Pharma’s Middle Finger to Fiscal Conservatives

Mytheos Holt
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Posted: Aug 25, 2017 9:39 AM
Pharma’s Middle Finger to Fiscal Conservatives

In the fight over pharmaceutical malfeasance in Washington, one common worry that embroils Republicans over criticizing the industry is the fear of somehow being gang pressed into common cause with advocates of socialized medicine. To criticize Pharma, the thinking goes, is to open the door to nationalizing the health care system by admitting to any flaws within it, and thus to invite socialistic control over peoples’ lives, as well as mass spending in perpetuity.

With regard to the first fear, it is almost redundant to state, as has been stated numerous times, that the biggest problems with the pharmaceutical industry are due to anticompetitive and anti-market policies, not due to the absence of socialism. There is a reason why Pharma willingly signed on with Obamacare and got massive rewards from that decision.

But with regard to the second fear – that of high spending in perpetuity – it now appears that the shoe is precisely on the other foot. Indeed, a new report in the Atlanta Journal Constitution reveals that one of the forces driving ballooning Medicaid spending is nothing less than…drumroll…pharma hiking its prices. In fact, the price tag of these price hikes is nothing less than a stunning $3.2 billion, and that’s on top of previous Medicaid spending.

No doubt, Pharma’s defenders will try to spin this as the price of state-of-the-art research. And in an alternate universe, they could theoretically be right. But here’s the thing: the drugs whose prices are being hiked have been on the market for decades. For example, one of the drugs that has been subject to this avaricious behavior is Ventolin, a drug that was first approved for production in 1981.

Now, given that fact, one might think that generic drugs could swoop in to out-compete the brand name alternatives at the pricing level. And in some cases, perhaps they could, but unfortunately, the fact that generics could exist in theory is rarely the case in practice. Why? Because pharmaceutical companies often hide behind specious excuses about consumer safety to justify refusing to give generic manufacturers samples of off-patent drugs they have every legal right to purchase. This problem has gotten so bad that the unlikely duo of Sens. Patrick Leahy (D-VT) and Mike Lee (R-UT) have teamed up to combat it, along with others. Their bill, the CREATES Act of 2017, bars drug companies from second guessing the FDA once the latter has approved a generic drug for production. That kind of competition would almost certainly drive down costs for taxpayers.

But even outside creating competition, there are more direct ways the government can apply pressure to Pharma to keep costs down for patients. One prototype is the 340B drug pricing program, which demands that pharma companies offer certain drugs at reduced prices to safety net hospitals (ie hospitals that serve the vulnerable, such as religious and children’s hospitals), as a condition of their being able to sell drugs to the Medicare Part B market. The policy has fallen out of favor with the Trump administration, for reasons that remain politically inscrutable. Indeed, just this week, the administration proposed delaying rules that could actually enforce this highly successful drug price killer. Far from this inconsistent and troubling approach, 340B should be used as a blueprint for similar policies to hold down spending on Medicaid. After all, no company has a right to as much taxpayer money as it wants.

One thing is certain: Fiscal conservatives can’t continue to tolerate an industry that milks the Federal government for cash and leaves taxpayers holding the bill. It’s time for the Right to swallow its misguided fear of being seen as socialistic for calling out an industry that profits on the absence of markets, and bilks everyday citizens out of their tax dollars. Last I checked, those kinds of behaviors are the definition of socialism. Let’s hope others in the Republican coalition feel the same.