DC Again Misidentifies a Problem – For Crony, Self-Serving Reasons

Seton Motley | Less Government | LessGovernment.org
Seton Motley | Less Government | LessGovernment.org
Indeed It Does

In the great Aaron Sorkin based-upon-real-life movie “Charlie Wilson’s War” there is a brief yet very apt exchange between Texas Representative Charlie Wilson and CIA agent Gust Avrakotos:

Wilson: “No, I don’t understand…because I’m stupid.”

Avrakotos: “No, you’re not stupid – you’re just in Congress.”

In the area of pharmaceuticals and their national and international markets – Georgia Republican Congressman Buddy Carter perfectly fits the Sorkin-Avrakotos description.

With, unfortunately, a very heavy dose of self-serving cronyism thrown in.

Congressman Carter was himself a pharmacist when he was engaged in productive work.  He and his wife still own three pharmacies.

Big Pharma – and Big Pharmacies – are big fans of Congressman Carter.  And in DC, big fans – means big donors.

All of which explains why Congressman Carter spends a great deal of his time attacking a perfectly reasonable free market development – which cuts ever-so-slightly into his pharmacy profits and those of his Big Pharma donors.

That perfectly reasonable free market development – are Pharmacy Benefit Managers (PBMs):

“According to the American Pharmacists Association, ‘PBMs are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims. For the most part, they work with self-insured companies and government programs striving to maintain or reduce the pharmacy expenditures of the plan while concurrently trying to improve health care outcomes.’”

Translation: PBMs gather together individuals and small groups – and use that accumulated oomph to negotiate better prescription deals than these individuals and small groups could negotiate on their own.

Carter and his donors argue the PBMs remuneration for negotiating these rebates is a chief inflater of drug costs.  This is more than a little absurd:

“(A) new analysis sheds light into how little of U.S. drug spending might be addressed by overhauling rebates. That’s because most of the money spent on pharmaceuticals in this country goes to drug companies – not middlemen like PBMs, wholesalers, pharmacies, insurers or doctors.

“The U.S. spent an estimated $480 billion on prescription medicines in 2016, including the gross profits of all intermediaries, according to an analysis last week on the Health Affairs blog….$323 billion of that was drugmakers’ net revenue excluding rebates, discounts and other price concessions like copay coupons – but not accounting for manufacturing expenses.

“In comparison, PBMs captured only 4 percent of the pie – or $23 billion in gross profits. That’s less than the profits taken by other players in the supply chain like pharmacies ($73 billion) (and) providers ($35 billion) (and a little more than) wholesalers ($18 billion).”

4% – ain’t very much.  The complaints of Carter and his donors – are like a football team’s offense and defense getting together…and saying the special teams is spending too much time on the field.

If Carter and Big Pharma want to fix their actual problem – they should look abroad.  Where they willingly submit to much larger doses of exactly the sort of group-discount negotiations – they decry in domestic PBMs.

This is where Carter and Big Pharma should all enthusiastically get behind President Donald Trump’s America First agenda.

Why the U.S. Pays More Than Other Countries for Drugs:

“Much of the considerable difference in pricing from country to country is the result of the bargaining power of big, state-run health insurance systems, like Norway’s, compared to the relatively weaker bargaining position of American doctor’s and health insurance systems.  America’s Medicare, for instance, is barred by law from negotiating drug pricing. Healthcare systems in other countries are also more willing to set hard price caps on drugs and to deny coverage for drugs deemed insufficiently cost effective.”

Fully Socialist government medicine systems the world over – are cutting Big Pharma off at the knees.  And since most of the world has stupidly, fully socialized their medicine systems – Big Pharma is getting cut off at the knees just about everywhere.

Which leaves just-about-only the US – and its still-at-least-semi-private medicine system.  And the only one of any worthwhile economic size and scale.

America and America alone is Big Pharma must make up for all their massive losses – accumulated all around the socialist-medicine world.  Which of course also means:

“As a result of the substantially inflated prices for drugs in the U.S., Americans effectively subsidize research and development for new drugs worldwide.…”

Get that?  We here in the US are getting screwed coming and going.

But wait – there’s more:

“Americans also pay for pharmaceutical firms’ large budgets for consumer advertising, which is not allowed in Europe….

“Higher American prices also account in part for the fact that big pharma firms tend to be very profitable enterprises – pharma and biotech firms in the S&P 1500 earn an average profit margin more than twice the average for all companies in the index.”

Get all that?

Big Pharma gets screwed all over the world – meaning they must make it all up here in the US.

And despite the worldwide screwing – Big Pharma is still very profitable.  Again, entirely thanks to the US.

And in a (perfectly understandable) effort to increase those profits – Big Pharma and their Congressman Carter are…bizarrely, repeatedly going after tiny-profit-PBMs here in the US.

Rather than diving into the orders-of-magnitude-larger pool of worldwide price-screwing Big Pharma has for decades been enduring.

Let alone addressing the massive theft and counterfeiting of their products – which Big Pharma has for decades suffered at the hands of China and many other places.

Again, President Trump is actively addressing all of this.  Nations everywhere taking advantage of us in trade deals – and outright theft of our stuff.

It has always been a much better idea for Big Pharma and their Congressman Carter to focus their attentions abroad.

Now, with President Trump, it is also a much better opportunity for Big Pharma and their Congressman Carter to focus their attentions abroad.

The best opportunity Big Pharma and their Congressman Carter have had in decades.

They should make the MUCH better business decision – and take maximum advantage of it.

This first appeared in Red State.

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