The issue of prescription drug prices is drawing the media spotlight. Last month, Martin Shkreli, CEO of Turing Pharmaceuticals and mega-Democrat donor, was savaged by the media after hiking the price of a generic drug used mostly to treat AIDS patients by 5,000 percent. He became a piñata for the Hillary Clinton campaign.
Last week, federal and state prosecutors sent subpoenas to drug company Valeant over its recent price hikes for at least two of its disease-fighting medicines. Democrats in Congress have been pressing for hearings on recent increases in drug prices, especially generic drugs. With a national election just a year away, these recent actions are just the first moves in a politically charged issue.
The issue of drug prices, which had been a political football for much of the ’90s and ’00s, never really went away. Instead it was supplanted by the larger debate over ObamaCare.
Drug companies signed on to supporting ObamaCare, even running ads touting the law, and publicly offered $80 billion in “discounts” over a decade in exchange for a lighter regulatory touch. The exact details of that “agreement” are, naturally, secret. But it is widely accepted that the PhRMA “discount” precluded government action on allowing imports of prescription drugs or price controls for Medicare recipients.
The federal government is, after all, PhRMA’s biggest customer. In 2013, the government, and certain Medicare beneficiaries, spent over $100 billion on prescription drugs. That figure only includes drugs prescribed under the Medicare Part D prescription drug coverage program, and doesn’t include Medicaid or other government health systems.
Now that ObamaCare is being fully implemented, health companies, including drug companies, are adapting their businesses to maximize their returns under the new law. As ObamaCare creaks under the weight of completely unrealistic cost-projections, the government will look for savings far beyond what PhRMA offered when the law was under consideration.
Drug companies naturally need to find revenue where they can, to weather the coming political debate.
In recent months, drug companies have turned their sites on an obscure, 20-year old federal program that provides discounted drugs to many poor and small hospitals. The so-called 340B program was created in the 1990s to allow “critical access” hospitals, serving low-income communities, to purchase outpatient prescription drugs at prices discounted by the government. Drug companies were “encouraged,” as the government would no doubt phrase it, to participate in the program by winning access to other government programs in exchange.
Just over 2,000 hospitals, many in rural areas, participate in the program, but the overall impact of the discounts on big PhRMA are modest. The entire program purchases only around $7 billion worth of discounted drugs a year, around 2 percent of the pharmaceutical industry’s revenues.
The drug industry recently launched a new advocacy group, “Alliance for Integrity and Reform 340B” to curtail or eliminate the 340B discount program. Major pharmaceutical firms, and many organizations that receive funding from them, are “members” of the AIR340B group. The group is run by Washington, D.C. PR firm Venn Strategies.
As health care policy moves into the post-ObamaCare debate, the health care industry has already begun aggressive lobbying to carve out new benefits. The 340B program was noncontroversial for most of its 20+ year existence, but even an obscure program like it can mean billions to the bottom line of a major drug company.
Soon, no doubt, there will be Congressional hearings on recent price increases by generic drug manufacturers, but those are just the headline-grabbing fronts of a multi-billion fight in the health care trenches. The government is in firm control of the nation’s health care system. In fighting for a slice of that, even a small discount drug program for poor hospitals is on the table.