A Test Case for the Dems: Big Pharma or Medicare Bargaining for Lower Drug Prices

When I worked in Washington, the biggest lobby – after Big Oil, and the big military contractors – was the big pharmaceutical companies – Big Pharma. Early in the Bush administration Big Pharma pushed the new Medicare drug benefit through Congress, releasing a $600 billion dollar gusher in their direction. The bill included a guarantee that Medicare wouldn’t use its huge bargaining leverage to negotiate lower prices with the drug companies – an extra bonus. If this isn’t corporate welfare, I don’t know what is.

Nancy Pelosi has announced that one of the Dems first priorities (“first hundred hours”) would be to end this ban and have Medicare use its bargaining clout to get lower drug prices for seniors. But Big Pharma is already on the attack.

First, Big Pharma says this will amount to government price controls. That’s absurd. Bargaining is bargaining. The Veterans Administration already negotiates drug prices on behalf of its 4.4 million enrollees. Medicaid negotiates on behalf of millions of Medicaid recipients. Why shouldn’t Medicare use its even bigger bargaining clout to get good deals for its nearly 23 million enrollees? Ever hear of bulk discounts? Happens all the time. Think of Wal-Mart. In fact, Wal-Mart is using its bargaining power to get lower drug prices.

Next, Big Pharma contends that if Medicare tries to negotiate lower drug prices, some drugs will not be available because their manufacturers just won’t sell at lower prices. But that’s no problem. Medicare beneficiaries who want these drugs could still get them through private insurers. The whole point is for Medicare to set up a plan that competes with the private companies, and offers seniors the choice of lower-priced drugs.

Big Pharma also says that if Medicare gets much lower drug prices, drug companies won’t have enough money to develop new drugs. But wait a minute. Remember, these are the same companies that lobbied for the new Medicare drug benefit because they wanted access to the billions of dollars that came with the program. Now that these billions of dollars are flowing, it’s disingenuous for them to argue they won’t have enough money to develop new drugs if Medicare gets discounts for the elderly.

The only thing that might stop the new Congress from going through with this sensible plan is huge bargaining power of a different kind. I’m talking now about politics. Because when it comes to campaign contributions and Washington lobbyists, Big Pharma has more bargaining clout than almost anyone. It has already lined up former Democratic congressmen and officeholders to lobby their old colleagues. And it’s showering the Hill with money. Already Max Baucus, the upcoming head of the Senate Finance Committee, is expressing doubts about the new Democratic plan.

Watch this one closely. Will Pelosi pull it off in the “first hundred hours?” This will be a major test case of whether Dems are willing to stand up to one of the truly powerful Washington lobbies.