Legalized Bribery

Ever wonder why health care costs so much in this country, and why we get such poor outcomes in return? Here's a small piece of the puzzle.

The New York Times reports that an obscure paragraph in the recent “fiscal cliff” bill extends a delay in implementation of Medicare price controls on Sensipar, a drug used by kidney dialysis patients, for two years. The drug is manufactured by Amgen. The delay will cost Medicare—and ultimately taxpayers—$500 million. The section of the bill (Section 762) is not tranparent and does not mention Amgen by name. It's one of many examples of pork that are buried in a bill that was supposed to reduce the deficit.

Here are the details. Currently, Medicare pays for dialysis drugs individually. They determined that this created an incentive to overprescribe medication that was useless and possibly harmful. The change, now postponed, was that Medicare would pay a single, bundled rate for dialysis treatment.  That was a threat to Amgen's profits.

According to the Times, this decision was made by Senator Max Baucus (D-MT), chair of the Senate Finance Committee, and Senator Orrin Hatch (R-UT), the ranking Republican on the committee. It was subsequently approved by Senate Minority Leader Mitch McConnell (R-KY) and Vice President Joe Biden, who negotiated the “fiscal cliff” agreement. Amgen has made over $5 million in political contributions since 2007, including $67,750 to Senator Baucus, $59,000 to Senator Hatch, $73,000 to Senator McConnell, and $141,000 to President Obama's two presidential campaigns.

Sen. Mitch McConnell
(or possibly a turtle)

The Times quotes aides to Senators Baucus and Hatch and an Amgen spokesperson as saying that the delay was justified because it would “give Medicare and health care providers the time they need to accommodate complicated changes in federal reimbursement for kidney care.” The price restraints were originally scheduled to begin in 2012. Congress granted Amgen a two year delay until 2014. The “fiscal cliff” bill extends that delay until 2016. How much time do they need?

An aide to Senator Baucus added that, “What is the best policy for Montanans and people across the country is at the heart of every decision Chairman Baucus makes.” But none of the people contacted attempted to justify the decision on medical grounds.

Amgen is the world's largest biotech corporation, with $15.6 billion in revenue in 2011. It has 74 lobbyists in Washington, including former chiefs of staff of both Senators Baucus and McConnell. Senator Hatch's leading staff member on health care policy is a former Amgen employee.

On December 19, Amgen pleaded guilty to illegally marketing Aranesp, an anti-anemia drug, for purposes the FDA had explicitly not approved. The $762 million settlement was a new record for a biotech company.

I think incidents like this pose a serious threat for single-payer advocates. One of the major arguments against single payer, which resonates strongly with the general public, is that the federal government can't be trusted to run a health care system that will provide quality medical care at a reasonable price. We usually try to counter that argument by pointing out that all other countries with single-payer systems achieve better health outcomes than we do at lower cost.

However, the United States is not like other industrialized countries. It's possible that our level of political corruption is so much higher than other countries as to make us not comparable to them. If so, it's impossible to predict how single payer would fare in this country. Of course, despite our corruption, Medicare is still cheaper than private insurance. However, if Congress ever passes a single payer bill, it is important that it contain safeguards that insulate the system from corporate and political interference.

Update (1/31/13)

The liberal organization Progressives United has latched onto this story and is asking people to sign a petition to the CEO of Amgen asking him to give back the $500 million. (Good luck on that!) The petition can be found here.