Opinion: Provisions Written by Special Interests Waste $80 Billion Annually on Drug Benefits

Seniors Pay For Corruption; $96 Million In Political Contributions. Produce Higher Drug Prices, Record Profits.

"The new law is confusing and complicated because it was written to help big pharmaceutical companies instead of hard-working people who need prescription drugs to live. It's no surprise that top Republicans who wrote the bill work for the drug industry now. Thousands of people across the country are paying the price for this corruption at the pharmacy. They're getting over-charged and facing outrageous delays, if they're getting their prescriptions at all." --Toby Chaudhuri, Campaign for America's Future Communications Director

The following Opinion piece was submitted by the Campaign for America's Future.

WASHINGTON, D.C.—Specific provisions of the Medicare prescription drug program inserted at the request of pharmaceutical and HMO interests will cost taxpayers and seniors more than $80 billion a year, according to a report released today by the Institute for America's Future and the Center for Economic and Policy Research.

The study, released by a coalition of groups led by the Campaign for America's Future, Public Campaign Action Fund, USAction and MoveOn.org Political Action, connects the program's escalating costs and complexity to the influence exerted by lobbyists for health insurance, health services and pharmaceutical companies in drafting the bill. According to the report, industry campaign contributions totaled $96 million from 2000 to 2004, and industry profits will swell by 500 to 600 percent as the new legislation goes into effect.

Institute for America's Future co-director Roger Hickey said: "In a sellout to the drug companies, Congress prohibited Medicare from negotiating a better price for seniors. Then it threw in billions of subsides to HMOs, adding another layer of confusion, bureaucracy and costs to the program. America's most vulnerable - seniors in need of prescription drugs - will pay the cost of this corruption."

Dr. Dean Baker, author of the report, said that the primary source of the waste is the Bush administration's decision to provide coverage through private providers and to prohibit - at the behest of the pharmaceutical industry -Medicare from using its leverage as a bulk buyer to negotiate lower prices. Baker compared the current program with the most simple and efficient way to cover the cost of prescription drugs: a simple add-on to the basic Medicare program, comparable to the prescription drug benefit provided by most private health insurers.

Baker also contrasted the cost of the program as written with the costs of establishing a drug benefit under Medicare but requiring the government to negotiate for lower prices. Baker found that if 50 percent of beneficiaries participated in such a Medicare-run system, the savings in lower administrative costs and drug prices would be more than $40 billion per year.


Institute for America's Future researchers found that, between 2000 and 2004, health insurance, health services and pharmaceutical companies contributed $96,370,907 to candidates for public office.

--71 percent of these funds went to Republicans. 38 percent went to Democrats. In the peak year (2002), 75 percent of the industry funds went to Republicans. Only 25 percent went to Democrats.

--In the 2004 presidential election, Health Insurance and Health Services/HMOs contributed nearly five times as much to George Bush than to John Kerry ($1,021,357 v. $211,900).

--Contributions grew 124 percent between 1998 and 2002 in anticipation of the vote (in 2003). The next election cycle (2004), contributions dropped 38 percent. Industry was satisfied and interest waned.

--Representatives who voted "Yes" on the Bush Prescription Drug Bill received a total of $6,075,520 from the pharmaceutical industry.


As costs to the public and seniors skyrocket, so do industry profits. A new Senate report found that Medicare revenues of HMOs and PPOs will increase from $37 billion in 2003 to $226 billion in 2010 under the new law (up 510 percent). During this time, Medicare revenues and profits of the private insurance industry will increase by 611 percent.

Because the federal government is paying prices set by the drug companies - rather than negotiating lower prices as does the Veterans Administration and most other countries - fully 61 percent of the estimated $228 billion federal Medicare expenditures will remain with drug makers as added profits, according to Professors Alan Sager and Deborah Socolar of Boston University.

The companies are not the only ones profiting from the bill. More than 13 administration and congressional officials in key positions during the writing and passage of this bill now work for pharmaceutical companies. Chief among them is Rep. Billy Tauzin, who chaired the House Energy and Commerce Committee and is credited with guiding the law's passage. Tauzin now works for the drug industry's PAC, the Pharmaceutical Research and Manufacturers of America. His pay is reported to be at least $2 million a year, making him one of the highest-paid lobbyists in Washington.

President Bush's Medicare chief from 2001 to 2003, Tom Scully, is now the top health care lobbyist for Alston & Bird, with pharmaceutical clients such as Abbott Laboratories and Carmark. Both Tauzin and Scully reportedly negotiated their lobbying contracts while working on the Medicare reform law from inside the U.S. government.

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