Why Drug Prices Are Out of Control, or Money Well Spent by Big Pharma

[marmar]

Why Drug Prices Are Out of Control, or Money Well Spent by Big Pharma

Friday, 24 January 2014 10:18
By A W Gaffney, Truthout | Op-Ed


Nowadays, it's not only radicals who are recognizing the rising problem of inequality. Between Bill de Blasio's mayoral inauguration, Obama's pointed speech early last month, and Pope Francis' critique of trickle down economics in November, the rhetoric of Occupy Wall Street seems to be going mainstream. Newly emerging statistics - for instance, that the top 0.01% of earners now seem to take home a bigger percentage of the national income than in any other year for which we have the numbers - seemingly rubs more and more Americans the wrong way.

To be fair, however, perhaps this increasingly skewed distribution of income and wealth should be interpreted as nothing more than the fair return on a prudent investment strategy. With enough money devoted to government lobbying, one could argue, any of us could be the beneficiary of upward wealth redistribution. But while some contributing factors to inequality - say the failure of the minimum wage to keep up with inflation (much less with productivity growth) - can be concisely displayed in numbers and graphs, acts of direct upward wealth redistribution require demonstration by way of a specific case study. Here, I consider the illustrative (and evolving) case of the transfer from taxpayers to pharmaceutical companies through Medicare Part D.

When Medicare was crafted in 1965, a drug benefit had strong Democratic Congressional support; at the same time, it wasn't a political priority for either party, and so given concerns about costs, it was dropped from the final bill. Growing pressure from seniors over subsequent decades, however, ultimately made a drug benefit an important political issue. Prescription drug coverage for seniors could have been created over these years with relative ease: A benefit could have been affixed to traditional Medicare, which would then have administered the program, and could have negotiated with pharmaceutical companies over prices (as other capitalist democracies, and even our own Veteran's Administration, already do).

However, the drug benefit that ultimately emerged - "Medicare Part D" - with President George W. Bush's 2003 Medicare Modernization Act (MMA) was the result of a much stronger power than common sense: corporate lobbying. Indeed, as argued in the 60 Minutes exposé, "Under the Influence," the pharmaceutical industry all but wrote the law. Former congressmen and senators who had registered as lobbyists for the industry then endeavored to get it passed. Thomas Scully, a former hospital industry lobbyist who was appointed by Bush to run Medicare, was the primary negotiator with Congress over the MMA. He managed to obtain a waiver of federal ethics rules that allowed him to negotiate for lobbying jobs while still running Medicare, and in the lead up to the law's passage, actually threatened to fire his chief actuary if he revealed a higher cost estimate for the program. Meanwhile, the main proponent of the bill in the House - Congressman Billy Tauzin, who had received significant campaign funding from the pharmaceutical industry - was actually already looking for lobbying jobs while the legislation was under consideration. Within weeks of its passage, he was in negotiations with the Pharmaceutical Research and Manufacturers of America (PhRMA), the chief lobbying group for the industry, for a position. ......................(more)

The complete piece is at: http://truth-out.org/opinion/item/21294-why-drug-prices-are-out-of-control-or-money-well-spent-by-big-pharma

[villager]

1. Criticizing the lobbying/business practices of Big Pharma! Why, that's just "woo!"

[marmar]

2. LOL

[Tuesday Afternoon]

7. !

[El_Johns]

8. +1

[xchrom]

3. du rec.

[daleanime]

4. Kick....

[AikidoSoul]

5. Can't this be changed? What would it take?

Kicked and recommended

[msongs]

6. it would take politicians who are not drug industry prostitutes...for a start nt

[ProSense]

9. Medicare could benefit

from a drug program similar to Medicaid's

Medicaid Drug Rebate Program

<...>

The Medicaid Drug Rebate Program is a partnership between CMS, State Medicaid Agencies, and participating drug manufacturers that helps to offset the Federal and State costs of most outpatient prescription drugs dispensed to Medicaid patients. Approximately 600 drug manufacturers currently participate in this program. All fifty States and the District of Columbia cover prescription drugs under the Medicaid Drug Rebate Program, which is authorized by Section 1927 of the Social Security Act.

The program requires a drug manufacturer to enter into, and have in effect, a national rebate agreement with the Secretary of the Department of Health and Human Services (HHS) in exchange for State Medicaid coverage of most of the manufacturer’s drugs. When a manufacturers markets a new drug and electronically lists it with the FDA, they must also submit the drug to the Drug Data Reporting (DDR) system. This ensures that states are aware of the newly marketed drug. In addition, Section II(g) of the Rebate Agreement explains that labelers are responsible for notifying states of a new drug’s coverage. Labelers are required to report all covered outpatient drugs under their labeler code to the Medicaid Drug Rebate Program. They may not be selective in reporting their NDC's to the program. Manufacturers are then responsible for paying a rebate on those drugs each time that they are dispensed to Medicaid patients. These rebates are paid by drug manufacturers on a quarterly basis and are shared between the States and the Federal government to offset the overall cost of prescription drugs under the Medicaid Program.

http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Benefits/Prescription-Drugs/Medicaid-Drug-Rebate-Program.html

The ACA increased the Medicaid rebate percentage.
http://www.medicaid.gov/AffordableCareAct/Timeline/Timeline.html

Issue Brief - Medicare Drug Negotiation and Rebates

<...>

Medicare Part D is a voluntary prescription drug benefit for Medicare beneficiaries, established in 2003 under the Medicare Modernization Act (MMA). Prior to this law, Medicare did not offer a prescription drug benefit. In 2012, almost 65 percent (over 30 million) of Medicare beneficiaries were enrolled in a Part D plan (MedPAC, 2013).

Medicare Part D went into effect in 2006, providing prescription drugs through private stand-alone prescription drug plans (PDPs) and Medicare Advantage (MA) plans. Part D drug prices are determined through a negotiation between the private drug plan that administers the benefit and the drug manufacturer. By law, the federal government cannot negotiate for Medicare drug prices...Prior to the implementation of Part D, Medicaid paid the drug costs for individuals who were dually eligible for Medicare and Medicaid. Dually eligible individuals are generally low-income, sicker and expensive to treat. The costliest 20 percent of dual eligible individuals account for 66 percent of Medicare spending (MedPAC, 2012). When Part D went into effect, dually eligible beneficiaries’ drug coverage switched from Medicaid to Medicare and the manufacturer discounts were discontinued.

<...>

Savings. One argument is that billions of dollars of savings would be produced if the federal government negotiated for Medicare drug prices. While there are no current Congressional Budget Office (CBO) cost estimates for federal drug negotiation, a report from the Center for Economic and Policy Research (CEPR) estimates that savings to the U.S. government would range from $230 billion to $541 billion over 10 years (Baker, 2013). CEPR noted that the U.S. pays twice as much as other wealthy countries for prescription drugs because their governments are able to negotiate for lower prices.

<...>

Best Price. A third argument is that it makes sense for Medicare to receive the best price available for prescription drugs, just like Medicaid and the VA. In Medicaid, the drug manufacturer provides the federal government discounts for drugs, which are shared with the states. The discount is either the minimum drug amount or an amount based on the best price paid by private drug purchasers, whichever is less. Current law requires drug companies to charge Medicaid 23 percent less than the average price they receive for the sale of a drug to retail pharmacies. Drug companies also must provide another discount if a drug’s price rises faster than the rate of inflation (Thomas and Pear, 2013)...Medicaid rebates, if applied to Part D, would save the federal government money. According to a 2011 study conducted by the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Services, Medicaid rebates were three times greater than the discounts negotiated by Part D for 100 brand name drugs. In 68 of these drugs, Medicaid rebates were twice as high as rebates granted by the drug companies for Medicare drugs (OIG HHS, 2011; Hulsey, 2013). Similarly, a 2008 study of drug pricing information by the U.S. House Committee on Oversight and Government Reform found that Part D paid, on average, 30 percent more for drugs than Medicaid (Hulsey, 2013).

- more -

http://www.ncpssm.org/PublicPolicy/Medicare/Documents/ArticleID/1138/Issue-Brief-Medicare-Drug-Negotiation-and-Rebates

The President has proposed the same rate for Medicare (http://www.democraticunderground.com/10022670043 ), which would save even more than the Senate proposal (http://www.democraticunderground.com/10022725266), $164 billion to $141 billion, respectively.

[kickysnana]

10. Those struggling to breathe have been sold out by our Government. But we don't collect real data.

[Enthusiast]

11. Kicked and recommended a whole bunch.....nt