Liberal opinion: Elizabeth Warren and other prominent Democratic Senators are hypocrites on the healthcare industry.
Last October, Sentator Elizabeth Warren berated the Pharmaceutical Research and Manufacturers of America (PhRMA) lobbyist Lori Reilly during a hearing held by the Senate Committee on Health, Education, Labor & Pensions. Warren harshly criticized the lobbyist for her industry’s predatory and monopolistic business practices, and again made a case for reforms such as importing drugs from Canada and allowing the federal government to negotiate drug prices. Warren finished by criticizing the millions of dollars spent by PhRMA “to keep drug prices high. That’s what improves profitability for your industry and the companies you represent.”
This direct, no-frills attitude consistently demonstrated by Warren and other Democrats has earned them the respect of progressives who are skeptical of the pharmaceutical industry. But the problems with America’s healthcare system run deeper than pharmaceutical companies making prices high. Congressional progressives may have taken a hard stance against pharmaceutical profiteering, but this philosophy does not extend to the healthcare industry as a whole.
On January 1st, the medical-device excise tax went back into effect, to the chagrin of the medical equipment industry. Despite being written into the Affordable Care Act, the tax on medical equipment received a moratorium as a result of a massive lobbying campaign launched by the device manufacturing industry. Doctor and journalist Elizabeth Rosenthal writes in her book An American Sickness:
Medtronic is the primary supplier of insulin pumps and – with St. Jude and Medical and Boston Scientific – implantable defibrillators. These three behemoths are based in Minnesota and Massachusetts, which is likely why Al Franken, Amy Klobuchar, and Elizabeth Warren, some of our most liberal senators, have all ‘worked across the aisle’ with Republicans to support repeal of the medical device excise tax…Companies in the device industry spent $32.8 million on lobbying in 2014 to get rid of the tax, with top individuals donations going to senators Franken ($47,249) and Klobuchar ($39,900).
In 2018, with the excise tax back in place, the debate has been rekindled and a full repeal is within grasp. Warren, along with fellow Massachusetts Senator Ed Markey, recently introduced a full-repeal bill so that, in Warren’s words, “Massachusetts device companies can continue to innovate and save lives.” This may as well have been taken directly from the website of AdvaMed, the largest medical device lobby in the country, which claims that the tax “deters medical innovation needed to save and improve patients’ lives.” According to OpenSecrets, Markey and Warren have received $290,225 and $34,706, respectively, from the pharmaceutical and medical device industries since 2013.
While Warren, Franken, and other progressive Democrats bemoan the lobbying and predatory business practices of the pharmaceutical industry, they take a hypocritical turn when it comes to equipment manufacturers. Not only will they defend the industry, they fail to perceive the contributions device makers give to America’s bloated and backwards healthcare system.
While a plethora of issues surround the market for generic medications, at least such a market exists. According to the FDA, there is “no such thing as a generic medical device that is equivalent to the meaning of ‘generic drugs.’” With the medical device industry being as oligopolistic as it is — market share is dominated by, at most, five firms for any given device — there is no reason to believe they will innovate and create low-cost products that work just as well or better than previous ones.
As Dr. Blair Rhodes, a proponent of the establishment of a generic device industry, writes: “If everyone used generic shoulder anchors for all U.S. shoulder cases, a $500 million per year industry would become a $75 million one. How do you tell your shareholders that you are going to decrease their return by 85%?”
Powerful device manufacturers have been clear about their feelings toward competition in the industry. In her book, Rosenthal chronicles the struggle of Dr. Elliot, a urologist who implants artificial sphincter valves into prostate cancer victims. One company, American Medical Systems, maintains a complete monopoly on the manufacturing of such devices and has made clear that their dominant position will not vanish any time soon. In 2008, the company claimed to have created a new version of their valve which would stave off infection, which, according to Elliot, cost an additional $1,300 for each new valve.
As Rosenthal writes:
When Dr. Elliot didn’t notice any reduction in infection rates after a few years, he discovered the company had no good data to back up its claims…He vowed to use only the older, cheaper valve and urged his colleagues to do the same. American Medical Systems parried by raising the price of the older valve by $1,300 so that it was no longer more cost effective. One surgeon’s ‘little attempt’ at cost control proved ‘futile’, Dr. Elliot told me, adding, ‘If there was a generic valve I’d be there tomorrow.’
This “innovation” was little more than a drastic price increase for an identical, rebranded product which offered no financial benefits and no life improvement to any patient.
Diabetes treatment follows a similar pattern. Rosenthal notes that manufacturers are focused on “selling every-costlier treatments and supplies” rather than finding a cure or offering the unthinkable: lower prices. She quotes a diabetes patient speaking about her insulin pump: “It’s made of plastic and runs of triple-A batteries, but it’s the most expensive thing I own, aside from my house.”
Medical device manufacturers have no incentive to innovate and have demonstrated no proclivity towards doing so. The issue of high equipment prices is one that parallels our appalling price of pharmaceutical drugs, yet those in government who bemoan the latter seem to let device manufacturers off the hook.
Or rather, they work on their behalf. Democrats like Warren and Markey shouldn’t be promoting a tax break for device makers, and instead they should be calling for tougher enforcement of antitrust laws and subsidies for generic manufacturers if and when any enter the marketplace.
According to the Congressional Research Service, the impact of the device excise tax would be “negligible.” Output and employment would fall by, at most “two-tenths of 1%” due to “the small tax rate” and the “exemption of approximately half of output.”ConsumersUnion, a non-profit research organization which publishes Consumer Reports, found that “large, publicly held companies are highly profitable and appear able to absorb the tax without the significant financial impact to their bottom line or the types of large-scale payoffs opponents of the tax suggest.”
Not only should the medical excise tax be kept in place, pressure should be placed on the industry to allow for fair competition and drive down ridiculous prices. No one company, organization, or trade group is solely responsible for America’s high cost of healthcare. No one who contributes to this disaster should be allowed a place in the shadows, safe from scrutiny or questioning.