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Medicare would save billions on drugs if it copied the VA

Data: Jama Internal Medicine; Chart: Chris Canipe/Axios

Medicare would have saved an average of nearly $12 billion per year if it had the Department of Veterans Affairs' ability to negotiate directly with pharmaceutical companies, according to researchers writing in the journal JAMA Internal Medicine. And that's just for 50 drugs.

Yes, but: Those savings would also require Medicare to say "no" to covering some drugs — a shift from the current policy, in which Medicare pays for almost all FDA-approved medications.

Details: Discounts on expensive brand-name drugs like Harvoni, Crestor and Xarelto would have led to large portions of the savings in the Medicare Part D program, according to the researchers. The analysis did not factor in injectable drugs like insulin, or drugs administered in hospitals and doctors' offices.

The bottom line: There is a tradeoff here. Medicare could save a lot of money by copying what the VA does, but Medicare would have to be willing to restrict access to some drugs.

  • However, according to prior research by Austin Frakt, a health economist within the VA system in Boston, the amount Medicare would save from discounted drugs would exceed the dollar value of Medicare patients losing some choice in what drugs they can take.