This article misses the biggest issue. This sentence stood out to me:

That arrangement stemmed from a 1990 law, which allowed pharmaceutical companies to give deep discounts to college and university health centers and other safety-net providers without affecting the so-called "best price" they are required to give Medicaid.

So, does this mean that drug companies are banned from offering discounts on drugs unless Congress gives them special permission? Amanda Schaffer's solution is to add (or re-add) colleges to the list of organizations eligible for drug company discounts. Why not get rid of the list altogether and let companies discount drugs whenever they want? If drug companies want to discount drugs, why should governments stop them, especially now as drug prices are climbing?

Why is the government forcing up the price of drugs when companies and consumers want to lower it?

The issue is what the Feds will pay under Medicare -- that is pegged to the best price offered elsewhere. The law used to exempt discounted drugs offered through colleges, but now does not.

Bottom line is that if a manufacturer offers continued offering the lower price to college students, it would reduce what they get paid for all their Medicare claims. And then there all the contracts with the large insurance companies that have prices pegged to Medicare reimbursement rates.

You mean, Medicaid, of course. That's the program for the poor, not the elderly.

"So, does this mean that drug companies are banned from offering discounts on drugs unless Congress gives them special permission?"

Aparently it does. I was unclear of that myself. I guess this goes to show how government handout programs help keep prices nice and high.

No, actually it is medicare. Medicare reimbursement sets the minimum value for pricing. The law states that medicare has to get the biggest discount from any given physician (there are a few state exceptions). For instance, a physician cannot discount his or her prices lower than medicare determined prices (or risk getting paid less by medicare forever). That is why physician have to collect their 20% medicare copays (not collecting the copay is considered by the government a bribe). Paradoxically, that is part of the reason why their are so few truly free clinics anymore. In order to comply with medicare rules you have collect full payment from a patient without insurance or you are breaking the law. If the patient cannot pay you have to show that you are trying to chase down the money (which is also part of the reason why there are so many bankruptcies based on medical debt even though the debt is so bad that there is no chance of collecting the money.

"So, does this mean that drug companies are banned from offering discounts on drugs unless Congress gives them special permission?"

Not at all. It's purely an economic interest by the pharmaceutical companies. Medicare says the prices they will pay as the lowest price offered anywhere by the drug company. This would mean that if the drug company discounted drugs to anybody, they'd have to charge the government the same low price.

Recognizing that discounts are a good thing, the government crafted the law we're talking about to exempt those sales from the "lowest price" law of Medicare. By not including university programs, they've pushed the drug companies to cease discounting (to avoid having to "discount" the Federal government as well) in that arena.

It's really not complicated. It's a sound business decision by Pharma, but one that is unnecessary and should be rendered moot through corrective legislation. Unfortunately, some people (the GOP) have attempted to turn it into a moral issue and you goofballs have taken the bait.

Samslaw:

It's really not complicated. It's a sound business decision by Pharma, but one that is unnecessary and should be rendered moot through corrective legislation. Unfortunately, some people (the GOP) have attempted to turn it into a moral issue and you goofballs have taken the bait.

The only moral issue I'm trying to raise is that free markets are beneficial. I understand the "lowest price" law -- I used to work in pharmaceutical litigation. My problem is that the government should not set prices, and especially should not set price then give a list of their favored suppliers who can offer a lower price.

For years we've been hearing about how Big Pharma jacks up the drug prices because they're greedy and evil. Now, they want to drop prices and the feds won't let them. Let the feds negotiate their deals for medicaid independent of anyone else's discount, and the people will have cheaper drugs.