Hooked on Drug Money: Will Congress Take a Stand on Medicare? (Truthout)

[marmar]

Hooked on Drug Money: Will Congress Take a Stand on Medicare?
By Dean Baker
t r u t h o u t | Columnist

Wednesday 10 January 2007

It's payback time, as the lobbyists say in Washington. One of the key planks in the Democrats' election platform was changing the Medicare drug benefit by allowing Medicare to negotiate lower prices with the pharmaceutical industry. While this may not have been as important to their victory as the war, voters were outraged by the Medicare drug bill approved by Republican Congress. The benefit was designed to enrich the pharmaceutical and insurance industries at the expense of taxpayers and beneficiaries.

Now the Democrats are in a position to make good on their promise to reform the bill, and the pharmaceutical industry is going all out to protect its future profits. The basic story here is very simple. The prices paid by the insurers participating in the Medicare program are far higher than the prices paid by the Veterans Administration or governments that negotiate directly with the drug companies.

If Medicare negotiated similar discounts with the industry, it could save taxpayers and beneficiaries between $300 and $400 billion dollars over the next decade. This comes to between $2,500 and $3,500 per household. In technical terms, this is real money.

In order to protect its profits and the big bucks earned by the CEOs, the industry is pulling out all the stops to make its case. This means making every claim imaginable, some of which are even contradictory.

Claim #1 is that the government cannot get lower prices than the private insurers. This could be true if the people running the Medicare program were uniquely incompetent. We have the data. The Veterans Administration pays prices that average 40 percent less than the insurers participating in the Medicare program. The same is true of the Canadian government, the Australian government, and all the other governments of wealthy countries that run health care programs. If we really have such incompetent people running Medicare, then we need to replace them with qualified managers, but that is not an argument against reforming the program.

It is important to remember that drugs are cheap. Wal-Mart is selling prescriptions of most generic drugs at $4 a piece. The only difference between the drugs that Wal-Mart sells for $4 and the ones that cost hundreds of dollars is that the latter enjoy government-created patent monopolies. It is only these patent monopolies that make drugs expensive; in nearly all cases they are cheap to produce. In principle, nearly all drugs could be profitably sold at $4 per prescription.

Claim #2 is that if Medicare negotiated prices, beneficiaries would only be able to get the drugs chosen by the government. This is wrong as well. The Veterans Administration has a formulary with preferred drugs available at lower prices. If patients have a need for drugs not on the formulary, they can still get them, they just pay a higher price - a price comparable to what the private insurers pay now. ......(more)

The complete article is at: http://www.truthout.org/docs_2006/011007A.shtml

[sharp_stick]

1. With all due respect to the article but I have a few quibbles.

Walmart is able to charge $4.00 for drugs made by generic companies consisting of a few chemists and hundreds of lawyers. No new drug or even updated drug has ever been discovered or developed by a generic company. No generic company has ever carried out a clinical trial either. No company AFAIK has ever discovered and developed a drug and then allowed it to be sold free of patent protection either.

With ever increasing complexity in the clinical trials including carrying out cardiac trials in patient populations filled with potential underlying cardiac complications these trials are getting longer and more expensive to produce. The $4.00 drugs would end the second a generic company actually had to carry out it's own research.

The drugs that Walmart is willing to sell at that level come from a very short list, almost all of the drugs on that list have been generic for years. Most generics now available cost well over that and Walmart charges well over that. When Apotex launched a generic Plavix at risk earlier this year they sold it at $129/30 days compared to the drug companies $169/30 days. I'd like to see Walmart put that on their list.

You can see the list of $4.00 drugs here:
http://i.walmart.com/i/if/hmp/fusion/Floridagenericdruglist.pdf

I like the unbacked up line that "nearly all drugs can be profitably sold at levels of $4.00 per prescription". Where does that come from? That may be true for long produced small molecules but IMO the newer biologic drugs will never be profitable at levels even close to that.

I don't see a lot of changes happening with the pharmaceutical industry in the near term although a lot of it would be well served by some serious changes. Negotiated prices aren't a bad idea but trying to give people the impression that this will leave us with $4.00 prescriptions is lazy reporting at best IMO. You, your insurer or the Government will pay dearly for new medicines no matter if there is negotiation or not.

[cosmicdot]

2. will they take a stand on health care?

both "Medicare" and "health care" could be addressed as one, couldn't they?

I wish they would put Conyers' bill on the table

H.R. 676
http://www.house.gov/conyers/news_health_care.htm
http://www.house.gov/conyers/news_hr676_2.htm

78 co-sponsors (why aren't some of these names made Majority Leader and/or Whip?) to date http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR00676:@@@P to this bill which was introduced in February 2005 (tabled and collecting dust in committee no doubt). Speaker Pelosi isn't among the co-sponsors. Neither is Majority Leader Steny Hoyer. Neither is Majority Whip James Clyburn. Neither is Caucus Chair Rahm Emmanuel. Neither is Caucus Vice Chair John Larson.

(It'd be nice to have dental and vision care added to the program.)

Reading a reply Nancy Pelosi made to a question posed by a Raw Story reader back in March 2006, I don't have much faith (wish I did) in "a new direction" re Medicare/health care which eliminates the profit motive in solving our health care crisis ... a 'New Democrat' direction is more likely ... maintaining Big Pharma/Big Insurance/corporate america's profits center focus in any solution process. Can't offend K Street, can we. Highlighted 'clues'.

Question:

Do you think America should adopt a national health care system? If so, what kind specifically?

Will
Medford, OR

Pelosi's reply:

"All Americans should have access to affordable health care whether they lose their job, change jobs, get sick, or just grow old. By improving and building on our current health care system, we can reach that goal.

Democrats want to provide a tax credit to help small businesses offer health coverage to their employees and create new health insurance options to help working families. We want to lower health insurance premiums by combating frivolous lawsuits, and providing direct assistance to communities that have a shortage of health care providers. Democrats want to give states the option to allow middle class families of children with disabilities to purchase Medicaid coverage, helping parents care for their children while continuing to work. We want to allow older Americans who have lost their jobs, whose employers have dropped their retiree health benefits, or who have lost their insurance coverage, to buy into the Medicare program.

Democrats also want to fix the flawed Republican prescription drug plan by giving Medicare the authority to negotiate drug costs, allowing for safe re-importation of prescription drugs, allowing beneficiaries to change plans and to get their drug benefit directly from Medicare.

http://www.rawstory.com/news/2006/Nancy_Pelosi_answers_Raw_Story_reader_0325.html

How about health care simply as a basic human right dropping all the 'affordable' 'access' 'premiums' GOP frivolous talking points dangling 'tax credits', etc., rhetoric?

[crickets]

4. Thank you!

How about health care simply as a basic human right dropping all the 'affordable' 'access' 'premiums' GOP frivolous talking points dangling 'tax credits', etc., rhetoric? (emphasis added)

I can't agree more.

[crickets]

3. Link Dump

Apologies, but I'm very tired so I'll just drop off some sources with short points at the end rather than try to write something coherent.

Rx R&D Myths: The Case Against The Drug Industry’s R&D "Scare Card"
http://www.citizen.org/publications/release.cfm?ID=7065

New Report Debunks Drug Industry Claims About the Cost of New Drug Research and Development
http://www.pnhp.org/news/2001/july/new_report_debunks_d.php

The Truth About Drug Companies
http://www.motherjones.com/news/qa/2004/09/09_401.html

The Truth About the Drug Companies (overlap, same book)
http://www.nybooks.com/articles/17244

Economics of the Pharmaceutical Industry
http://www.nber.org/reporter/fall06/danzon.html

Main points (semi-quoted):

- Much of the industry R&D costs are reduced by taxpayer-funded research.

- Roughly 79% of the new drugs in the past twenty years were "me too" drugs rather than new ones.

- Fortune magazine: Big Pharma has held "the most profitable industry in the US" spot since 1982.

(READ THOSE LAST TWO AGAIN. Put them together. What do you get?)

- The REAL money outlay goes to ads and marketing, not R&D. (ETA: and lobbyists! See pnhp.org article.)

"The drug industry is stealing from us twice... First it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies. Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation."

- Often, small firms are actually the ones developing the new drugs and then out-licensing to larger companies when they are ready for later-stage drug development, regulatory review, and commercialization. (Or the small company, with product, is gobbled up by the big one.)

- The industry battled in court to keep congressional investigators from the GAO from seeing the industry's complete R&D records. Congress can subpoena the records but has not done so.

THE R&D WHINE IS A CROCK.

Dean Baker at TO is right. Medicare should have no problem negotiating for lower prices on non generic drugs. The pharmas would not wither away and die. They'd just have to stop charging highway robbery prices. Boo hoo. The question is whether someone will drag this out in the light of day and deal with it.

It's not just about products, supply and demand. There are moral stakes as well, and they don't get near enough mention sometimes even though everyone knows the moral stakes in the backs of their minds when the issue is discussed. The following article addresses a global problem with global perspective, but it applies at all levels.

Debunking Pharmaceutical Propaganda
http://www-tech.mit.edu/V123/N41/shef_colum.41c.html


...aaand g'night before I fall on my keyboard. ;)