Move On says AARP selling out medicare

Having beaten back price controls on prescription drugs in the United States, the American pharmaceutical industry is trying to roll them back overseas, with help from the administration and Congress.

Medicare bill hands victory to drug groups
By Christopher Bowe in New York

Passage of the US Medicare bill is a victory for pharmaceutical companies, providing some relief from public anger over drug access and cost and potentially boosting sales and profits.

The industry could see up to $10bn in extra sales and $4.7bn in additional profits, a rise of 2 per cent, in 2006 when the benefit starts, according to a Merrill Lynch study. The study estimates potential sales of $15.4bn in 2010 and $7.4bn in profits.

These estimates are based on senior citizens spending more on drugs than they do now because of new money coming from the Medicare scheme.

The volume of sales is expected to climb as about 10m senior citizens without drug insurance could boost usage with new coverage. But analysts caution that the biggest expansion in the US federal healthcare system for the elderly in 40 years might also force heavy discounts on drug makers, offseting any increase in volume and limiting their windfall.

In a report by Citigroup, analyst George Grofik estimates that pricing pressures could wipe out the extra sales made from more volume.

The Citigroup report said that discounts of 22 per cent in retail prices would mean no extra revenue for the drug industry. But a discount of only 10 per cent could mean $2.66bn in new sales to the industry.

The new plan also moves the drug industry out of the public's line of fire, at least temporarily.

The industry felt that once senior citizens without cover were provided with cover, the issue of drug costs for them would recede. Hank McKinnell, Pfizer's chief executive, likened it to car insurance: since motorists are covered they care less about the cost of parts for repairs after an accident.
The drug industry also got the structure it wanted - a benefit administered by private-sector companies.

But political battles loom. Senior citizens are still required to pick up a large portion of their drug costs and the US government will become responsible for nearly half of all prescription drug purchases.

This could be worrisome if costs increase rapidly and the government tries to push for more price controls - something the industry abhors.

"If volume growth is much greater than anticipated under the Medicare drug benefit, and not sufficiently offset by pricing pressures, we believe the industry would face the prospect of government price setting activity down the road," said Mr Grofik.

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Scrat
The question is why the drug companies couldn't or can't do it by just refusing to sell at the controlled price. I asked that previously and still do.
If the government rather than tying their hands had simply told the industry either you bring the prices in line with the rest of the world we will impose price controls. The Industry would have taken the appropriate action. Of course why should they when they can more easily milk the American people.

Scrat
My contention if the government were to threaten to implement them it would give the needed impedes to the drug industry to refuse to sell drugs to other nations at reduced prices at the expense of the American consumer. Of course with the present legislation that has become impossible. The Drug companies won that vote.

I think the vote in the the senate was in the neighborhood of 73 for industry and 27 for the people.

If a counter AARP were formed I would join it. I am over sixty and never saw the good in the first one, so never joined.