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Shkreli Implodes And Provides Hillary A Perfect Medicare Moment

Xconomy National — 

It was already a good political time for Hillary Clinton to unveil her plan to control the cost of prescription drugs. Martin Shkreli made it perfect.

As you’ve probably heard by now, the front-running Democratic candidate Clinton on Tuesday outlined about a dozen ways she would aim to alter the American healthcare landscape if elected president.

She’s already altered the financial landscape, with major biotech stock indices down six to seven percent since she first hinted at the plan in a tweet Monday.

The unveiling of the plan came amidst—and contributed to—the public flaying of hedge-fund manager-turned-biotech exec Martin Shkreli, who has become public enemy #1 for price-gouging practices at his company, Turing Pharmaceuticals. When asked to explain, Shkreli turned on his questioners with insults, compounding his reputation for bizarre Internet behavior and turning himself into a global punching-bag.

Turing’s drastic markup of an old drug for parasitic infections, often used to treat patients with HIV, was first revealed in a story last week on Healio, followed by reports in USA Today and the New York Times.

Clinton then piled on via Twitter.

(Shkreli said in TV interviews Tuesday night he would back away from the price increase, then took his Twitter account private.)

Given the timing, it wouldn’t be a surprise if the Clinton camp had its plan queued up, waiting for a good pharma-blunder media moment to spring it. And they got one.

But Shkreli, a bit player in the biotech industry, is just a springboard into deeper waters. (Turing isn’t the only drug company of late to buy old drugs on the cheap then turn to resell them at huge markups, as the New York Times noted in its story Sunday.) The outline of Clinton’s plan has about a dozen components, depending how you break it down, including legal importation of cheaper drugs from Canada and other countries and a mandate for more drug R&D spending. They all will gin up debate, no doubt, and I’ve summarized them at the end of this post.

But I want to spotlight one: allowing Medicare to negotiate drug prices.

For those just digging into the pharmaceutical business, it’s one of those double-take moments: The biggest drug buyer in the world’s largest drug market isn’t allowed to negotiate prices? Come again?

Private health insurers and their agents negotiate furiously—and have threatened more and more to wield that power. Other U.S. drug-buying government agencies, namely Medicaid and the Veteran’s Administration, are allowed to negotiate, and they pay far less for drugs than Medicare, as we’ll see a bit later.

But Medicare’s hands are tied, thanks to the 2003 Medicare Modernization Act. Under the terms of that act, the program’s negotiating power is fragmented, parceled out amongst private entities that administer Medicare’s prescription drug plan, known as Part D, region by region. Efforts to give Medicare full bargaining power (which would be formidable, given that the program had roughly 40 million enrollees in 2014) died in Congress in 2007.

But the idea is never far from the surface of political discussion on the left, and bubbles up frequently. President Obama called for it recently, even as he promoted his support for a new era of precision medicine. Medicare negotiation is part of Democratic presidential candidate Bernie Sanders’ platform, too.

(Lest you think Clinton is simply trying to outflank her more liberal rival, remember that she voted against the MMA in 2003. And you young ‘uns out there might not remember that before there was Obamacare, there was Hillarycare, as her Republican opponents are happy to remind you.)

It’s a good time to take on the drug industry, not just because of its poor reputation. Americans like Medicare, and even more, like the idea of giving it negotiating power.

The climate makes Thomas Oliver, a University of Wisconsin professor who has written extensively about the history of Medicare and prescription drugs, believe the time will soon come.

“This is the one area of Medicare where we don’t have a reasonable relationship between costs and the payment for service,” says Oliver, who think Republicans will warm to the idea “within five to ten years” because of fiscal conservatism. “Open ended drug pricing, leaving it to small drug plans to negotiate prices, that’s just going to look weak, and tens of billions of dollars are at stake every year.” The MMA is often reviled as a give-away … Next Page »

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