Posted on 09/09/2017 5:42:49 AM PDT by Kaslin
The bipartisan Washington, DC “consensus” has so many blind spots, you’d think its exponents lived in a black box. Recently, it has become clear that one of the biggest of those blind spots is the federal government’s treatment of the pharmaceutical industry.
This can be most clearly seen in the troubling continuity between the favored policy of pharma-friendly elements within the Trump administration, and the Obama administration’s own weakness on a critical policy in the battle over drug prices: namely, the 340B drug pricing program.
As granular followers of pharmaceutical policy will already know, 340B is a program passed during the first President Bush’s term, which offers pharmaceutical companies a very simple deal. If they want an ability to sell drugs, price negotiation free, to the giant pot of money that is the Medicaid and Medicare Part B markets, then they have to also sell drugs at lower prices to a specific subset of hospitals that serve a disproportionate share of vulnerable populations, classified as “safety net hospitals.”
To any executive, this should be both a financial and political no-brainer. Financially, the ability to sell to the $57 billion Medicaid and $168 billion Medicare Part B market is so profitable that it easily dwarfs the losses from selling at reduced prices to certain hospitals. Politically, engaging in such voluntary price slashing behavior can engender good will from a grateful public.
Nevertheless, in a show of politically senseless greed, pharma has done everything in its power to either weaken or end 340B altogether. As one rationale, they claim that the Obama administration expanded the program beyond its original intent by allowing rural hospitals to participate.
However, ironically, even if this accusation were true, the fact remains that the Obama administration did not actually show much willingness to enforce the rule. Witness the fact that President Obama only permitted a policy fining companies that overcharged 340B hospitals and clinics to enter the books eight days before he left office. What’s more, the actual fine was only $5,000 per offense and you must prove that a company “knowingly and intentionally overcharged”, a pittance to the largest pharma companies. One presumes that Obama didn’t act sooner because he knew that his chosen successor, Hillary Clinton, needed all the pharma donations she could get. And indeed, she did get them, albeit to no avail.
Now, with a President in office who accused the industry of “getting away with murder,” you’d think that this policy would’ve gotten more teeth and been implemented more strictly. Unfortunately, due to Conservatism, Inc’s continuing attempt to subvert and undermine the President’s preferred policies, the opposite has happened. Just last week, the Trump administration once more delayed the enforcement rule by another year!
What makes this truly bewildering is that just a few months before, the Trump administration’s Centers for Medicare and Medicaid Services (CMS) took steps to strangle the 340B program under the pretext that hospitals were abusing it to pad their bottom lines, contrary to the letter and spirit of the program. Hopefully, the Administration will come to their senses and follow the recommendation of their own advisory committee to scrap the idea, but the irony should not be overlooked. That is that when pushing pharma friendly policies, Conservatism Inc’s swamp denizens default to concerns about the law being followed, only to turn around months later and eliminate enforcement for…the law.
Sadly, 340B is probably not the only place where this pro-big business but anti-rule of law approach will rear its ugly head. Nevertheless, it should be called out now. After all, this is precisely the kind of behavior that made Americans sign onto President Trump’s pledge to “drain the swamp.” Hopefully, the Trump White House will revert to that pledge, rather than continuing to permit the swamp’s lobbyist-driven incoherence to overrule the campaign promises of the President and the wishes of the American people.
What is the difference between “government dictated fixed prices” versus government required “discount programs” for certain classes of buyers? Very little.
So, don’t let me hear that we, the U.S., does not “fix drug prices” in this country. In some manner, we do.
I do not think that Medicaid & Medicare & any select group of hospitals deserve a break, a selective break only they get. Most likely, higher prices are charged to everyone else because of the federal programs for special classes of drug buyers.
Given all the givens in drug pricing, here and abroad, we CAN make some pricing demands on the drug companies, without specifically setting prices and with any selective application of any rule.
The drug companies already accept government dictated prices in many countries. They are nearly always less than charged here.
I don’t like the idea of any government dictating the prices, but the fact is it is being done and big pharma is accepting it. Yet they fight it here.
We can get lower drug prices, without dictating what those prices must be, with one simple rule.
Acknowledging that big pharma is accepting lower government fixed prices outside the U.S., we can tell big pharma those prices are going to apply in a simple rule for drug pricing in the U.S. That rule would be that they can charge in the U.S. no more than the median of the prices they are accepting for a drug in overseas markets where the government dictates the price - not the highest, or lowest, just the median.
Three things will happen. Big pharma will rethink and adjust how they are dealing with those foreign markets that dictate the price. In some cases they will fight harder for a higher price. In some cases they will quit selling a drug in particular foreign market. The more they accept dictated prices overseas, the more it will affect their prices here. Many U.S. prices will go down. Some prices overseas will go up. The availability of drugs in some markets will change.
The U.S. will quit subsidizing foreigners drug prices.
Excellent analysis.
Maybe I'm overly simplifying this, but if we want the government to control the prices then why not just have th government buy the patents to these drugs?
Hmmm. Interesting!
A few things:
1) many foreign countries not only fix the prices, but threaten to not recognize patents for companies that don’t comply. There are several ways that the prices are fixed, ranging from dictating the price, to limiting the price to merely production costs plus a percentage (forcing the cost of development onto US customers alone). Having already sunk the cost of development into the drug, it is more profitable to then extend the market into the other countries than not.
2) is it gouging to set a high price for something that was never available before? Real gouging is jacking up the price because your competitor has been banned from selling. It is not merely having a price that is more than your buyer wants it to be. Higher prices bring more investment. Educated, stable strong investment generally brings more breakthroughs.
3) It is a bad thing that the US population is subsidizing pharmaceutical breakthroughs for the rest of the world. It is a worse thing to bring the engine to a halt. We need the national willpower to address this issue - and not in the leftist way of spreading the misery.
“3) It is a bad thing that the US population is subsidizing pharmaceutical breakthroughs for the rest of the world. It is a worse thing to bring the engine to a halt. We need the national willpower to address this issue - and not in the leftist way of spreading the misery.”
It is a big big-pharma lie. More than half of big pharma is not U.S. based and does R&D not just in the U.S. but in their home bases - U.K., Sweden, Swiss, France & Germany, as well as other places they have operations as well.
As I said, I am all for NOT having any price controls.
I’d be all for that if the reality was NOT that all the big pharma companies are accepting government dictated prices elsewhere, including some of them right in their home-base market, and turn around and subsidize those give-aways by charging higher prices here.
The only “market” incentive we have against that practice of big pharma is to return back on them NOT a particular fixed price here, but merely using the median of government fixed prices on a drug they are accepting by government mandate in other countries as the upper limit on prices they can charge here. What government fixed price agreements they agree to elsewhere, will become their own doing in setting any price limits here.
Hopefully some of them will have a powerful incentive to get their own home governments out of the price-fixing business. Some will at least negotiate better deals, for the pharma companies. As I said, some will quit selling some drugs in some of those fixed markets.
In the end, places like Europe and others will see some price increases and the U.S. will see some price declines.
In the long run, we can hope to start a trend to eliminate the price fixing others are doing - at, what is right now, our expense.
Its not a perfect free market world, so I care not to pretend it is, just for big pharma, at the expense of the American consumer.
It is a big big-pharma lie. More than half of big pharma is not U.S. based and does R&D not just in the U.S. but in their home bases - U.K., Sweden, Swiss, France & Germany, as well as other places they have operations as well.
I don't see how that contradicts what lepton wrote - unless you're also claiming that non-U.S. pharma's U.S. prices are kept in line with non-U.S. government controls.
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