Medicare Part D offers blueprint for reform

By Mabrie Jackson

Special to the Star-Telegram

The race for the White House is in full swing, and it's clear that the national debate will center in large part on the future of Medicare.

With spending on the program expected to reach $1 trillion by 2022, both parties agree Medicare needs reform. The partisan divisions arise over how best to fix the program.

For starters, lawmakers could look inside Medicare itself to see what's working. There, they will find a blueprint for long-term reform: Medicare's prescription drug benefit, Part D.

Medicare Part D's unique, market-based structure has proved astonishingly effective at bringing down costs and expanding prescription drug access for seniors here in Texas and nationwide.

And the program has fueled our flourishing biopharmaceutical industry -- a sector of our economy that is generating thousands of high-paying jobs.

First implemented in 2006, Part D plans are administered by private insurance companies. These companies must offer at least two drugs in each of 150 categories, and seniors choose the plan that best fits their individual needs.

The fact that seniors are so empowered gives participating insurers direct financial incentive to make their plans as appealing as possible. Insurers attract consumers by negotiating with pharmacies and drug companies to keep prices low and choices high.

The program has been a tremendous success. Part D has cost the government 41 percent less through 2013 than the Congressional Budget Office's original projections. Seniors are also paying less than projected. Their average monthly premium is only $30 this year, compared with the initial estimate of $56.

Part D is driving down overall Medicare costs as well. According to a recent study published in the Journal of the American Medical Association, affordable drugs through Part D have dramatically improved medication use and adherence, saving Medicare about $1,200 per person per year in hospital, nursing home and other nondrug costs.

The alternative to Part D's market structure would be government-imposed price controls on prescription drugs. Moving away from the market in that direction would have a devastating effect on biopharmaceutical drug innovation.

It costs an average of $1 billion and takes 10 years of research and testing to bring out a new lifesaving medication. Pharmaceutical companies can undertake such massive investment only if they can be sure that a market will be there so they can make a return.

Texas had more than 4,100 clinical studies under way in 2010. That's second in the nation by this widely used measure of R&D innovation. Last year, the biopharmaceutical sector invested nearly $762 million on local research.

The more than 4,500 biotechnology and biomedical companies in Texas employed more than 108,000 workers and were responsible for $42 billion of Texas' economic output.

Texas's thriving biopharmaceutical sector is the result of smart policy choices like the market structure chosen for Part D, and they are paying off.

Medicare Part D is a major success story -- it has brought down drug costs for millions of seniors saved taxpayers and the government, and ensured that the biopharmaceutical industry will continue to invest heavily in new lifesaving treatments.

Smart Medicare reform will build on the success of Part D and its use of market forces to hold costs down while encouraging innovation.

Mabrie Jackson of Plano is president of the North Texas Commission.

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