With healthcare reform now back on the docket in the U.S. Senate, liberals are crying bloody murder over the purely hypothetical costs to the insured that exist entirely in their heads. But they’re not wrong about one thing: healthcare is too expensive, and the fact that people try to lay the costs of it almost entirely on their insurance is a symptom of that outlandish expense.
Fortunately, thanks to the efforts of one such insurer — Blue Cross Blue Shield — we now know exactly who to blame for that expense existing in the first place. Specifically, Blue Cross recently released a report showing that it has been spent 73 percent more on drugs since 2010: a problem it attributed to huge increases in drug prices driven by pharmaceutical companies. Like clockwork, those companies have been raising their prices on-average by 10 percent per year for the past seven years, with no apparent mitigating explanation.
That alone would be damning enough, but there’s another element that drives home the problem. According to the report, while drugs that are off-patent have only seen increases of 3 percent a year, drugs that are still patented and subject to the unrestricted monopoly power over prices that a patent brings have seen their prices rise by an unbelievable 18 percent per year.
While Pharma has tried unconvincingly to pooh pooh the results of the study as misleading, the fact is that if you wanted someone to turn over a proverbial rock and expose everything wrong with the pharmaceutical industry in one study, this one would be it. Or at least, it would be, with one exception: the study only covers non-Medicare and Medicaid patients. In other words, we don’t fully know how much taxpayer money is being blown on these exorbitant monopolistic prices. Odds are that figure would be even less pretty.
These are the kinds of abuses that the competition afforded by the free market is supposed to quash. However, thanks to the byzantine network of anticompetitive measures used by Pharma with the help of big government, no such market can exist. Fortunately, there are steps that Congress can take to reform this market at the same time that it also repeals the disaster that is Obamacare.
Firstly, Congress can pass the CREATES Act, which cracks down on pharmaceutical companies that use anticompetitive measures to prevent drugs that have gone off-patent from ever being manufactured by generic companies. Specifically, the act makes it far harder for the industry to claim that generic manufacturers somehow fail to meet safety standards as a pretext to refuse to sell them samples of their drugs. Instead, the statute returns that determination to the hands of the FDA, where it properly belongs, and gives generic manufacturers more extensive legal remedies to obtain the required samples once the FDA has declared them worthy. If nothing else, this will prevent the kind of abusive price increases described here from crossing over into the off-patent market.
Secondly, Congress can pass patent reform that strengthens procedural safeguards like the Inter Partes review process: a process by which the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office (USPTO) can throw out patents that are either meritless or have been extended past a legally justifiable period directly. While Pharma claims this process cheats it out of research and development dollars, this claim falls apart the instant you realize that the process has never once invalidated a patent for a new drug: it has only ever invalidated those patents once their initial ten-year period of protection expires, if at all. Pharma doesn’t like this because it keeps it from engaging in the sleazy process known as evergreening, i.e. keeping patents “evergreen” by continually finding rationales to expand their lifespans and thus the monopoly pricing power. This is all the more reason to keep processes like this on the books and to expand their power where prudent.
Thirdly, Congress can protect taxpayer dollars by empowering the government to set conditions on the sale of drugs to Medicare and Medicaid patients. A successful model for this exists already in the form of the 340B drug pricing program — a program that requires pharmaceutical companies to sell their drugs at reduced prices to hospitals that serve high numbers of low-income populations, such as children’s hospitals, as a precondition for having access to the Medicaid and Medicare Part B market. Such programs are fully voluntary and recognize the truth that no private company or actor has a right to taxpayer dollars.
Every single one of these policies is not merely pro-patient. They are pro-market as well. While holding down the cost of insurance is a fundamental part of the healthcare debate, and one that Congress will hopefully address successfully in whatever bill clears the House and Senate, that cost cannot be addressed without also holding down the skyrocketing cost of care. Blue Cross blew the cover of the people responsible for those costs: now it’s up to our policymakers to finish the job.
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