If Pharma Has a Better Way to Play the Villain, Let's Hear It


A posting here in May discussed Congressman Paul Ryan's soak-the-middle-class proposal to cripple Medicare by turning it into a program that would give people vouchers to buy inadequate, private health insurance. The thrust of the article was a suggestion that pharma could elevate its poor image among the public by opposing this Republican effort to roll back the safety net. The pharmaceutical companies apparently chose to remain silent on the Ryan bill. Instead they left it to Ryan's constituents and attendees at town hall meetings around the country to treat the Republican Medicare proposal with the scorn it deserves.

Now four months later a group calling itself the Healthcare Leadership Council (HLC) emerges with its own nefarious plans to reduce the Medicare benefit. HLC is a lobbying group whose membership includes Big Pharmas such as Pfizer, Merck and Johnson & Johnson, as well as the drugstore chain Walgreen's and medical providers such as the Mayo Clinic.

The reason behind the HLC's policy "contribution," if one must use such a favorable term to describe it, lies in their effort to thwart the mandate of the Congressional Super Committee that arose out of this summer's compromise on raising the national debt ceiling.

To obtain Republican agreement on raising the debt ceiling and averting a global economic meltdown, Democrats had to acquiesce to Republican demands about addressing debt and deficit concerns immediately, despite the broad consensus among economists that more government spending is needed right now to end the recession. The main device that Congress and the White House created for addressing this debt distraction involved the Congressional Super Committee, a group comprised equally of Democrats and Republicans from both houses.

As a means of incentivizing Congress to develop a debt reduction plan, the Super Committee was given specified, budget reduction targets that it would submit to Congress late this year in the event the larger body fails to pass such a plan. The default cuts mandated to the Super Committee would involve substantial budget reductions to programs favored by Republicans (e.g., the Defense Department) and by Democrats (Medicare). In establishing the Super Committee, Congress even relinquished its option to modify those default cuts.

Now in handing this meat cleaver capability to the Super Committee, Democrats maintained a superficial shred of their core principles by stipulating that any Medicare cuts would fall entirely on manufacturers and providers. No Super Committee changes could affect beneficiaries, either by demanding higher payments or reducing benefits.

It is precisely this Super Committee mandate to preserve benefits and affordable costs that the HLC considers anathema. The essential elements of their Medicare changes include the following.

• Gradually raising the Medicare-eligibility to 67 from 65, starting in 2014

• Raising co-pays and deductibles for seniors

• Requiring well-off seniors to pay higher premiums

• Adding private-sector competition to traditional Medicare coverage by making government-subsidized private insurance compete against regular Medicare.

Appalling as the HLC proposals may appear, it bears recalling that the Super Committee mandate to protect beneficiary services and costs may be more illusory than real. As a former Bush staffer told the Washington Post in August, even cuts nominally confined to manufacturers and providers will inevitably work their way through the system as reduced services and/or higher costs.

But leaving aside that discussion, it is worth mentioning that The Healthcare Leadership Council is an unusual entity. Pharmas and providers don't often make common cause in political lobbying and when they do, one should always remain wary. In this case the reason for their united effort is not hard to discern because pharmas and physicians both squeeze American consumers far more than they hit citizens of foreign countries. In joining together for the HLC Medicare proposal, the two health care sectors want to preserve their US margins.

The European Organisation for Economic Co-operation and Development (OECD), for example, found that Americans pay vastly more for drugs than people in other countries. While many people already know we pay approximately one-third more than Canadians, the OECD concluded we also pay 43% more than the French, 54% more than Spaniards, 59% more than Germans and 76% more than the Japanese.

When it comes to paying higher provider costs, a Columbia University study published earlier this month found "that the incomes of primary care doctors and orthopedic surgeons were substantially higher in the United States than in other countries." That difference "results mainly from higher fees," not from higher practice costs, higher med school tuition or from a larger number of medical services here. The result is that these higher fees are a "major factor" in America's higher health care costs.

So lobbying and policy efforts at the Healthcare Leadership Council are a twofer for pharma. On the one hand they agitate to keep their high profit margins at the expense of the American middle class, while at the same time they can subsidize their customers, the physicians, who want to achieve the same windfall.

Pharma is an important global industry that, at its best, creates advances in health care and benefits the economy. It is perplexing that the industry is not content to let these good deeds speak for it and, instead, sponsors an initiative that seeks to shrink the Medicare benefit. It would be hard to imagine a more direct way for pharma to increase its role as a public villain.

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