 by state Sen. Liz Mathis after speak
Democratic presidential candidate U.S. Sen. Amy Klobuchar (left) is greeted Oct. 20 by state Sen. Liz Mathis after speaking during the Linn County Democrats Hall of Fame Dinner at the DoubleTree by Hilton Hotel Cedar Rapids Convention Center. (Jim Slosiarek/The Gazette)

In a new television ad that began airing earlier this month in Iowa, Democratic presidential candidate Amy Klobuchar asks these questions: “Why do prescription drugs cost more in the U.S. than in Canada?” and “How come it’s against the law for Medicare to negotiate for lower prices?”

The U.S. senator from Minnesota launched the ad Dec. 2 to tout her plans for bringing down prescription drug costs.

Analysis

High drug costs are a regular topic in the Democratic presidential campaign and Klobuchar’s ad is no exception. But do the claims in her questions check out?

First, we will check her claim that prescription drugs cost more in the United States than in Canada.

Graded an A

For its sourcing, the Klobuchar campaign provided a study published in the March 2018 edition of the Journal of the American Medical Association.

Researchers from Harvard University, the Harvard Global Health Institute and the London School of Economics used data compiled by international economic organizations — including the Organisation for Economic Co-operation and Development — and compared health care spending in the United States to spending in 10 of the world’s highest-income countries.

The campaign noted specific findings in the study that showed the United States spent about twice as much on medical care as Canada, yet utilization rates in the United States were similar to those in Canada and other nations.

The study found that among the 11 countries studied, the United States was the highest pharmaceutical spender in 2016 at $1,443 per person. That same year, Canada’s total spending reached $613 per person.

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Other research shows the U.S. spending on prescription drugs outpaces other high-income countries as well.

A 2017 publication by the Commonwealth Fund, a private U.S. foundation focused on health care, compared 2015 prescription drug prices in the United States to prices in Canada and eight other high-income countries.

In 2015, U.S. spending on pharmaceuticals exceeded $1,000 per person, according to the Commonwealth Fund. While researchers said the spending in the United States was at least 30 percent more, they did not specify the costs per person for the other counties.

The study cited by the Klobuchar campaign further stated that for several common brand-name pharmaceuticals, the United States had “substantially higher prices than other countries, often double the next highest price.”

For example, Lantus, a popular name-brand insulin, cost $186 per month in the United States. In Canada, it cost $67 a month.

On the other hand, the study also said investment has been viewed as critical to innovation, and found the United States “accounted for 57 percent of total global production of new chemical entities” in 2016

Even among insured populations, Americans pay more for prescriptions than those in other countries, according to a 2015 analysis by Bloomberg News.

After discounts to the list price were given to insurers, Bloomberg News found, seven top-selling name brand drugs cost more in the United States than in other high-income nations studied.

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According to Bloomberg News, that’s because drug companies set their own prices. It’s also because one of the largest buyers of medicine in the United States — Medicare — is “prohibited from negotiating prices directly with drug companies.”

This leads to Klobuchar’s second claim that it is against the law for Medicare to negotiate for lower drug prices.

Klobuchar’s campaign pointed to an opinion article published Aug. 10, 2018, by Forbes, “Why Medicare Can’t Get The Lowest Drug Prices.”

The opinion article, written by Forbes contributor John F. Wasik, makes the case that a law passed by Congress in 2003 prevented Medicare from having the power to negotiate ideal prescription drug prices in creating Pharmacy Benefit Managers, or the corporations that serve as middlemen between pharmaceutical companies and pharmacies.

About 59 million Americans received Medicare benefits in 2018, according to the Kaiser Family Foundation, a nonprofit that analyzes health care.

According to Kaiser, the Medicare Modernization Act — which established Medicare Part D, the prescription drug benefit — includes a “non-interference” clause.

The clause stipulates the Secretary of the U.S. Department of Health and Human Services, which oversees Medicare, “may not interfere with the negotiations between drug manufacturers and pharmacies and Medicare Prescription Drug Plan sponsors.”

“In effect, this provision means that the government can have no direct role in negotiating or setting drug prices in Medicare Part D,” the Kaiser Family Foundation stated.

Conclusion

The claims framed in Klobuchar’s questions check out. Research in recent years has shown the United States pays more for prescription drugs than Canada and other high-income earning countries.

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While Klobuchar’s campaign does not specifically name a direct cause for those costs, the ad does allude to the fact that Medicare — one of the nation’s biggest buyers of medicine — is barred from negotiating prices with drug companies. Other sources of information support this statement also.

Fact Checker gives these claims an A.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market.

Claims must be independently verifiable.

We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Michaela Ramm of The Gazette.

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