Baucus: Senate Finance Committee and Entitlements
This should be interesting:
The incoming chairman of the Senate Finance Committee said Thursday he wants to hold hearings on looming insolvencies in the Medicare and Social Security programs but said President Bush’s plan to partially privatize Social Security is dead. “Don’t waste our time,” said Democratic Sen. Max Baucus of Montana. “It’s off the table.” He said the rising cost of Medicare and other health costs is a priority for the committee, though he did not detail how the committee would approach those problems. He said he will hold “vigorous” hearings on the issue. Baucus said he will propose legislation to simplify the Medicare prescription drug program by streamlining the number of plans available and making it easier for people to choose one.
Privatization of Social Security has died so his committee will focus on real reforms – not rightwing agendas! And Baucus wants to make good on the Democratic proposal to make that bloated Bush prescription drug benefit more efficient or as Kevin Drum puts it:
Nancy Pelosi can now begin to concentrate on her legislative agenda. One of the top items on that agenda is allowing the federal government to negotiate prescription drug prices with pharmaceutical companies, a common-sense proposal that would result in lower costs for both the government and for senior citizens on Medicare.
Of course, the GOP is more interested increasing goodies for the fat cats paying for them with some magic credit card, so we are likely to hear the mantra about less R&D for life saving drugs. Kevin points us to Jonathan Cohn who counters with:
The most important basic medical and scientific research that leads to major medical breakthroughs usually takes place under government auspices – typically, through grants from the National Institutes of Health. In other words, taxpayers – not drug companies – are the ones financing the most important drug research today. So, even if the pharmaceutical industry did reduce its research and development investment because of declining revenues, what we’d lose probably wouldn’t be the next cure for cancer – it would be the next treatment for seasonal allergies, and likely no better than the ones we have already.
Offering patent protection is neither the only way to encourage R&D nor necessarily the most economically efficient way. But I have another problem with such monopoly rights – the incentive to do a massive amount of promotion. Let’s take Merck as example. Merck sales have averaged about $22.5 billion a year from 2003 to 2005 with operating profits being about 30% of sales. Its R&D budget runs about 17% of sales and the cost of producing drugs is just over 20% of sales. Its selling and marketing expenses are running in the neighborhood of 33% of sales. I realize that some of the upfront promotional expenses of a pharmaceutical company represent the type of detailing that helps doctors figure out which drugs to give to which patients. But are the proponents of unchecked monopoly power really trying to tell us that we need all of this marketing activity?
But if you are a member of the free lunch wing of the GOP, why would one care that the Federal government will be spending a fortune on this new entitlement? Just give everyone another tax cut and pretend money grows on trees!
Speaking of the free lunch wing of the GOP, check out Alan Murray as properly criticized by Daniel Gross. Alan Murray curiously writes:
The most conspicuous example of overreach was a line inserted in the Medicare Modernization Act of 2003 that prohibited the U.S. government from negotiating prices directly with drug companies … Allowing the government to negotiate prices directly with drug companies has become Democratic dogma. And a few moderate Republicans are toeing the line as well. That doesn’t make it a good idea. Truth is, drug companies can’t really “negotiate” with the government, any more than a backwoods hiker can negotiate with a 900-pound grizzly bear. With a market share of about 46%, the government would set drug prices, not negotiate them, and then establish “formularies” telling seniors which drugs they could use and which ones they couldn’t. Would that make seniors feel better off? I doubt it.
It’s a good idea to let taxpayers be subsidizing the monopoly power or Big Pharma?