Pharmas Support Rx Benefit ... Sort Of

July 28, 2003
It may come as a surprise to learn that the pharmaceutical industry is supporting legislation to provide a Medicare drug benefit, though it is fielding an army of lobbyists in an effort to shape the legislation to its liking.

Pfizer Chief Executive Hank McKinnell agreed. "Providing a meaningful prescription drug benefit for older and disabled Americans is the single best investment we can make in the health of Medicare beneficiaries today and in our nation's health care system for tomorrow," he said.

McKinnell noted that expanding access would increase sales volumes. The elderly are among those most likely to take prescription medicines such as Pfizer's Lipitor or Novartis' Diovan.

It's not quite that simple, of course. While the drug companies are always eager to sell more pills, their greatest fear is that if the federal government foots more of the bill, it may want to control drug prices, as is now the case in most of Europe.

"We've made no secret of the fact that the number one risk to us and to other drug companies is that the government would set the prices," said Ian D. Spatz, vice president of public policy at Merck. "There will be tough negotiations, and there will be private-sector downward price pressure, but also there will be increased utilization."

The United States is the largest market for global drug makers in dollar volume and to a large extent provides the revenue the drug companies need to finance the development of new drugs. If the U.S. market became less lucrative, it would hurt drug company profits but would also retard research, the drug executives noted.

If their fears about price controls can be allayed, the drug companies favor more federal involvement -- not only because of the potential of increased sales but also because giving the 40 million Americans on Medicare more access to prescription drugs would also help to quell criticism of the high cost of branded drugs.

Key to drug companies' support of the legislation now making its way through Cognress are the details of the provisions that would hand off the job of providing the prescription drug benefit to private insurance companies, which would compete for businesses.

The devil lies in the details. Even if the government gave seniors a choice of several plans run by private insurance companies, prices might come under pressure. If patients could select health plans à la carte, some would go for the cheapest solution. In a system where several parties compete to provide attractive rates, drug companies might still wind up charging less of a premium for a new pill.

Controlling costs at all may be very difficult. "To believe that health care costs will be stabilized is an illusion," says Vasella.

Merck's Spatz also expressed concerns about the private coverage plans. But he added that he would like economically disadvantaged people who are eligible for both Medicare and Medicaid to get their drugs through Medicare.

"They should be treated as Medicare beneficiaries first and poor people second," Spatz said.