The bipartisan Washington, DC “consensus” has so many blind spots, you’d think its exponents lived in a black box. Recently, it has become clear that one of the biggest of those blind spots is the federal government’s treatment of the pharmaceutical industry.
This can be most clearly seen in the troubling continuity between the favored policy of pharma-friendly elements within the Trump administration, and the Obama administration’s own weakness on a critical policy in the battle over drug prices: namely, the 340B drug pricing program.
As granular followers of pharmaceutical policy will already know, 340B is a program passed during the first President Bush’s term, which offers pharmaceutical companies a very simple deal. If they want an ability to sell drugs, price negotiation free, to the giant pot of money that is the Medicaid and Medicare Part B markets, then they have to also sell drugs at lower prices to a specific subset of hospitals that serve a disproportionate share of vulnerable populations, classified as “safety net hospitals.”
To any executive, this should be both a financial and political no-brainer. Financially, the ability to sell to the $57 billion Medicaid and $168 billion Medicare Part B market is so profitable that it easily dwarfs the losses from selling at reduced prices to certain hospitals. Politically, engaging in such voluntary price slashing behavior can engender good will from a grateful public.
However, despite all this, in recent years, this policy has long been in the crosshairs of the pharmaceutical industry. Why? Because (among other things) it limits their ability to price gouge cancer patients, one of the most profitable markets out there. Never mind that cancer drugs are already among the most expensive, and thus the most profitable, drugs on the market. Witness the breakthrough new cancer drug from Novartis, which is projected to be “a quantum leap more expensive” even than other cancer drugs.
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Nevertheless, in a show of politically senseless greed, pharma has done everything in its power to either weaken or end 340B altogether. As one rationale, they claim that the Obama administration expanded the program beyond its original intent by allowing rural hospitals to participate.
However, ironically, even if this accusation were true, the fact remains that the Obama administration did not actually show much willingness to enforce the rule. Witness the fact that President Obama only permitted a policy fining companies that overcharged 340B hospitals and clinics to enter the books eight days before he left office. What’s more, the actual fine was only $5,000 per offense and you must prove that a company “knowingly and intentionally overcharged”, a pittance to the largest pharma companies. One presumes that Obama didn’t act sooner because he knew that his chosen successor, Hillary Clinton, needed all the pharma donations she could get. And indeed, she did get them, albeit to no avail.
Now, with a President in office who accused the industry of “getting away with murder,” you’d think that this policy would’ve gotten more teeth and been implemented more strictly. Unfortunately, due to Conservatism, Inc’s continuing attempt to subvert and undermine the President’s preferred policies, the opposite has happened. Just last week, the Trump administration once more delayed the enforcement rule by another year!
What makes this truly bewildering is that just a few months before, the Trump administration’s Centers for Medicare and Medicaid Services (CMS) took steps to strangle the 340B program under the pretext that hospitals were abusing it to pad their bottom lines, contrary to the letter and spirit of the program. Hopefully, the Administration will come to their senses and follow the recommendation of their own advisory committee to scrap the idea, but the irony should not be overlooked. That is that when pushing pharma friendly policies, Conservatism Inc’s swamp denizens default to concerns about the law being followed, only to turn around months later and eliminate enforcement for…the law.
Sadly, 340B is probably not the only place where this pro-big business but anti-rule of law approach will rear its ugly head. Nevertheless, it should be called out now. After all, this is precisely the kind of behavior that made Americans sign onto President Trump’s pledge to “drain the swamp.” Hopefully, the Trump White House will revert to that pledge, rather than continuing to permit the swamp’s lobbyist-driven incoherence to overrule the campaign promises of the President and the wishes of the American people.
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