As we report in a companion piece here on CJR.org—“Medicare uncovered: What’s not on the table”—the president’s budget proposal, to be delivered tomorrow, reportedly contains a provision that takes a baby step toward discounted drugs for some poor people on Medicare. It would allow the government to obtain rebates from pharmaceutical makers for drugs covered under Medicare, for the benefit of seniors enrolled in its low-income subsidy program.
Mandating these discounts begins to use Medicare’s purchasing leverage to help both beneficiaries and taxpayers. How do the drug makers respond? By trying to stomp it out, of course. And just how they are trying to block the measure is interesting: disease advocacy groups, which tend to have ties to drug makers, along with others who may be ideologically allied, are signing on to a letter campaign by two of the industry’s allies.
Since the middle of March, those two allies have enlisted hundreds of organizations to sign on to letters to Congress arguing against the requirement that drug companies give the rebates. The two are the Council for Affordable Health Coverage, a group that’s been around since the 1990s to push conservative and market-oriented views on healthcare, and another organization, called RetireSafe, which The Hill reports is funded in part by the Pharmaceutical Research and Manufacturers of America.
The drug companies fear that these discounts, in the form of rebates for some Medicare beneficiaries, could open the door for more serious negotiations later on—the kind of negotiations other countries engage in that allows them to pay much less for medicines. Such a step, involving a more robust use of government marketing power, could affect their bottom lines. Drug companies are some of the most profitable enterprises around, and are not about to accept change lightly.
The letters from the Council for Affordable Health Coverage and RetireSafe are similar. The Council’s letter argues that the rebate “is a poorly informed, ill-conceived policy that poses serious risks to the health and well-being of millions of seniors.” It predicts dire consequences, like increasing premiums, jeopardizing patient adherence to drugs, and shifting costs to employers. Too bad most signers of the letters probably won’t see the rebuttal to these arguments posted late last year on a blog on Health Affairs, the respected peer-reviewed journal about health policy. “Rebutting an unfair critique” was the headline.
The RetireSafe letter makes some of the same arguments, which apparently have come from a study by Douglas Holtz-Eakin, former director of the Congressional Budget Office and now president of the American Action Forum, a policy institute that supports limited government. The RetireSafe letter disingenuously notes that while supporters of drug price negotiations “assume that because HHS (Health and Human Services) is precluded from negotiations, no negotiations to lower drug costs take place. The opposite is true.” Drug plan sellers, it says, “already negotiate discounts and rebates with manufacturers as a condition of participation in Medicare.”
Well, yes they do. But drug companies dealing with their friends in the insurance industry is hardly the same as engaging in tough negotiations with the government. Whether signatories to the letter wil take the time to understand the difference is another matter.
So who has signed on to these letters to help out the drug makers? Many of the organizations—more than 300 signers on each letter—are disease advocacy groups. It’s not uncommon for such groups to have close ties to drug makers, either as direct funders or consultants or both. Take for instance, the Society for Women’s Health Research. According to its website, it formed a corporate advisory council in 1991 whose 22 members are mostly makers of drugs and medical devices. The mission of the advisory council, according to the site, is “to engage the resources of the health care industry and its suppliers in collaboration with SWHR to spearhead changes to improve womens’ health and research.”