Froma Harrop: Big Pharma doesn’t own Amazon
President Trump offered few words about health care in his State of the Union address. He did mention drug prices, though.
“One of my greatest priorities is to reduce the price of prescription drugs,” he said. “In many other countries, these drugs cost far less than what we pay in the United States. … That is why I have directed my administration to make fixing the injustice of high drug prices one of my top priorities.”
Which is an interesting thing for Trump to say, given that he has just made Alex Azar, a top executive at drugmaker Eli Lilly, head of Health and Human Services. Lilly tripled the price of insulin during Azar’s tenure there. Suffice it to say, the one injustice Eli Lilly does not want to fix is high drug prices.
There was a bigger story going on, and it was not unrelated. Amazon, Berkshire Hathaway and JPMorgan Chase announced that they are putting their heads together to create a health care plan for their 1.1 million U.S. employees. Sounds like leverage to me. Eight states have fewer people.
During the presidential campaign, Trump vowed that if elected, he would have Medicare negotiate more favorable drug prices with the manufacturers. Since he took office, that pledge has not seen the light of day.
Washington was never good at standing up to the medical-industrial complex. There’s too much money to be made in standing down. And a separation between the public’s wallet and Big Pharma’s desire to extract huge profits is surely one wall Trump will never build.
But the medical industry does not own Amazon, the world’s largest internet company, or Berkshire Hathaway, the conglomerate Fortune ranks as America’s third-most profitable company, or JPMorgan Chase, America’s biggest bank.
The fine details have yet to be revealed, but the stated plan is to create a company that would be free from profit-making incentives. That’s not great news for profit-oriented suppliers. The stocks of UnitedHealth Group, Aetna and CVS — which plans to buy Aetna — all took a beating after the announcement.
The partners say they will use technology to simplify the delivery of health care. And they insist the new system will improve the services available to employees.
The beauty of this corporate trio’s gambit is they are bypassing the politicians. Their aim is to “disrupt” the forces that saddle them with exorbitant prices.
“The ballooning costs of health care act as a hungry tapeworm on the American economy,” Warren Buffett, Berkshire’s fabled CEO, stated with trademark simplicity.
Wonder what they’re going to do about drug prices. The drug Humira offers a window into the challenges.
According to the ads, Humira enables a woman hurting from rheumatoid arthritis to chase her puppy all over the house. (“Ask your doctor about Humira.”) In 2012, Humira cost a ridiculous $19,000 a year. Its maker, AbbVie, recently raised the price to a piratical $38,000.
The bottom line is that the U.S. spends nearly twice as much on health care as a percentage of the economy as do other industrialized countries — while its people use about the same amount of health care. Corporate America has long objected to what this costly health care is doing to its bottom line.
So bringing down the prices is the big game in taming total health care spending. No one says this will be easy, and doubters point to past failed corporate efforts. But these are three giants who don’t scare easily. Amazon has already shown interest in selling pharmaceuticals.
Since Washington won’t do much about the prices for health care, let’s see what Amazon, Berkshire and JPMorgan come up with. Go forth and disrupt, we say.
Follow Froma Harrop on Twitter @FromaHarrop.