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SO REPEAL OF THE NON-INTERFERENCE BAN is coming. Maybe not this year, but soon. And then the fun will really begin.
First, activist groups will besiege the president and HHS secretary demanding that they ensure that drugs be made “affordable” to seniors. Many of the retirees the industry thought it had bought off will bestir themselves and start writing letters and making phone calls. Members of Congress will rush to the fore, demanding that the administration make vigorous use of its “negotiating” authority.
Medicare then will present companies with an offer they can ill afford to refuse. Here’s what we will pay. If you won’t accept our generous offer — obviously made with the laudable intent of ensuring affordable access to drugs for all seniors — then take your drugs elsewhere. The accompanying press statement will be released widely.
Companies could say no and blame the government for cutting off Medicare recipients. But we know how such fight would play out in practice.
The president would hold a press conference denouncing greedy drug firms for charging extortionate prices. Congressional leaders would rail against highly-paid drug executives for putting company profits before the health of seniors. Groups purporting to represent workers, consumers, and retirees would concoct junk studies and churn out press releases insisting that fairness dictates that the drugs be sold for pennies.
In response, a few industry spokesmen would babble incomprehensibly about research and development. Then companies would cave. And investment capital would flee the industry.
WE MIGHT END UP SEEING the same process in microcosm with Gardasil, Merck’s new drug which protects against human papillomavirus (HPV). For instance, the Washington, D.C. City Council is now moving forward to mandate innoculation of young girls with Gardasil, which obviously will enhance the firm’s profits.
Merck’s strongest de facto ally is health committee chairman David Catania. But two years ago Catania was attempting to void patents for and impose price controls on pharmaceuticals. An amendment to limit Gardasil’s price is a logical next step. If so, Merck will have no one but itself to blame.
Once Gardasil — a genuinely marvelous product — was approved by the FDA, Merck began lobbying states to require HPV vaccination of all girls. Texas Gov. Rick Perry imposed such a mandate by executive order; the New Mexico and Virginia have approved legislation requiring HPV innoculation. The District has voted preliminary approval for a similar measure.
But Merck soon found itself buffeted by a backlash from family and privacy activists. They resented such a blatantly self-serving move, especially since HPV is not a communicable disease, but rather, a result of sexual activity.
Under pressure Merck abandoned its lobbying efforts. But it remains vulnerable to forces that it helped set in motion. Having requested government to inflate demand for its product, the firm is ill-positioned to resist demands that it lower the vaccine’s price. Indeed, by emphasizing the social importance of mass innoculation, Merck has made the very argument used by the U.S. government in the midst of the 2001 Anthrax scare to pressure Bayer to deeply discount its price for Cipro. It won’t be long before the David Catanias of the world seize their opportunity to do the same to Merck.
Pharmaceutical price controls are coming. Of course, Congress could repeal the drug benefit. Presidents and congressmen could demonstrate statesmanship and reject Medicare price “negotiation.” And Martians could visit the earth to dispense an elixir delivering ever-lasting health, happiness, and peace.
Eventually Congress will approve, and the president will sign, legislation instructing HHS to “negotiate” drug prices for Medicare. The result will be bad policy, but will represent a measure of political justice for the industry. The drugmakers wanted a government handout; they will end up with price controls.
Government never joins any enterprise as a junior partner. Hopefully other businesses will learn this costly lesson before it is too late.