Why Pharma doesn't want Paul Ryan as V.P.

by Daniel R. Hoffman, Ph.D.

One might understandably think that Big Pharma is sitting in the political catbird's seat now that Paul Ryan is the Republican nominee for Vice President. After all, Ryan's signature issue consists of changing Medicare into a voucher system in a way that pharma's lobby, the Pharmaceutical Research & Manufacturers of America (PhRMA), strongly supports. In fact the PhRMA's president recently gave an interview promoting just such a change to Medicare.

But that interview was conducted before Romney named Ryan his running mate. According to well sourced industry reporters, PhRMA and others in pharma assumed Ryan would play an important role in making Medicare even more favorable to the drug industry by holding onto his position as House Budget Committee chairman. Now that Ryan is a candidate for VP, some of these writers claim, "it might work out better for pharma if Ryan loses this election."

Pharma got exactly what it wanted from Paul Ryan and his Congressional colleagues in 2003 when George Bush pushed Medicare Part D through the House by a single vote. The drug industry was so thrilled that they immediately appointed the Louisiana Congressman who ramrodded the Part D legislation, Bill Joe Tauzin, as PhRMA president with a $2 million annual salary. The drug lobby now hopes it can apply the same formula to Medicare as a whole.

Ryan's plan for turning Medicare into a voucher system applies the same approach used by Bush's Medicare Part D, in which the government subsidizes the individual purchase of private insurance. Part D covers just prescription drugs and Ryan calls for doing the same thing with the entire Medicare benefit. 

Pharma was especially pleased with Ryan's work on Part D that prevented Medicare from using its volume purchasing power to negotiate drug prices. As a result, the industry clearly recognizes the benefit of keeping their champion in charge of Congressional budget making. At the same time they also understand that putting someone known as their yes-man on the presidential ticket may not work out quite so well. The reason is that PhRMA and the Romney staff recognize that by closely tying the presidential campaign to voucherizing Medicare, pharma's Republican handmaidens risk losing millions of votes and Congressional seats. 

Medicare as it currently operates has a devoted following among scores of millions of Americans. Given the tradition in this country of not tampering with social institutions until they're ready to crash and burn, PhRMA recognizes that the value of altering Medicare in 2013 is likely to generate more opposition than support because current budget projections forecast its solvency until 2024.  That makes the prospect of creating a political cyclone in 2012 seem very risky. The resulting furor, in fact, could even arouse demand for the kind of reform that pharma would find unpalatable.

There is another reason pharma believes electing Paul Ryan and Mitt Romney would disrupt their well laid plans. Even before the Department of Health and Human Services publicized the information this week, pharma executives knew that almost 5.4 million seniors and people with disabilities have already saved more than $4.1 billion on prescription drugs as a result of the Affordable Care Act. Those savings, consisting largely of rebates from the pharma companies, make 30 million more people into customers for pharma's products.  The Ryan-Romney pledge to repeal the Act "on day one," if they win election, will jettison a much anticipated boost to the industry's sales volume. 

So some of these industry writers channel their sources by claiming, "maybe the most important impact for pharma from the selection of Ryan as the VP candidate is that it vaults him into contention as the GOP standard bearer after Romney," in 2016 or 2020. These industry writers impute to pharma executives the opinion that "it might just be even better for PhRMA in the long term if Ryan loses this campaign." That way, pharma and other Ryan supporters would have several years to burnish his image and better prepare him "for a full on campaign in 2016."

While that may sound like a reasonable plan, fish that's pungent on Monday is unlikely to smell better by mid-week. In 2008, for example, right wing partisans salivated at the prospect of "seasoning" Sarah Palin for a 2012 presidential run, even after the Alaska governor showed that she lacked an understanding of even some fundamental government principles. After another year of close inquiry, few political operatives took her seriously.  

The same process has already started with Paul Ryan.  Nobel prize-winning economist Paul Krugman wrote that Ryan's economic plan "is and always has been a con game." The overall effect of a Ryan budget, according to Krugman "would be to increase the deficit by around two and a half trillion dollars," with the benefit going to the "top 1 percent, while the spending cuts would primarily come at the expense of low-income families." 

As more of that understanding spreads through the literate community, pharma is apt to find that Paul Ryan represents damaged presidential goods.

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