Big Pharma a Big Winner in Health Care Reform

| Mon Mar. 22, 2010 2:28 PM EDT

The Republicans look a sour lot this morning, but the pharmaceutical industry appears more than content with the health care legislation passed by the House, and with its Democratic friends in the White House and on the Hill.

Big Pharma helps foot the campaign bills of a sizeable chunk of members of Congress, and both parties generally lined up behind the insurance and drug industries from the get-go. So it should come as no surprise that the Democrats, who long ago gave up any pretence of opposing corporate power, found a way to accomodate the pharmaceutical companies on the way to passing their tepid reform. To a large extent, the "debate" over health care was a show debate, an extended round of Washington smoke and mirrors. The administration cut its deal with Big Pharma early on, and pretty much stuck to it throughout the process.

In fact, the Dems actually made the drugsters look good, celebrating the industry's generous "concessions" and "discounts" while ensuring that no real threat to Big Pharma’s profits would make their way into the final bill. The industry's main goal from the very beginning has been to fend off any government power to negotiate or seriously regulate drug prices—and this they did. Big Pharma's second big win was to prevent any measure that would have opened the way for American consumers to buy less expensive drugs abroad, especially from Canada.

At the same time, the supposed give-backs by the drug industry are projected to more than pay for themselves. The much-lauded discounts on brand-name drugs for seniors in the Medicare prescription drug program, for example, are good for Big Pharma because they discourage oldsters from switching to generics, or giving up meds they can't afford. (And just to be safe, the drug companies jacked up prices on their bestselling brand-name drugs this year.) Finally, more insured people simply means more money coming into the coffers, for Big Pharma as well as for the health insurance industry.

Confirmation of the industry analysis came early in the day from the stock market, where drug stocks initially remained level; there certainly was no rush to dump shares, which is what would happen if the bill actually represented any threat to profits. And by 1 p.m., CNN Money was reporting a rally in health care stocks.

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"I was unable to find anything in there that would cause me to have anxiety if I were a shareholder in a pharmaceutical company," Ira Loss, a senior health-care analyst at the research firm Washington Analysis, told Dow Jones. According to the ticker story:

Billy Tauzin, who led the industry's negotiations on health care with lawmakers, said overall drug makers fare well. “While we’re not totally happy,” Tauzin began, “we generally feel like it tracks with our principles.”

Sanofi-Aventis SA (SNY) Chief Executive Christopher Viehbacher said in an interview that the impact of the legislation will be neutral to slightly negative “but better for the industry than if healthcare reform didn’t pass.”

Tauzin, head of the Pharmaceutical Research and Manufacturers of America or PhRMA, and Viehbacher said getting protection for brand-name biologics is among the important provisions for the industry. Drug makers pushed hard to get 12 years of exclusive market protection while the White House and some lawmakers wanted to lower the protection to seven years.

Despite fees and rebates imposed by the legislation, "analysts say drug makers will end up recouping those costs through new customers: The bill would provide insurance coverage to an additional 32 million Americans." The Dow Jones story continues:

Chalk up another good round for Pharma and Biotech in health care reform,” began a note to clients Friday from Concept Capital, a research firm. Ken Tsuboi, co-manager of the Allianz RCM Wellness Fund, sees the impact of bill, and its $90 billion in concessions over 10 years, as relatively minor in an industry that has annual global sales of about $750 billion, with about $300 billion in the U.S., and margins close to 30%.”I think that it is actually a pretty good deal for Pharma,” Tsuboi said.

The GOP, which purports to be the party of big business, ought to be applauding at least these portions of the health care reform legislation—and perhaps when the cameras go away, some of them will quit bitching and count their blessings. As for the obnoxious Tea Party gang, if they start threatening the real power in this country, which is vested in corporations, they may well find themselves whipped and isolated.

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