Pharmaceutical industry executives are frequently accused of greedily putting “profits before patients” (as if drug companies could profit by means other than serving patients). This accusation would be unjust if these executives were after profits. Unfortunately, however, today’s pharmaceutical executives are not after profits. They are after loot. They seek to gain, through legislation, money coercively taken by the government from American citizens. But, unbeknownst to these executives, their looting is self-destructive. In fact, by aiding and abetting the government in its violation of individual rights, the pharmaceutical industry is committing suicide. To see why, let us begin by examining some of the ways in which the industry calls for the violation of rights and receives loot as a result. Then we will turn to the reasons why this practice is killing the pharmaceutical industry.
Consider the industry’s support for the Medicare Modernization Act of 2003 (MMA). The MMA expanded Medicare to include coverage of prescription drugs for Americans over the age of 65 and was the largest expansion of welfare in America since the creation of Medicare itself.1 When the Act took effect in 2006, it made the U.S. federal government the single largest purchaser of prescription drugs in America.2
In 1999, years before this bill had been conceived, Alan Holmer, then president of Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s lobby group, made clear in a trade journal the industry’s view that “the question is not whether, but how, to expand Medicare coverage of prescription drugs.”3 In 2000, Holmer testified before the Senate Finance Committee that at “some point in the not-too-distant future, a Congress will pass, and a President will sign, legislation to expand drug coverage for Medicare beneficiaries. . . . Expanded drug coverage for seniors will be a positive development.” Holmer emphasized:
The pharmaceutical industry strongly supports . . . expanding Medicare coverage of prescription medicines. . . . Medicare beneficiaries need high-quality health care, and prescription medicines often offer the most effective therapy for them. We believe that the best way to expand prescription drug coverage for Medicare beneficiaries is through comprehensive Medicare reform.4
The pharmaceutical industry got its desired “reform,” and when the MMA became law, the government not only began dictating the terms by which private insurers would provide prescription drug coverage to Medicare beneficiaries, it also began spending tens of billions of dollars annually to subsidize that coverage.
From where does the U.S. government get this money? The government does not create wealth; it does not produce anything. Every penny the government spends on drugs (or anything else) comes from taxpayers. The government gets this money by taking it under threat of force from hard-working Americans (or by printing or borrowing it, which is deferred taxation). This is legalized theft; the money taken by force is loot. And when the government spends this loot on prescription drugs for the elderly, the loot is passed on to the pharmaceutical industry.
Now, merely receiving loot from the government does not in and of itself constitute the moral crime of complicity in the government’s coercion. But the pharmaceutical industry is not merely receiving money from the government as a result of the MMA. The industry advocated this socialist scheme of forced wealth redistribution from the start, supported it at every stage of development, and is now receiving the loot as planned. Although the industry exchanges drugs for the loot, the entire arrangement on the part of taxpayers whose money is taken by force to buy the drugs is involuntary. Taxpayers do not choose to fund the industry in this way; they are forced to do so—by a law that the pharmaceutical industry enthusiastically helped to create. . . .
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1 Joseph R. Antos, “Medicare and the Prescription Drug Benefit: Increased Pressure for Reform,” http://hsgac.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=877dff99-6f2b-451e-89d0-27b715964a55. Accessed October 18, 2009.
2 Benjamin Zycher, “The Human Cost of Federal Price Negotiations: The Medicare Prescription Drug Benefit and Pharmaceutical Innovation,” Manhattan Medical Institute Medical Progress Report, no. 3, November 2006, http://www.manhattan-institute.org/html/mpr_03.htm/. Accessed October 18, 2009.
3 Alan F. Holmer, “Covering Prescription Drugs under Medicare: For the Good of the Patients,” Health Affairs, vol. 18, no. 4, July/August 1999, p. 23.
4 Alan F. Holmer, Statement before the Committee of Finance of the U.S. Senate, March 22, 2000, http://finance.senate.gov/3-22phrm.pdf. Accessed October 3, 2009.
5 Cynthia M. Williams, “Using Medications Appropriately in Older Adults,” American Family Physician, vol. 66, no. 10, November 15, 2002, pp. 1917–24.
6 Dennis Cauchon, “Medicare Drug Plan Spending Drops $6B in 2008,” USA Today, October 31, 2008, http://www.usatoday.com/news/health/2008-10-30-medicare_N.htm. Accessed December 1, 2009.
7 Harry and Louise “Get the Job Done” television commercial, http://www.youtube.com/watch?v=fOr17a4ZOIU. Accessed October 4, 2009.
8 Billy Tauzin, “Health Care Reform: Saving Money Is Important, But So Is Saving Lives,” http://www.phrma.org/about_phrma/straight_talk_from_billy_tauzin/health_care_reform_-_saving_money_is_important,_but_so_is_saving_lives/. Accessed December 2, 2009.
9 Pharmaceutical Research and Manufacturers of America, “Platform for a Healthy America,” http://www.phrma.org/platform_for_a_healthy_america/. Accessed October 4, 2009.
10 Janet Adamy, “House Leaders Unveil Health Bill,” The Wall Street Journal, October 30, 2009, http://online.wsj.com/article/SB125682351602615905.html.
11 Industry leaders sometimes claim that what they want is “market-based policy approaches . . . that build on the current public-private mix of health insurance coverage” [Bristol-Myers Squibb statement on U.S. health-care reform, http://www.bms.com/responsibility/key_issues/Pages/healthcare_reform.aspx], but, in fact, the changes they advocate amount to a government takeover of medicine.
12 This scheme, if enacted, will also practically eliminate out-of-pocket payments for prescription drugs in America; almost all prescriptions will be “paid for” either by insurance companies or by the government. This is significant because, when people do not pay out of pocket for their prescriptions, they tend to be less concerned about the price of drugs; thus, they tend to purchase more and higher-priced drugs than they would if they were paying out of pocket. This too will result in huge increases in dubious revenues for the pharmaceutical industry.
13 Television commercial, http://www.phrma.org/files/Factory_Final%20-1_6_08.wmv. Accessed October 5, 2009.
14 Duff Wilson, “Waxman Takes on Drug Makers over Medicare,” New York Times, August 25, 2009, http://www.nytimes.com/2009/08/26/health/policy/26dual.html. Accessed October 3, 2009. Note that, when the MMA was signed into law, its language contained a “noninterference clause” that explicitly prohibited the federal government from intervening in drug price negotiations between pharmaceutical companies and Medicare drug coverage plans, which are administered by private contractors. Thus, Representative Waxman is attempting to retroactively change the terms of contracts made by the pharmaceutical industry. Source: Martin Sipkoff, “Lowering Part D Costs without Direct CMS Negotiations,” Managed Care, September 2009, http://www.managedcaremag.com/archives/0909/0909.medmgmt.html. Accessed October 4, 2009.
15 Alicia Mundy, “Drug Makers Face Tougher Measures,” Wall Street Journal, October 30, 2009, http://online.wsj.com/article/SB125685873503217267.html. Accessed October 31, 2009.
16 Paul Hsieh, “Mandatory Health Insurance: Wrong for Massachusetts, Wrong for America.” The Objective Standard, vol. 3, no. 3, Fall 2008. pp. 39–50.
17 David D. Kirkpatrick, “Democrats Say No to Cost Cap for Drug Makers,” New York Times, August 6, 2009, http://www.nytimes.com/2009/08/07/health/policy/07lobby.html?_r=1&ref=health. Accessed October 5, 2009. In fact, the health-care “reform” bill that passed the House in November 2009 includes cuts in payments to drug companies of an estimated $125 to $150 billion; Mrs. Pelosi got most of the “squeeze” she was looking for. See, Janet Adamy, “Parsing the House Health Bill,” Wall Street Journal, November 28, 2009, http://online.wsj.com/article/SB125763756556136303.html.