Joe Biden’s record on healthcare policy is not the best. In 2020, he opposed Medicare-for-All, demagoguing the issue by calling it “socialism,” in order to deny Bernie Sanders the Democratic presidential nomination. The announced Biden alternative was an Obamacare public option, which was allowed to die a quiet death once the president’s nomination was secured.
Later, under the Inflation Reduction Act of 2022, the main Biden healthcare initiative was to extend for three years the higher Obamacare marketplace subsidies temporarily raised during the pandemic and to cap individual out-of-pocket Medicare costs for prescription drugs and insulin.
Much has been made of the subsidy-stimulated record of 21 million Obamacare marketplace sign-ups for 2024 (approaching double the 2020 level), supposed proof of the program’s popularity. Actually, it’s more a sign of practicality on the part of Americans, who are not stupid: If the system can’t provide what you really need or think you deserve, take the best thing on offer; it’s better than nothing. What with the failure of 10 states to expand Medicaid, the marketplaces are all there is for many uninsured, but the increased Obamacare subsidies, purely a stopgap, will end in 2025 — a potentially fatal flaw in the program.
Nevertheless, one area where Biden and the Democrats have followed through on healthcare with apparent success is on mandatory Medicare prescription-drug negotiations, a last-minute inclusion in the Inflation Reduction Act. If Obamacare is complicated, confusing and subject to change — Paul Krugman, an advocate, admits it’s a Rube Goldberg device — drug-price negotiations are relatively cut and dried, an exception to most aspects of America’s convoluted healthcare system.
Starting two years from now, in 2026, the first 10 brand-name drugs chosen for negotiation (from among those of highest cost to the Medicare program) will have their prices adjusted for purchase under Medicare’s Part D prescription entitlement. They will be followed by 15 more drugs in 2027, another 15 in 2028, and 20 per year thereafter.
The 40 drugs to be selected through 2028 represent less than meets the eye. They will make up a tiny share of the thousands of drugs on the market and be limited to those with no generic or biosimilar competitors; they will also retain patent protection, most for nine years after entering the market and the more complex for 13 years.
Although the program is incremental and extremely modest — progressive Democrats initially wanted all drugs negotiable from the start — a comparison with what went before is like night and day. Medicare’s original Part D drug benefit, enacted as part of George W. Bush’s 2003 package of “reforms” that accelerated privatization of the overall program, was incorporated in the Medicare Prescription Drug, Improvement, and Modernization Act, passed mostly (but not entirely) with Republican votes; it created a watered-down entitlement, beginning in 2006, with its infamous “doughnut-hole” coverage gap.
Part D aimed at a minimal lowering of drug costs for seniors without disturbing in the least the profits of Big Pharma. Negotiation of drug prices, which some thought then could reduce drug-company revenues by 3% to 10%, was expressly forbidden by law. Accordingly, industry profits continued unabated, reaching $50 billion annually by 2020.
Such outlandish profits are made possible by US prescription-drug prices that average 250% higher than the combined averages for the 38 advanced countries of the Organization for Economic Cooperation and Development (OECD), according to a 2022 RAND Corporation study. The companies making up Big Pharma justly fear the precedents Medicare price negotiations will set in the US, their favorite unregulated place to do business, especially in forcing down prices in the private, non-Medicare market. One estimate suggests negotiations will save the Medicare program itself close to $100 billion during the first decade alone.
These savings, however, will be meaningful only if negotiated prices proceed in conjunction with other steps to limit abuse of the system by the pharmaceuticals. Foremost of these will be ending the corrupt “evergreening” of drug patents; that is, allowing federal patent renewals for continued exclusive production and sale of existing drugs rationalized by minor chemical or cosmetic changes aimed at marketing them for alternative conditions, claiming the drugs are “new” when they’re not. Patent protection, it’s clear, is mainly profit protection.
Panic is beginning to set in among Big Pharma members at the prospect and ramifications of losing their Medicare cash cow. It’s reflected in their radically expanded advertising budgets, which have doubled since 2016 to a combined $12 billion annually, a cost factored into retail prices. (The US is unique in permitting drug ads aimed directly at consumers, something banned in most countries.)
There’s also the inference that lower negotiated prices will mean fewer new drugs being developed because, presumably, companies won’t risk their reduced profits on innovative research. In 2021, the Congressional Budget Office, influenced no doubt by industry-friendly economists, estimated lower prices will mean eight fewer new drugs over the next decade and 30 fewer the following decade, a 13% decline. It’s an unknowable contention, but it provides a conveniently scary scenario, encompassing an evidence-free veiled threat Big Pharma has used for years to protect its turf.
In the end, the real threat to healthcare consumers is that the Supreme Court may rally to Big Pharma’s defense. Already, six drug firms, including four targeted in the first round of Medicare negotiations (Merck, Johnson & Johnson, Squibb and AstraZeneca), have joined their lobby PhRMA (Pharmaceutical Research and Manufacturers of America) and the US Chamber of Commerce to sue the government, charging price negotiations are unconstitutional.
As written, the law requires companies to negotiate, or choose between paying a penalty tax or withdrawing their drugs from the Medicare program. Industry lawyers plan to resuscitate the 19th century doctrine of “substantive due process,” devised by Court conservatives to protect monopolistic railroads from public regulation by declaring them “persons” that couldn’t be deprived of their property under the Fifth and 14th Amendments without “due process of law” and “just compensation.” A Supreme Court that revived the concept of corporate personhood in its 2010 Citizens United decision may find that’s a hard rationale to resist.
Let’s give Sen. Mitt Romney (R-Utah) the last word. Defending the drugmakers at February’s Senate healthcare hearings, ex-CEO Mitt imparted this choice bit of corporate wisdom: “In capitalism, if you’re running an enterprise … you try and get as high a price as you can.”
Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.
From The Progressive Populist, April 1, 2024
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