There's a lot of fast and loose numbers thrown around in Washington these days when it comes to health care.  It seems like every other day, President Obama and health industry leaders are pulling some "magic asterisk" out of the air, and claiming to have "cut" real health dollars.  When you get past the headline, you find it's more fluff than substance.

Until now.

This week, PhRMA announced that they would be cutting name-brand drug prices in half for many seniors.  Under Medicare "Part D," seniors face heavily subsidized drug coverage for the first few thousand dollars in annual drug spending, and when they have a very large prescription drug bill.  However, there is a coverage gap in between those two subsidies that many have called the "donut hole."  In this "donut hole," seniors are left to pick up the tab for their medicines.  It's in this coverage gap that PhRMA is cutting drug prices in half.

Notice what you don't see there.  You don't see a government bureaucrat "negotiating" with drug companies.  You don't see a price control bill passed by Congress.  What you do see is an industry doing well by doing good.  They know that happy customers are consistent customers, and there is a perceived customer relations issue with this coverage gap. So, like any group of companies, they are making their customers feel better about buying their product.

Now, suppose the government had stormed in and demanded this.  At that point, PhRMA would have to protect the interests of member companies and shareholders, and would need an adversarial stance against the federal "negotiators."  Seniors would have ended up with a far worse deal.

There's nothing wrong with our healthcare system that can't be solved by the government just getting out of the way.

Posted by Ryan Ellis on Thursday, June 25, 2009 5:24 PM EDT

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