Dec. 20 (Bloomberg) — Drugmakers are learning that good citizenship doesn’t win friends in Congress or the administration.
The industry offered $80 billion in price cuts to support the Affordable Care Act in the hope that those concessions would be enough to satisfy politicians. Instead, the politicians seem to have concluded there’s more money where that came from.
Drugmakers would be right to think that proposals to cut the deficit put much of the pain on their industry. Several proposals being considered by budget negotiators appear to take a disproportionate level of spending cuts from drugmakers compared to other health-care providers.
About 14 cents of every Medicare dollar pays for prescription drugs. That pales next to the 23 cents that goes to health insurers and 31 cents that goes to hospitals.
Drugmakers, however, go to the front of the line when it comes to proposals to reduce Medicare spending as part of a deficit-reduction plan. For example, President Barack Obama last year proposed that drugmakers bear $135 billion in cuts, more than half of nearly $250 billion in proposed Medicare cuts. Higher drug rebates for Medicare were the president’s proposed vehicle.
In a new Bloomberg Government Study, analyst Brian Rye walks through the drugmakers’ concessions to pass the Affordable Care Act as well as through the proposals being floated to reduce the budget deficit. Rye observes that drugmakers may have set themselves up for this fate by demonstrating a willingness to make concessions. And now lawmakers are back for more.
Whether drugmakers will be as acquiescent this time around is unclear, but they may already be negotiating from a position of weakness.
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