The one thing you need to know about Clinton's war on high drug prices

WASHINGTON - It's almost an afterthought, but the last two bullet points dangling at the end of Hillary Rodham Clinton's manifesto against high drug prices are its linchpin: She wants to allow the government to flex its muscle and negotiate lower drug prices from pharmaceutical companies.

Her proposal overall has a laundry list of provisions that sound good, but would have unclear effects on controlling drug prices: pushing companies to make more investment in research; capping out-of-pocket spending by consumers. But at the end comes the direct challenge to the status quo - one that would overturn a Bush-era provision that limited the cost-cutting power of government.

When Medicare's prescription drug benefit was implemented in 2006, it came with a major caveat: It was forbidden by law to "interfere with the negotiations" between drug manufacturers, pharmacies, and plans and "may not require a particular formulary or institute a price structure for the reimbursement of covered" drugs.

In other words, a program that represents 40 million Americans, and an immense chunk of drug spending - around seven percent of all prescription drug spending in the world in 2014, according to a study published this summer - can't leverage that purchasing power to get favorable prices. Instead, its beneficiaries are divided into pools run by private companies, which can and do negotiate rebates, but are far more fragmented; many studies suggest giving the government the power to bargain would create the leverage to save many billions more each year.

Clinton would also like to extend the more generous rebates given to Medicaid to the low-income beneficiaries in Medicare, a simple move that is projected to save $100 billion.

One analysis released this summer by researchers at Carleton University and Public Citizen, a patient advocacy organization, found that Medicare was paying, on average, double the price of brand name drugs in other developed countries. The Swiss pay a third less on average and the Dutch pay about less than half of what Medicare pays for brand name prescription drugs, the study found. Other government programs, such as Medicaid and the Veteran's Benefits Administration, also pay less than Medicare. The study estimated that the plan could save between $15.2 billion and $16 billion per year if it could simply adopt the same prices as those two other federal programs.

But that isn't the only piece of evidence. A study published by academic researchers in the Journal of General Internal Medicine in 2008 found that the savings would be $22 billion if Medicare were able to negotiate similar prices as other federal programs. And in 2011, the Congressional Budget Office estimated that if Medicaid's more generous rebates were extended to Medicare's low-income subsidy program, it could save $112 billion over a decade.

The idea that Medicare should bargain has come up repeatedly, although it hasn't gotten very far. Most recently, President Obama has made the case for it. Bernie Sanders has included it on his own agenda.

But one group sticking up for the status quo, the industry trade group PhRMA, has argued that the cost savings have been significant for Medicare. In a fact sheet about the program, the group has pointed out that total costs of the program have been $349 billion less than was originally projected for the first decade of the law.

"Medicare Part D plans negotiate significant discounts and rebates with drug manufacturers to achieve savings on medicines, and use them to help reduce premiums, deductibles and cost-sharing for beneficiaries," PhRMA says in its own bullet points on the policy.

The question is whether the government's bargaining power could do better - and how those effects might be felt through the rest of the health care system.

There's some evidence to suggest Medicare's influence might bring down prices in the private market, too. A paper published in 2013 in Health Affairs found that at least when it comes to hospital payment rates for inpatient care, what Medicare paid rippled through the system: a 10 percent drop in Medicare rates was projected to be followed by a 3 percent or 8 percent drop by private insurers, depending on the statistical model deployed.

Clinton calls leveraging the government's size a "backstop," but it might be a foot in the door.