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Challenge of Non-Interference

To understand the policy challenge created by repeal of the non-interference clause, consider this simple example. Acme Drug Company brings a drug to the market as a single source innovator. Essentially, they are without generic competition. Acme prices their drug at $100. Random Insurance Company wants to purchase the drug at $90 for beneficiaries in their Medicare Advantage Prescription Drug Plan. Currently, many would argue that the flaw in the Medicare drug payment system is that Acme has the leverage to tell Random ‘no’ to their request for a lower drug price.

So what exactly does the entry into the conversation of “government negotiation” entail? If CMS or some other duly appointed federal authority steps in between Acme and Random, what power does it have? This is the challenge of non-interference repeal.  Unless you assume that the intervention of federal authority brings with it some ability to force Acme to lower its price, repealing non-interference, in and of itself, is meaningless. The federal authority can ask Acme nicely. The federal authority can say “pretty please.”  But if Acme retains the right to say “$100,” the federal authority produces no savings to the taxpayer.

For repeal of the non-interference clause to be meaningful, the federal authority must be invested with tools to force Acme to lower its price. The mechanisms the federal authority require involve potentially uncomfortable policy choices.  Repealing the non-interference clause is not enough.  Make no mistake about it: repealing non-interference in a way that achieves lower drug pricing requires providing the federal government with extensive powers and the mandate to use them.

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The health industry is a complex system, and reimbursement is the lifeblood. Reduction in payments from governmental and commercial payors affects providers, suppliers, manufacturers, and all others across the health care continuum.

Regulatory approval and accreditation is the heart of the system. For many, delay in licensure and other regulatory approvals can threaten financing and corporate viability. Accreditation of residency training programs is essential to the vitality of academic medical centers and teaching hospitals.

Restructuring is a fact of life in this dynamic...

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