After the 2014 midterm election, President Obama has less power than he once did. His loss of Congress means he will sign no more big bills that change the political landscape. In policy debates, Republicans seem content for now to ignore him except where they find common ground, as on trade.
But Obama remains popular within his party, and he seems eager to retain as much power as he can in shaping its future. This is why one segment in Obama’s recent interview with Vox’s Ezra Klein probably sent pharmaceutical lobbyists diving for their telephones.
The dangerous moment came when Obama brought up the idea of “using Medicare as a lever” to bring down healthcare costs. “There’s certain areas like drugs,” he said, “where the fact that Congress — and the Republican Party in particular — has been resistant to letting drugmakers and Medicare negotiate for the lowest price. It results in us paying a lot more than we should.”
Obama was essentially hinting at the destruction of a longstanding political detente. The guarantees that drugmakers secured for themselves in two major lobbying battles of the last decade — one of which was with Obama’s administration — now appear to be on perilous footing.
PhRMA, the drug industry’s lobbying group, has long supported efforts to expand the government’s role in healthcare for self-interested reasons. The lobbying group wholeheartedly backed the Medicare Part D plan that was pushed and signed by President George W. Bush, sensing an opportunity to make a lot more money as the government purchased more drugs. When Obamacare was placed upon the table in 2009, prescription drugmakers saw a similar opportunity that would result in more people filling prescriptions for their products. And so they cut a deal that committed them not only to quiet support of Obamacare but also public advocacy on its behalf.
In both cases, the drugmakers avoided (or at least delayed) two policy changes that threatened their business model. The first was reimportation of prescription drugs from countries that set artificially low prices. The second was the use of negotiations by large government programs to bring down drug prices across the board — the very idea Obama mentioned in the Vox interview.
This illustrates the danger that America’s largest industries face when they set aside the freedom of the market in which one operates in favor of competing for a good position from which to suckle from the government teat. A government guarantee of profits is always alluring, but it is often dangerous as well. At this point, PhRMA has invited government to take up a disturbingly large role as a customer. Between 2005 and 2013, Medicare and Medicaid have nearly doubled their share of the overall market for prescription drug purchases to more than 35 percent. The trend has accelerated since 2009, with purchases through private insurance actually declining and purchases by those two programs up 28 percent — and that’s before the Medicaid expansion.
With increased government purchases comes increased government power. As Peter Pitts, former associate commissioner of the U.S. Food and Drug Administration, once put it in an interview with the Washington Examiner, “You can’t cut a deal with a group of people who are fundamentally against your business model and expect that it’s going to save your bacon.”
Obama’s comments signify that drugmakers’ hard-won rhetorical immunity from the withering Democratic attacks of the previous two decades may already be running out. Unfortunately for them, as partisans begin shaping the issue debates of the 2016 election cycle, there is no new vaccine on the horizon.
