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How the pharmaceutical industry's lobbyists cost America $378 billion

Karen Tumulty and Michael Scherer have an excellent article on how the pharmaceutical company bought its way to total victory on health-care reform. I'd summarize, but it's really better that you read it.

By Ezra Klein  |  October 22, 2009; 3:25 PM ET
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The sad thing is that Obama let them run all over him. Where is candidate Obama of the 2008 presidential campaign? The candidate who promised to fight for average Americans to get cheaper drugs like Canada does? This is a prime example of the cynicism Obama talked about so often. I wish he'd look in the mirror now that he's president.

The good news is, it's not too late for the White House and Harry Reid to reverse course on that huge giveaway Pharma deal when the House and Senate bills are merged during the conference process. Think about the hundreds of billions of savings that can be passed onto the middle class in this country.

This will be Change We Can Believe In.

Posted by: jasonr3 | October 22, 2009 3:52 PM | Report abuse

oh the administration kept this under lock and key.

I read this article last night and I honestly didn't think you'd post on it Ezra. I give you credit.

I especially like this:

"It's the low-hanging fruit," says Mark Merritt, head of the Pharmaceutical Care Management Association, the trade organization for prescription-drug-benefit managers. "If you can't get this right on cost control, what can you get right?"

Obviously they can't get anything right on cost control. You think Lipitor and Crestor is expensive, look at some of these drugs. When we get to a point where there is clear evidence that Drug A can cure cancer but the drug costs $500,000 who do you think's getting it?

I also love this part:

Then-chairman Ted Kennedy, whose state of Massachusetts is home to many biotech firms, had long supported a 12-year exclusivity period. The industry showed its gratitude last year when Amgen, one of the biggest biotech firms, donated $5 million — twice the size of the next largest donation — to a nonprofit educational institute being built in Kennedy's honor.

So the late Senator Kennedy sold out his constituents for some campaign money and a large donation for an institution in his name. What a great job!!!


Posted by: visionbrkr | October 22, 2009 4:04 PM | Report abuse

It wasn't the lobbists, it was your boy Rham.

Posted by: obrier2 | October 22, 2009 4:19 PM | Report abuse

Prescription Research Institute, a non-profit organization engaged in promoting the safe and effective use of expired medications recently launched its web site

Conducting laboratory tests on expired medications in conjunction with surveys of consumer use of outdated medicines in their homes, the Institute will create the world’s largest data base resulting in medication cost savings, public health benefits and a positive environmental impact. The high cost of medicines is a problem that seems to be getting worse rather than better. The U.S. Armed forces recognized this in 1985, resulting in the creation of the Shelf Life Extension Program (SLEP) . SLEP established that 90% of the Department of Defense’s billion-dollar stockpile of drugs were proven to be effective and safe as long as 10 years beyond the manufacturer’s expiration date. More recently, the FDA decided to release for public consumption outdated Tamiflu and Relenza. We believe these actions show that the use of effective outdated medicines needs to be closer examined.

We’re conducting stability tests of expired medication and collecting data. You can assist by completing our survey.

Posted by: ba1939 | October 22, 2009 4:26 PM | Report abuse

I completely agree. There are only a couple of low-hanging fruit as far as big, easy cost savings--and pharmaceuticals is one. I haven't seen an analysis of the impact of Obama's misguided $80 billion PhRMA deal on national health expenditures but the lost savings must be in the hundreds of billions. It even has the potential to blow up the whole reform if enough new biologics come to market.

Consider that at Kaiser their entire operating profit derives from savings negotiated by their pharmacy benefit program. Literally 100%. The idea that you could deal that away is just crazy...

Posted by: bmull | October 22, 2009 4:48 PM | Report abuse

Is passing a bill, even the Senate Finance Committee bill, a sure thing today?

There is a lot of opposition and it makes a lot of sense to split the opposing forces and tackle them sequentially rather than all at once. All the people crying 'sellout' need to come up with a path to 50+1 for a plan that would overcome MORE opposition from Pharma, doctors, device manufactures, etc..

And don't say 'elected Dems need to show more spine'. The Senate is filled with soft losers who do the right thing as a last resort. Asking that motley lot to take more fire, not less, doesn't exactly square with reality.

Posted by: jamusco | October 22, 2009 5:08 PM | Report abuse


I met a client of mine last week that is an assisted living facility. They have literally weekly 3-4 full large garbage bags filled with sealed, NEW prescriptions that they are required by law to dispose of. Completely good prescriptions that could go to the poor if no one else. The fact that the government not only allows this BUT REQUIRES IT, is just as dumb as it gets.

Posted by: visionbrkr | October 22, 2009 5:11 PM | Report abuse

One guess who's funding Anna Eshoo:

Posted by: DaffyDuck2 | October 22, 2009 6:08 PM | Report abuse

Drug cost is probably the easiest and one of the most important things to get right. When I say "easiest" I don't mean that it's politically easy. I mean that they could rely on economic models to determine good policy based on past experience and solid forecasting. I think its important because PhRMA is potentially the most concentrated source of trouble for future medical spending.

I doubt the 12 year monopoly period is based on any good analysis other than pushing the envelope.

Furthermore, I would prefer to see a complete reform of patent law to a reward system and more widely shared information.

For more on this subject, see what Dean Baker has to say about it:

Posted by: bcbulger | October 22, 2009 6:15 PM | Report abuse

Is this the part where Obama says no to the special interests and lobbyists or will that come later?

Posted by: kingstu01 | October 22, 2009 6:20 PM | Report abuse

According to Dean Baker's analysis from 2005, we spend about $150 billion dollars per year above the competitive market rate for prescription drugs. Some people will say that that's to get innovation of new drugs.

However, he also says that the drug companies spend 40 billion per year on drug research with 26 billion going toward [non-innovative] copy cat drugs and 14 billion on breakthrough prescription drugs.

Bottom line: We spend an extra 150 billion extra dollars per year with only 1/10 of that amount going to the discovery of new medications.

Posted by: bcbulger | October 22, 2009 7:16 PM | Report abuse

Mr. Klein: Can't you actually read the article or summarize it correctly for your readers? This article was on a very specific issue, i.e. the question of how long the patent exclusivity rights would be for generic versions of biological drugs.

Your readers can't figure that out either, going on about expiration dates on pill bottles. Pharmaceutical costs are only 10% of the overall pie -- you're going to have to go elsewhere, once you've squeezed whatever juice you think is in the "low-hanging fruit."

Posted by: Klug | October 22, 2009 10:00 PM | Report abuse

Actually the article is about lobbying, and the money spent by the biologics companies to hold exclusivity of patent on the new miracle drugs before the generic companies can make them too.

Generics have saved $734 billion in a decade with the other drugs.

But biologics is a new plateau of medical treatment only recently attained. Biologics are derived as always in medicine on the back of the standard model of the basic research being performed by government and other tax-funded entities, and with the final manufacturing end then handed away at no charge to business.

Nontheless, the industry argues that too short a period of time for exclusivity of manufacture will not allow companies to recoup their development costs.

Before biologics, drug companies had five years to make their margin. Obama as a compromise is suggesting 7 years. The companies want 12 years as a minimum.

The article concludes by asking if the government will have the strength to resist the massive lobbying dollars (which cloud the air with consultants and dire prognostications) and to conduct this negotiation - where the asking party of course overstates as we all do in a negotiation - to the benefit of the dying patients who can't afford more life, or to the profits of the biologics companies.

Posted by: rosshunter | October 22, 2009 10:36 PM | Report abuse

Ahhh, here we are again: the poor, poor NIH, which gets robbed every time by those evil, evil drug companies. If all their work is just "handed away", why don't they just do it themselves? Do the eeeevil drug companies hold a gun to their heads?

Posted by: Klug | October 22, 2009 11:17 PM | Report abuse


its not as much about the low hanging fruit but the fact that with biologics (and their manufacturers 20% profit margins+) that what they're doing is RAISING THE FRUIT so no one can reach it. Sure there's a current benefit to shortening the time frame for generics but its the future that's a major concern for everyone as well.

(Note to self: I can't believe I'm taking the LIBERAL point of view on this issue)

Posted by: visionbrkr | October 23, 2009 8:34 AM | Report abuse

oh and for your claim of "once you get past this low hanging fruit what is your answer then" you are correct there are other things that need to be done to curb utilization. There need to be healthier lifestyles, eating habits that curb our dependence on Lipitor for example. But that low hanging fruit, the 10% you speak of supposedly is what has been driving a lot of the costs over the last 5-10 years. As Ezra states its is hundreds of billions of dollars. Enough to pay for a large chunk of this reform.

As has been said before "everyone will need to take a haircut" to ensure everyone has access and coverage. I'm sorry but Pharma has taken no such haircut. Doctors are going to with the SRG. Insurers will with the public option and the end of subsidies. Most hospitals are bald already. Pharma, the other player at the table seems only to be GAINING here and not sacrificing anything. If they're sacrificing and you're aware of it, please let me know but to go from 5 years on an ultra expensive biologic drug to 12 seems like they're gluttonous pigs.

Posted by: visionbrkr | October 23, 2009 8:41 AM | Report abuse

Pharma didn't take its haircut because it has been first and loudest in supporting a deal. They're even spending money to run ads in SUPPORT of a deal. Hey -- the Democrats can hand the money back, you know? Shows you can still make a deal in DC, I guess.

Posted by: Klug | October 23, 2009 12:21 PM | Report abuse

visonbrkr you crystallize the underlying dilemma here with your support for the "liberal" position.

Wouldn't it be nice if we could all deliberate this matter so that those with more liberal ("give to the people") leanings could spar with those who held more conservative ("but don't take from the owners") leanings, and between the two extremes a representative balance could be struck.

What damages this process for all of us is the distortion of lobbying, especially as it over-advocates, clouding the issues with spurious argument, and actually wearing opponents down with a kind of fatigue.

I've said before that I think we have a good political system except for the corruptions upon that system. But I'm starting to realize that a system susceptible to those corruptions indicates a systemic flaw itself.

How to strengthen the immune system of our political process?

Posted by: rosshunter | October 23, 2009 12:30 PM | Report abuse


ya i know what kind of ads they're running and how much they paid for them. (A drop in the bucket from the king's ransom they'll get).

The problem is that not only aren't they taking a haircut, they're they're most profitable healthcare sector AND they're increasing their profits. Makes you wonder if the Democrats have stock in Amgen and the other biologics???

I'm sure we'll find out years from now when its too late.

Just take a cue from insurers though. Don't get too piggish or you'll end up on the chopping block next.

Posted by: visionbrkr | October 23, 2009 3:32 PM | Report abuse

Of course they have "stock" in Amgen -- that was part of the point of the article. While traditional pharma has basically moved itself into four or five states (CA, NC, NJ, PA, MA), biotech is all over and going to be "the next big thing."

It's hard to tax lottery winngs when everyone thinks they may have a golden ticket.

Posted by: Klug | October 23, 2009 6:22 PM | Report abuse

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