Contraceptive mandate is a boon for Big Pharma

Why is President Obama giving drug companies such an easy ride?
Bob Laird | Aug 25 2011 | comment  



Backlash continues to mount against the August 1 decision by the US Department of Health and Human Services (HHS) to mandate that contraception be fully covered as “preventive” medicine by insurance companies – and thus, “free” for consumers. Most of the criticism has thus far revolved around the lack of real conscience protections for religious employers and the fact that the decision relegates pregnancy to a disease to be prevented. An additional consequence is coming to light which raises serious ethical questions: pharmaceutical companies will now be paid full price for contraceptives that they previously had to provide at a discount due to federal regulations.

How did that happen?  In an effort to entice college students to establish method and brand loyalty, pharmaceutical companies were offering reduced pricing on contraceptives to college campus health clinics. Prior 2005, however, federal cost-control regulations were in place that forced these companies to sell their products to college clinics at the same price at which they sold to one of their largest buyers, Medicaid. In his book, Obamanomics, Timothy Carney explains that in 2005, President Bush signed a law that allowed these companies to provide cheap contraceptives on college campuses.  But there was a catch – drug makers also had to reduce the costs of these birth control items to Medicaid recipients.

In a recent article in The Washington Examiner, Carney reports that this changed due to a little-noticed favour to contraceptive producers that was “tucked into an omnibus bill.” In March 2009, a $410 billion omnibus spending bill was passed which contained a provision that allowed pharmaceutical companies to supply the drugs to college students at steeply discounted prices -- without offering these same discounts to the Medicaid program.  Essentially, this allowed the companies to keep their low-price enticement to get college women hooked on their products while bilking taxpayers at full price for those sold to government-funded Medicaid.

With the August 1 HHS ruling, however, both the 2005 and 2009 rulings are obsolete. Discounts on college campuses are no longer necessary since contraceptives will be free of charge. In fact, the HHS will be putting money back in the pockets of the pharmaceutical companies, paid for with our tax revenues and insurance premiums.

The HHS ruling becomes effective on August 1, 2012 – just before next year’s Fall semester.  The precise timing of the implementation will allow all college students free access to contraceptive products for the 2012-13 school year.  This is good news for pharmaceutical companies: now they can expect full reimbursement for their birth control products since there will be no incentive for them to reduce their prices.

Let’s follow the money:

1. Both college students and Medicaid recipients had access to low cost birth control via pharmaceutical companies as a result of a 2005 law. The drug companies absorbed the cost difference between the full price and the discounts for both programs.

2. In 2009, President Obama signed a bill that allowed pharmaceutical companies to provide low-cost contraceptives to college students without offering matching discounts to the government-funded Medicaid program. The drug companies only needed to absorb the cost difference between the full price and the discounts for college health clinics.

3. On August 1, 2011, HHS ruled that such contraceptives would now be provided at no cost to college students.  Effective August 1, 2012, the contraceptives would be paid for by either the students’ parents through their private health insurance or by the Federal Government through Medicaid or another of the government-funded insurance exchanges.  The pharmaceutical companies will no longer have to discount their birth control products to anyone because they will be paid in full by either private insurance or the government.

Anyone who has taken Economics 101 knows what happens to prices when the government intervenes and mandates provision of a given product – they go up, and rapidly. Ironically, these are the same pharmaceutical companies which were criticized by the President for their “anti-competitive actions” during his presidential campaign. With the new HHS mandate, Big Pharma will be able to reap record profits by charging all of its customers full price for contraceptives, since these products will be paid for both through higher insurance premiums and through our tax dollars.

The moral and ethical problems raised by the HHS mandate continue to mount. All people of good will should contact their elected representatives and let them know that this cannot stand.  The growing and unfettered power of the administration to make such moves without open debate or congressional involvement is a very serious matter that must be honestly addressed.

Bob Laird is a fellow of HLI America and is the former Director of Tepeyac Family Center. He writes from Lorton, Virginia, USA. This article was originally published on HLI America’s Truth and Charity Forum.



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