Pelosi Advisor Proposes Non-Binding Arbitration as Road to Lowering Drug Prices

Yves here. Arbitration??? Are you kidding me?

First, this is just an excuse for not regulating or negotiating. Every other advanced economy, and they all have fewer patients than the US, bargains with drug companies over prices. I know a bit about the Australian system, run by its Therapeutic Goods Administration. The TGA studies the research about drug efficacy carefully and doesn’t allow in every drug on the market. It also tends not to buy drugs where minor enhancements (a 24 hour timed release version, compared to a former version where you take it 3x a day) lead to big price increases (and an extension in patent life, as in these minor changes are still treated as “new drug applications” in FDA rules). I got around a bit during my two years in Australia, and I never heard or read complaints about patients not able to get drugs they thought they needed.

Second, as most readers likely know, arbitration systems are regularly abused or gamed via having arbitrators who are not neutral. Securities arbitration, credit card arbitration, and ISDS panels are among the many examples. On top of that, there is no or limited discovery in an arbitration process and no requirement to adhere to rules of evidence. See this short paper by Public Citizen on why mandatory arbitration clauses are unfair. Many of the issues it raises apply to arbitration broadly.

By Thomas Neuburger. Originally published at DownWithTyranny!

Prescription drug prices in the U.S. are universally hated (source). Which political party will step up and genuinely address the issue?
Let’s put two recent stories next to each other and see what conclusions we can draw.

A “Game Changing” Opportunity

First, Democratic pollster Stan Greenberg has found that Donald Trump has two strong vulnerabilities — one on trade, one on drug prices — and also that these are interlinked:

Democrats and progressives believe they may have found a way to unmask [Trump’s] sham populist pivot. And their developing counterargument involves not one, but two, of the issues on which Trump will build his case for reelection: prescription drugs and trade.

This counterargument surfaced almost by surprise in a series of focus groups recently conducted in the industrial Midwest by veteran Democratic pollster Stan Greenberg, for the trade watchdog group Public Citizen. Greenberg outlined his findings in a memo that was shared with this blog.

Specifically, Greenberg found that working-class white voters who switched from Barack Obama to Trump are deeply angry about soaring prescription drug prices. As a result, they vehemently oppose a key provision benefiting Big Pharma at the core of Trump’s renegotiation of NAFTA — which he touts as proof that he’s delivering for his working-class white base.

The problem on the trade side is that the proposed NAFTA 2.0 agreement (rebranded as “USMCA”) includes major concessions to drug manufacturers. Elizabeth Warren, for example, in announcing her opposition, said that “NAFTA 2.0 is … stuffed with handouts that will let big drug companies lock in the high prices they charge for many drugs.”

Especially egregious is the increased patent protection in the new agreement (emphasis added):

[T]he US Trade Representative Office’s Fact Sheet on the deal states that it “Includes 10 years of data protection for biologic drugs and expanded scope of products eligible for protection.” (Details await publication of the full agreement. Also, apparently, “data protection”—of, for example, clinical trial results—is the equivalent of patent protection for such products.)

The 10-year span is more than what had existed before (in the case of Mexico, essentially nothing; with Canada, an eight-year term is on the books) but the biopharma industry has long argued for the same 12-year exclusivity that exists for biologics within the US market. That 12-year span was a key sticking point in the long-ago Trans Pacific Partnership (TPP), which, before it was dumped by the incoming Trump Administration, was an effort to bring some added protection to biopharma products.

The problem on the drug side is that almost every voter in the country, Republican and Democrat, hates the current price of pharmaceutical drugs. The polling against it is universal. Here’s how Greg Sargent characterized Greenberg’s results:

Working-class whites in Greenberg’s focus groups apparently agreed. As his memo notes, these voters “hate” pharmaceutical companies and are deeply convinced that high drug prices are the result of their political influence.

In effect, Greenberg concluded, this debate links corporate power directly to soaring medical costs, providing a gateway to a larger argument about the ability of big corporations to rig market rules in their favor. These voters, Greenberg noted, “especially distrust the way that corporations bend the system to their will,” with lobbyists and big campaign donations, “so that they can earn more profits while hurting workers and consumers.” As one Macomb man put it: “They are buying their laws, basically.”

Greenberg was surprised by the depth of emotion about pharmaceutical companies and drug prices, noting that they “emerged as an extraordinary point of anger.” The result: Pointing to the Big Pharma provision constitutes the “single most powerful argument” against Trump’s NAFTA rewrite.

All of this provides Democrats with an excellent opportunity in the next election cycle, an opportunity that Greenberg characterizes as “game changing.”

Pelosi Advisor Proposes Non-Binding Arbitration as Road to Lowering Drug Prices

Second, here’s what Democratic leaders are doing in the face of this opportunity:

Liberals worry Pelosi may pivot away from a bold drug price plan

A split between House Democratic leaders and rank-and-file members over how to lower drug prices is threatening the party’s efforts tries to make good on one of its biggest campaign promises just weeks into the new congressional session.

Some progressive lawmakers and outside groups are concerned that aides to Speaker Nancy Pelosi are proposing to have a third party help decide the price of a drug through binding arbitration — a solution that falls short of the Democrats’ 2018 campaign platform that promised direct government negotiations for medicines in Medicare Part D.

Note that the plan’s “binding” arbitration is actually non-binding, since drug companies can opt out.

The same article says, “Two major concerns are emerging with his push for arbitration. Sources say [Pelosi senior advisor Wendell] Primus is limiting it to a select group of high-cost drugs, instead of developing a broader proposal for all medicines. Additionally, the arbitration process would be voluntary and nonbinding, meaning companies could opt out without consequence” (emphasis added).

Public Citizen’s Peter Maybarduk calls the deal “a total capitulation to pharma from what we can tell.” Social Security Works’ Alex Lawson said, “Poll after poll shows that lowering drug prices is a top concern for the American people. They also show that maintaining access to needed drugs is equally important. … Negotiating with licenses … accomplishes both goals by directly negotiating lower prices without putting patients’ access in pharma’s greedy crosshairs.”

The Pelosi plan appears to be toothless and impotent.

What Is Democratic Party Leadership Up To?

Debate is now raging in progressive circles about this proposal. The question isn’t, What good is it? It’s universally disliked. The question instead is, What is Pelosi up to?

Answers range from “she has a secret plan” to “acting foolishly but well-intentioned” to “protecting sources of Party revenue on the backs of voters’ health.”

The question for this piece isn’t, What do you think of Pelosi’s proposal? The question instead is, What will voters think of the Democratic Party in 2020?

Feel free to answer these questions in a way that makes sense to you.

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    1. Cynthia

      As I have said before, I think all of this mainstream resistance to true and meaningful healthcare reform has a lot to do with protecting shareholder value. This is particularly true with regards to the pharmaceutical industry, as well as the health insurance industry. Both are high fliers in terms of stock prices and both are widely held by a large swath of Americans, rich and not-so-rich alike.

      Therefore, if drug prices were to be reined in, stock prices in the pharmaceutical industry would take a major hit. This is something that the investing public will not tolerate and thus will resist at all costs, even if these costs severely strain the rest of the economy to the point of breaking it. The same thing can said about health insurance costs. They too will meet the same kind of resistance from the investing public, perhaps even more so.

      But in a way it is even worse with regards to the health insurance industry. Not only are their stocks high fliers, but their workforce is comprised of a lot of highly paid employees, not just the ones in the executive suite, but also the ones in the backoffice of most health insurance companies across the US.

      OTOH, the hospital industry’s role in this resistance to reform is a little difference. Most of the most profitable hospital systems in the country are classified as “nonprofits.” Therefore, there is little shareholder value to protect. And the remaining hospitals systems that do trade on Wall Street are not all that profitable for investors. Thus again, there is very little shareholder value to protect here. However, there is a lot of good and high paying jobs to protect in the hospital industry, many of which can NOT be automated or outsourced to low wage countries.

      So between the pharmaceutical industry and the health insurance industry trying to protect shareholder value and the hospital industry trying to protect high paying jobs, it is no wonder that healthcare reform is meeting so much resistance. There is simply not much left in the arsenal to break this resistance, short of a very deep and broad collapse of the economy, I’m afraid.

  1. The Rev Kev

    I am going to go with the idea that she just had the Democrats pass a loyalty test with her donors, especially as the Democrats have control of the House now. When Stan Greenberg found that Americnas hate soaring prescription drug prices I was kinda surprised. Mostly because a poll taken during the Obama years would have found exactly the same, and the Bush years, etc. Thinking that they now had a Big Bertha size cannon to use against Trump, Pelosi went to work.
    Using the advice of that Wendell Primus, who seems to be a policy wonk with a health think tank named AcademyHealth, she has caused the powder to be swiped to be put with all the other powder that the Democrats have stored, jammed a nail down the touch-hole and finally put a Denver Boot on the wheels of this cannon. Sure she could have caused masses of voters support the Democrats but when you attack one interest group of Donors – Big Pharma here – then that makes all the other big donors get nervous such as Wall Street, the Arms Industry, etc. It had to be stopped.
    By crippling this initiative she has assured them of the Democrats support for all these groups no matter what their own interests are – even winning Office. Be prepared for Four More Years then. Sorry.

  2. Big Tap

    “What will voters think of the Democratic Party in 2020?”
    I said this before but Pelosi is helping Trump by killing voter enthusiasm of liberals and the Left who elected the Democratic House majority and may sit out 2020 if this stuff continues. She’s setting up a repeat of 2009-2010 of dashed hopes and no progressive change. You would almost think Pelosi is a Trump agent.

    The voters expected something more than this proposal straight from Big Pharma. Only a neoliberal like Pelosi would come up with arbitration like what Corporate America forces on us. First the progressive killer in PayGo and now this. I’m also assuming military budgets will be exempted from PayGo just the progressive programs will be impacted. The voters want price controls on drugs not some arbitration nonsense.

    1. Eureka Springs

      I don’t buy much of your reasoning but if I did then I would have to say with so many years of the Dems doing exactly this type of governing then the Dem voters who expected something different are idiots, dumber than rocks. This is who Dems are and exactly what they do. Maybe I’m in an N.C. bubble, however it seems at long last Pelosi is finally receiving 3 percent of the most basic scrutiny she has long deserved. A horrible two-faced excuse for a human being.

      The system is completely fubar and criminal minds are entirely in charge across the board.

    2. tegnost

      she’s protecting the left flank of the republican party.
      “The redcoats are coming! The redcoats are coming!”
      Time to dredge up some old fight songs…

  3. taunger

    The article highlights the Pelosi mess, but I’m left wondering about part 1. Do I trust the pollster? If so, then do my feelings about Warren pounding this issue in ads change? I found them out of touch except for older voters. Is she actually brilliant and ahead of the curve? Or is the pollster just sidling up to Warren?

  4. Norb

    More class war by another name. Pelosi needs to be asked the direct question, “should businesses be allowed to make a profit off human suffering?” Any morally guided person would say no. Pelosi and her ilk would of course say absolutely yes- but not in those direct terms. The language would be a word salad of platitudes only leading to confusion and obfuscation.

    The question should be why does everyone continue to play these insane word games? War is not peace. Profit over human wellbeing is not healthcare.

    Just look at all the lame Democratic responses over the government actions in Venezuela. A blatant coup d’etat is trotted out as, once again, a move for the “people” of Venezuela. The American media refuses to define or clarify who the “People” are so the citizenry is left confused and divided over what they are talking about.

    Healthcare is handled in a similar fashion. Profiteering is allowed to continue because it affects the deplorables most- the people who are expendable. The deplorables are treated as sacrificial lambs to the market gods. The process is all the more insidious because it is carried out in an underhanded and dishonest manner.

    Until the Democrats are seen as the most dangerous political actors in America due to their duplicity, the working class- the vast majority- will continue to suffer. Their blatant dishonesty is more damaging than Republican hubris because of it’s enabling character. The Republican/Democrat nexus of corporate interest will continue on its merry way until it is destroyed.

    Moral force is the only way, both for individuals and for anyone seeking systematic change. On this score, the democrats in their current form will always loose. But then again, they aren’t really interested in winning.

    1. tegnost

      Their blatant dishonesty is more damaging than Republican hubris because of it’s enabling character
      …and the dogs won’t eat the dog food
      The voters didn’t buy it last time, and now they are hungrier and barking.
      thanks Norb, always very thoughtful comments from you.

    2. Susan the Other

      Funny how these big corporations, the donors to the oh-so-moral democrats, all think they are “capitalist” enterprises. What a belly laugh. They are anything but. They have always been crooks, but now they are desperate crooks and trying with their dying breath to secure their own positions. Remember our dear Nancy lecturing everyone during the election that we can’t do all those radical changes to help our miserable country because “we are a capitalist country.” She has admonished us about our “sacred institutions” and other utter-and-complete nonsense. It is possible that she could be that stupid and immoral, but I think she’s mostly an old fool. And a greedy one. It was interesting that when she campaigned for the speakership and won, she apparently won by agreeing to step down after this term. For some reason, achieving the gavel was very important to her. We are now witnessing why. She is in a position to cause great harm to the entire country and she knows it and intends to use it. Nancy must step down. We don’t have any time left to pretend that her donors are capitalists. They are crooks. And so is she.

      1. Big River Bandido

        She’s just the mouthpiece, not the problem. The problem is that the House Democrats are so corrupt and so neoliberal, that Pelosi is perfectly representative of her caucus.

        Get rid of that head and another just like it will simply sprout. The entire Clintonite wing of the party must be purged.

  5. amfortas the hippie

    with shameless nonsense like this appearing every other day, will the firthcoming insistance on lessereevilism have as much traction as last time?
    2015-16, i was aware of myriad examples of such perfidy, going back decades….with mainstream articles, direct congressional testimony and even video evidence of third wayers sticking the knife in and twisting. all to no avail. ” but look at the other guys!!!”
    what level of betrayal will it take?
    again, camus and kafka ad patron saints of our benighted age.
    perhaps soon we can add monty python.
    all over local news the other day was texas gop fellating predatory lending. my mom held forth in kitchen about evil gop. me:” yeah those bad repubs….” holding up my fone with a wapi art about debbie wassermanschultz.
    so now mom thinks im a trumper, lol…. because everything involved only black and white.
    politics as pro football

    1. Darius

      Democrats are like addicts. They haven’t reached rock bottom. They’re saying that Trump is so horrible they have a lot more room to suck. With Hillary they miscalculated and went over the suck line. Pelosi is rushing right up to the suck line so fast she going to trip and her face is going to hit the ground far over the other side.

      1. amfortas the hippie

        and the common ‘rebuttal’ to my disbelief of russiax3!: “whataboutism”.
        as if our govs skulduggery matters not.
        “we must join him, gandalf. we must join with sauron…”

        1. Isotope_C14

          I think many more *do* vote.

          Those ballots are “misplaced” and then added to the “didn’t vote” list.

          Interstate cross-check, provisional ballots…

          How come Pelosi isn’t talking about paper ballots, hand-counted in public?

    2. Anonylisa

      I hear the same from my older family. From what i gather, they completely buy the incrementalist argument. (and they were strong advocates of all the major changes in the 60’s…WTF…incremental wasn’t good enough then!). they think Repubs back then were better and you could work with them. maybe…

      if i really corner them on policy, they agree with me that the Dems’ ideas are not enough, but they simply point out that Repubs are racist and will take away my birth control. (we are white, btw)….

      1. Joe Well

        they were strong advocates of all the major changes in the 60’s…WTF…incremental wasn’t good enough then!)

        Progress for me but not for thee, the motto of affluent liberals.

  6. lyman alpha blob

    How you know we’re doomed and will never have nice things –

    Democrats and progressives believe they may have found a way to unmask [Trump’s] sham populist pivot. And their developing counterargument involves not one, but two, of the issues on which Trump will build his case for reelection: prescription drugs and trade.

    This counterargument surfaced almost by surprise in a series of focus groups…

    We’re what, 3 or 4 years in here dealing with Trump and the Democrats are just now figuring out that maybe Trump isn’t a real populist but they still need a focus group to tell them what to do?!?!?!?

    No wonder AOC speakling frankly and clearly gets millions of views. It’s as rare as finding a pearl in an oyster, although it certainly shouldn’t be.

  7. rob

    Might as well just point out another thing that has already showcased this,

    There was a bill moyers episode on drug prices back in ?the oo’s? 90’s?.
    it was entitled “big pharma vs the state of maine”
    It was about the state of maine negotiating for drug prices in for their medicaid system. They kept winning in their state courts with big pharma, and then won in the supreme court…. that a state should have the right to negotiate for drug prices….

    so with the pharma industry losing in court repeatedly, what do they do? They lobbied every member of congress, republican AND democratic , to pass the medicare part D, which specifically kept the federal government from using the fact that it bought roughly 52% of all drugs from big pharma, as a leverage tool to reduce drug prices for everyone in this country.

    So, The fact that drug prices are ripping everyone off, is a bipartisan deal.
    We have plenty of bipartisanship in this country. Every time they screw the american people, it is a bipartisan effort.

    Nevermind that was back when it was shown that a third of the research that was done in creating new drugs was done by the NIH, at taxpayer expense,and given to the drug manufacturers free of charge
    WHILE big pharma was spending more per year in marketing than drug research
    While big pharma was spending more per year in lobbying, than drug research,
    all the while crying about the reason drug prices were so high was to pay for research of new drugs

    This is again showing that we the american people are the prostitutes in this example. The congress is pimping us out to the johns of big pharma, and we get screwed, they get the money.

    And with pelosi, doing nothing like this again, that is exactly what is wrong with the democratic party that they can’t even beat a chump like trump. So despite trump being a total bag of sh&t, pelosi is making his re-election possible.

    1. notabanker

      Similar numbers in the tech industry when it comes to R&D vs marketing and cost of sales. They spend a pittance of revenues on it.

  8. Randy

    AW come on! Give Pelosi a break. When she saw “patent protection” she read it as “patient protection”. Just another innocent mistake.

  9. marym

    If Pelosi has a “secret plan” it would probably be to add some convoluted, means-tested subsidies, sold to liberals as a benefit, but which will be an assurance to PhRMA that any real or imaginary ripple in their revenue stream due to arbitration will be more than offset by subsidies. Maybe some tax breaks too.

    As with Part D, the ACA closing of the prescription payment donut hole, and any other human need, to corporate Democrats the response is always the next incremental transfer of the common wealth to the owner/donor class.

    Dem loyalists are still blindly invested in Pelosi, but it’s hard to imagine how anyone else would see an obscure and unenforceable arbitration scheme as a plausible path to affordable medicine.

  10. John Ashley

    “This counterargument surfaced almost by surprise”…………

    Nothing in the article is of any use if this is/was a SURPRISE.

    The congress reps have set up a fraud based scheme of pricing and are supporting a medical industry rife with anti-trust violations.

    Shame on ALL of them that have served over the last 20-30 years.

  11. thump

    And there was recently the Intercept article about how Pelosi aid Wendell Primus told insurance execs that Dems would be on their side fighting against Medicare For All, but they’d be working against Pharma to lower drug prices. Well, maybe not so much.

  12. JimTan

    I think some of the congressional focus on drug prices is to get ahead of all the upcoming lawsuits that allege fraudulent drug prices and suggest collusive price fixing. The Attorney General of Minnesota filed a lawsuit last October accusing drug manufacturers of “fraudulently setting artificially high list price for insulin, while offering rebates to pharmacy benefit managers (PBMs) in exchange for them covering the drug on behalf of health plans”. According to this article Washington and New Mexico are currently conducting similar investigations into these drug manufacturers. There’s also a 2017 class action lawsuit against drug manufacturers which also alleges fraudulent insulin prices and that:

    “price increases over the past several years have taken pushed insulins that previously cost $25 per prescription up to $450. The increases, taken in “lock step,” were “astounding and inexplicable,” according to the class action. Further, the manufacturers have said that “their price hikes are unrelated to any jump in production or research and development costs,” according to the suit.”

    The effect of these high insulin prices on some diabetics, particularly those with high-deductible health plans, has caused some pretty ugly situations including:

    “patients have resorted to under-dosing, using expired insulin, avoiding doctors, starving themselves to control blood sugar, taking out loans and slipping into Diabetic Ketoacidosis to get insulin from emergency rooms”

    This is one example of the human toll exacted by high prescription drug prices. Interestingly, drug manufacturers are trying to dismiss this class action by arguing that “the relief plaintiffs seek would not only require this Court to regulate the sales of insulin, but also would have an impact on the entire pharmaceutical industry at large”. Congress, the ball is officially now in your court.

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