Monday, October 20, 2014
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Pharma offers opportunity for progressive change

In 2009 pharma cut a deal with the Obama administration that called for the industry to refrain from opposing the Affordable Care Act (ACA) and subsidize the prescription drug coverage of seniors under Medicare Part D. Prior to ACA, Medicare recipients faced the full "donut hole" burden that required each one to pay $3,000 per year for drug costs until catastrophic-coverage kicked in. The quid that pharma agreed to give as its part of the deal included discounts covering 14% of the donut hole in 2012, escalating to 75% in 2020.

Pharma offers opportunity for progressive change

In 2009 pharma cut a deal with the Obama administration that called for the industry to refrain from opposing the Affordable Care Act (ACA) and subsidize the prescription drug coverage of seniors under Medicare Part D.  Prior to ACA, Medicare recipients faced the full "donut hole" burden that required each one to pay $3,000 per year for drug costs until catastrophic-coverage kicked in.  The quid that pharma agreed to give as its part of the deal included discounts covering 14% of the donut hole in 2012, escalating to 75% in 2020.

Pharma agreed to this not because of any heartfelt desire to help seniors, but because they knew that in return, the ACA would bring them windfall profits.  As analyst Brian Orelli puts it, "the drug industry is going to benefit substantially from Obamacare in the long run."  (See here)

According to Orelli, Obamacare will fatten pharma's profits as a result of "more patients, better diagnosis, no maximum payouts, and more spending on chronic diseases, which all lead to an increase in spending on drugs."

The deal locks in pharma's prosperity for at least the next decade as a result of a government program that requires everyone to buy health insurance that can pay for high-priced drugs.  Given this cozy deal, it seems puzzling that pharma companies now claim financial pressures are making them demand mandatory, retroactive rebates from their suppliers.

Last week the UK’s Sky News reported (see here) that GlaxoSmithKline (GSK) is demanding rebates from its large suppliers on work already in process or due to be completed during 2013. GSK is headquartered in Great Britain and has several operations in the Philadelphia area.

The company informed its vendors that those wishing to stand on the terms of their contracts by refusing to take lower net fees will risk removal from GSK's of preferred vendors.  As non-preferred vendors, their opportunities for future work at GSK would be negligible.  

So in addition to pharma's more accustomed practices of off-label marketing, bribery (of investigators, leading physicians, journals, professional societies, patient advocacy groups, nursing homes), and withholding unfavorable study results, the Big Pharmas now want to extort givebacks from their suppliers.

The situation is rich with irony, but the pharmaceutical industry which has made itself the poster boy for putting profit ahead of the public's well being can actually contribute to making the US more economically equitable and just.

How so?  Answering that question requires looking at one of factors that prevents the US from adopting an affordable, high quality health care system of the sort enjoyed by other advanced nations.  As it turns out, the same factor also impedes social progress in other areas such as mass transportation, public housing, education, child care and eldercare.

The key point is that pharma can spur progress by serving as a common social obstacle around which opposition can organize.  In this way pharma can promote social solidarity, the principal ingredient needed for reform that has been lacking in America's market-based, consumption-driven society.

For 30 years the Chicago school economists and their Republican political henchmen have exalted and sanctified the market.  In their view the "unfettered" market is omniscient, the arbiter of ethical justice and the source of everyone's worldly aspirations.

The plain truth is that markets are all about consumption.  While consumption is an important part of life, it contains the inherent limitation that consumer action is largely that of individuals rather than groups.  While it's nice when one person can choose vanilla and the next person can choose chocolate without the need for joint decision making, individual consumption leaves out an entire range of socially beneficial options. 

Individual consumption is fine as far as choosing whether to see Dr. X at the Penn Healthcare System or Dr. Y at Jefferson/Main Line.  But the process of creating a health care system that provides access to top-quality care for every American at affordable prices requires collective action.

In the same way, individuals can decide on their own to buy any of a hundred automobile models, but choosing a mass transit system to get anywhere in town within twenty minutes, the way London's Tube does it, requires concerted action.

Marketing discourages that sort of planned, coordinated action.  Instead it encourages everyone to seek satisfaction and solve life's problems through buying more.

During the twentieth century, when labor unions were a force for improving the conditions for working people, they used the slogan, “solidarity.”  Although few unions actually lived up to that motto, at least their professed goal involved mutual aid and care for one another.

As an avaricious presence in the lives of many Americans, pharma serves as an organizing point that can bring a diverse range of people together in common cause.  A thirty-year old mom whose toddler has a fever, elderly people with chronic conditions, and those who suffer any one of many medical conditions all confront pharma's intrusive greed every time they go to fill a prescription.

It is not too much of a stretch to see organizing all of them around the common grievance of high drug costs.  Once they achieve that awareness, who knows what other grounds for solidarity they may find.  In so doing they would have pharma to thank for some of the progress that may follow.


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Daniel R. Hoffman, Ph.D. President, Pharmaceutical Business Research Associates
About this blog

Check Up covers major health events in our region and offers everything from personal health advice to an expert look at health reform. Read about some of our bloggers here.

For Inquirer.com. Portions of this blog may also be found in the Inquirer's Sunday Health Section

Michael R. Cohen, R.Ph. President, Institute for Safe Medication Practices
Daniel R. Hoffman, Ph.D. President, Pharmaceutical Business Research Associates
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