Mar 1 2007

Media on Medicare

Don’t mess with success—or corporate profits

With the new Democratic Congress promising to let the Medicare prescription drug program negotiate lower prices from drug companies, those companies have gotten their friends in the media to find some reason—any reason—why this would be a bad idea.

The Washington Post, happy to defend corporate profits, declared in the lead paragraph of a front-page November 26 article that Democrats were in danger of “wrecking a program that has proven cheaper and more popular than anyone imagined.”

“Anyone” clearly doesn’t include Congress, which barely passed the program in 2003 based on the White House’s 10-year cost projection of less than $400 billion (though, as the chief Medicare actuary revealed shortly after passage, a higher projection was suppressed by the Bush administration—New York Times, 3/25/04). The latest 10-year estimate: $797 billion (, 9/29/06), a doubling of the cost in less than three years. But that original estimate was nowhere to be found in the latest round of Medicare stories singing the program’s praises.

It’s true that the projected cost for 2006 was reduced significantly, from $38.1 billion to $30.5 billion (, 9/26/06). The biggest reason for this cost reduction, though, was that far fewer people than expected signed up for the plan (AP, 11/28/06). But isn’t it “more popular than anyone imagined”? The Post article cited polls saying that “more than 80 percent of enrollees are satisfied”—but that figure has to do with whether people feel they’ve chosen the right plan out of the many offered by the program, not whether they’re happy with the program itself.

A Wall Street Journal/Harris poll released November 20, for example, found 75 percent of enrollees were satisfied with their plan—but only 59 percent gave a positive rating to the program. And those who enroll, of course, are more positive than those who are eligible but don’t enroll; among all people over age 65, only 47 percent give the Medicare drug program positive marks. Did no one “imagine” that a program costing hundreds of billions of dollars would get the approval of more than half the people it was supposed to benefit?

No doubt the program would be more popular with its beneficiaries if it cost them less, which price negotiation would almost certainly achieve. But the drug companies—and their media steno-graphers—are making dire predictions about all the different ways the Democrats’ plans could “wreck” the program.

A Chicago Tribune editorial (12/3/06) warned that “drug companies would lose the incentive to invest in research” if “the feds were able to wring huge discounts from drugmakers.” Unmentioned in the Tribune and virtually every other mainstream article on the plan is that the drug industry’s profit margins, at about 18 percent of sales, are the highest in the business world (New York Review of Books, 7/15/04). As economist Dean Baker noted (Beat the Press, 11/26/06),

lower prices may also mean less marketing (the industry spending approximately as much on marketing as it does on research). It might also mean less copycat research. (According to the industry’s own analysis, approximately two-thirds of its research spending goes to developing copycat drugs.)

Baker went on to point out that the drug industry still makes a profit with the much lower prices it charges the Veterans Administration, Medicaid, Canada and all the other countries who negotiate prices with them; otherwise, it wouldn’t engage in those transactions.

Another media-accepted argument is that even if the Dems manage to give Medicare the power to negotiate with drug companies, “the official congressional scorekeepers aren’t persuaded that the government would actually save money” (Wall Street Journal, 12/7/06). Though the much smaller VA program has successfully negotiated prices 40 percent-50 percent lower than the prices private insurers have negotiated under Medicare (Beat the Press, 12/7/06), the Chicago Tribune editorial warned that “it’s unclear whether Medicare would be able to copy that success,” since, as the paper argued, “the VA offers a much smaller variety of drugs than most private Medicare plans, and tightly controls its costs in other ways.” And, as the media emphasized, “limiting choice would be unacceptable to many Medicare beneficiaries” (Washington Post, 11/26/06) because “American consumers have repeatedly resisted efforts to save money on medical care by restricting choice” (L.A. Times, 11/26/06).

Actually, the main reason the VA offers fewer drugs is that it has tough standards for effectiveness and safety (standards that the belatedly withdrawn Vioxx, for example, never met—Tapped, 11/27/06). That’s part of the reason why the New England Journal of Medicine (5/29/03) concluded that VA care was significantly better than Medicare’s fee-for-service program.

Of course, it’s odd to read journalists who are obviously working from drug-company talking points arguing that allowing Medicare to negotiate prices wouldn’t save any money. It’s because it would save money, lots of it, that Big Pharma is fighting the idea so hard. The New York Times reported (11/24/06) on the drug industry’s quick and massive mobilization to respond to the new threat to their Medicare windfall. “It’s all hands on deck,” said Ken Johnson, a senior vice president at Pharmaceutical Research and Manufacturers of America. In the recent media blitz, mainstream journalists have been acting as loyal members of that crew.