Tag: Pharmaceutical industry

A Payout to Big Pharma

Let’s repeat this before we start: the current debate is not about birth control. No one wants to abolish birth control, not even Rick Santorum. You think with all the mistresses and hookers the GOP has stashed away, they want to get rid of birth control? No, the debate is about a mandate, plain and simple. It’s about what government can and can not force insurers/employers to do.

But the furor has missed something important. As Avik Roy points out, the birth control mandate isn’t just a vote-buying scheme for women. It’s a huge payout to the Big Pharma companies that supported Obamacare.

Today, oral contraceptives are really cheap. At Wal-Mart, a one-month supply of Sprintec or Tri-Sprintec, manufactured by Barr Laboratories (a unit of Israeli drug giant Teva Pharmaceuticals) costs a grand total of $9.

Under the current system, drug companies have an incentive to compete on price. If you have health insurance that covers birth control today, your insurer is likely to charge you a higher co-pay for expensive, “branded” versions of birth control over cheaper, generic ones. If you don’t have health insurance, and you’re buying the Pill directly from the pharmacy at Wal-Mart, you have even more incentive to shop on price.

Under the new mandate, this price incentive disappears. Insurers will be required to pay for any and all oral contraceptives, without charging a co-pay, co-insurance, or a deductible. This “first dollar coverage” of oral contraception kills the incentive to shop based on price.

If history is any guide, this significant change will drive up the price of oral contraception. Today, Tri-Sprintec costs $9 a month. In 2020, don’t be surprised if it costs $30. Drug companies will be able to market “branded” contraceptives at premium prices, knowing that women are free to choose the most expensive, designer product because it will cost them the same as the cheapest generic. Prepare yourself for multi-million-dollar Super Bowl ad campaigns from competing manufacturers.

The Democrats simply refuse to understand the basic economics of the four ways money is spent. When you can spend somebody else’s money on yourself, you have no incentive to control costs. This is one of the key reasons our healthcare system is such a clusterfuck: the people consuming healthcare are disconnected from the people paying for it. No one has any incentives to control costs. And by promising 100% first-dollar coverage of birth control — no matter how much that birth control costs — the President is laying the groundwork for making this problem far far worse.

And that’s just looking at it from the side of “how much is this going to cost us”. The big story is the payout we are giving to Big Pharma in return for their support of Obamacare — a payout that could amount to billions. When George Bush refused to include price controls in Medicare Part D, he was pilloried for it and derided as an instrument of Big Pharama. But now we have a President giving a far more direct subsidy to pharmaceutical companies and not only is he not criticized for it, he is praised for his progressive insight and vision.

To hell with this Derrick Bell crap. Forget about Bill Ayers and Saul Alinsky. This is what matters. We have entire industries — banking, automotive, energy and pharmaceuticals — that are getting handouts and subsidies from our government. Obama didn’t start this nonsense, but he is making it worse. And this is not the path to prosperity, no matter how much the prospect of free birth control tickles the fancies of radical feminists.