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This episode in the Senate illustrates the influence of large corporations in shaping public policy. The will of the people was ignored while the power of large contributors to election campaigns was favored. According to Opensecrets, an organization that tracks campaign donation records, drug companies, hospitals, insurance companies and doctor organizations spent $400 million in 2005 and 2006 lobbying Congress and candidates for federal offices to enact policies they wanted.
Negotiation of drug prices should be of concern not only to recipients of Medicare and Medicaid benefits, but also to all taxpayers. Medicare Part D provides partially or fully government subsidized prescription drugs to senior citizens. The Medicaid program covers other people whose incomes are not sufficient to enable them to get the care they need to remain healthy or to control their chronic diseases or conditions. In both programs, the federal government subsidizes costs. Money to provide these drug benefits comes from taxes.
If the secretary of Health and Human Services could negotiate with the pharmaceutical companies, prescription drug prices would probably be lower. Either costs to the government would be lower and tax dollars could be saved, or more people would be covered in the Medicaid program, or both. Profits of pharmaceutical companies would be reduced, but they are currently doing extremely well. Writing for Inter Press Service, Adrianne Appel reported that Johnson and Johnson had profits of $10 billion in 2005; Pfizer, $8 billion that year. Johnson and Johnson’s chief executive officer was rewarded with $28 million in salary and bonuses in 2006. Merck’s CEO received $10 million in
compensation that year.
Former Pfizer’s CEO Henry McKinnell received pension, stock and other benefits worth $180 million when he left the company.
Although he voted for cloture, Sen. Norm Coleman, R-Minn., expressed concerns and reservations about empowering the government to negotiate with the drug companies in a recent letter to constituents. Medicare Part D, he believes, is working very well and is costing much less than estimates. But Medicare Part D costs are negotiated by the many insurance companies, all of which count only fractions of the beneficiaries of these government programs as their customers. Therefore their negotiating ability, the leverage they can exert on pharmaceutical companies, is much less than the Medicare’s would be.
The lower-than-expected cost of Medicare Part D program may be due to the fact that many seniors find the program so complex and the plans they must choose from so numerous and varied that they abandon efforts to register in it. Differences in the plans — formularies, “tiers” within the formularies, co-pays and deductibles, a retail cost private insurance companies negotiate with pharmacies — make it almost impossible for any senior to calculate the best “deal” without using a government-provided software program. But many senior citizens and Medicaid beneficiaries do not use computers or have access to the Internet. And the government software program sometimes uses incorrect or out-of-date data.
Some critics caution against using the success of the Veterans Administration in obtaining lower drug prices as a reason to expect that the Department of Health and Human Services would be able to negotiate them satisfactorily.
The number of drugs in the VA’s formulary is many fewer (a little more than a third) than the number currently included in most of the Medicare formularies.
But that difference is not inherent to the process of negotiating drug prices. Including a large number of drugs may mean that the total cost of the program is greater than it would be if the formulary were smaller, but it would still be far less than it currently is.
Coleman has announced his opposition to any proposal that involves formularies, but the reason for that opposition is unclear. In Medicare Part D, there is a procedure for covering drugs that are not included in formularies in unusual cases. If a physician certifies that a patient needs a non-formulary drug because others are not effective or not indicated, due to allergies or incompatibility with other drugs the patient is using, exceptions can be approved. Exceptions could be part of any government-subsidized drug program.
The pharmaceutical industry lobbied hard against the proposal to allow the secretary of Health and Human Services to negotiate drug prices with the companies. The vote to override the filibuster apparently failed because many of the senators complied with the wishes of corporations that contributed to their election expenses.
Ours is supposed to be a government “of the people, by the people, and for the people.” The fate of the drug negotiation bill seems to be an instance of government
for the corporations. It will remain such until we take back our government at the polls, insisting that the candidates we elect represent the people, and not the donors of large gifts to their election campaigns.
Stewart Shaw is a former Winona State University registrar who is getting a second education in retirement. He also volunteers for several local organizations.
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