PHARMA/POLICY: Price negotiations coming?

Joe Paduda is puzzled that drug company prices and profits are going up, yet the NY Times thinks that we can’t get a better deal on drug prices for Medicare. But in some ways that’s a little irrelevant, as the introduction of price negotiations are a political not an economic question. And despite the fact that in 2003 negotiations were politically unacceptable to Tom Delay et al, it appears that (as quoted in Krugman’s column today), the politics of negotiation are all one way.

This is clear from the latest Newsweek poll, which shows overwhelming public support for the agenda Nancy Pelosi has laid out for her first 100 hours if she becomes House speaker. The strongest support is for her plan to have Medicare negotiate with drug companies for lower prices, which is supported by 74 percent of Americans — and by 70 percent of Republicans!

Even assuming that the Dems don’t fumble their current advantage away (or more accurately that the Republicans don’t keep shooting themselves in the foot and the knees) and they take the House and Senate, we’re not getting negotiations tomorrow. First, it might not get past the Senate filibuster, although those poll numbers are pretty scary for Republicans and will take a boatload of PhRMA cash to overcome. Second, Bush will likely veto it, as the current MMA is basically what passes for his domestic legacy (unless he wants “I cut taxes for the richest people in the world and made the children of the middle class pay for it” on his tombstone).

But in any event Pharma needs to prepare for a world in which Medicare drug price “negotiations” are much more likely than they’ve expected heretofore.

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8 replies »

  1. Back in Nov. of 1994 my son had a brain tumor. All is well now. I can remember reading somewhere about a family with high medical bills and no hospital insurance. Somehow they formed with other families a plan to develop a self paying insurace plan. Hundreds of families with seriously ill members put x amount of dollars into an account for medical payments for various reasons. If my memory serves me correctly each family started out paying like $500 a year. As medical cost went up and more families came into the circle the membership price went up. I did not keep this article. I am wondering if anybody out there has heard or read this same article some 12 or 13 years ago. Maybe someone knows of such a plan for families with out insurance today.
    Thanks for your help.

  2. Direct negotiations between the Feds and drug manufacturers is unlikely to yield much in the way of savings. The reason? Manufacturers pay for market share movement, not volume; today, market share movement occurs via formulary and supporting programs; and CMS will never enforce a formulary. More details at my blog: http://www.libratto.com.

  3. You are absolutely right, Peter. We have a corrupt political system that virtually demands that money flows from special interests to politicians. Only full public funding of campaigns will fix it, but we have a set of wealthy folks and politicians that like things just as they are.
    We also have a right wing that touts morals and values, except when it comes to their favorite politician taking money and returning favors. (And I say that as a center-right Republican.)
    As a business owner I would have at least fired and possibly have jailed an employee who took money from vendors and gave my company assets in return. In our political system we don’t do that, we re-elect these crooks.

  4. Peter — I agree that, more often than not, it takes a crisis to create the necessary catalyst for reform in the political world.
    I remember a number of years ago, at a conference, I asked the late NY Senator Daniel Patrick Moynihan why Congress wasn’t tackling entitlement reform (Social Security and Medicare). His answer was that politicians don’t like to solve problems like that “until they have to.” The reason is that any reform scenario is likely to create lots of “losers” who will have to pay higher taxes and/or accept cuts in benefits. On the positive side, after 35 years in the investment business, I have learned (sometimes the hard way) to not underestimate the resilience of our economy and our system. As Warren Buffett said, and I paraphrase, in our now 230 year history, anyone who has sold America short has been wrong!

  5. I really don’t think Democrats will do much better at good healthcare policy as they play the same votes-for-cash scam on the American voter. The system will have to change first. And I don’t think Dems really want Iraq right now, which is unsolvable without at least twice the troop levels. Just think what we’d be saying if Kerry was pres. I shift from wanting the present bastards out and leaving them in to let them fully answer for their own complete self serving failures, which if Dems take the house, they will get to blame on Democrats. I’m afraid Americans have boxed themselves in to a system where complete crisis is the only tool for reform.

  6. Eli Lilly 3Q 10% profit rise is nearly all from psyche drugs including zyprexa.How have they schemed to squeeze more money from their zyprexa cash cow when pill production has actually gone down?
    ANS-Eli Lilly profiteers have jacked up the price of zyprexa to the federal govt,from the Medicare D payouts.Eli Lilly is a big drug company that puts profits over patients.
    They covered up findings that their Zyprexa has a TEN times greater risk of causing type 2 diabetes
    Only 9% of Americans trust big pharma,right around the same rating as tobacco companies.
    Daniel Haszard Eli Lilly zyprexa drug caused my diabetes http://www.zyprexa-victims.com

  7. Apparently Medicare has gone far in accomplishing the task of making many cancer drugs available to our Seniors. Nearly all generic cancer drugs and 70% of brand-name cancer drugs are covered by the Part D plans. Most of the brand-name drugs not covered had generic equivalents that are covered. And a number of trusted old generic agents have been found to be just as effacious as the more expensive brand name ones.
    Medicare Drug Plan Helps Patients Fight Cancer
    By Steven Reinberg
    HealthDay Reporter
    Now, only if they can be allowed price negotiations and eliminate the doughnut hole?