Will Big Pharma Cripple Healthcare Reform?
By
Phil Mattera, Dirt
Diggers Digest
For those of us who criticized the Affordable Care Act for not
going far enough, a big part of the concern was the law’s reliance on the
private insurance industry to handle much of the expanded coverage. That
industry, with its history of denying coverage and inflated premiums, deserved
to be phased out rather than being awarded a large new captive customer base.
It now looks like an even more serious problem for healthcare
reform will be another industry with a checkered past: Big Pharma. The
drugmakers are generating a growing crisis not only for Obamacare but also for
more established programs such as Medicare and Medicaid.
For example, some 3,000 ophthalmologists billed an average of
$1 million each (one billed $21 million by himself), reflecting heavy use of an expensive
medication for macular degeneration injected into the eye.
Another challenge comes from Sovaldi, a new hepatitis C drug
sold by Gilead Sciences with a list price of $1,000 per pill, or $84,000
for a typical course of treatment. The product is doing great things for
Gilead, which recorded $2.3 billion in sales for the drug’s first full quarter
on the market — a pharmaceutical industry record.
It is causing problems for those entities that have to pay for
use of the drug, including state Medicaid programs, the Department of Veterans
Affairs and private insurance companies. One of the largest of those companies,
UnitedHealth Group, recently cited the cost of hepatitis C treatments
such as Sovaldi as one of the reasons for a drop in its earnings in the first
quarter of 2014.
Earlier, several members of Congress, including Rep. Henry
Waxman of California, sent a letter to Gilead expressing concern about the
price of Sovaldi, but it generated little concern on the part of the company or
the rest of the industry. One pharma industry analyst was quoted as saying: “We just look at this
letter as a little bit of noise.”
Unfortunately, the dismissive tone was justified. Congress has
done little to rein in the cost of prescription drugs and even took the absurd
step of barring the federal government from negotiating with pharmaceutical
providers in the Medicare Part D program.
The cost problem will only get worse. Patents are expiring on
many major drugs, and the industry is creating fewer new ones, prompting
companies to squeeze everything they can out of their shrinking product lines.
That means higher prices and other shady practices such as
promoting drugs for uses for which they have not been approved. Many of the
industry’s largest companies have paid large amounts to settle
illegal-marketing charges brought against them by the Justice Department, among
them Eli Lilly ($1.4 billion relating to
Zyprexa), GlaxoSmithKline ($3 billion relating to
Paxil and Wellbutrin) and Pfizer ($2.3 billion relating to Bextra
and other medications).
Illegal marketing is just one of the serious charges brought
against Big Pharma in recent years. The $3 billion GlaxoSmithKline settlement
also covered allegations that it withheld crucial safety data on its diabetes
drug Avandia from the U.S. Food and Drug Administration.
Merck paid the federal government more
than $650 million to settle charges that it routinely overbilled Medicaid and
other government programs and made illegal payments to healthcare professionals
to induce them to prescribe its products. Eli Lilly paid $29 million to settle foreign bribery
charges.
It remains to be seen whether these cases have prompted Big
Pharma to clean up its act. I remain skeptical, especially in light of recent signs that the industry is engaged in
more concentration designed to allow companies to narrow their focus and thus
gain bigger market share in particular sectors.
More specialization will mean less competition, which in turn
will mean fewer choices and rising prices. When it comes to drugs, the
Affordable Care Act will have increasing difficulty living up to its name.