Healthy Skepticism Library item: 1366

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Freed B.
Silent drug lobby generates Holmes-style mystery
The Hill 2003 Jul 30

Full text:

Sherlock Holmes, where are you? There’s a mystery in Washington. Congress is working on a prescription drug benefit for seniors under Medicare. Yet the drug companies, which used to howl at the mention of the “M” word, are uncharacteristically quiet. What’s going on?

It’s quite simple. The pharmaceutical companies know that their friends on Capitol Hill and in the White House are taking care of the industry’s interests. They once feared that a Medicare drug benefit would be a first step toward overall control of prices in every market. But the drug companies are confident now that the Medicare bills passed by the House and Senate last month would protect the industry’s ability to set prices and preserve its high profits by prohibiting the government from interfering in price negotiations to get a better deal.

The effect would be a bonanza for the drug companies and a bust for seniors who would get a modest amount of help toward paying for pricey drugs. Of course, all of this depends on Congress producing a final bill.

The situation is reminiscent of Sherlock Holmes’s “Silver Blaze” case. Holmes solved the theft of a thoroughbred named “Silver Blaze” by noticing that “the dog did nothing.” The dog guarding the horse didn’t bark, so Holmes deduced that the culprit was a stable boy who the dog knew.

Sen. Dick Durbin (D-Ill.) noticed a similar phenomenon during Senate consideration of the drug benefit. “I’m waiting for the barking of the pharmaceutical lobby,” he said on the Senate floor late last month. “Why haven’t we heard from the drug companies?”

The companies haven’t barked because they have little to fear. A decade of hefty political giving has deepened their relationships at both ends of Pennsylvania Avenue. Between 1992 and 2002, the pharmaceutical and health products industries tripled their political contributions from $8 million to $27 million per election cycle, according to the Center for Responsive Politics. The giving also grew decidedly more Republican, rising from 54 percent in the 1992 cycle to 76 percent in the 2002 cycle.

The contributions have bought results. A recent analysis by KPMG, the advisory services firm, predicted that a Medicare prescription drug benefit would be a big win for the pharmaceutical industry.

Richard Merli, the managing editor of KPMG’s Pharmaceuticals Insider, estimates that a Medicare drug benefit would boost sales to Medicare recipients by at least 20 percent, thus generating more volume for drug companies.

Merli acknowledges that drug company profits would be protected since “pharmaceutical companies [would] negotiate drug prices with private insurance companies and benefit managers, not the government Medicare program. While managed care companies negotiate discounts of up to 15 percent, Medicare can drive much steeper discounts of 35 percent to 40 percent on healthcare services.

“Instead of mandating government controls,” continues Merli, “both bills divide the nation into 10 or more regions in which private insurance companies would offer coverage for prescription drugs. The pharmaceutical industry would then negotiate drug prices with numerous insurance companies rather than a single government office.”

Those are great reasons for the drug companies to be silent.

And they add up to a reason for seniors to worry. If the final bill puts no curbs on drug prices, seniors – most of whom live on modest, fixed incomes – still wouldn’t be able to afford the drugs they need, even with the help of a Medicare drug benefit.

Evidence supports this. Brand name prescription drug prices keep climbing, and there’s no indication that they won’t continue to do so in the future. Indeed, the consumer advocacy group Families USA reports that their increase since the mid-90s significantly exceeded the inflation rate.

Chances are that whatever final drug benefit Congress may pass won’t curb the prescription price spiral. Combine that with the likelihood that the anticipated modest $400 billion benefit can’t provide the level of drug coverage seniors really need, and it’s no mystery that seniors are being set up for a disappointment.

If the pending bill is enacted into law, three years from now, disenchanted seniors will start asking what Congress and the White House gave the pharmaceutical industry to keep it from barking. And they won’t be happy with what they discover.