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January 12, 2007

Ron Paul Votes For Price Fixing Prescription Drugs

by Kevin

Today, the U.S. House of Representatives voted today to allow the government to “negotiate” the price of prescription drugs bought for Medicare Part D. Ron Paul voted for it. There is a precedent for the government “negotiating” prescription drug prices, that is the VA drug plan. However, a piece in the Weekly Standard by Robert M. Goldberg describes the reality of VA “negotiating”.

Far from negotiating drug prices, the VA imposes them. Federal law requires companies to sell to the VA at 24 percent below wholesale price. If they won’t, they are banned from selling medicines to Medicaid, Medicare, and the public health service. The VA demands even deeper discounts by creating a national formulary–a restrictive list of approved drugs for its patients. Companies that don’t meet that additional discount don’t make the list. Patients must get drugs from VA pharmacies instead of retail outlets. Patients who endure side effects from a formulary medicine–or who fail to respond to one–must submit themselves to an arduous and time-consuming bureaucratic process to gain access to any pharmaceuticals not on the list.

In opposing the Medicare Part D reform in 2003, Democratic senator Patty Murray stated that she “was unhappy at the prospect that this plan could tell patients with MS, Parkinson’s disease, and ALS that they can’t get the drugs they need because their plan will not cover them.” Yet Azilect, the newest drug to treat the symptoms of Parkinson’s disease, approved in 2006, is not on the VA drug list, though every Medicare Part D plan has adopted it. In delaying access to new medicines, the VA is no different from the national health services of Canada and Great Britain. Tysabri, a new drug for multiple sclerosis, is available under every Medicare plan. It is not on the VA drug plan.

So in other words, price controls. These government imposed price controls have effects on both availability of drugs and the quality of the drugs. Since the drug companies will not give the drugs away to the VA, VA patients cannot buy the drugs. However, Medicare Part D is privately administered so newer and better and more drugs are available to patients under Part D. There are no price controls since private companies actually negotiate, not threaten, the drug companies to give them the best possible deal and the private companies pass them on accordingly.

In addition, as Goldberg points out, this could have a chilling effect on biotech research.

If making the lives of seniors shorter and sicker isn’t bad enough, the Democrats’ price control plan threatens to devastate pharmaceutical and biotechnology innovation just as the failed Clinton drug- pricing scheme of 1993 would have. Back then, a federal Breakthrough Drugs Committee was envisioned that would evaluate a drug’s cost effectiveness. In response, venture capital investment in biotech dropped drastically and the market valuation of the biotech industry plunged 40 percent.

Today, drug companies have over 1,000 partnerships with biotech firms. So among the first victims of the Democratic drug price-control scheme would be investors in the research Michael J. Fox also supports. That includes Merck, which just invested over $1 billion in a company run by Nobel Prize winners that developed a technique to suppress tumor growth common to stem cell therapy, and Eli Lilly, which is investing in a company called Suven that focuses on Alzheimer’s, schizophrenia, depression, vascular dementia, and Parkinson’s disease.

Speculative biotech research will be unsustainable under Democratic price pressure. Genzyme, whose drugs are always a target of Democratic anti-pharmaceutical show trials, just bought the rights to a Parkinson’s clinical trial program of Avigen. Celegene, which is likely to be bashed for the annual $61,000 price of Revlimid (a treatment for multiple myeloma and other cancers of the blood system), is investing heavily in a promising source of adult stem cells that have been used to replace dopamine neurons in people with Parkinson’s. It is hard to imagine how such research could be sustained in a system that would cut drug companies’ revenues and sales in half.

Of course to correct all these problems with HR 4, the Democrats will propose to make it better, with HillaryCare.

Now let me turn my attention to Ron Paul, aka Dr. No. He’s being billed as the “Taxpayer’s Best Friend”. Surely as a man who believes in the free market and in limited government, he knows better than to support price fixing. Unless of course a free market can be made for price fixing now. Things like this, his xenophobic streak, and his questionable stance on foreign policy will temper my enthusiasm for a Ron Paul candidacy.

Note: I’m not defending Medicare Part D, which should be repealed, or I’m not opposing Ron Paul’s bid for president, yet. I’m raising some questions.

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20 Comments

  1. If the private companies are negotiating the price of drugs in Medicare part D, how come we are paying 85 billion dollars for the program. (At that rate I think the government could just pay retail for every prescription)

    Comment by VRB — January 13, 2007 @ 12:10 am
  2. Just as private insurers do, the Feds should negotiate pricing for all the goods and services it (we) pay for. The method of negotiation used by the VA is the problem, not the concept itself.

    Knowing Rep. Paul as I do, I suspect, in his own mind, he was focused on true negotiations and saving taxpayer dollars, rather than embracing a process of government fiat.

    Comment by John Shuey — January 13, 2007 @ 6:54 am
  3. I have been reimporting medicines for U.S. citizens for over five years. What I have learned about the pharmaceutical business over that time is more than I ever hoped.

    What everyone needs to know right off the bat is, there is no free market in N.America. It is and has been since 1988 a “government-granted” monopoly.

    Let me explain, in 1985 Europe began what they call “parallel trading”. Which has worked famously and without a hitch since. This was the last thing the drug manufacturers wanted in the U.S. and Canada. Their prime markets. So they ran screaming to Washington in order to block any notion of reimporting drugs to the U.S. from other countries. The result was the “Prescription Drug Marketing Act” of 1987.

    The Act stated that manufacturers and only manufacturers can reimport drugs to N. America. For safety sake of course. Thereby avoiding any so-called “free market”.

    The only way we’ll ever see a free market is by repealing the PDMA.

    Comment by Rob — January 13, 2007 @ 8:40 am
  4. Rob,

    You neglect to say one important thing, Europe and Canada place price controls and/or subsidize the cost of prescription drugs.

    John,

    Just as private insurers do, the Feds should negotiate pricing for all the goods and services it (we) pay for. The method of negotiation used by the VA is the problem, not the concept itself.

    I do not disagree with that statement.

    Comment by Kevin — January 13, 2007 @ 8:58 am
  5. Ron Paul has a questionable stance on foreign policy? He does not wamnt us to be world police and involve ouerselves in conflicts overseas, getting mixedup in the wars of others. Go read the writings of the founding fathers. By your reckoning, George Washington wouldn’t be a bit worthy of being president.

    Comment by Clay Rains — January 13, 2007 @ 9:23 am
  6. Clay,

    I’m glad you brought up the myth that our Founding Fathers believed in military non-interventionism. George Washington did, but other Founders did not. John Adams sent the American navy to assist the British Royal Navy in fighting the French Navy in the West Indies. Thomas Jefferson sent the navy and the Marines to the Barbary States to combat piracy (the 19th century’s War on Terror).

    Isolationism, argueably, was a good policy in the late 18th century. Now, in a time of air travel, globalization, missiles, and weapons of mass destruction is a foolish proposition.

    Comment by Kevin — January 13, 2007 @ 9:49 am
  7. Please mention that the Weekly Standard, like the Cato Institute are whores for Big Pharma. This site is mis-named if ‘kevin’ is happy to trade liberty for security.

    Comment by Charles B. — January 13, 2007 @ 11:39 am
  8. “Just as private insurers do, the Feds should negotiate pricing for all the goods and services it (we) pay for. The method of negotiation used by the VA is the problem, not the concept itself.”

    John (and Kevin) –

    If you look at the effects that Medicare is having on non-Medicare patients through their “negotiation tactics” you would disagree with that position. I know several people who work in medical billing and accounting, and they say Medicare continually underpays them for services, causing the prices for those services to go up for everyone else. The reality of the matter is that we all pay much more for Medicare than the tax taken out of our earnings.

    Comment by Quincy — January 13, 2007 @ 2:34 pm
  9. Quincy,

    Government should not be in the process of setting drug prices, period. Neogotiating with government, in this case, is akin to the neogotiation that goes on between a robber and their victim.

    However, when government is saying buying cars or office supplies for its own use; you damn right I want them getting the best deal they can. When government is handing out contracts, I want them to go to the lowest bidder.

    Comment by Kevin — January 13, 2007 @ 2:40 pm
  10. Kevin –

    The problem is that government is using its negotiating to get certain protected people a better deal on prescription drugs. While Medicare is a boon for those privileged enough to get it, the rest of us pay both directly and indirectly for their privilege. I don’t think we disagree on this part.

    When it comes to government spending money for its own use, I’d accept the idea that they should pay the lowest possible price as an axiom.

    Comment by Quincy — January 13, 2007 @ 2:54 pm
  11. it is the doughnut hole that is so bad. all that we gained in savings was lost in the doughnut hole.

    Comment by earlene schmidt — January 14, 2007 @ 3:06 am
  12. it is the doughnut hole that is so bad. all that we gained in savings was lost in the doughnut hole.

    Comment by earlene schmidt — January 14, 2007 @ 3:06 am
  13. “Isolationism, argueably, was a good policy in the late 18th century. Now, in a time of air travel, globalization, missiles, and weapons of mass destruction is a foolish proposition.”

    What meaningless platitudes! Buzzwords do not change or alter solid logic. Globalization and air travel do not “require” international meddling and imperialism. Such activities lead to the destruction of lives and bending of truth, both utterly immoral activities.

    Isolationism is an ad hominem-esque misnomer. Political non-interventionists welcome international trade (free trade!) and international peace. They realize that a rich and prosperous citizenry are far less likely to go to war with the nations they visit and trade with.

    Backwater Iraq/Iran is not the threat the our “leaders” claim they are. They are poor shit countries with who merely fight in any way they can to Israeli dominance in the middle east, and sometimes to pursue petty interests for their own petty fiefdoms (unlike our naked imperialism in th e U.S.).

    Never forget that the only countries that have WMD’s are those that complain about them so much.

    Comment by Mr. T. — January 14, 2007 @ 1:09 pm
  14. I don’t understand the “price contols” accusation. He’s not controlling the prices I pay. He’s controlling the prices government pays.

    There is no good way to run government healthcare. May god help those whose lives depend on it.

    I don’t fault Dr. Paul for not being able to polish this turd.

    Comment by James Babb — January 14, 2007 @ 7:39 pm
  15. ———–
    Rob Said: “…in 1985 Europe began what they call “parallel trading”. Which has worked famously and without a hitch since.”
    ————
    IMHO, this is a somewhat shortsighted view of Parallel Trading. There are two sides to it: One, immediate cost savings to the consumer (in this case that includes every tax-paying American, since we pay the bill for Medicare, Medicaid, the VA and all the other socialist wealth redistribution schemes) The other side of it is the un-measurable side, in that it reduces the willingness of ‘Big Pharma’ to invest and take the risks associated with developing new drugs. There is no doubt that it reduces the up front cost to the consumer, but it ignores the long term costs.

    Right now, the free ride Europe has been getting is one of the things that has driven up the costs in the United States. We pay the price differential for their short term savings–kind of a European tax on drugs paid by the American consumer.
    We are also one of the last countries to have a relatively free market in pharmaceuticals, and are probably the last with sufficient wealth and population to justify the R&D risks. Here is a good article from the UK that describes the quandary. http://www.medicalnewstoday.com/medicalnews.php?newsid=6747

    So the question is, do we want that new cancer cure, or any of the other miracle drugs that have been and are being developed? Also, what about all those jobs in R&D? This could have significant secondary costs throughout the economy.

    Realize, that I do not like Mercantilism in any form, and what you describe re the “Prescription Drug Marketing Act” of 1987, is exactly that. The question is, that since it was foreign governments that caused the problem, just where should ‘Big Pharma’ go for protection? Do they need protection? Do we want to continue subsidizing European health care? Can we use the redirection of costs in trade negotiations with the EU? Those to me are the real issues we need to resolve at a National level.

    Comment by SteveB — January 14, 2007 @ 8:13 pm
  16. Further Thoughts On The Ron Paul For President Campaign

    Trackback by The Liberty Papers — January 17, 2007 @ 9:09 am
  17. [...] Ron Paul Votes For Price Fixing Prescription Drugs Posted By: Doug Mataconis @ 6:20 am || Permalink || || Categories: Politics Ron Paul vs. Hillary Clinton? : The New Liberty pinged this post. TrackBack URI: http://www.thelibertypapers.org/2007/01/14/a-moment-of-hubris-on-the-ron-paul-for-president-campaign/trackback/ Read more posts from Doug Mataconis • • • [...]

    Pingback by The Liberty Papers»Blog Archive » A Moment Of Hubris On The Ron Paul For President Campaign — January 17, 2007 @ 9:32 am
  18. The article referenced in your post is incorrect as the VA does cover Tysabri. See: http://www.va.gov/ms/default.asp?action=article&ID=315

    I would strongly suggest that you post the correction on your Blog, especially for the Veterans that have MS (Multiple Sclerosis) and need Tysabri.

    Thank you. Lauren Roberts

    Comment by Lauren Roberts — January 20, 2007 @ 12:01 pm
  19. [...] Congressman Paul also addresses the criticism he’s received from some libertarians, including my fellow contributor Kevin, over his vote in favor of allowing the Federal Government to negotiate prescription drug prices paid by Medicare: [...]

    Pingback by The Liberty Papers»Blog Archive » The Ron Paul Interview — January 22, 2007 @ 7:52 pm
  20. Tom Price Tells Retirees Their Prescription Drug Costs are Already Low Enough

    The Cherokee Ledger News recently reported that Dr. Price voted not to let Medicare negotiate drug prices to help save both the program and retired Americans money. He did so against the wishes of the AARP and in contrast to most of his colleagues in congress. The Veterans Administration does negotiate prices, and saves vets millions.

    Why the “no” vote, you ask? Because he’s bought and paid-for by the medical lobby. His votes are easy to predict. If the bill moves money into the hands of the medical lobby, he’s all over it. If it moves money out of the medical industry, it’s a no-go (I’m sorry, it’s “bad for patients”).

    But let’s take a look at Price’s excuses:

    • “The less involvement government has in medical care, the better.”
    –So does this mean Price wants to eliminate Medicare? No, I didn’t think so. This is just meaningless rhetoric.

    • 90 percent of AARP members support giving Medicare the power to bargain for lower drug costs.
    – To them Price says, “I’m sorry that AARP’s taken such a partisan approach on this.”

    • “Washington bureaucrats will decide which drugs will be available for patients, not from a scientific or safety standpoint, but purely based on money. Many drugs would be knocked off the approved list if Medicare had the power to negotiate, resulting in a smaller choice of drugs being available to seniors”
    – False. The bill (unfortunately) did not authorize Medicare to remove a non-discounted drug from coverage. The stronger Veterans Administration policy does.

    • “Nobody negotiates with the federal government. The federal government tells you what to do.”
    – Well, he voted to make sure the first sentence remained true.

    • “Government never has quality in mind when it comes to medical care; its whole objective is decreasing costs.”
    –As opposed to health insurance companies, who think of nothing but quality and don’t care about expenses? Sure.

    • “The free market has continually proven more adept at lowering expenses.”
    –Whoops, I thought it was the government that was manically focused on decreasing costs. Well, his quote is true, if you realize it’s referring to health insurance company expenses, not patients’ out-of-pocket expenses.

    • “Many quality physicians have been forced out of business by Medicare requirements.”
    – Even if that’s true, it was no doubt due to Medicare’s reimbursements for office visits and other direct physician care, not its prescription reimbursement policies.

    Comment by John Konop — February 1, 2007 @ 3:56 pm

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