Re: Lord Byron’s Amendment on Closing Prescription Drug Loophole

In Open Letter on December 22, 2009 at 3:52 AM

Opposing cost-control measures aimed at saving Americans $19.4 billion over the next decade (the official CBO estimate) Georgia Senators Johnny Isakson (R) and Saxby Chambliss (R) have successfully voted down the bi-partisan McCain-Dorgan Amendment on Lowering Prescription Drug Prices. In short order, the bill was rejected 51-48, with supporters failing to obtain a 60 vote passage requirement.

Read Politico‘s coverage, Senate Rejects Dorgan Amendment.

For background, the Amendment, proposed to be included in the Health Bill currently before the Senate, is outlined by Lord Dorgan in this press release — Lowering Prescription Drug Prices.  In an earlier letter sent to both Georgia senators, I had written previously about the legislation — read here. Impressively, passage had been argued for by Senators John McCain (R) and Byron Dorgan (D) most prominently on the floor of the Senate on the day leading up to final vote last Tuesday. Sen. Chuck Grassley (R) also spoke soberly in favor of the bill’s passage that day.

John McCain had spoken previously about anticipated pushback —

“The ability for Americans to buy cheaper, safe, imported prescription drugs is needed more than ever before with 16 million Americans out of work and millions more struggling financially. But while Americans all over the country are being forced to choose between their next meal and their necessary medications, pharmaceutical companies continue to lobby Congress to keep rules in place to prohibit the importation of the exact same prescription drugs sold here in the United States in order to maintain their profit margins.”

C-SPAN footage of the event is available — click here for more.

Alongside a minority of Senators, the two Georgia representatives were able to oppose a real benefit to wallets and pocket books of their constituents, including the elderly already-retiring Baby Boomer generation. In doing so, Senators Isakson and Chambliss have managed to benefit a majority of lobbyists, all being paid to invoke the will of the pharmaceutical industry in Washington, D.C. On this note, some background understanding of Big Pharma lobbying power is called for.  Bill Moyers, the veteran PBS journalist, has covered the lobbying-congressional staffing revolving door well — watch his special here.

Notably, Blue Cross/Blue Shield has been a big funder of both Republican Georgians in the latest election cycle, as you can see in the pyramid graphic below.

The Center for Responsive Politics, pulling data from the Federal Election Commission, provides a helpful source for these political campaign contribution figures, allowing for a summing of both individual and political action committee (PAC) dollar contributions spanning the period 2005 to present for both senators.

Graph two displays a more real-time appreciation for the extent of barrier elimination having unfolded over the month of December alone in time lapse, this time from the vantage point of a publicly-traded stock demonstrated in the health insurance company Wellpoint Inc., the affiliate of Blue Cross/Blue Shield.

As one can make out in the figure, a clear rising trend has pushed up the price per share for the company over this period, first the public-option and second the Dorgan Amendment have successively been dropped from final passage. Last closing price is 60 dollars and 10 pennies.

Health economists like Neun and Santerre (2007) have realized and documented the inelasticity in demand for medical care exhibited among individual consumers long before this legislation. Now that the patient demand curve for health insurance is proposing to be mandated for approximately 9 out of every 10 of us, one would maybe expect a greater sense of moral obligation on behalf of politicians advocating for more cost improvement for the individual, in clear structurally proven ways.

Until preventative medicine is heralded as a goal in policy formation (read NBER Digest’s review of “Low Life Expectancy in the United States” by Preston and Ho), the McCain-Dorgan proposal embodies one of the strongest responses, if not the strongest, answering the call for cost containment we’ve seen. In manifold manner, it would eliminate prescription drug pricing cross-country disparity, implement what Europeans refer to as “parallel trading” and, in doing so, create a more optimal health care zone that would serve wisely in reducing waste, e.g., the likes of shoe-leather costs incurred by many of the eldery who are having to cross the border into Canada to obtain lower priced Lipitor and assorted “little purple pills” in inelasticly-demanded bulk.

Will there be future solid opportunity for passage of such legislation?

F. Scott Fitzgerald, the American writer, once proclaimed, “There are no second acts in American life.” Maybe his quote will prove true this time, not in the context of the 1920s transitioning into the 1930s, but instead in the context of the 2000s transitioning into the 2010s.

Economists are predicting a “Lost Decade” ahead, but that implies that we were “Found” in the first place.


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