National Right to Life Committee is Clueless on Medicare
I’m a big fan of a broad concept of the culture of life, the “seamless garment”, emanating from Gaudium Et Spes (#27). It’s far too easy to oppose abortion and give the thumbs up to unjust war, and vice versa. The pro-life movement in America has always focused on abortion, and indeed, was born in the wake of the Roe v. Wade decision. This is perfectly justifiable. I don’t even have a problem with the right to life movement dealing also with euthanasia, embryonic stem cell research, and human cloning — as it does. Like I said, I would like them to broaden their focus, but that’s their call.
I do, however, have a huge problem with the position of the National Right to Life Committee (NRLC) on Medicare and drug prices. For an organization that likes to defend its narrow focus on certain core issues, this seems a little peculiar. What is the NRLC’s problem? The issue relates to the Bush administration’s reform of Medicare part D, the prescription drug bill (by the way, the largest expansion in government spending since the Johnson administration). There were a number of huge problems with this bill, which was largely written by the drug and insurance companies.
What are the issues? For a start, the bill takes traditional Medicare out of the picture entirely, as the government does not pay directly for the drug. Instead, the participant joins a private insurance plan, and the government then sends out the subsidy. What is the problem? Well, since the late 1990s, there was been an attempt to entice Medicare recipients into private insurance plans. Given that they are profit-making, insurance companies simply could not compete with Medicare. As a result the Bush administration began heavily subsidizing HMOs to induce them to keep taking Medicare patients. This program now costs 11-25 percent more per beneficiary than traditional Medicare. This is a direct subsidy to the insurance industry, with no value added.
Second, the government is simply not permitted to negotiate with the drug companies. This was the great prize sought by the pharmaceutical industry, as it too wanted a piece of the pie. The person who pushed this through Congress, Billy Tauzin, resigned immediately after the passage of the bill to become head of the major trade group for pharmaceutical companies. He served his masters well. The NRLC seems to like this aspect of the bill, and is opposing attempts by the Democrats to allow government negotiation with drug companies. Here are their arguments:
- Because the pro-life movement opposes euthanasia, it opposes rationing – government-imposed denial of lifesaving health care.
- Government-imposed price controls on drugs deny Americans the opportunity for the development of new life-saving drugs, like cures for Alzheimer’s disease.
- Under the new Medicare prescription drug benefit which began in 2006, the government cannot interfere in drug price negotiations between drug providers and drug insurers.
- Under the guise of authorizing the government to take over negotiations for drug prices in Medicare, some in Congress are pushing for a Medicare law amendment that would mean government-imposed drug controls.
- Just as we helped defeat the Clinton Health Care Rationing Plan, pro-lifers must mobilize to defeat the proposal that would ration new lifesaving drugs by imposing drug price controls under the guise of government “negotiations.”
Let me see if I understand this: we oppose euthanasia, therefore we oppose rationing of heath care, therefore we oppose any attempts for governments to influence drug prices. This is possibly the most ludicrous argument in the whole heath care debate I have yet seen (well second only to Fox News telling is universal health care fosters terrorism)! Those of you who read this blog I know feel rather passionately about health care: see here, here, and here.
It the NRLC is worried about access to health care, maybe it should think about the 45 million without insurance. Maybe they should consider the fact that the leading cause of personal bankruptcy in the US is unpaid medical bills. Maybe they should realize that rationing is commonplace in the US, with a new study showing that “American people are already waiting as long or longer than patients living with universal health-care system.” Maybe they should be concerned about the fact that only 47 percent of patients could get a same or next-day appointment with a doctor for an immediate medical problem, higher than in every country in the sample bar Canada. Maybe they note that 40 percent of Americans stayed away from a doctor in the past few years because they simply cannot afford it. And finally, maybe they should be concerned that the US spends almost twice as much as other industrial countries for health care, but achieves greatly inferior outcomes (life expectancy and mortality rates).
So much for the access and rationing issue. Let me briefly address their point on drugs. First, things, first: when the the government negotiates with drug companies, it is not regulation or government intervention (unless you happen to have an ideological aversion to any role for the government in the market). All insurance providers negotiate with drug companies. A large provider has more bargaining power. As the provider of Medicare, the government is endowed with significant bargaining power — technically, it exploits its monopsony power. Most of us think this is a good thing. It is simply a negotiation between two players in the market, one of which happens to represent the government. It has nothing whatsoever to do with rationing. In fact, this kind of negotiation is common in Canada and in Europe, and access to health care there…well.. universal.
What about innovation? Many claim that high drug prices stimulate innovation. For a start, a huge amount of research is undertaken in universities and government agencies, while drug companies focus more and more on marketing. Here’s an important statistic: taxpayer-funded research developed 15 of the 21 most important drugs introduced between 1965 and 1992. When it comes to the drug companies, consider where the money is. Remember what happened when the patent expired on the acid reflux drug, Prilosec, making it much cheaper? The drug company in question (AstraZeneca) produced Nexium, a virtually identical drug, and engaged in a marketing blitz. As a GAO report points out, while pharmaceutical research and development expenses increased by 147 percent in 1993, applications for “new molecular entity” drugs (differing significantly from those on the market) was only up 7 percent. More than two-thirds of drugs out there are of the “me-too” variety.
So, as noted by Jonathan Cohn:
“…even if the pharmaceutical industry did reduce its research and development investment because of declining revenues, what we’d lose probably wouldn’t be the next cure for cancer–it would be the next treatment for seasonal allergies, and likely no better than the ones we have already.”
Moreover, non-U.S. pharmaceutical companies do perfectly fine. As Kevin Drum points out:
“..plenty of pharmaceutical research is done outside the U.S.: The #3 pharmaceutical company in the world, GlaxoSmithKline, is British. The #4 company, Sanofi-Aventis, is French. The #5 company, Novartis, is Swiss. #6, Hoffman-La Roche, is also Swiss. #8, Astra-Zeneca, is Anglo-Swedish. Their combined R&D spending is slightly higher than the American companies that make up the balance of the top ten.”
But let’s put all this aside for a second and assume that the big drug companies are still engaged in (some) useful innovation. Don’t these companies invest based on their expected return? Yes, but it’s complicated. These companies raise capital in the same markets as everyone else, so overall pricing has to be high enough to provide them with the risk-adjusted returns on equity that the market demands. So it prices are pushed down in the US, they will be pushed up in other markets. The only alternative is that every country in the world drives such a hard bargain that the drug companies are put out of business. Extremely unlikely.
In conclusion, where do we stand? The NRLC, which prizes itself on focusing on narrow and unambiguous pro-life issues, has taken a stand in a debate that is by no means unambiguous, and only tangentially related to their core agenda. Now, if they want to argue that access to health care is a basic human right (as the Church teaches) and that health care reform is imperative to the pro-life cause, then I will applaud them. But that’s not what they are doing. They are simply wading into an ideological debate and siding with the Republicans. I wonder if they think that all other single payer countries that allow negotiation between governments and drug companies should be attacked by the pro-life movement?