America’s Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System

By Steven Brill

Random House, 2015

The Clear Winners of Healthcare Reform, and How We Got There

From March 23, 2010 through late January 2015, stock prices of seven of the largest health insurance companies soared from 118 percent to 361 percent, a period in which overall stock prices rose just 75 percent.

March 23, 2010 is also the date President Obama signed the Affordable Care Act.

Insurance companies, which gained several million new captive payers required to buy private insurance, were not the only industry insiders to harvest a bonanza. The 25 biggest pharmaceutical companies pocketed more than $100 million in profits in 2013 alone.

Big Pharma, too, gained a lot of new subsidized business through the ACA, a law that Steven Brill in his new work, America’s Bitter Pill, concludes in part produced only “one clear group of winners – the healthcare industry.”

Brill’s main mission is to provide an insider account of the ACA’s inception, enactment, and implementation, through a tale of lobbyists, executive branch and congressional staff, some academics, federal office holders, and techies.

Late in the story, here’s how Brill summarizes the development of the Affordable Care Act:

All the years of Ted Kennedy’s crusading, all of [Senate Finance Committee staffer] Liz Fowler’s drafting, all of the days of wrangling votes on Capitol Hill in 2009 and 2010, all of the backroom deals and furious lobbying by all those industry players, all of the frantic efforts to game the CBO [Congressional Budget Office] scoring process, all of the millions of hours and billions of dollars spent writing regulations and building the almost junked website…

In the nearly 500 pages of the book, a few ordinary people do appear, but only as victims of the healthcare industry, whose struggles as patients, mostly with unpayable bills, demonstrate the need for reform.     

Missing from this account are the thousands of nurses and other healthcare and community activists who have worked for years for fundamental transformation of what Brill colorfully calls a “dysfunctional healthcare house (that) with the bad plumbing and electricity, leaky roof, broken windows, and rotting floors, would never have been built and become so entrenched in its special interest foundations that it could not be torn down.”

But tearing it down, because of its fundamental corruption and what Brill also calls “a broken down jalopy,” is exactly the cure advocated by nurses and the activists who have long campaigned for real reform, through an expanded and improved Medicare for all.

Even while conceding that single-payer or national healthcare is the “path taken by every other developed country, all of which produce the same or better healthcare results than we do at a far lower cost,” Brill simply dismisses that as an alternative to the ACA. Of course, so did all the key players he profiles, from Congressional and White House staff to the top Democrats at the helm of the process, including former single-payer advocates Ted Kennedy and President Obama.

We do get a clear report on the many deals cut with the corporate healthcare industry, including with the drug companies, hospitals, and insurance companies in particular. Most of this is known from newspaper accounts, but Brill does bring it into a strong story narrative.

His primary critique is on the high charges and profits of corporate hospitals and drug companies. He exposes the high chargemasters of hospitals and other industry price gouging, recounting many examples first told in his highly regarded March 2013 Time magazine article also titled “Bitter Pill.”

Brill deconstructs the false pharmaceutical pretext that high drug prices are necessary for “research,” detailing the drug companies’ higher spending on marketing and administration than on research and development, not to mention huge public subsidies for that research.

Brill is generally soft on the insurance companies. He over emphasizes the “lower” profit margins of insurance companies compared to hospitals, and sharply criticizes the Obama administration and the president personally for hypocritically attacking the insurers, then utilizing insurance consultants to rescue the Healthcare.gov federal insurance exchange website.

While noting the insurers’ top objective, the mandate to deliver all those new paying customers, Brill neglects another major objective the insurers also won, protecting their anti-trust exemption so they can effectively collude on prices and market share, as reported by Matt Taibbi and others.

To be fair, Brill does an admirable job pointing out the high out-of-pocket costs for many, even after application of the very expensive subsidies given to the uninsured to purchase private insurance through the health exchanges. He also nicely exposes the facade of the “Medical Loss Ratio” as a cost-saving device which is easily manipulated by the insurers to count bookkeeping and other non-care activities as a medical expense.   

While Brill is unsparing in detailing many of the gaping problems of the ACA and devotes nearly half the book to nearly tedious descriptions of the well-chronicled failure of the ACA rollout which Brill blames, with some justification, on President Obama’s “failure to govern,” Brill ultimately strongly defends the ACA.

In his words, “Obamacare gave millions of Americans access to affordable healthcare, or at least protection against not being able to pay for a catastrophic illness or being bankrupted by the bills. Now everyone has access to insurance and subsidies to help pay for it. That is a milestone toward erasing a national disgrace.”

But, he concedes, the law “hasn’t come close to making health insurance premiums and out-of-pocket costs low enough that healthcare is truly affordable to everyone, let alone affordable to a degree that it is in every other developed country.” A reminder of that reality comes from a recent Kaiser Family Foundation survey that nearly 30 million Americans remain uninsured, largely because of the cost (though many also because of the botched rollout Brill describes of an absurdly complicated law.)

Brill concludes not by recommending the single-payer solution adopted by most of those other developed countries, but by a fix that would make many nurses gasp – regional-based integrated care networks of hospitals and insurance companies acting as oligopolies or monopolies regulated as public utilities led by doctor-CEOs who will align the incentives “in the right way.”

One model he cites is the Cleveland Clinic, led by heart surgeon Dr. Toby Cosgrove. Brill may not realize this hospital system also demonstrates that having an Ivory Tower medical center in one’s backyard does little to improve the health of a community.  Within the three miles surrounding the Cleveland Clinic area, infant mortality exceeds some Third World countries. The system is frequently under attack for failing to meet their charity care obligations and shifting the burden of caring for uninsured and underinsured to the lone public safety net hospital. Meanwhile, the system is grossing $11.63 billion and posted over $900 million in profits in 2013 alone.  

The Cleveland Clinic has also been cited by the Centers for Medicare and Medicaid Services for violating Medicare rules more than three dozen times since 2010. In 2013 alone, the system was cited for 23 health and safety issues. 

Nurses may question whether regulation and lower executive salaries, as Brill proposes, would correct all that. He argues that his system would make healthcare a public good out of the free market, but when he talks about aligning incentives, he gives short shrift to hands-on care and resourcing the provision of care by highly skilled clinicians exercising their professional judgment. Phrases such as safe, therapeutic care or a single standard of care not based on ability to pay don’t enter the lexicon of the regulated “integrated healthcare oligopolists” led by rightly aligned beneficent doctors who are allowed reasonable profits.

Compared to saving money through a truly universal system of guaranteed healthcare, cost controls through global budgets for hospitals that cover actual annual expenses for patient care, regulated prices and bulk purchasing of prescription drugs, and negotiated fees for providers, Brills’ approach is inadequate. Rather than dismissing single-payer, he could investigate how to pull the levers of power and overcome the industry he cogently criticizes.

Brill’s own experiences as a patient feature prominently in his conclusions and nurses may wish that the patient’s understanding of the system led to more insight about how to change it.

– Michael Lighty and Charles Idelson

   Michelle Mahon contributed to this review

Just got back from today’s public hearing regarding the EPA’s proposed new surface ozone standard. Matthew Elliott, from Kaiser South Sac, spoke on behalf of RNs everywhere about the need to confront and tackle the negative health effects of air pollution on our communities. We were the only Union in attendance and Matt’s comments, delivered from the perspective of a direct care RN, clearly had a profound impact on the panel.

We were joined today, of course, by the Sierra Club, who led the way with fantastic comments and analysis. During a lunch break, SC held a rally at Cesar Chavez Plaza Park across the street from the hearing location. There, over a hundred students from across CA joined with members from almost a dozen community, religious, and environmental groups to demand a more stringent smog standard.

Nurses were the highlight of the rally. More than 50 were attending a CE class nearby, and they marched down J Street in red scrubs and surgical masks, chanting Clean Air Is Health Care (led by Kevin Baker, Michael Unimuke, Maryanne Henke, and others, who did a fantastic job keeping up with the changing logistics.) The group in Cesar Chavez heard us coming down the street and took up our chants. Once we arrived, students and community allies grabbed our signs and joined with the nurses in denouncing industry efforts to loosen air quality standards.

Even the EPA administrators were impressed with the rally. They mentioned it right before the afternoon session began, where Matt and I gave our comments. All in all, I think it was a great success.

On the policy/analysis side of the equation, we still have a lot of work to do. The final rules will not be published until about Oct. 2015. This is a complicated issue with important consequences for the working class. I was able to follow the industry’s comments and am confident we can undermine their arguments and agenda. SC and others would also provide an excellent source for sound policy analysis. Our final written comments are due March 17, so thankfully, there’s time to work.

Thanks for inviting me to participate. Had a blast.

Brendan

For all the heavy weights in the healthcare industry, that industry that now gobbles about one fifth of the U.S. economy, none has more weight to throw around than the pharmaceutical giants.

Big drug companies make the most profit, mark up their prices the most, have the most clout in Congress and other elected officials, and generally get whatever they want.

But public pressure on the price gouging on drugs is now ratcheting up.

This past week after Gildead Sciences, a U.S. biopharmaceutical company, agreed to discount its $1,000 a pill hepatitis C drug Sovaldi in Germany, a number of mainstream U.S. healthcare journalists raised again the question of why should U.S. drug companies give discounts in other countries that are not available in the U.S.

FiercePharma, an industry website, noted that drug price deals in Germany and the United Kingdom are “closely watched in other countries” that expect similar price breaks. And further that Gildead continues to face heavy “pressure” from developing nations “to provide its vaunted treatments to poor patients at accessible prices.” [Source: FiercePharma.com]

Developing nations, and HIV/AIDS activists in particular, have been protesting price gouging by the drug kings for years.

Doctors Without Borders also took aim at two of the biggest drug giants GlaxoSmithKline and Pfizer in a report in mid-January calling on the two firms to reduce the price of a new vaccine against pneumococcal disease needed by children in the developing world. “Because of the astronomical cost of new vaccines, many governments are facing tough choices about which deadly diseases they can afford to protect their children against,” said the group in its report. [Source: TheGuardian.com]

The heat from that report prompted the world’s richest man Bill Gates, who counts on a philanthropic reputation in developing nations to soften his corporate image, felt compelled to speak out in defense of big pharma. “Criticism by health campaigners of the high prices of some vaccines only serves to deter pharmaceutical companies from working on life-saving products for poor countries,” was how London’s Guardian newspaper summed up Gates’ views. [Source: TheGuardian.com]

It’s hard to shed too many tears for the drug companies. In 2013 alone, the 25 wealthiest giants racked up more than $100 billion.  Johnson and Johnson set the pace with more than 13.8 billion in profit, according to data from Thomson ONE Banker.

That buys a lot of clout. Especially in the U.S. where the drug lobbyists have for years killed off proposals to allow Medicare, for example, to negotiate discount drug prices the way countries with national health systems do.

In his new book on the Affordable Care Act, “America’s Bitter Pill,” journalist Steven Brill, cites research showing that overall prescription drug prices are 50 percent higher for comparable products than in other developed countries.

By 2012, more than $280 billion was being spent annually on prescription drugs in the U.S. “If Americans paid what other countries did for the same products, they would save about $94 billion a year,” Brill wrote.

Brill also describes his personal experience with Celebrex, a drug used for arthritis and other muscle and joint pains. Brill found that his insurer paid Pfizer, which makes Celebrex, $50 for each pill. In 2013, he continues, Pfizer “actual incremental cost of producing and shipping its products, before counting expenses for marketing, overhead or research and development, was 18.6 percent, yielding a gross profit margin of 81.4 percent.” In his case, that meant Pfizer was making a profit of $38.40 on each of his $50 pills.

Drug companies typically seek to justify their high charges by, in particular, claiming that they need exorbitant profits to cover their costs for risky research and development of new, more effective drugs.

But an internal National Institutes of Health (NIH) document, the advocacy group Public Citizen reported in 2001, “exposed that taxpayer-funded scientists conducted 55 percent of the research projects that led to the discovery and development of the top five selling drugs in 1995.” [Source: Citizen.org]

As legendary consumer advocate Ralph Nader puts it, “Americans built the drug industry, and the gratitude of the drug companies is to charge them more than in any other countries.” Americans pay the price twice, first in subsidizing the publicly funded research and development and then in paying the highest prices.

And, as Brill noted, when it came to drafting the Affordable Care Act, this 800-pound gorilla looked every bit like an 8-ton gorilla – and got almost everything on its agenda.

Among the big players in the healthcare industry who were in the deal making from the outset, PhRMA, the lobbying arm for the drug giants, was “first to the table,” Brill wrote.

PhRMA was successful in achieving essentially all of its demands, including protecting the 2003 Medicare prescription drug deal which required the government to pay 106 percent of what the drugmakers reported was their ‘average wholesale price,’ which Brill aptly termed “a straitjacket that cost taxpayers $40 billion a year.

PhRMA also succeeded in getting Obama administration support to kill proposed amendments to the ACA that would have allowed consumers to buy drugs from Canada that could produce savings of 30 to 50 percent on medications, Brill noted. Other concessions to the drug kings would follow.

One symptom of the legacy, the aforementioned Sovaldi. A Washington Post blogger, Brill reminds us, speculated that California might have to spend more buying Sovaldi for its Medicaid beneficiaries than it currently does on all K-12 and higher education.”

If some heat on big pharma is beginning to boil now, it is long overdue.