This is so typical for the guy who promised "the most transparent" admin ever....sneak something into a bill that is unrelated to the bill's primary objective.
The problem with implimenting this idea is that pharma companies will adjust to avoid paying the government more. They will re-evaluate contracts with DoD/VA, Commercial Medicaid, and other commercial sectors. They will lower their commerical rebates and raise their "best price." This will raise prices in every sector, including government, by lowering pharma's exposure to Medicaid rebates. Pharma will also launch products at higher prices, allowing for fewer price increases, and allowing more of each future price increase to be free of CPI-driven incremental Medicaid exposure.
In typical government fashion, the unintended consequences of this proposed action will be higher prices for everyone and reduced rebates for all sectors, including Medicaid and Medicare Part D. So Obama's plan will likely make the government pay more....it certainly will not save anywhere near the amount of money he is claiming.
All that said, I think the headline of the article the OP provided is an overstatement. Pharma will adjust, and thus the widespread layoffs that would be required if "all things were equal" will never happen. "All things" are NEVER equal. Business stay in business by adjusting....and pharma will adjust to this, too. It's so typical....it sounds good....it paints big bad pharma as the bad guy....it seems reasonable on the surface....why shouldn't Part D get Medicaid rebates, right?? But the devil is in the details....details our President simply doesn't understand because he has no clue how business operate.
