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.