Pelosi Advisor Proposes Non-Binding Arbitration as Road to Lowering Drug Prices


Yves here. Arbitration??? Are you kidding me?

First, this is just an excuse for not regulating or negotiating. Every other advanced economy, and they all have fewer patients than the US, bargains with drug companies over prices. I know a bit about the Australian system, run by its Therapeutic Goods Administration. The TGA studies the research about drug efficacy carefully and doesn’t allow in every drug on the market. It also tends not to buy drugs where minor enhancements (a 24 hour timed release version, compared to a former version where you take it 3x a day) lead to big price increases (and an extension in patent life, as in these minor changes are still treated as “new drug applications” in FDA rules). I got around a bit during my two years in Australia, and I never heard or read complaints about patients not able to get drugs they thought they needed.

Second, as most readers likely know, arbitration systems are regularly abused or gamed via having arbitrators who are not neutral. Securities arbitration, credit card arbitration, and ISDS panels are among the many examples. On top of that, there is no or limited discovery in an arbitration process and no requirement to adhere to rules of evidence. See this short paper by Public Citizen on why mandatory arbitration clauses are unfair. Many of the issues it raises apply to arbitration broadly.

By Thomas Neuburger. Originally published at DownWithTyranny!

Prescription drug prices in the U.S. are universally hated (source). Which political party will step up and genuinely address the issue?
Let’s put two recent stories next to each other and see what conclusions we can draw.

A “Game Changing” Opportunity

First, Democratic pollster Stan Greenberg has found that Donald Trump has two strong vulnerabilities — one on trade, one on drug prices — and also that these are interlinked:

Democrats and progressives believe they may have found a way to unmask [Trump’s] sham populist pivot. And their developing counterargument involves not one, but two, of the issues on which Trump will build his case for reelection: prescription drugs and trade.

This counterargument surfaced almost by surprise in a series of focus groups recently conducted in the industrial Midwest by veteran Democratic pollster Stan Greenberg, for the trade watchdog group Public Citizen. Greenberg outlined his findings in a memo that was shared with this blog.

Specifically, Greenberg found that working-class white voters who switched from Barack Obama to Trump are deeply angry about soaring prescription drug prices. As a result, they vehemently oppose a key provision benefiting Big Pharma at the core of Trump’s renegotiation of NAFTA — which he touts as proof that he’s delivering for his working-class white base.

The problem on the trade side is that the proposed NAFTA 2.0 agreement (rebranded as “USMCA”) includes major concessions to drug manufacturers. Elizabeth Warren, for example, in announcing her opposition, said that “NAFTA 2.0 is … stuffed with handouts that will let big drug companies lock in the high prices they charge for many drugs.”

Especially egregious is the increased patent protection in the new agreement (emphasis added):

[T]he US Trade Representative Office’s Fact Sheet on the deal states that it “Includes 10 years of data protection for biologic drugs and expanded scope of products eligible for protection.” (Details await publication of the full agreement. Also, apparently, “data protection”—of, for example, clinical trial results—is the equivalent of patent protection for such products.)

The 10-year span is more than what had existed before (in the case of Mexico, essentially nothing; with Canada, an eight-year term is on the books) but the biopharma industry has long argued for the same 12-year exclusivity that exists for biologics within the US market. That 12-year span was a key sticking point in the long-ago Trans Pacific Partnership (TPP), which, before it was dumped by the incoming Trump Administration, was an effort to bring some added protection to biopharma products.

The problem on the drug side is that almost every voter in the country, Republican and Democrat, hates the current price of pharmaceutical drugs. The polling against it is universal. Here’s how Greg Sargent characterized Greenberg’s results:

Working-class whites in Greenberg’s focus groups apparently agreed. As his memo notes, these voters “hate” pharmaceutical companies and are deeply convinced that high drug prices are the result of their political influence.

In effect, Greenberg concluded, this debate links corporate power directly to soaring medical costs, providing a gateway to a larger argument about the ability of big corporations to rig market rules in their favor. These voters, Greenberg noted, “especially distrust the way that corporations bend the system to their will,” with lobbyists and big campaign donations, “so that they can earn more profits while hurting workers and consumers.” As one Macomb man put it: “They are buying their laws, basically.”

Greenberg was surprised by the depth of emotion about pharmaceutical companies and drug prices, noting that they “emerged as an extraordinary point of anger.” The result: Pointing to the Big Pharma provision constitutes the “single most powerful argument” against Trump’s NAFTA rewrite.

All of this provides Democrats with an excellent opportunity in the next election cycle, an opportunity that Greenberg characterizes as “game changing.”

Pelosi Advisor Proposes Non-Binding Arbitration as Road to Lowering Drug Prices

Second, here’s what Democratic leaders are doing in the face of this opportunity:

Liberals worry Pelosi may pivot away from a bold drug price plan

A split between House Democratic leaders and rank-and-file members over how to lower drug prices is threatening the party’s efforts tries to make good on one of its biggest campaign promises just weeks into the new congressional session.

Some progressive lawmakers and outside groups are concerned that aides to Speaker Nancy Pelosi are proposing to have a third party help decide the price of a drug through binding arbitration — a solution that falls short of the Democrats’ 2018 campaign platform that promised direct government negotiations for medicines in Medicare Part D.

Note that the plan’s “binding” arbitration is actually non-binding, since drug companies can opt out.

The same article says, “Two major concerns are emerging with his push for arbitration. Sources say [Pelosi senior advisor Wendell] Primus is limiting it to a select group of high-cost drugs, instead of developing a broader proposal for all medicines. Additionally, the arbitration process would be voluntary and nonbinding, meaning companies could opt out without consequence” (emphasis added).

Public Citizen’s Peter Maybarduk calls the deal “a total capitulation to pharma from what we can tell.” Social Security Works’ Alex Lawson said, “Poll after poll shows that lowering drug prices is a top concern for the American people. They also show that maintaining access to needed drugs is equally important. … Negotiating with licenses … accomplishes both goals by directly negotiating lower prices without putting patients’ access in pharma’s greedy crosshairs.”

The Pelosi plan appears to be toothless and impotent.

What Is Democratic Party Leadership Up To?

Debate is now raging in progressive circles about this proposal. The question isn’t, What good is it? It’s universally disliked. The question instead is, What is Pelosi up to?

Answers range from “she has a secret plan” to “acting foolishly but well-intentioned” to “protecting sources of Party revenue on the backs of voters’ health.”

The question for this piece isn’t, What do you think of Pelosi’s proposal? The question instead is, What will voters think of the Democratic Party in 2020?

Feel free to answer these questions in a way that makes sense to you.

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