Archive for the ‘Pharmaceuticals’ Category

In this dawning age of Government by Gazillionares, it may seem impertinent to whisper that a few of their tax breaks should be revisited. But candidate Donald Trump did pledge to reduce or eliminate “most deductions and loopholes available to the very rich.”

In this context, Sen. Jack Reed (D-Rhode Island) and Rep. Lloyd Doggett (D-Texas) are re-introducing the “Stop Subsidizing Multimillion Dollar Corporate Bonuses Act.”  This bill closes the loophole in tax law that allows big businesses to rake in billions of dollars in federal tax breaks every year to subsidize top executive pay packages. Current law that was signed in 1993 (otherwise known as Section 162(m) of the Internal Revenue Code) caps the deductibility of pay at $1 million for top executives at publicly-traded corporations. Anything more is considered excess, such as a three martini lunch. The intent of the 1993 law was to protect taxpayers from subsidizing runaway executive pay. The loophole provides that a bonus tied to some performance metric, approved by shareholders, can be deducted. The problems with letting shareholders decide are many. For starters, it’s not in the interest of an owner to pay more tax. Further, shareholder voting is largely controlled by the same institutions such as mutual funds and other banks that benefit from the subsidy.

The Economic Policy Institute estimates that between 2007 and 2010, a total of $121.5 billion in executive compensation was deductible from corporate earnings, and roughly 55 percent of this total was for performance-based compensation. By closing this loophole, the policy reform would raise $50 billion in revenue over 10 years. That further illustrates both the gravity of the problem as well as the utility of the reform to fund needed programs.

In the House, the Doggett bill enjoys nearly 30 co-sponsors. Senate bill co-sponsor Sen. Richard Blumenthal (D-Ct) argues that, “Even as income inequality rises and middle-class wages stagnate, American taxpayers are subsidizing tens of billions of dollars in corporate bonuses.  We should be investing in working families, not using taxpayer dollars for tax breaks to corporations that overpay their executives. ”

Those in the C-suite may argue that these princely payments are wages like all other wages, namely, a legitimate business expense. That turns on the labor theory of value, namely that workers produce value and should be compensated accordingly.  But this theory falls apart readily. Current CEOs of the Fortune 500 are paid 300 times what median workers are paid; thirty years ago, the differential was more like 50 times. It’s tough to reckon that the CEOs of the 1980s who developed the first personal computers and cell phones, new miracle medicines, fuel efficient automobiles, that they’re only a tenth as valuable as today’s corporate chiefs.

In reality, the benefactors of these bonuses control the purse strings. It isn’t that pharmaceutical titans such as Martin Shkreli  work longer hours than the average worker, or truly create wondrous products that most of us can’t imagine; instead, they game the system. In Shkreli’s case, he used other people’s money to buy a drug company named Valaent, then increased the price of an existing life-saving drug by several thousand percent. In addition to Shkreli’s compensation, Valeant CEO Michael Pearson was compensated $10 million in 2015, all subsidized by taxpayers.

On Wall Street, where the added value to the economy is suspect, the bonus culture has run amok. At JP Morgan’s London office, for example, traders gambled with hundreds of billions of dollars in deposits made cheap by the taxpayer-subsidized Federal Deposit Insurance Corp (FDIC). Sometimes they won, such as when they bet that American Airlines would go bankrupt. Sometimes they lost, such as when they overextended on a bet so complex that the JP Morgan CEO himself could identify the problem for weeks. Instead of being paid double, triple, or even 10 times the average income for US workers, (about $50,000), they received more than 100 times. Their boss, Chief Investment Officer Ina Drew, allegedly prompted the mega-trade to goose her stock-based (taxpayer subsidized) bonus, according to a Public Citizen analysis based on a Senate investigation.

Recently, Wells Fargo showed how the bonus virus—subsidized by taxpayers—led to massive fraud. Faced with termination if they failed to meet a quota of new account creation for existing customers (such as a credit card for a checking account customer, a practice known as “cross selling”), thousands of Wells Fargo employees fabricated these accounts. That led to more than a decade of faux growth reported to shareholders, according to a Public Citizen account.  The solid growth in accounts sent the stock price steadily up. And since senior manager pay derived from that stock price—deductible as a business expense—the top brass earned gold. CEO John Stumpf was paid $18 million in 2016, of which $17 billion was deductible, meaning about a third came courtesy of average American taxpayers. Senior officer Carrie Tolstedt was compensation $9 million, with all but $0.7 million deductible.

Sens. Reed, Blumenthal and Rep. Doggett have promoted this reform for years. In the past, this bill entered the concrete of divided government; this time, it becomes part of the chaos theory in which any hypothesis may prove valid.

Support for reform spans the partisan bridge. In 2006, Senator Chuck Grassley (R-IA), the then-chair of the Senate Committee on Finance, stated: “162(m) is broken. …It was well-intentioned.  But it really hasn’t worked at all.  Companies have found it easy to get around the law.  It has more holes than Swiss cheese.  And it seems to have encouraged the options industry.  These sophisticated folks are working with Swiss-watch-like devices to game this Swiss-cheese-like rule.”

Key tax policy in the Trump administration may turn on a trio of Goldman Sachs alumni: Treasury nominee Steven Mnuchin, senior Trump advisor Steve Bannon, and National Economic Council Director-designate Gary Cohn. Goldman Sachs, the epitome of the Wall Street that feeds of Main Street, may be an unlikely breeding ground for populist reforms. Moreover, the accessible public record to date on what this trio thinks about tax policy, however, is shorter than this blog. Bannon, for example, has cancelled public appearances following the election.

One can only hope that, now they have their millions, they may feel liberated from financial concern to shape sensible policy.

As tax policy makes its way through Congress, lawmakers including the Trump administration will ideally calculate that the winners in this reform are many.

Just some of the over 700,000 signature delivered to Mylan

Just some of the over 700,000 signature delivered to Mylan, Photo Credit: Ed Grystar W. PA. Coalition for Single Payer Healthcare

By Sean Grant

Protesters on Tuesday delivered petitions to Mylan’s corporate headquarters just outside of Pittsburgh demanding that the company end price gouging EpiPen users, they did not expect a warm welcome. They knew beforehand that they would not be allowed to approach the building. In front of TV cameras, Mylan accepted the petitions on a wheeled cart.

But Mylan representatives who collected the petition signatures – gathered by Public Citizen, MoveOn.org Civic Action and others – offered no comment to the media, raising the question of whether the company will heed the call of the nearly 700,000 Americans who signed the petitions. The public clearly is outraged at Mylan’s raising the price of EpiPens by more than 500 percent since 2007 for no apparent reason other than greed.

Protesters were not allowed to enter Mylan's visitor entrance at their building

Protesters were not allowed to enter Mylan’s visitor entrance, Photo Credit: Ed Grystar W. PA. Coalition for Single Payer Healthcare

Before the petition delivery, Mylan twice announced new measures to appease the public, but these weak attempts at appearing contrite only further enraged people. As Public Citizen President Robert Weissman stated, “It’s not enough to offer coupons and it’s not enough to offer an overpriced generic version of its own branded product. The company must roll back its unjustified and outrageous price increases.” Read those press releases here and here.

As the petitions were rolled away on dollies to chants of “people over profit,” attention shifted to Mike Laffin, a member of Mylan’s communications team, who was sent out to deal with the reporters clamoring to ask questions. Laffin, however, could provide nothing more substantive than “Any other questions need to be directed to our communications team or customer service.” He repeated the phrase several times, perhaps most forcefully when one reporter asked if Mylan had any plans to lower the price of the EpiPen further.

Considering how ineffective the customer service department has been so far, referring reporters to it – by a live person from the communications department – doesn’t seem like the brightest PR move. But the company keeps making missteps, it seems. It is imperative Mylan finally listen and take substantive action.

View a video of the petition delivery 

 

By Anisha Sehgal

Both consumers and healthcare payers are struggling with the rising price of drugs. Unless meaningful reforms are enacted, this problem will only get larger and patients will continue to face crippling out-of-pocket costs in order to care for themselves and their loved ones. The Medicare Part B demonstration is an example of such a reform and would begin to repair the dysfunctional way that we pay for prescription drugs. Unfortunately for patients, the pharmaceutical industry has mounted considerable opposition to this reform and it is not alone. Politicians and organizations such as patients’ groups have also voiced their objection. However, the majority of these individuals and groups have received industry funding.

A recent Public Citizen report revealed that of the 147 patients’ groups who have signed letters objecting to the Medicare Part B demonstration at least 110 (75%) received funding from pharmaceutical or medical device corporations. Since patients’ groups are not required to disclose their funding sources there may be even more than the 110 groups identified by the report that received money from pharma.

The letter organized by the Community Oncology Alliance was sent to congressional leadership while the letter organized by the Partnership to Improve Patient Care was sent to the Center for Medicare and Medicaid Services (CMS). Along with the 147 patients’ groups, 241 doctors’ groups and pharmaceutical industry groups — both of which benefit from the maintaining the status quo of the current reimbursement method — signed either of the two letters opposing the reform. The letters’ combination of patients’ groups as well as industry groups, such as local Biotechnology Innovation Organization (BIO) affiliates, demonstrates the close ties patients’ groups have with the pharmaceutical industry.

In 2015, Part B spending reached $22 billion, double the amount it was in 2007. A reform such as this is necessary in order to remedy Medicare Part B’s unsustainable spending trend. The Medicare Part B demonstration, which is supported by numerous consumer interest groups including Public Citizen, aims to remove incentives for doctors to unnecessarily prescribe higher priced medicines when effective and affordable alternatives are available. Currently a physician who administers a drug under Medicare Part B will be reimbursed for the average sales price plus six percent. The demonstration proposes changing the reimbursement to the average sales price plus 2.5 percent and a flat dollar amount.

The pharmaceutical industry is strongly opposed to this reform because a decrease in the prescription of higher-priced drugs means a decrease in the industry’s profits. In fact, the industry has already spent more than $9 million in campaign funding for members of Congress, which is strongly correlated with lawmakers’ stances on the issue, as revealed by another recent Public Citizen report.

The pharmaceutical industry’s troubling pattern of influence raises questions about the independence of this reform’s opponents. Patients’ groups should reconsider their stance on this issue and realize that in this debate pharma is only looking out for itself, not for the deserving patients of this country.

By Will Neer and Anisha Sehgal

Imagine being diagnosed with a life threatening illness. The immediate reactions of shock and panic may also be mixed with relief once your doctor informs you that there is an effective treatment available. However, that relief can quickly disappear and instead be replaced with hesitation and fear once the hefty price tag associated with the treatment is revealed.  This unfair cycle of emotions is a process too many Americans and their families are forced to experience due to astronomical drug prices.

A type of drug commonly used to treat serious illnesses is a biologic. However, as prescription drug corporations often charge more than $100,000 annually for biologic treatments, many Americans are fighting insurer rationing or even turning to pill splitting.  A piece of bipartisan legislation, S. 0394 / H.R. 5573, titled the Price, Relief, Innovation and Competition for Essential Drugs (PRICED) Act aims to remedy this problem. The PRICED Act would amend U.S. law and shorten the time that prescription drug corporations have monopolies on biologic medicines – and how long they can charge monopoly prices, thereby making these treatments more readily accessible.

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By Anisha Sehgal

Pharma Part B infographicDuring election season, Americans across the country hear politicians make grand statements on how they will look out for the good, hard-working people of their state and push for progress that will benefit us all. As we watch them head off to Washington we expect or at least hope that they will deliver on their promises and act in a manner that looks out for our best interests.

However, a recent Public Citizen report on the role of corporate money in politics has revealed the strong influence donations can have on swaying lawmakers’ support on big issues. We are in the midst of a contentious debate regarding the Centers for Medicare and Medicaid Services’ (CMS) proposed Medicare Part B demonstration, a proposal strongly opposed by the pharmaceutical industry. Public Citizen’s new study reveals that members of Congress who opposed or were critical of the reform on average received 82% more in campaign contributions for the 2016 election cycle from the pharmaceutical and health products industry than rank and file members who did not take a stance against the reform.

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