Exhibit A: Medicare, The Corporate Welfare Program – Wolf Richter- Testosterone Pit

Congress excels at enriching corporate welfare programs—in this case, Medicare. Ironically, it happened while Congress is struggling to rein in Medicare’s gargantuan deficits with belt-tightening measures that would hit people who paid into the system throughout their working years. This time, the prime beneficiary was Big Pharma, particularly one company….

Amgen. Yet the giant biotech drug maker had gotten into a heap of trouble on another issue. On December 19, when no one was supposed to pay attention, and when everyone was supposed to be distracted by the Fiscal Cliff theatrics, Amgen pleaded guilty to “illegally introducing a misbranded drug into interstate commerce.” It settled a bevy of criminal and civil issues by agreeing to pay $762 million—as the Department of Justice pointed out—”the single largest criminal and civil False Claims Act settlement involving a biotechnology company in U.S. history.”

Even while the settlement was taking its course, Amgen’s lobbyists—Open Secrets lists 75, from 25 lobbying groups—were scurrying around the corridors of power in Washington to have an innocuous-sounding but highly profitable paragraph regarding its dialysis drug Sensipar inserted into the Fiscal Cliff bill.

The New York Times, in its article on that issue, described the depth and complexity of Amgen’s “efforts in Washington” where it has “deep financial and political ties” to various lawmakers, including Senators Max Baucus (Democrat of Montana) and Orrin G. Hatch (Republican of Utah) “who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee.” The company also “worked hard” on its influence with the White House.

But even that wouldn’t be enough firepower.

Amgen and its foundation have directed hundreds of thousands of dollars in charitable contributions to influential groups like the Congressional Black Caucus and to lesser-known groups like the Utah Families Foundation, which was founded by Mr. Hatch and brings the senator positive coverage in his state’s news media.

Amgen’s former employees are now working, where else, on Capitol Hill, including “Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy.” He was, the Times reported, “directly involved in negotiating the dialysis components of the fiscal bill, and he met with ‘all the stakeholders,’”—including Amgen lobbyists—“Mr. Hatch’s spokeswoman said.”

In early January, this massive firepower succeeded. The House, incapable of arriving at any kind of Fiscal Cliff deal, had thrown in the towel. The Senate had taken over the bill, and in the process, a paragraph had been slipped in. Amgen’s name didn’t appear in it, nor did its drug Sensipar, but that nugget is now tucked into Section 632 (b) of the Fiscal Cliff bill, on page 108, under the cryptic heading, “TWO-YEAR DELAY OF IMPLEMENTATION OF ORAL ONLY ESRD-RELATED DRUGS IN THE ESRD PROSPECTIVE PAYMENT SYSTEM.”

It edged in stone an additional two-year delay of a Medicare cost-cutting measure, in place for other dialysis drugs since 2011, when Sensipar was exempted for two years. It camedespite a very inconvenient report in late December by the Government Accountability Office on how Medicare overpaid up to $880 million in 2011 for these dialysis drugs. And there is a history.

About a decade ago, Amgen’s blockbuster drug, Epogen—also used by dialysis patients—got tangled up in doubts about its effectiveness and safety. The Times reports:

Researchers found that Medicare’s practice of reimbursing providers with separate payments for the drugs and for dialysis treatments encouraged overprescription because the providers made healthy profits with each dose. They also found that high doses posed cardiovascular risks to patients.

In 2008, Congress undid that perverse and potentially risky profit incentive. It required that Medicare pay for dialysis and associated drugs with a bundled rate. In 2011, when the changes kicked in, providers found that they could pump up their profits by cutting down on these costly drugs. Overprescription and high doses stopped. Sales plunged by 23%.

But Amgen’s lobbyists had finagled a new deal. Among the goodies: Sensipar and other oraldrugs for dialysis patients—unlike Epogen, which is injectable—were granted a two-year delay. Providers would continue to profit from prescribing Sensipar to the max; Amgen would profit by being able to avoid Medicare price constraints and by maintaining robust sales volumes; and Medicare would quietly pay for it all—and worsen its deficit. Corporate welfare at its best.

But the two-year bonanza would expire in 2014—hence Amgen’s renewed “efforts in Washington” that resulted in an extension of the bonanza for two additional years, starting in 2014. And Medicare will foot the bill: up to $500 million. Given the profit Amgen will be able to wring from that $500 million, its lobbyists were probably among the most underpaid bunch of people around.

Healthcare spending ballooned to $2.7 trillion, 17.9% of GDP, or $8,680 per capita. But households, pushed to the limit and struggling, have lowered their share over the years; so have businesses. What gives? Medicare! For that massive debacle, read…. Paradigm Shift For The Healthcare Expense Monster.