That's too simple a summary. The bulk of his arguments are about eliminating perverse incentives, such as the one you propose: if a public developer takes a percentage of the savings, the easiest way to inflate that bonus is to inflate the overall cost, especially if the public developer knows the real cost of execution. Rather than incentivizing him to squeeze the suppliers, you're incentivizing him to exaggerate expenses. In the article, the developer cares more about costs, but he's also controlling costs directly with hourly billing instead of fixed bids, giving him transparency.
In the US, if a doctor dispenses a drug in-office to someone covered by Medicare, then Medicare pays the doctor the cost of the drug plus 6%.
The usual example trotted out in press coverage is Lucentis vs. Avastin for treating macular degeneration. Research has established little to no difference between them in effectiveness, but Avastin costs $50/dose while Lucentis is $2,000/dose. So if you're treating a Medicare patient with macular degeneration, and give them Avastin, as a doctor you get $50 + 6% back from Medicare, for $3 "profit" on it. But if you prescribe Lucentis, you get $2000 + 6%, for $120 "profit".
Want to guess which drug gets dispensed?
It gets better when you find out both drugs come from the same company, and that company has fought against having Avastin (the cheap one) endorsed for treating macular degeneration.
There's an added complication in the example you give, which is licensing, and that the manufacturer fought hard for years to prevent people prescribing avastin instead of lucentis.
They even restricted the sale of avastin for eye use.
It's not surprising doctors didn't prescribe the cheaper med in that situation.
