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Last summer, the Obama Administration confirmed that it had come to an agreement with the pharmaceutical industry. In closed door meetings, the industry pledged cost savings of $80 billion over the next 10 years. In return, the administration agreed not to include overly burdensome regulations in healthcare reform legislation. At the time, critics complained that the drug industry received a sweetheart deal:
To an industry as big and profitable as the drug makers, giving up $80 billion over ten years wouldn’t seem like much of a sacrifice...
More telling, however, is the disheartening--yet not surprising--revelation made by both Jonathan Cohn of the New Republic and Duff Wilson of the New York Times. Faced with the prospects of health care reform, drug makers are raising prices. Wilson writes:
Even as drug makers promise to support Washington’s health care overhaul by shaving $8 billion a year off the nation’s drug costs after the legislation takes effect, the industry has been raising its prices at the fastest rate in years.
In the last year, the industry has raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992.
Cohn argues that the pharmaceutical industry will actually benefit greatly from reform:
Put [all of the reform efforts] together, and you have more demand for name-brand drugs. As a result... pharmaceutical companies would be able to raise their prices--enough to boost revenue significantly: "If this bill is implemented," the [IMS Health] report concludes on page 138, "an increase in prices on new drugs can be expected."
...revenues for the makers of name-brand drugs could grow by hundreds of billions of dollars over the next ten years.
While on the campaign trail, President Obama endorsed certain reform efforts that would promote competition amongst drug companies and lower prescription drug costs for American families. Reforms such as allowing the re-importation of drugs, increasing the use of generic drugs, and repealing the ban on direct negotiation of drug prices between Medicare and drug companies would help drive down costs and increase access for Americans. Now, however, it seems as though he is going back on his word. After making the closed door deal with drug makers, none of the promised reforms appear in Democrat proposed healthcare bills. Instead, Democrat plans carry on the corporate welfare of the last administration-- which helped the pharmaceutical industry to take in billions-- and actually include provisions that will make drug companies even richer.
This revelation is yet another reason to oppose the healthcare legislation being pushed through Congress.