I’m suffering from a severe case of cognitive dissonance, brought on by completely conflicting statements in articles from a single source, the New York Times. In Friday’s business section, Alex Berenson notes that big pharma, led by Pfizer, Lilly, Novartis and Wyeth all enjoyed strong profit gains (free registration required) in the third quarter.
The profits were generated, in large part, by price increases in the US, where Lilly’s prices were up 11%, contributing to a 14% gain in US revenues. Fair enough, prices went up, so did profits.
In the next (virtual) breath, another NYT article quotes the Congressional Budget Office’s as concluding that a Democratic Congress’ efforts to reduce Medicare drug spending by negotiating directly with pharmaceutical manufacturers will not work because private industry is so darn good at negotiating prices. (polemics are mine, but you get the point)
So let’s see. Drug manufacturers are making nice profits by increasing prices in the US. Prices are not going up overseas, where every other country negotiates prices en bloc. And yet the US, the single largest market for drugs, could not impact drug prices by negotiation?
Additional evidence supporting the theory that governmental negotiation results in lower drug prices comes from the Veteran’s Administration.
I’m really dissonant-ified.
Joe,
Brilliant. Aunt Gert’s investments are in Pfizer and the others, and she depends on their success for her retirement living. I guess if her drug expenses were less, she could live with a smaller dividend from her investments…
Somebody should tell the Congressional Budget Office that Medicare pays 50% more than the Veterans’ Administration pays for the top 20 brand-name prescription drugs sold to seniors.
Why?
Because, unlike Medicare, the VA is allowed to negotiate prices.
As for private insurers, they also pay far more than the VA. For one, no private insurer is big enough to have the clout that the the VA has (and that Medicare would have if it negotiated.) Secondly the pharmacy benefit managers (PBMs) that negotiate for many insurers take kickbacks from the drug companies. And finally, private insurers aren’t that concerned about drug prices because, if prices go up, they know that they can (and will) pass any increases on to employers and patients in the form of higher premiums.