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Why Pharma likes health-care reform

Want more evidence that Pharma stands to gain from health-care reform? Back in March, IMS Health, the consultancy that does a lot of the forecasting for the pharmaceutical industry, foresaw a slight contraction in the industry. Now IMS Health is predicting annual growth of 3.5 percent over the same period -- largely due to new demand generated by health-care reform.

This isn't necessarily surprising. Health-care reform, in theory, gives the pharmaceutical industry many new customers who can suddenly afford drugs, and it also closes the donut hole in Medicare Part D, making it easier for seniors to purchase drugs. But as Jon Cohn says, it does suggest that the industry could contribute a little more toward the total cost of reform. It also suggests that we should think about that "contribution" a little differently. Pharma isn't offering rebates for seniors out of the goodness of their hearts. They're investing in a new business venture that will bring them substantial profits.

By Ezra Klein  |  November 11, 2009; 1:25 PM ET
Categories:  Health Reform  
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Comments

The same is true for hospitals, physicians, medical device manufacturers and medical equipment suppliers. Not really sure what's new, except that Cohn is looking at industry numbers for the first time perhaps. There are a lot of those numbers out there, for all parts of the health care industry.

Concessions in exchange for more patients was an explicit negotiation between the WH and industry. Not sure what insight Cohn has found. Seems like old news.

Posted by: wisewon | November 11, 2009 1:39 PM | Report abuse

wisewon,

but the problem is that there really weren't concessions at all (at least not oh Pharma's part). How do you equate those concessions? I spoke to a high up manager at a insurer that we work very closely with and they told us that the negotiated price that they pay for major drugs took a spike at the end of last year due to the "expected reforms". That's the least transparent cost out there. Anybody know what the retail cost for Lipitor is for a 30 day supply? Insurers get a discount but its not what you'd think. And when that spiked up they were saying they'd push for reform and give up $80 Billion. $80 Billion my ARSE.

Posted by: visionbrkr | November 11, 2009 2:24 PM | Report abuse

Sustained median profit margins of >16% should not be tolerated in health care. Period.

Posted by: bmull | November 11, 2009 4:58 PM | Report abuse

bmull,

well, before you calculate median profit margins of >16% you should consider the cost of developing a drug, which has certainly increased since 2004.

Posted by: RandomWalk1 | November 11, 2009 5:49 PM | Report abuse

I'm tired of wisewon beating the drum about doctors' salaries. Doctors' salaries have not been increasing at the rate that the cost of health care has been increasing. Most doctors have been earning about the same income for at least the last ten years! Now, it's a different story if you want to talk about the income that doctors get from owning their own imaging equipment or developing devices, etc.

Posted by: goadri | November 11, 2009 8:07 PM | Report abuse

Vision:

Have you checked a calendar recently? Lipitor goes off patent on in slightly more than 2 years.

Want evidence that Big Pharma thinks its future is relatively bleak? Ask the 30,000+ people who have lost their R&D jobs in the last three years.

Posted by: Klug | November 11, 2009 9:10 PM | Report abuse

"But as Jon Cohn says, it does suggest that the industry could contribute a little more toward the total cost of reform."

I don't understand this at all. We're not talking about a neighborhood free clinic here. It's not up to Big Pharma to "contribute" to reform, it's up to the White House and Congress to construct a sustainable health policy for the nation.

If direct marketing to consumers drives up demand for more expensive products that have little or no benefit over others, then they should be banned. If pharmacy co-pay rebate programs subvert attempts to induce price sensitivity among patients, they should be banned too.

There is actual proof that both of these practices drive up actual costs of care for everyone and yet I haven't read a single word about taking action. Why not?

Why are so many progressives complicit in this pass given to Big Pharma?

Posted by: Athena_news | November 11, 2009 9:15 PM | Report abuse

klug,

it was an example. Fine how about a biologic? Any one, pick one? How do you think your pharma industry is going to be taken to task when only the superwealthy can afford live saving cancer drugs in 10-15 years? I'm thinking we'll have a new scapegoat instead of the insurance industry.

30,000 is nothing when the entire economy has shed 6 million. Sorry, pharma gets no sympathy from me. Maybe if you're profit margins were below say 15-20% then i'd feel a pinge of sympathy for you but sorry, NO.

Posted by: visionbrkr | November 11, 2009 11:27 PM | Report abuse

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