Big Pharma Vs. The Rule of Law


Mytheos Holt Policy Analyst
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With the fall of Hillary Clinton and the “rules for thee, but not for me” theory of politics embodied by her machine, I would like to endorse another radical idea: Everyone, including moneyed interests, should follow the law.

I can hear the incredulity already. “How is that radical? I thought that was common sense?” Well, judging by the reaction of the pharmaceutical industry to a new series of guidelines from the Department of Health and Human Services, apparently it is. Somehow.

I’m sure for many, this is their first time hearing about this. This past month has obviously been a whirlwind in politics, so many could be forgiven for not noticing more obscure developments out of the world of policy. But now that the dust has settled and we have a new president-elect, those issues not only deserve consideration, but require it. And the efforts of an entire industry to weaken rules aimed at making them operate fairly deserve precisely this kind of better-late-than-never attention.

So here’s what’s going on.

One of the laws that governs how pharmaceutical companies interact with hospitals and the federal government is the obscure 340B drug discount program. 340B provides that any pharmaceutical company that wants to sell to the lucrative Medicaid and Medicare Part B markets has to sell its drugs at a reduced price to select categories of hospitals, such as children’s hospitals, rural hospitals, or safety-net hospitals that treat a lot of poor people.

Seems simple enough, right? Well, it would be, except for one thing: What happens if pharma ignores the requirement and sells its drugs a high price anyway, figuring it won’t get caught? Given the limited resources these hospitals enjoy, that bet sadly is more likely to pay off than you might think. And until very recently, they could get away with that kind of “rules don’t apply to me” strategy, because there was no clear process by which the hospitals in question could file disputes against drug companies.

To give you some sense of Big Pharma’s clout consider this: To date, there have been 644 government audits of hospitals in the 340B program and only 11 of drug manufacturers. That’s not an accident.

Enter HHS, which recently introduced a rule that sets very clear guidelines for how hospitals can blow the whistle on manufacturers overcharging them despite 340B regulations. And pharma — surprise, surprise — is not happy. It has submitted comments complaining about the rule and picking so many nits it puts a monkey to shame, but ultimately it all comes down to sour grapes that the system isn’t easy enough to cheat.

Let’s be blunt: If this election represented anything, it is a stinging rebuke to the idea that people with enough money and influence can game the system as much as they like and Washington will look the other way. The rule of law has long been a principle of conservative governance, and it is not one that anyone, from Trump skeptics to president-elect Trump himself, has any interest in abandoning. Having put the self-proclaimed “law and order” candidate in the White House, the rest of our government has an obligation to catch up with that same law and order stance.

If pharma wants taxpayer money, it must follow the rules the taxpayers’ representatives set for it. Let’s hope HHS, for once, doesn’t follow the Obama administration’s posture of caving to the drug industry, and keeps the strictest version of this new rule in place.