Posted 2/26/16 on Employee Benefit News.
The Congressional committee that recently demanded Martin Shkreli’s appearance must have hoped to spotlight a smug jerk responsible for the outrageous prescription drug pricing that we’re all up against. Of course there are lots of Shkrelis running drug companies, but most are shrewder and less brash, and might not make for such good theater.
Rep. Elijah Cummings (D-MD), one of the Committee’s questioners, seemed to think that his witness could move healthcare forward by disclosing the machinery of the drug sector’s excesses. “The way I see it, you could go down in history as the poster boy for greedy drug company executives or you could change the system. Yeah, you.”
Excessive treatment and cost are at the core of the entire U.S. healthcare crisis. The fact that other societies and a few innovative firms here consistently deliver equal or better quality care at dramatically lower cost betrays the idea that conventional U.S. healthcare is necessarily superior or even appropriate.
Every part of healthcare is guilty, but the pharmaceutical sector is a case in point. An open record of lobbying spending and what pharma has obtained from Congress makes clear that its contributions have worked to that sector’s economic advantage and against the interests of American patients and purchasers.
Open Secrets data show that, between 1997-2015, Congress accepted $3.3 billion in campaign contributions from the pharmaceutical/health products sector, 43% more than they received from insurance, the second most politically influential industry. That averages out to about $181 million annually over that 18-year period, or a stunning $411,000 per legislator per year.
These numbers are chump change compared to the drug market. At $985 per person in 2011, the U.S. has the world’s highest drug spend by far, more than double what other developed countries pay on average ($483) for approximately the same benefit. In 2015, the U.S. had aggregate prescription drug sales of $374 billion. In other words, we spent about $190 billion more on drugs last year than other industrialized countries would have for the same population. And this figure is deceptively low, since 20-30% of Americans remain uninsured or underinsured, and can’t afford drugs and other treatments.
This excessive drug spending was stoked by a lobbying investment totaling only $235 million in 2015, or just 0.06% of that year’s total prescription drug spend. Evidently, when an industry sector works at scale, policy can be influenced incredibly cheaply.
But policies forged in the special interest yield shamelessly conflicted mechanisms. For example, once a drug is approved by the Food and Drug Administration (FDA), the drug’s manufacturer can set virtually any price it wishes without a rationale tied to the cost of development, the drug’s value to patients, or what is paid in other countries for the same drug. How does that play out? Consider Gilead’s cure for Hepatitis-C treatment, Sovaldi. At $1,000 per pill, the cost has wreaked havoc on health plan budgets and dramatically curtailed patient access to the drug. Meanwhile, the same drug is available for $11 per pill in Egypt and $4 in India.
A related head scratcher is Congress’ prohibition against Medicare negotiating drug prices. The government must pay whatever price is demanded on behalf of millions of subsidized patients using that drug. From the vendor’s perspective, it’s hard to imagine a better deal than having the purchaser let you set any price and then unreservedly guarantee that the bill will be paid.
Drug policy has become emblematic not only of the larger healthcare cost problem, but of a deeply dysfunctional Congressional practice that threatens patients’ interests and our nation’s long-term economic stability. Candidates Clinton, Sanders and Trump have vowed to address Medicare’s prohibition on drug pricing negotiation. Anticipating a challenge to the status quo, pharma has already launched a well-funded campaign that targets 7,000 policy influencers. The worry is that, unless something changes, we already know whose side Congress is on. The Shkrelis.