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When it comes to the massive Medicare Part D prescription drug program, you’d think Uncle Sam would have pretty good leverage in negotiating drug prices.
But the government is actually barred from doing such bargaining, according to Democratic Wisconsin Congresswoman Rep. Tammy Baldwin -- who lays blame on her opponent for the U.S. Senate, Republican Tommy Thompson.
Baldwin attacked Thompson, who served as health and human services secretary under GOP President George W. Bush, in an Aug. 15, 2012, interview.
She told John "Sly" Sylvester, a liberal talk show host on WTDY-AM and -FM in Madison:
"We have written into law, under Tommy Thompson's watch, a prohibition for the federal government to be involved in negotiating with pharmaceutical companies for better prices for seniors for drugs. That's unbelievable. You know, if you buy in bulk, you get a better deal."
Let's check both parts of Baldwin’s claim -- that the government is prohibited from negotiating on drug prices and that Thompson played a role in creating the ban.
Negotiating drug prices
Medicare Part D is a voluntary insurance program for prescription drugs for people on Medicare. Congress created it by passing legislation in 2003, although the program didn’t take effect until 2006.
Here is some background from PolitiFact National:
In rating as Half True a claim by former GOP presidential candidate Rick Santorum -- that Medicare Part D came in 40 percent under budget because of its design -- our colleagues explained that private insurance companies offer a variety of plans subsidized by the government, and beneficiaries get to choose the plan that's best for them.
PolitiFact National has also reportedon the program as part of its Obameter, which tracks promises President Barack Obama made as a candidate in 2008.
Since Congress approved the program, proposed by Bush, Democrats have groused that it was a huge giveaway for the pharmaceutical industry because it did not allow Medicare to negotiate drug prices. Obama vowed to change the program to allow Medicare negotiate lower prices. But he backed away from the pledge during negotiations over his health care reform bill, and no provision on negotiating drug prices was included in the bill that became law in 2010.
(That eventually led our colleagues to rate Obama’s pledge as a Promise Broken.)
That isn’t to say there isn’t any negotiating.
A July 2006 New York Times article cited by Baldwin campaign spokesman John Kraus reported that "Congress -- in what critics saw as a sop to the drug industry — barred the government from having a negotiating role. Instead, prices are worked out between drug makers and the dozens of large and small Part D drug plans run by commercial insurers."
Thompson campaign spokesman Brian Nemoir also cited the negotiating done by the various companies offering Medicare Part D plans, arguing it has resulted in the overall cost of Medicare Part D to be lower than projected.
(PolitiFact National found in June 2011, in rating Santorum’s claim, that the program came in under budget because fewer people than expected used it, drug spending increased less than expected and the program had encouraged use of generic drugs.)
But we’re not here to settle Nemoir’s claim; and one could argue, as Baldwin does, that costs could be even lower if the federal government did the negotiating.
When we checked back with Nemoir, he acknowledged that the federal government is prohibited from negotiating drug prices on behalf of Medicare Part D plans.
The second part of Baldwin’s claim is that the prohibition was put into law "under Thompson’s watch" -- indicating he didn’t unilaterally impose the ban, but played a role.
Kraus cited a number of news articles, including one in the Milwaukee Journal Sentinel that said Thompson was the Bush administration’s "point man" on getting Medicare Part D through Congress; and one in the Philadelphia Inquirer that said Thompson "lobbied tirelessly" for the plan.
Moreover, Nemoir acknowledged that the prohibition on the federal government was done under Thompson.
Baldwin said federal law adopted "under Tommy Thompson's watch" prohibits the federal government from negotiating for "better prices" on prescription drugs for senior citizens.
Her reference was to the Medicare Part D prescription program, which Thompson lobbied for and which includes the prohibition she stated.
We rate Baldwin’s statement True.
WTDY AM-FM, John Sylvester interview (at 10:00) of Tammy Baldwin, Aug. 15, 2012
Email interview, Tammy Baldwin campaign communications director John Kraus, Aug. 22, 2012
Email interview, Tommy Thompson campaign political director Brian Nemoir, Aug. 23 and 31, 2012
PolitiFact National, "Action unlikely before end of administration," April 25, 2012
Kaiser Family Foundation, "Resources on the Medicare prescription drug benefit"
AARP, "How Medicare Part D works," January 2011
New York Times, "A windfall from shifts to Medicare," July 18, 2006
New York Times, "Despite Democrats’ warnings, private Medicare plans find success," Aug. 25, 2012
Milwaukee Journal Sentinel, "Some Wisconsin lawmakers undecided on federal Medicare bill, drug plan," Nov. 21, 2003
Philadelphia Inquirer, "Thompson leaving, but Rumsfeld to stay," Dec. 4, 2004
PolitiFact National, "Did Medicare Part D come in 40 percent under budget because of its design?," June 15, 2011
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