What the press refers to as “tweaks” in the new version of health care legislation would appear to hand Big Pharma a sizeable victory, allowing the companies to extend the lifetimes of brand name drugs by selling them at discounted prices within the Medicare drug plan. This is portrayed as a magnanimous gesture by the profitable pharmaceutical makers. And to help the poor guys out a little and lessen the strain on their stockholders’ pocketbooks, the government apparently will come in to pay the companies some of the dough they lose in providing the discounts. Another way of putting this is that it seems the discounts aren’t really discounts at all. In the world of congressional smoke and mirrors, they’ve miraculously become a subsidy.
Government policy ought to push less expensive generic drugs into the marketplace. Mandating their preferred use by Medicare would be one small step in that direction. Generally speaking, the brand-name drugs should be eliminated when their patents run out. The proposed legislation apparently will have the effect of lengthening the company monopoly on brand names, thereby assuring higher, not lower prices.
Although somewhat confusing, this article from the New York Times may help you get a feel for what’s going on.
Bottom line: cost control is sacrificed market monopoly.
