Taking Away Grandma's Medicines

Democrats want the Medicare system to negotiate with pharmaceutical companies to get lower drug prices for the Medicare program. But as Arnold Kling points out Medicare would only have negotiating power if it could threaten not to have a drug in its program.

For example, pretend that Medicare currently pays $2 a pill for some drug. Medicare demands that the pill's producer sells them the drug for $1.50 each. What happens if the pharmaceutical company doesn't go along? If Medicare keeps providing the drug then the answer is NOTHING! Consequently, the pharmaceutical company should never agree to lower prices.

The only way for the Medicare program to have negotiating power, therefore, is if it is willing to prevent Medicare recipients from having access to some expensive drugs. Republicans opposed to Democrat's Medicare reforms should play up this point.