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Negotiation power isn't going to get you much. The Canadian gov't negotiates on behalf of 35M Canadians and gets big discounts. United Healthcare, the biggest US private insurance company, has 40M+ members. They negotiate, but they don't get much of a discount (typically).

The real reason why European countries (and Canada) pay less is because they legislate discounts. They give the drug companies no other options. I would call it arm-twisting more than negotiating.

And yes, Medicare doesn't negotiate, it legislates discounts. Medicare pays no more than the Average Selling Price for a drug (average price across all sales). It also legislated that the manufacturers pay a discount to cover the donut hole for Medicare Part-D.

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> And yes, Medicare doesn't negotiate, it legislates discounts. Medicare pays no more than the Average Selling Price for a drug (average price across all sales)

ASP is a terrible price. The VA pays 42% of AWP (Average Wholesale Price). Drugs on the Federal Supply Schedule, which is what the Bureau of Prisons, the DoD, and most other government agencies use, are 53% of AWP. Medicare prices are 84% higher than Federal Supply Schedule. With their volume, Medicare should be able to get prices at least as good as what the Bureau of Prisons gets. [1]

[1] http://www.ncpssm.org/Document/ArticleID/207/Price-Negotiati...

ASP is not the best price, but it's certainly not "terrible". It's the average price including all discounts offered to private insurers.

The 42% of AWP that the VA pays sounds awesome, but AWP is inflated (typically 20-40% more than list price).

At any rate, yes, you are correct, the big four (DOD, BOIA, DOC and one I can't remember) get very discounted prices. However, they can also exercise a lot of control over what patients get without having to hear a lot of complaints. For example, the DOC is not using Sovaldi all that much, but if prisoners complain, not much is done.

Now imagine if Medicare said "no, too expensive, we're not paying for that drug". Congressmen would be getting hundreds of calls from seniors and the AARP about denying the elderly population the latest and greatest drugs.

> The real reason why European countries (and Canada) pay less is because they legislate discounts. They give the drug companies no other options. I would call it arm-twisting more than negotiating.

What do you mean by 'legislate discounts'. As far as I'm aware, most European countries do not get involved with compulsory licensing, which is what it seems you're referring to.

I suspect the difference is more about public relations - an insurance company does not want to get in the news for turning down a particular treatment, because people will move to another company. With a public system, you are spending taxpayer money, so there's more of an acceptance of a balance between cost and benefit, and therefore the buyer has some credibility when they say they will not pay above the level of cost-effectiveness.

You call it 'arm-twisting', I call it 'a necessary counter-power that should be part of every patent-related legislation'.

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