Do Democrats have what it takes to stand up to the pharmaceutical industry?
For years, Democrats have talked about allowing Medicare to negotiate prices for prescription drugs, just as government health insurers do in other countries. Simple market logic would suggest that the current system, in which Medicare is barred by law from negotiating, is utterly absurd.
So now that Democrats are negotiating a sweeping reconciliation bill, this is the time to do it. And the idea is supported by President Biden, the Democratic congressional leadership and most of the party.
But it looks like the chance may be lost, all because of a few centrist Democrats who have decided that preserving pharmaceutical industry profits is absolutely vital.
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In a vote Wednesday in the House Energy and Commerce Committee, one of multiple committees handling this bill, three Democrats — Reps. Scott Peters (D-Calif.), Kathleen Rice (D-N.Y.) and Kurt Schrader (D-Ore.) — voted with Republicans to kill the provision that would allow price negotiation, preventing the measure from going forward.
Explaining her position, Rice said: “I support many of the proposals being considered this week, but I do not support advancing policies that are not fiscally responsible and jeopardize the bill’s final passage.”
That is utterly bizarre; price negotiation is entirely “fiscally responsible,” because it would save the government hundreds of billions of dollars. As for jeopardizing final passage, it would only do so if Rice herself and other centrists use this to kill the entire bill.
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Liberals often explain the positions taken by centrist Democrats by saying “They’re just a bunch of corporate shills doing industry’s bidding!” That’s often a drastic oversimplification — when they disagree with liberals, centrists may be acting out of sincere belief or to reflect the politics of their swing districts.
But this time, that may be the best explanation.
To repeat, in all our peer countries, governments negotiate prices with drug companies. Yet in the United States, the company says “This new Flerzmax medication will cost patients $12,000 a month. Take it or leave it.” In some cases, these are lifesaving or extremely useful drugs, which makes it very difficult for Medicare to say no.
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The industry always argues that getting a better deal from them on prices would destroy their ability to develop new medicines. As drug company CEOs recent wrote to Congress, price negotiation “would threaten patients’ access to medicines and sacrifice future medical advances.”
Americans need to pay the highest drug prices in the world, the argument goes, but that’s just what we have to do, in effect subsidizing the industry so they can discover new treatments from which the whole world will benefit.
The problem is that while pharmaceutical companies produce amazing medications that save untold numbers of lives, they aren’t a bunch of monkish scientists slaving away at their lab benches. This is one of the most profitable industries in the world — one study showed that between 2000 and 2018, 35 large drug companies made a total of $1.9 trillion in profits — and when they double the price of a medicine it isn’t because they’re strapped for research money.
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As you’ve probably noticed if you have a television, the industry spends billions of dollars on ads to get you to pressure your doctor to prescribe you the latest blockbuster drug — advertising which is illegal in most countries, but not in the United States.
While that may be the most visible part of their marketing machine, they actually spend far more on marketing to doctors. And from the trillions they take in, there’s plenty left over to reward stockholders: As a July congressional report concluded, “From 2016 to 2020, the 14 leading drug companies spent $577 billion on stock buybacks and dividends — $56 billion more than they spent on R&D over the same period.”
And of course, the people leading those companies could fill up their infinity pools with cash if they wanted: If you’re Pfizer’s CEO and you were paid a mere $21 million in 2020, you might look jealously at the Novavax CEO who made $48 million or the Regeneron CEO who took home a staggering $135 million.
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What makes all that possible is not only the ban on price negotiation but all kinds of taxpayer assistance, from the federal government funding basic research the drug companies piggyback on to generous R&D tax credits. To keep that money flowing, they employ an army of lobbyists; in 2020 alone, the industry had over 1,500 lobbyists and spent $300 million on lobbying, yielding spectacular returns.
The average person may not know all those details, but they know that prescription drugs are insanely expensive. And while most polling on this question has been done by liberal groups (see here or here), it shows overwhelming support for price negotiation among Democrats, Republicans and independents, even in the districts of the centrist Democrats who oppose it.
Despite its defeat in committee, price negotiation isn’t dead yet; it could still be part of the final bill. It will be a test of whether Democrats have the ability to do something incredibly popular and worthwhile when it means standing up to one of the most powerful industries in the world. Right now it’s anyone’s guess whether they will.
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