Gabriele Holtermann-Gorden/Sipa USA via AP Images
AbbVie, the company that makes Humira, which treats rheumatoid arthritis, made about $16 billion in net sales on the drug in 2020.
One reason why America stands alone among developed nations for its lack of a universal national health insurance program is that we missed the moment. Most developed nations put together their systems immediately following World War II. But when FDR instituted wage and price controls during the war, labor unions feared losing their bargaining leverage. As a result, employer-provided health insurance was exempted from both wage controls and individual income tax. As the autoworker and steelworker unions won groundbreaking health benefits in their wartime contracts, good health plans provided at work suddenly became a much sought-after trade-off, for unions and workers as a bargaining chip and for employers as a tax write-off.
Because the employer-provided system stuck, we missed the opportunity to nationalize either the insurance industry or health providers when they were smaller and less influential. In the decades since, health care companies became far more powerful as health services took up a steadily larger percentage of GDP. By the time the U.S. showed an interest in taking on the sector, it couldn’t slay the leviathan. After decades of failed governmental attempts, the Affordable Care Act was enacted, but only by making what amounted to an accommodation with insurers and providers, giving them a larger market in exchange for extremely modest trims to their per capita profits. On the whole, the industry made out better, and runaway costs for medical treatment continued relatively unabated.
Despite the tremendous demand to devise the perfect health care plan, the issue of broad-based reform has been almost entirely sidelined by the new administration.
The logic of this story suggests that shying away from a fight with the health industry today will just lead to a more impossible fight tomorrow. And yet, that pretty well articulates what the Biden administration’s political theory is right now. For the past 50 years, incoming Democratic administrations and the party base have made health care a top policy priority; the Biden administration has not. The American Rescue Plan did nothing on health care other than increasing federal subsidies for the purchase of health insurance, and only for a limited time period tied to the pandemic. The White House had to be dragged kicking and screaming just to extend those subsidies in its current American Families Plan proposal. Other Biden campaign promises, like a public option or a plan to deal with prescription drug costs, have thus far been left on the cutting-room floor.
It’s not like the desire for reform of the health care system has muted, either among the public or among Democratic partisans. Indeed, the 2020 Democratic primaries featured health care as a primary, if not the primary, topic of debate among the candidates. Despite this tremendous demand to devise the perfect health care plan, and the significant time and ink spilled in the effort, the issue of broad-based reform has been almost entirely sidelined by the new administration. Biden has certainly foregrounded COVID vaccinations, and shown a path to a simpler, more accessible health care system that exposes the complicated private-sector apparatus for what it is. But there’s been no movement beyond that.
The reason why seems perfectly clear. As Prospect contributor Jon Walker indicated last month, the White House wants no part of a fight with doctors, drug companies, or hospitals. Any meaningful effort at expanding public health insurance or lowering patient costs would come at the expense of these concerns. Biden would rather put off that fight to a more palatable moment. But the history of U.S. health care suggests that such a moment will never come. It will always get harder as health care interests get bigger and more entrenched.
You can see this in the Democrats’ halting efforts to find a drug price reform plan that might save patients and the government money. After years of fighting with her progressive flank, House Speaker Nancy Pelosi came to what she thought was a deal on a consensus bill, H.R. 3, that would allow Medicare to directly negotiate with drugmakers on a specific subset of medicines. H.R. 3 passed the House in 2020, and it was considered a strong bet for a Biden infrastructure package, because it saved hundreds of billions of dollars that could be plowed back into spending.
But not only did H.R. 3 not make the proposal, centrist members revolted against H.R. 3, admitting that they only voted for it last year because they knew it wouldn’t pass. They’re now seeking something more “moderate,” which translates into something that puts far less pressure on drug company profits.
This about-face illustrates the incredible power of the drug industry lobby in Washington. But it’s not like that’s going to get better anytime soon, absent legislative action. This week’s House Oversight Committee inquiry into Humira, the most popular drug in America, serves as a perfect example.
AbbVie, the company that makes Humira, which treats rheumatoid arthritis, made about $16 billion in net sales on the drug in 2020. A year’s supply costs about $77,000, up nearly fivefold since its initial approval in 2003. And the price went up again this year by 7.4 percent, the 27th such increase in the history of the drug. AbbVie can do this, as the Oversight Committee’s staff report explains, because of its abuse of the U.S. patent system. “AbbVie has obtained or applied for over 250 patents on Humira to block competition,” the report notes, with 90 percent of those patents coming after Humira was already on the market.
The company also entered into “pay for delay” agreements with generic manufacturers, literally bribing them to keep lower-cost versions of Humira off the market. Even AbbVie was shocked by how well this worked; the company had expected several competing drugs to be available by 2017. The agreements it was able to secure delayed those drugs’ arrival until 2023, securing for Humira six more years of monopoly profits that is costing the U.S. health system at least $19 billion over that period. Competing drugs are available in Europe, which has a rational health care system. Only in the U.S. have drug companies, like the rest of the health industry, been allowed to run wild.
The Oversight Committee referred the matter to the Federal Trade Commission, as pay-for-delay settlements are theoretically illegal if widely used. But while yelling at drug company CEOs is therapeutic in and of itself, an industry chomping on ever expanding profits will just be that much harder to dislodge. One telling bit of the Oversight report shows that AbbVie’s one competitor for Humira, Amgen’s Enbrel, raised prices almost exactly in tandem with its rival over an 18-year period. With this shadow pricing, you can just see the drug industry growing without limit as politicians dither and strategize futilely about how to challenge it.
The seven top insurance companies all increased U.S. revenues and profits in the first quarter of 2021.
Drug industry girth is mirrored in other parts of the health sector. Though you might not have assumed this in the middle of a global health crisis, the seven top insurance companies—the ones supposed to pay the bills—all increased U.S. revenues and profits in the first quarter of 2021, coinciding with the deadliest part of the pandemic. The American Medical Association recently filled in this puzzle by releasing a study showing that, for the first time, the majority of physicians now work outside of private practice. In all, 40 percent of American doctors now work “directly for a hospital or for a practice at least partially owned by a hospital or health system,” and this trend toward bigger agglomerations of physicians and hospitals is growing. This has led to self-preferencing for in-network medical support, with inappropriate referrals for diagnostic imaging and higher spending on lab services as just some of the results; a Senate Antitrust Subcommittee hearing yesterday on hospital consolidation went through some of these issues.
But a growing segment of physicians now also work for insurance companies; a division of UnitedHealth called OptumHealth now employs over 53,000 doctors, or 5 percent of the total U.S. physician head count. UnitedHealth’s proposed purchase of Change Healthcare would integrate with medical billing and claims and create an all-knowing integrated giant, as the Prospect has reported.
So you have bigger hospitals, bigger insurers, and bigger drug companies, all imposing their will on the system. And the middlemen in all the transactions among these entities are also getting bigger. The health industry in 2021 is a Goliath, and in 2022 it will be a still bigger Goliath, and so on. Deferring this fight only guarantees a worse policy outcome, as Congress tangles with a more fearsome foe.
As the public fumes at the inability to fix the health care system, the deferral of the fight further merely entrenches that inability. There’s no brighter day or better time to reform the system. Each day that goes by erodes the possibility of victory.
