HHS Mandate — Big Bucks for ‘Big Pharma’?
NEWS ANALYSIS: Co-pay-free contraception and abortifacients likely will deliver windfall profits to pharmaceutical companies eager to sell expensive ‘brand drugs.’
BY JOAN FRAWLEY DESMOND
| Posted 2/7/13 at 2:47 PM
WASHINGTON — Health-care reformers eager to control costs have pressed for policies that incentivize patients to choose less expensive generic versions of popular drugs.
Indeed, President Barack Obama’s Affordable Care Act ostensibly promotes the use of generics, but there’s one glaring exception: the mandated “preventive services for women.”
That controversial rule, which requires private employer health plans to provide co-pay-free contraception and abortion-inducing drugs, allows patients to choose pricy brand-name drugs with no penalties.
The puzzling inconsistency in the federal government’s promotion of generics and discounted brand drugs has already prompted scrutiny of the organization Pharmaceutical Research and Manufacturers of America — known on Capitol Hill as “PhRMA” or “Big Pharma” — and its hidden role in the passage of the Affordable Care Act.
Now, the nomination of a former pharmaceutical industry lobbyist as the new general counsel of the Department of Health and Human Services has sparked fresh questions about what drug makers stand to gain from the controversial rule.
The nomination of William Schultz, who has served as HHS’ acting general counsel since 2012, is particularly striking. As reported in a December 2012 Washington Examiner article written by the newspaper’s senior political columnist, Tim Carney, when Schultz worked as a lobbyist, his biggest client was “Barr Laboratories, maker of the morning-after contraception pill known as Plan B.”
During the Clinton administration, Schultz served as deputy commissioner of the Food and Drug Administration before he became a lobbyist and represented Barr, among other companies. So why has Schultz returned to government service?
As Carney noted in his Washington Examiner column, in his role as “general counsel for HHS, Schultz would presumably be the point man on defending the [contraception] mandate. Has he been recusing himself? Schultz’s office dodged my question on the subject.”
In fact, critics have long expressed concern about the drug industry’s role in the final, secret negotiations leading to the passage of the Affordable Care Act. The Wall Street Journal and other media organizations have published emails detailing talks between the White House and representatives of the pharmaceutical industry, which, ultimately agreed to approve the use of generics and discounted brand drugs with the understanding that the new health bill will give the industry access to a large pool of previously uninsured consumers.
By the time President Obama signed the bill, PhRMA had secured some key victories, and it subsequently orchestrated a $150-million advertising campaign to promote the unpopular health bill better known as Obamacare.
In its June 2012 story, The Wall Street Journal reported that the “drug lobby would spend $70 million on two 501(c)(4) front groups called Healthy Economy Now and Americans for Stable Quality Care” to promote the health law.
While the Journal’s coverage cited emails between the White House and the drug lobby dealing with negotiations over Medicare drug coverage, few media stories have focused on the drug industry’s interest in securing co-pay-free contraception.
Why There’s a Windfall
One exception is a 2012 article in The Atlantic by Avik Roy, who explained why co-pay-free contraception would be a “windfall” for the drug industry.
“The reason why birth control is so cheap is because there are no longer any patents covering the use of a combination of estrogen and progesterone for the purpose of oral contraception. The first pill, Enovid, was made available in the U.S. in 1957. These hormones are very inexpensive to synthesize and manufacture,” explained Roy.
Before the HHS contraception mandate took effect, according to Roy, “drug companies had an incentive to compete on price,” as insurers generally required higher co-pays and pharmacies charged more for “expensive, ‘branded’ versions of birth control over cheaper, generic ones.”
But once this price incentive disappears, drug companies will be free to raise prices. Says Roy, “If history is any guide, this significant change will drive up the price of oral contraception.”
“Today, Tri-Sprintec costs $9 a month,” she said, referring to one brand of pharmaceutical contraception. “In 2020, don’t be surprised if it costs $30. …Prepare yourself for multimillion-dollar Super Bowl ad campaigns from competing manufacturers.”
In a 2012 Daily Beast story, “Big Pharma’s Role in the Contraception Debate,” Peter Schweizer noted that Capitol Hill had failed to pass legislation designed to secure conscience protections for employers who opposed the HHS mandate, and he suggested that lawmakers on both sides might be influenced by PhRMA’s clout.
“So welcome to the world of crony contraceptives, which means good times for both the bedroom and the corporate boardroom,” the article concludes. “Follow the money seems like good advice, even when it comes to some of these thorny social issues.”
This month, The American Spectator returned to the issue in an article entitled “Crony Contraception.” David Catron echoed predictions that the HHS mandate would prove extremely profitable for drug makers.
Catron also asserted that the appointment of Schultz as general counsel for HHS suggested that Big Pharma was leaving nothing to chance: Schultz was in place to defend and secure the future windfall resulting from co-pay-free contraception.
Catron offered no hard evidence to bolster either his allegations against Schultz, and his broader assertion that Big Pharma was committed to defeating legal challenges against the HHS mandate.
Indeed, while Catron suggests that the White House’s contraception mandate is a reward for Big Pharma’s financial and institutional support during two presidential campaigns and the battle to pass Obamacare, it’s equally possible that both parties shared the goal of expanding contraception use — and their political alliance arose naturally from that common goal.
That said, it’s puzzling that there has been minimal coverage of the industry’s ties to the White House and any likely role it may have played in securing the contraception mandate.
While media organizations frequently investigate the impact of political donors and industries on groundbreaking legislation, the pharmaceutical industry’s stake in a major election-year issue drew little attention.
Is that because media organizations failed to do their job? Or is it because they endorsed the HHS mandate?
Joan Frawley Desmond is the Register’s senior editor.
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