Major
pharmaceutical companies in the United States
are battling with Vermont Senator Bernie Sanders
over an issue that is at the heart of whether we
value human well
being over
corporate profits. As chair of the Senate
Committee on Health, Education, Labor, and
Pensions (HELP), Sanders has vowed to force CEOs
of pharmaceutical companies to publicly answer
for why their drug prices are so much higher
than in other nations. He plans to bring a
committee vote to subpoena
them.
The subpoenas are necessary because—brazenly—the
CEOs of Johnson & Johnson and Merck have
simply refused to testify to the HELP committee.
What are they afraid of?
In
a defensive-sounding
letter to
Sanders, an attorney for Johnson & Johnson
accused the Senator of using committee hearings
to “punish the companies who have chosen to
engage in constitutionally protected
litigation.” The letter does not specify the
litigation in question—perhaps because it would
sound so ridiculous and would reveal the company’s
real agenda.
Last July, the company, along with Merck and
Bristol Myers Squibb sued
the Biden administration for
allowing the Medicare program
to regulate prescription drug prices.
It
appears that Johnson & Johnson and Merck are
indeed afraid of being questioned by lawmakers
about drug-profiteering in the U.S.
One
pharmaceutical expert, Ameet Sarpatwari of
Harvard Medical School explained to the New
York Times that,
“The U.S. market is the bank for pharmaceutical
companies… There’s a keen sense that the best
place to try to extract profits is the U.S.
because of its existing system and its
dysfunction.” Another expert, Michelle Mello, a
professor of law and health policy at Stanford
university, told the Times, “Drugs are so
expensive in the U.S. because we let them be.”
In
other words, it’s been a free-for-all for
pharmaceutical companies in the U.S. In 2003,
then-President George W. Bush signed
a Medicare reform bill into law,
promising help for seniors struggling to pay for
medications, but that law stripped
the federal government of
its power to negotiate drug prices for
Medicare’s participants. It was a typically
Republican, Orwellian move: promise help to
ordinary people and deliver the exact opposite.
Nearly
two decades later, the Inflation
Reduction Act (IRA),
which Biden signed into law in 2022, tied
Medicare drug prices to inflation and required
companies to issue rebates if prices rose too
fast. It was the first time since Bush’s 2003
law that drug manufacturers were subject to any
U.S. price regulations. Pharmaceutical companies
aren’t having it, and not only did they sue
Biden over the IRA, they don’t seem to want to
It’s
not enough for Medicare to be able to cut drug
prices. There needs to be nationwide regulation
on all drug prices for all Americans. After all,
American taxpayers generously subsidize the
research and development of most drugs. A report by
Sanders’ staff explained that “[w]ith few
exceptions, private corporations have the
unilateral power to set the price of publicly
funded medicines.” The report’s authors chided
that “[t]he government asks for nothing in
return for its investment.”
What’s
more, the report rightly points out that people
in other nations benefit from having access to
lower-cost drugs that Americans have paid global
pharmaceutical companies to develop. For
example, Symtuza,
an HIV medication that scientists at the U.S.
National Institutes of Health helped to develop,
is available to U.S. patients for a whopping
$56,000 a year, while patients in the UK pay
only $10,000 a year for the same drug purchased
from the same company.
It’s
not as if companies like Johnson & Johnson
have some perverse preference for European
patients over American ones. It’s merely that
their prices are regulated by most other
industrial nations. The U.S. “happens to be the
only industrialized nation that doesn’t
negotiate” drug prices, explained Merith Basey,
Executive Director of Patients
For Affordable Drugs NOW,
in an interview on
Rising Up With Sonali last fall.
Indeed,
countries like the UK,
France, and Germany,
offer models for the U.S. in drug price controls
and much has been written about what works best.
Further, there is—unsurprisingly—a strong public
desire for price controls. According to a Kaiser
Family Foundation poll in
August 2023, “majorities across
partisans say there is not enough regulation
over drug pricing.” Moreover, a whopping 83
percent of those polled “see pharmaceutical
profits as a major factor contributing to the
cost of prescription drugs.”
There
is no shortage of ideas for specific price
control regulations that could work in the U.S.
For example, the Center for American Progress’s
October 2023 report, “Following
the Money: Untangling U.S. Prescription
Drug Financing,”
delves deep into how market prices are
determined for medications and suggests
interventions at every stage of drug price
setting.
Frankly,
such complex solutions would not really be
necessary if all
Americans could simply join Medicare health
coverage and if Medicare’s bargaining power to
negotiate drug prices could be applied to all
drugs. But, in the absence of this commonsense
holistic approach to healthcare, even complex
price controls would be better than no price
controls.
Predictably,
conservative capitalist critics have trotted out
the same, tired arguments against government
price regulations of pharmaceuticals. “Drug
Price Controls Mean Slower Cures,”
declared a Wall Street Journal editorial
headline. The paper’s editorial board called the
IRA, “the worst legislation to pass Congress in
many years,” and went as far as accusing the
Biden administration of “extortion.”
But
who is engaging in extortion? Economists
studying the pharmaceutical industry have found
that for years companies have been so flush with
cash that they have spent
hundreds of billions of dollars in
stock buybacks and exorbitant executive bonuses
and pay packages. “The $747 billion that the
pharmaceutical companies distributed to
shareholders was 13 percent greater than the
$660 billion that these corporations expended on
research & development over the decade,”
wrote William Lazonick and Öner Tulum in a
report for the Institute for New Economic
Thinking.
Further,
the Wall Street Journal’s screed ignores price
controls in the UK, France, Germany, and other
nations. If those have no bearing on the speed
and quality of drug development, why should U.S.
price controls have an impact? And if they do
have an impact, then Americans are being
unfairly required to bear the burden that people
all over the world benefit from.
The
Journal’s editorial board made one accurate
claim, saying that the IRA “will also give
companies the incentives to launch drugs at
higher prices and raise prices for privately
insured patients to compensate for the Medicare
cuts.” The paper made this prediction without
any comment on unfettered corporate greed.
Indeed, if anyone is engaging in de facto
extortion, it appears as though pharmaceutical
companies may be the guilty parties in punishing
Americans for price controls.
Pharmaceutical
companies launched the new year with announced
price hikes on at
least 500 medications—a massive effort at gouging
the public. In contrast, the IRA’s drug price
controls apply
to only 10 medications so far,
and will be expanded to 15 drugs per year for
the next four years, and 20 drugs per year
thereafter.
Rather
than removing price controls on the paltry
numbers of medications the IRA can regulate, an
easy fix is to apply those same regulations to
most or all drugs. Best of all, in order for
such a solution to be implemented,
pharmaceutical company CEOs wouldn’t even have
to drag themselves into committee hearings to
explain away their corporate greed.
This commentary was produced
by Economy
for All, a project of the
Independent Media
Institute.
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