Seth Moulton correct that prescription drug prices can be negotiated for VA, but not Medicare

Democratic presidential candidate Seth Moulton (D-Mass.) doesn’t support single-payer health care — even though it’s the health care policy he’s covered by. Single-payer health care refers to a health insurance plan for everyone that is paid for by one entity, such as the government.

But as a veteran, Moulton said he knows firsthand "the good, the bad and the ugly" of such an approach. His service makes him eligible for health coverage through the Veterans Administration health system, which single-payer advocates often cite as an American success story.

And at a time when prescription drugs are a hot topic for presidential candidates, he made an interesting claim during a CNN town hall earlier this month:

"The VA negotiates prescription drug prices. Medicare doesn't do that."

Moulton has represented Massachusetts’s 6th Congressional District since 2019 and declared his candidacy for president in April on ABC News. It was during this interview that he said, "I think I'm the only candidate who actually gets single-payer health care."

Some of the issues Moulton emphasizes in his presidential platform are national security, a national service education, health care and mental health. Moulton was a captain in the U.S. Marine Corps and competed four combat tours in Iraq.

After Moulton made the claim, he added, "that means our prescription prices at the VA are lower than Medicare."

When asked about the source for the conclusion about prescription drug pricing, Moulton spokesman Matt Corridoni cited a paper in Health Economics published online in April 2011.

To verify Moulton’s claim, we asked health care experts if it was true that the Department of Veterans Affairs negotiates drug prices but Medicare doesn’t.

All of them said Moulton’s claim is correct.

"The VA uses an entirely different system to establish drug prices, and also has a formulary — unlike Medicare," said Tricia Neuman, senior vice president of the Henry J. Kaiser Family Foundation and director of the foundation’s program on Medicare policy.

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"Medicare delegates this job to private Medicare (Part D) drug plans that negotiate with drug companies, which leads to variations in drug prices across plans," she said.

Walid F. Gellad, associate professor of medicine and health policy at the University of Pittsburgh, provided some more context for his claim.

"The VA does negotiate prescription prices on behalf of all VA patients, although they also benefit from a law that caps the amount they pay for prescriptions," Gellad said. "Incidentally, it's not providers who do the negotiating, but the government agency itself."

Gellad explained that the VA negotiates prices on behalf of its beneficiaries, but Medicare doesn’t negotiate on behalf of people it covers.

Economist Gail Wilensky, the former head of Medicare under George H.W. Bush and a senior fellow at the Project Hope health foundation, noted a key difference between the agencies: the VA covers around 6 million people, and Medicare has approximately 44 million beneficiaries.

"The use of administered pricing — where government sets the price like it does for Medicare physicians and hospitals—is more complicated for drugs because of the long lead cycle in their development," Wilensky said. "The Centers for Medicare and Medicaid Services and the U.S. Department of Health and Human Services have no experience negotiating prices for anything. This would be a challenging place to start — with potentially a lot of unintended consequences."

A specific problem, Wilensky said, is the time that it takes for drugs to develop: it can take "10 years from the time drug development starts until it makes it to market."

Wilensky said that this "means that if administered pricing for various drugs was set inappropriately, it wouldn’t be felt or observed for a decade. Whereas, if rates for physicians are set inappropriately, the pushback would be felt quickly."

Nevertheless, Medicare does actually do some negotiation, Gellad noted, just not by the government on behalf of its beneficiaries.

"Medicare does allow health plans that deliver the drug benefit to negotiate on behalf of their members," Gellad said.

Drug prices through the VA do tend to be lower than Medicare, experts told us.

"Prescription prices at VA are lower than Medicare, partly because of the law that I mentioned, but definitely also because of VA being able to negotiate on behalf of all its members," Gellad said.

Moulton said that the VA negotiates drug prices but Medicare does not. All of our experts said the claim is correct. Medicare isn’t allowed by law to negotiate prices on behalf of its beneficiaries. The VA — with 6 million patients — does negotiate and also has a legally enforced limit on the price of prescription drugs. We rate this statement True.