State Savings with an Efficient Medicare Prescription Drug Benefit

Nicole Woo and Dean Baker

CEPR Reports and Issue Briefs from Center for Economic and Policy Research (CEPR)

Abstract: Americans pay far higher prices for prescription drugs than do people in other wealthy countries. The reason that other countries spend so much less on drugs is that their governments negotiate prices with the pharmaceutical industry. The United States government could adopt the same approach with the Medicare drug program and use its market leverage to negotiate the same, or even lower, prices as are paid by other wealthy nations. This issue brief finds the potential savings to states would be enormous, cumulatively between $31 billion and $73 billion over 10 years, and also each state individually could expect significant savings. California leads the way, with potential savings between $3.3 and $7.8 billion. The next six top-saving states are Florida, New York, Texas, Pennsylvania, Ohio and Illinois, all with projected savings of at least $1 billion per year. Even those states with the least potential savings, such as Wyoming, North Dakota and Vermont, would still save tens of millions of dollars over a decade.

Keywords: Medicare; medicare drug benefit; prescription drug; Dean Baker; hospital insurance; pharmaceutical industry; private insurers (search for similar items in EconPapers)
JEL-codes: H I I1 I13 I14 I18 I3 I38 (search for similar items in EconPapers)
Pages: 3 pages
Date: 2013-03
New Economics Papers: this item is included in nep-hea and nep-ias
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Persistent link: https://EconPapers.repec.org/RePEc:epo:papers:2013-08

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