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Controlling Medicare Costs: Study Suggests VA-Administered Drug-Only Benefit for Veterans Enrolled in Medicare


Medicare and VA both finance large outpatient prescription drug programs, but in different ways. In the ongoing debate about how to control Medicare spending, some suggest that Medicare should negotiate directly with drug manufacturers as does VA. VA provides a pharmacy benefit with very low cost-sharing to more than five million veterans annually, but has more restrictive formularies than Medicare. This article discusses the role of interest groups in drug-plan policy differences between Medicare and VA. For example, limitations on the Medicare drug benefit probably arose from the advocacy of drug manufacturers and retail pharmacies, among others. Relative to Medicare policy, these interest groups are less involved in VA policy. While key policy differences among various interest groups make major changes in Medicare unlikely, they suggests the possibility of leveraging VA drug purchasing to achieve savings in Medicare. Thus the authors suggest a partnership between Medicare and VA that could provide access to the VA drug benefit to a large number of Medicare-enrolled veterans who do not currently have it. Depending on how costs were shared among Medicare, VA, and beneficiaries, the plan could produce savings for Medicare (more than $500 million annually), be budget neutral with respect to VA, and be cheaper for beneficiaries than comparable Medicare plans.

PubMed Logo Frakt A, Pizer S, and Hendricks A. Controlling prescription drug costs: Regulation and the role of interest groups in Medicare and the Veterans Health Administration. Journal of Health Politics, Policy and Law December 2008;33(6):1079-1106.

This study was funded by HSR&D. All authors are part of the Health Care Financing & Economics group, VA Boston Healthcare System.

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What are HSR&D Publication Briefs?

HSR&D requires notification by HSR&D-funded investigators about all articles accepted for publication. These journal articles are reviewed by HSR&D and publication briefs or summaries are written for a select number of articles that are then forwarded to VHA Central Office leadership to keep them informed about important findings or information. Articles to be summarized are selected by HSR&D based on timeliness of the findings, interest of leadership, or potential impact on the organization. Publication briefs are written for only a small number of HSR&D published articles. Visit the HSR&D citations database for a complete listing of HSR&D articles and presentations.