Pharmaceutical industry perturbed by the Drug Savings and Choice Act

In the April Dose of Reality, Neil Davis shows how the pharmaceutical industry, which is not happy about the provisions in the Medicare Prescription Drug Savings and Choice Act of 2009, is, in effect, a giant marketing machine, but not really an industry devoted to finding new drugs to cure illness. (You read that right.)

It is the most profitable of all industries in the United States, with profits equaling 25 percent of sales. Big Oil isn’t even close.…

In 2000, drug company expenditures for marketing and administration amounted to 36 percent of sales income, but only 14 percent of income went to research and development. Thus, the expenditure for marketing and administration was two and a half times that for drug research and development.

Also, of seventy-eight drugs approved by the Food and Drug Administration (FDA) in 2002, only seventeen contained new active ingredients, and only seven were classified by FDA as improvements over older drugs. Not one of these improved products came from a major drug company.

So, going by the numbers, the truth is that big pharmaceutical companies are primarily marketing machines. Their high profits and large marketing costs are the true reasons that the public has to pay such high prices for pharmaceuticals. It is not due to the need to cover the cost of developing new drugs.

The health care reform war starts

And the first sally, according to Neil Davis, is the Medicare Prescription Drug Savings and Choice Act of 2009 (HR 684 and S 330).

I am hoping that President Obama and the Democrat-controlled Congress will get behind the serious reform proposed by HR 676… this bill calls for a total overhaul of the system by taking health care out of the marketplace.…But the early signs are that the Democrats in Congress and President Obama are not willing to make a frontal attack on health care reform.

Instead, Davis says, they are hoping to set up a government operated program that would deal with only one small part of the health care picture: negotiating drug prices for Medicare. A step in the right direction, but only one smal step--still, one that would save perhaps $40 billion annually!

More in the March Dose of Reality.

The Health Care Reform War Opens

Democrats fired the opening shot of the Health Care Reform War in January with the introduction of a bill to allow Medicare to negotiate prescription drug prices with the pharmaceutical industry. Introduced in both the House and Senate, the Medicare Prescription Drug Savings and Choice Act of 2009 (H. R. 684) negates provisions of the Bush administration’s Medicare Prescription Drug Improvement and Modernization Act of 2003 that prevented such negotiations.

If the bill becomes law, Medicare will have the same power to negotiate as the Veterans Administration. That organization is able to buy pharmaceuticals for little over half what the Medicare D insurers pay. Consequently it is expected that major savings will accrue to both taxpayers and Medicare beneficiaries, perhaps as much as $40 billion annually.

Very likely, as with the stimulus package legislation just enacted, the passage of this legislation will shape up as a partisan battle. Our Senator Begich surely will vote for it, but the Republicans in Congress probably will stand almost unanimously against passage in order to protect pharmaceutical and insurance industry profits. Alaskans should watch how Senator Murkowski and Representative Young vote on this issue. It is an opportunity for them to display their true colors; are they on the side of the taxpaying public, or are they on the side of the for-profit insurance and pharmaceutical industries? There is no in-between on this one.