Tag Archives: Big Pharma

Big Pharma Wins Big in Health Care Reform

The Republicans look a sour lot this morning, but the pharmaceutical industry, which helps foot the campaign bills of a sizeable chunk of members of both parties, is delighted with the legislation, and with its Democratic friends in the White House and on the Hill.

Members of Congress in both parties generally have lined up behind the insurance and pharmaceutical industries from the get go. So it should come as no surprise that the Democrats, who long ago gave up any pretence of opposing corporate power, found a way to accomodate the pharmaceutical companies on the way to its tepid reform. To a large extent, the “debate” over health care was a show debate, an extended round of Washington smoke and mirrors. The administration early on cuts its deal with Big Pharma, and pretty much stuck to it throughout the process.

In fact, the Dems actually made the drugsters look good, celebrating the industry’s generous “concessions” and “discounts” while ensuring that no real threat to Big Pharma’s profits would make their way into the final bill.

The industry’s  main goal from the very beginning has been to fend off any government power to negotiate or seriously regulate drug prices–and this they did. 

Big Pharma’s second big win was to prevent any measure that would have opened the way for American consumers to buy less expensive drugs abroad, especially from Canada.

At the same time, the supposed give-backs by the drug industry are projected to more than pay for themselves. The much-lauded discounts on brand name drugs for seniors in the Medicare prescription drug program, for example, are good for Big Pharma because they discourage oldsters from switching to generics.

And more insured people simply mean more money coming into the coffers, for Big Pharma as well as for the insurance industry.

Confirmation of the industry analysis came early in the day from the stock market, where drug stocks initially remained level; there certainly was no rush to dump shares, which is what would be expected if the bill actually represented any threat to profits. And by 1 p, EST, CNN Money was reporting a rally in health care stocks.

“I was unable to find anything in there that would cause me to have anxiety if I were a shareholder in a pharmaceutical company,” Ira Loss, a senior health-care analyst at the research firm Washington Analysis, told Dow Jones. According  to the ticker story:

Billy Tauzin, who led the industry’s negotiations on health care with lawmakers, said overall drug makers fare well. “While we’re not totally happy,” Tauzin began, “we generally feel like it tracks with our principles.”

Sanofi-Aventis SA (SNY) Chief Executive Christopher Viehbacher said in an interview that the impact of the legislation will be neutral to slightly negative “but better for the industry than if healthcare reform didn’t pass.”

Tauzin, head of the Pharmaceutical Research and Manufacturers of America or PhRMA, and Viehbacher said getting protection for brand-name biologics is among the important provisions for the industry. Drug makers pushed hard to get 12 years of exclusive market protection while the White House and some lawmakers wanted to lower the protection to seven years.

Despite fees and rebates imposed by the legislation, “analysts say drug makers will end up recouping those costs through new customers: The bill would provide insurance coverage to an additional 32 million Americans.” The Dow Jones story continues:

Chalk up another good round for Pharma and Biotech in health care reform,” began a note to clients Friday from Concept Capital, a research firm.Ken Tsuboi, co-manager of the Allianz RCM Wellness Fund, sees the impact of bill, and its $90 billion in concessions over 10 years, as relatively minor in an industry that has annual global sales of about $750 billion, with about $300 billion in the U.S., and margins close to 30%.”I think that it is actually a pretty good deal for Pharma,” Tsuboi said.

The GOP, which purports to be the party of big business, ought to be applauding at least these portions of the health care reform–and perhaps when the cameras go away, some of them will quit bitching and count their blessings.  As for the obnoxious Tea Party gang, if they start threatening the real power in this country, which is vested in corporations, they may well find themselves whipped and isolated.

Health Care Industry Stocks Up As Democrats Go Down

Courtesy of Kaiser Health News, here’s a roundup of this morning’s reports on how the Republican victory in Massachusetts–and its ominous implications for health care reform–affected the stocks of the heath care profiteers. This, of course, is what it’s really all about.

Health shares rose Tuesday as traders considered the prospect that a Republican victory in the special Senate election in Massachusetts could jeopardize the health reform legislation. The Boston Globe reports that “traders placed bets that the outcome of an election in Massachusetts would make it harder for President Obama to overhaul health care. … Rising health care stocks led the market higher as the prospect of a logjam in Washington eased concerns that profits at companies like insurers and drug makers would suffer” (Paradis, 1/20).

BusinessWeek/Bloomberg: “The potential demise of the legislation cheered investors who feared the plan may limit revenue in the health-care industry, said Takeru Ogihara, who helps oversee $27 billion as chief strategist at Mizuho Trust & Banking Co., in a telephone interview from Tokyo.” Although the legislation could add millions of customers for health care businesses, analysts said it also “carried the risk of higher fees, increased regulation and narrower profit margins, said Paul Keckley, executive director of the Deloitte Center for Health Solutions, a Washington-based research group. Health-care companies in the MSCI Asia Pacific Index rose 1.4 percent as a group, the largest advance among 10 industries. Takeda Pharmaceutical Co., Asia’s biggest drugmaker, and Astellas Pharma Inc., which derives 24 percent of revenue from North America, both climbed. In Europe, GlaxoSmithKline Plc of London and Sanofi-Aventis SA of Paris, which get 40 percent and 31 percent of sales, respectively, in the U.S., led gains. (Nussbaum and Tirrell, 1/20)

The Wall Street Journal reports that Merck and Pfizer stocks jumped “on hopes for more concessions to be made to health-care legislation. Broad gains across other sectors came as investors bet that compromises may be likely for other issues such as corporate taxes and financial-services regulation” (Kardos Yesalavich, 1/20).

BusinessWeek: “Options traders boosted bullish bets on U.S. healthcare stocks, lifting volume for contracts to buy the shares to six times the four-week average, on speculation that Republicans will block an industry overhaul. More than 64,000 calls giving the right to buy shares of the Health Care Select Sector SPDR Fund, or XLV, changed hands as of 4 p.m. New York time, almost seven times the level for puts to sell shares. The exchange-traded fund tracking 52 drugmakers, health insurers and hospital operators climbed 2.4 percent to $33 for the biggest advance since June” (Kearns, 1/19).

Drugmaker Got Kickbacks for Nursing Home Patients

There really should be a special place in hell for pharmaceutical manufacturers who make money by exploiting the weakest and most vulnerable of patients: old people with dementia.  I wrote about one such case back in April of last year:

Pharmaceutical giant Eli Lilly recently agreed to pay a record $1.4 billion dollars to settle charges that it illegally marketed the anti-psychotic drug Zyprexa as a treatment for Alzheimer’s and other forms of dementia in elderly patients. This despite the fact that the drug was not only unapproved for this “off-label” use, but had also been shown to cause obesity and diabetes.

Now, $1.4 billion might sound like a tough punishment, until you find out that Lilly’s total sales of Zyprexa have topped $37 billion. And at least some of those sales were thanks to doctors who, with guidance from Lilly drug reps, wrote thousands of prescriptions for patients with virtually no ability to defend themselves.  

The steep fine against Lilly apparently didn’t discourage another drugmaker, Johnson & Johnson, from using even sleazier tactics to promote its own lucrative antipsychotic for use on nursing home residents. As the New York Times reported on Friday:

Johnson & Johnson paid kickbacks to the nation’s largest nursing home pharmacy to increase the number of elderly patients taking the antipsychotic Risperdal and several other medications, according to a complaint filed Friday by the office of the United States attorney in Boston.

The payments violated the federal anti-kickback statute and led Omnicare, a pharmacy company specializing in dispensing drugs to nursing home residents, to submit false claims to Medicaid….The complaint charges that Johnson & Johnson and two of its subsidiaries…paid tens of millions of dollars to induce Omnicare to buy and recommend Risperdal for elderly patients as well as the drug maker’s prescription pain relievers Duragesic and Ultram, and the antibiotic Levaquin.

The complaint charges that Omnicare’s pharmacists engaged in intensive efforts to persuade physicians to prescribe the drugs from 1999 to 2004, a period in which the pharmacy’s annual purchase of Johnson & Johnson medications nearly tripled to more than $280 million, from about $100 million. During the same period, the pharmacy’s annual purchase of Risperdal rose to more than $100 million, according to the complaint filed in United States District Court in Massachusetts….

In return for Omnicare’s efforts, the drug maker allegedly paid the pharmacy company kickbacks in the form of rebates based on the market share of some Johnson & Johnson drugs, sponsorship of Omnicare meetings, grants and payments for Omnicare data, like the prescribing habits of doctors, of the kind that Omnicare had previously provided the drug maker for free, the complaint said.

Let’s recall that these are the same pharmaceutical companies who were praised for their cooperativeness last year when they cut a back room deal with the Obama administration to support health care reform. Part of the deal supposedly involved cutting costs for seniors on the Medicare Part D prescription drug program. Of course, it turned out the deal wasn’t all it was cracked up to be–and while it supposedly “gave” to seniors with one hand, Big Pharma kept on ripping them off with the other.

In the Johnson & Johnson case, the Times reports, the company seems to have conspired to circumvent government regulations specifically meant “to protect nursing home residents from medication mismanagement, like being sedated with psychiatric drugs for the purposes of discipline or convenience.” These regulations require an outside consultant pharmacist to review nursing home patients’ medications once a month, and report any irregularities.

But the government’s complaint in the Johnson & Johnson case raises the question of whether some companies have used the consultant pharmacists — the very people entrusted by the government with safeguarding the integrity of nursing home drug prescriptions — for corporate gain. In this case, according to the complaint, Omnicare’s consultant pharmacists worked to increase Risperdal’s market share….

In one company document among the court exhibits, for example, Omnicare said that its efforts generated a record market share high of 55.5 percent for Risperdal in the first quarter of 2000. “This market share represents Omnicare’s ability in persuading physicians to write Risperdal in the areas of behavioral disturbances associated with dementia,” the Omnicare document said.

But Risperdal, which is approved by the Food and Drug Administration to treat schizophrenia and bipolar disorder, is not specifically approved to treat behavioral problems in elderly people with dementia. In fact, in 2005 the F.D.A. required that the labels of certain antipsychotic drugs, including Risperdal, carry a black box label warning that elderly people with dementia-related psychosis treated with such drugs were at an increased risk of death compared with those taking a placebo.

So Johnson & Johnson knew that their drug, used in this way and on these patients, could actually increase the risk of death. But what’s the death of a few old, disoriented, defenseless, forgotten people, compared with the potential for fantastic profits? Not much, apparently. According to the Times article:

In an Omnicare letter to Johnson & Johnson in 2001, an executive wrote that the pharmacy planned to spend about $173 million on Johnson & Johnson products.

The executive wrote in capital letters, “We are selling more high-priced drugs (read Risperdal here) for the pharmaceutical industry!!”

Big Pharma’s Skyrocketing Prices

The AP reported yesterday on a new Government Accountability Office (GAO) report on soaring drug prices:

Prices on a growing number of prescription medications have ballooned in recent years as consolidation in the drug industry leaves fewer companies manufacturing niche medications.

Congressional investigators say the number of extraordinary price hikes on drugs doubled between 2000 and 2008. The drugs affected are mostly specialty medications but also include some popular products like Bayer’s antibiotic Cipro and the Eli Lilly schizophrenia treatment Zyprexa.

The Government Accountability Office report issued Monday attributed the rise to a combination of factors, including industry consolidation and price hikes by third-party providers who repackage drugs for patients.

The GAO’s findings could put new pressure on drugmakers to contribute billions more to the health care reform effort being finalized by Congressional Democrats.

The drug industry originally pledged $80 billion to defray the costs of covering millions more Americans, but the package being negotiated between the House and Senate is expected to call for well over $100 billion in financing from drug companies.

GAO found more than 400 examples of unusual price jumps on brand name drugs during the eight-year period — most ranged from 100 to 499 percent, but several exceeded 1,000 percent.

Unsurprisingly, the drug industry lobby Pharmaceutical Research and Manufacturers of America (PhRMA) “says the requested investigation is based on misleading data.”

What I’m waiting to see is whether these findings actually do inspire the Democrats to “put new pressure on drugmakers to contribute billions more to health care.” As I’ve written before, Big Pharma’s $80 billion “gift” to health care reform is a Trojan horse. And measures that might actually cut into their still-wide profit margin–like government price controls–are weak in the House’s bill, and absent altogether from the Senate’s.

House v. Senate: Health Reform Bills’ Impact on Medicare

 The Medicare Rights Center has provided Medicare beneficiaries and health care advocates with valuable tools for assessing the health care bills that have emerged from the House and the Senate–most recently, a side-by-side comparison chart of the two bills. As I’ve written many times before, both bills fall short of bringing about serious, systemic health care reform. Nonetheless, there are significant differences, so it does matter what happens in the coming battle over a final conference bill.

Unsurprisingly, the House bill is better on just about every count–perhaps  because it wasn’t written to please Joe Lieberman or Ben Nelson. When it comes to Medicare, the House bill is noticably stronger on changes to the Part D prescription drug program, and on assistance to low-income Medicare recipients. (The one caveat is that the Senate bill alone has income cielings for discounts, and I happen to agree that rich geezers can afford to pay more.)

I’ve included the material on the Medicare prescription drug program below, which shows that the House is far more willing to take on Big Pharma. It’s well worth taking a look at the Medicare Rights Center’s full chart here

Patient Protection and Affordable Care Act (Senate Bill)

• Requires 50 percent discount on brand-name drugs in the doughnut hole, effective July 1, 2010. (The doughnut hole is the $3,600 gap in the drug benefit when consumers pay full price.) Discount does not apply to individuals with incomes above $85,000 and couples with incomes above $170,000 per year.

• Reduces coverage gap by $500 in 2010 only.

Affordable Health Care for America Act (House Bill)

• Requires 50 percent discount on brand-name drugs in the doughnut hole, effective July 1, 2010.

• Phases out doughnut hole completely by 2019 by shrinking the gap each year starting in 2010.

• Secures price concessions from drug manufacturers.

• Allows Medicare to negotiate lower drug prices.

• Lifts the 36-month limit on coverage of drugs to prevent rejection of a kidney transplant.

“Obamacare” and the Facade of Regulation

Plenty of countries have created excellent health care systems largely through regulation–so why can’t we  do the same? The French and Japanese health care systems, for example, do not exclude private industry. They are not socialist in any sense of the word, and even retain a role for private insurance companies. What each system consists of is a regulatory apparatus that serves as the instrument for carrying out national policy–which is providing high quality health care for all the country’s citizens, at a reasonable cost. The regulation works because you can’t get around it, and because it was designed–and actually operates–in the public interest.

To achieve anything similar in the United States, however, would require a virtual revolution in how our government operates. Our system of government regulations isn’t really what we think of as regulation at all. Rather, it throws up a facade of rules, which corporations walk right through. And no wonder, since although the regulations are supposed to be arrived at independently and designed for the public good, corporations have long had a hand in writing them, as well, thanks to the power of lobbying, campaign contributions, and the revolving door between business and government.

Rather than being enacted to protect the public from the limitless greed of private industry, many regulations are actually passed in support of corporations. The worst example is probably the Securities and Exchange Commission, which is just a clubhouse for Wall Street. Another top contender is the Food and Drug Administration. The basic legislation passed by Congress in the 1930s and updated in the early 1960s set policy governing the sale and use of drugs, which demanded that companies demonstrate the proposed product is safe and efficacious. But that policy directive was quickly abandoned. Today the drug manufacturers breeze through the FDA, setting their own rules for use, establishing their own prices, and exercising their monopoly rights within the patent system which in the case of pharmaceuticals is  maintained for their benefit.

 An excellent article in the December Harpers, “Understanding Obamacare” by Luke Mitchell,  provides a better understanding of how the  American system of regulation in the corporate interest works. “The idea that there is a competitive ‘private sector’ in America is appealing, but generally false,” writes Mitchell. He continues:

No one hates competition more than the managers of corporations. Competition does not enhance shareholder value, and smart managers know they must forsake whatever personal beliefs they may hold about the redemptive power of creative destruction for the more immediate balm of government intervention. This wisdom is expressed most precisely in an underutilized phrase from economics: regulatory capture.

In the case of health care, Mitchell argues, “The health-care industry has captured the regulatory process, and it has used that capture to eliminate any real competition, whether from the government, in the form of a single-payer system, or from new and more efficient competitors in the private sector who might have the audacity to offer a better product at a better price.”

What’s really sharp about Mitchell’s analysis, though, is his recognition that “the polite word for regulatory capture in Washington is ‘moderation.'” As he explains it:

Normally we understand moderation to be a process whereby we balance the conservative-right-red preference for “free markets” with the liberal-left-blue preference for “big government.” Determining the correct level of market intervention means splitting the difference….The contemporary form of moderation, however, simply assumes government growth (i.e., intervention), which occurs under both parties, and instead concerns itself with balancing the regulatory interests of various campaign contributors. The interests of the insurance companies are moderated by the interests of the drug manufacturers, which in turn are moderated by the interests of the trial lawyers and perhaps even by the interests of organized labor, and in this way the locus of competition is transported from the marketplace to the legislature. The result is that mediocre trusts secure the blessing of government sanction even as they avoid any obligation to serve the public good. Prices stay high, producers fail to innovate, and social inequities remain in place.

This seems to me an extremely accurate depiction of the forces that have governed our current health care reform–from the start, when Big Pharma struck a secret deal with the White House, right up to the present moment, when Big Insurance’s bag man Joe Lieberman is deciding the fate of hundreds of millions of Americans.

And no wonder, since as Mitchell points out, the “moderation” formula has been perfected not by Republicans, but by Democrats: “The triangulating work that began two decades ago under Bill Clinton,” he writes, “is reaching its apogee under the politically astute guidance of Barack Obama.”

The piece goes a long way toward explaining how health care reform could have turned out so screwed up despite (or, as the case may be, because of ) Democratic control of the White House and Congress, and  is well worth reading in full.

Hip to Profits: The Sleazy Business of Medical Device Manufacturing

The latest issue of Mother Jones includes an article by Peter Stone on the shady dealings and inflated profits of the medical device industry. These companies makes things like artificial joints and heart valves, which are often needed by older people—and paid for by Medicare.

In recent months, these companies have launched a huge lobbying blitz  in response to provisions in the health care reform bills that would levy fees on their high-profit enterprise. The efforts apparently have not been wasted: In the latest versions of the legislation, the level of fees has dropped considerably (though that hasn’t stopped the manufacturers’ whining).

Compared with Big Pharma, the medical device industry has received relatively little media coverage or public attention, which makes this article worth reading in full. A few highlights:

We’ve been left jaded, after all, by the endless reports of drugmakers’ seducing physicians with golf and spa weekends, expensive gifts, and lucrative consulting contracts. Well, now that federal investigators have quietly turned their sights on the makers of medical devices—a $200 billion industry whose marketing practices have seen relatively little scrutiny—it’s becoming clear that implant companies are just as solicitous of doctors as Big Pharma has been.

Consider Minneapolis-based Medtronic, the country’s leading device maker, which hauled in nearly $15 billion in 2009 sales despite having become a repeat target for state and federal prosecutors. In 2006, Medtronic agreed to pay the feds $40 million to settle allegations that from 1998 through 2003 it had set up sham consulting and royalty agreements, trips to strip clubs in Tennessee, and other incentives to entice surgeons to use its spinal products….

Stone runs through cases that have led to hundreds of million in federal fines against medical device manufacturers in the last three years, including a $311 million settlement with the top five manufacturs of artificial hips and knees accused of giving doctors millions in kickbacks, often disguised as consulting fees.

Some effort to combat these practices has emerged from the Senate Special Committee on Aging, chaired by Wisconsin Democrat Herb Kohl, which held a “Surgeons for Sale” hearing last year, and in January introduced the Physician Payments Sunshine Act of 2009. This legislation, Stone writes, “would compel makers of medical devices, drugs, vaccines, and the like to publicly disclose any payment of more than $100 to a doctor; failure to report could result in fines of up to $1 million.”

Kohl is hoping the provision will become part of the final final draft of health care reform legislation. But the medical device manufacturers, in league with Big Pharma, will do everything they can to keep that from happening.