The art of the drug deal

August 13, 2009

Helen Redmond explains how the drug industry got a seat at the head of the health care reform table.

BILLY TAUZIN, a former Republican member of Congress from Louisiana and the current president of the Pharmaceutical Research and Manufacturers of America (PhRMA), is all about the art of the deal. He's the Donald Trump of brand-name prescription drugs, but unlike "The Donald," "The Billy" goes to the White House and closes deals in private with the president of the United States.

In a secret, behind-the-scenes mother of all deals, the Obama administration agreed to two central PhRMA demands: no government negotiation of drug prices for Medicare beneficiaries and no re-importation of cheaper drugs from Canada or other countries. In exchange, the industry "pledged" $80 billion in cost savings over 10 years. The details of how the cost savings will be achieved and accounted for haven't been disclosed.

To ensure it was a done deal, Tauzin, with audacity to spare, demanded in interviews with the national media that the White House publicly acknowledge "the deal." He was reacting to health care legislation in the House of Representatives that would allow the government to negotiate drug prices and to statements by House Speaker Nancy Pelosi.

PhRMA President Billy Tauzin
PhRMA President Billy Tauzin

"We know we can squeeze more from the system," Pelosi told the New York Times. "The minute the drug companies settled for $80 billion, we knew it was $160 billion." Then, in classic doublespeak, she added, "The president made the agreements he made. And maybe we'll be limited by them. But maybe not!"

Succumbing to the pressure of drug industry lobbyists, White House Press Secretary Robert Gibbs announced at a press conference, "We feel comfortable with the amount of money that has been talked about at this point."

Tauzin said of the deal earlier on, "We were assured: 'We need somebody to come in first. If you come in first, you will have a rock-solid deal.'" Later, reported the New York Times, Tauzin threw down the threat: "80 billion is the max," he said, "no more or less, adding other stuff changes the deal. Who is ever going to go into a deal with the White House again if they don't keep their word? You are just going to duke it out instead."

THE PRESCRIPTION-buying public, of course, got a raw deal. In accepting PhRMA's demand for no price controls, the government is forgoing what could be as much as $220 billion in savings over the same period. That's according to a report by the Institute for America's Future that matched drug price savings the government negotiated for the Veteran's Administration.

Americans spend a staggering $200 billion a year on prescription drugs. We pay more money for medication than people in any other advanced industrial country. The Congressional Budget Office found that drug prices in other countries are 35 to 55 percent below the prices in the U.S. Go to any online pharmacy in Canada, and the price of a month's worth of medication is almost always lower there than it is here. But don't purchase any medication; buying drugs from Canada is illegal.

During Obama's campaign for president, he promised that, if he were elected, he would "allow for the safe re-importation of drugs" and that it was a "profound mistake" that Congress exempted Medicare from negotiating drug prices. He explained:

We will break the stranglehold that a few big drug and insurance companies have on the health care market...It's become clear that some of these companies are dramatically overcharging Americans for what they offer...We're not going to get the change unless we can overcome the resistance of the drug companies, the insurance companies, the HMOs, those who are making a major profit from the system currently. Now, I think all these industries have a roll to play...We want to listen to what they have to say. They should have a seat at the table, but they can't buy every chair.

The pharmaceutical industry doesn't have to buy every chair at the health care reform table, just a few. The $100 million a year that they spend lobbying members of Congress is far more important. Sen. Max Baucus (D-Mont.), Obama's point person for health care reform, is one of the top recipients of drug company and insurance campaign contributions.

Obama's latest flip flop will no doubt anger millions of people who despise the profit-gouging drug industry and are desperate for relief from the high cost of prescription medication.

For millions of Americans, a trip to the pharmacy to fill a prescription induces nothing short of a panic attack. Picking up a prescription is a trade-off against paying the mortgage, buying food, putting gas in the car or paying utility bills. Millions routinely skip doses of medication to make it last longer, to the detriment of their health.

A study by the Center for Health System Change (HSC), a nonpartisan health policy research organization, found that the proportion of Americans under 65 years old who reported problems affording medications increased from 10.3 percent in 2003 to 13.9 percent in 2007. Uninsured, working-age people who were unable to afford prescription drugs saw the biggest jump--from 26 percent in 2003 to nearly 35 percent in 2007.

As report authors Laurie Felland and James Reschovsky, senior health researchers at HSC, wrote:

The outlook for non-elderly Americans' access to prescription drugs is not positive. The ability of many people to afford prescription drugs is likely to deteriorate as the economy continues to decline. The economic downturn will swell the ranks of the uninsured and place greater fiscal strains on state Medicaid budgets, likely leading to tightening of drug benefits and eligibility.

The outlook for the salaries of the CEOs of the biggest drug companies is positive, even during an economic depression. Last year, Johnson & Johnson CEO William Weldon was paid $29,127,432; Abbott Labs CEO Miles White made $28,253,387 and Merck's Richard Clark took in $25,073,555.

The only way to bring down the cost of medicine is for the government to negotiate with the pharmaceutical industry as almost every other country does. In those countries, access to both medicine and health care is viewed as a human right. Until that happens--and the Obama administration will have to be forced to do it--Americans will continue to suffer the devastating health consequences of going without medicine and pay the highest prices in the world.

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