In making a fool of President Obama, Big Pharma has turned itself into a poison pill of health care reform. In the summer, the drug companies offered $8 billion a year over 10 years in drug cost cuts, as long as the government did not ask for further reductions in what Medicare provides them. Obama proclaimed this a huge breakthrough, given the drug industry's prior attacks on reform. "The pharmaceutical industry has been quite constructive in this debate,'' Obama said. "And the savings that they've put on the table are real and significant and appreciated.''
Big Pharma has taken the savings off the table. A new AARP analysis has found that drug companies raised their prices for prescription drugs by 9.3 percent over the last year, amounting to $10 billion in new revenues. That is $2 billion more than the promised annual cost cuts. The New York Times reported that the analysis for the advocacy group for Americans 50 and older mirrored that of Credit Suisse, which found that the eight largest US pharmaceutical companies jacked up prices by an average of 8.7 percent. It is the highest rash of rises since 1992, when the drug makers feared serious reform under President Clinton.
The Obama administration cannot claim it was blindsided. Obama repeatedly hailed the drug companies as new partners even as they continued old practices of wildly raising prices in anticipation of legislation.
In an April Wall Street Journal story, Credit Suisse analyst Catherine Arnold detailed how Bristol-Myers Squibb, Pfizer, and Eli Lilly raised the prices of leukemia, kidney cancer, attention deficit, and erectile function drugs (including Pfizer's Viagra and Lilly's Cialis) by between 14 percent and 33 percent. This was after a 2008 in which pharmaceuticals were the third-most profitable industry in the United States, according to Forbes magazine, with profits at 19 percent of revenues. The 2008 gains of the top 21 drug makers amounted to $51.5 billion.
Yet Obama made the deal. It was understandable that he sought a crack in the stone wall of industry opposition to reform. But the continued price-gouging is the biggest insult thus far to the first-year White House. This does not even get into how drug companies have repeatedly been fined or forced into agreements with many states totaling several billions dollars for misleading marketing. The public has also learned of drug company financing of ghostwritten articles in medical journals, the burying of unfavorable laboratory findings, and the insidious manipulation of consumers in television ads, to get consumers to pressure their doctors to prescribe highly profitable brand-name drugs.
In March, Obama said he was cracking down on the "broken system'' of military contracting. But drug companies still have the free hand of a Halliburton.
Obama and Congress must tear up the $8 billion a year agreement and tie drug maker cost cuts much more directly to actual profits and the consumer's ability to pay. If they do not, there is no hope for the rest of reform. At this very moment, according to the AARP analysis, the prices for many brand name prescription sedatives and medicines for asthma, arthritis, dementia, osteoporosis, and elevated cholesterol have shot up between 12 percent and 19 percent.
Obama long ago ruled out the best way to end the gouging, a single-payer system. But with these price hikes, the single payer left holding the bag will forever be the patient. Obama, by capitulating too soon to the drug companies, has now given himself the biggest test yet of who governs Washington, he or the lobbyists he promised to curtail.
Not only is the health care industry the top lobbying force so far in 2009 and pharmaceuticals the top subgroup, spending $200 million, but in the 2008 presidential election, drug makers switched to Obama, a Democrat, from their historical tilt toward Republicans.
They gave Obama $1.1 million in campaign contributions, 3 1/2 times more than Republican John McCain. Without action against the gouging, it will become too charitable to say that Big Pharma took Obama for a fool. It will become clear Obama was in bed with Big Pharma all along.