Martin Shkreli Isn't The Only Greedy Little Monster Driving Up The Price Of Medicine

More great investigative reporting from David Sirota at the International Business Times, this time on how proposed healthcare insurance mergers between Anthem-Cigna and Aetna-Humana will harm the public by reducing competition and raising costs for consumers. He reports how Kathleen Sebelius, "one of the key architects of President Obama’s Affordable Care Act is raising questions about the potential consequences of two giant healthcare insurance mergers that could affect millions of Americans now facing rising premiums." Sebelius is worried that going from 5 major insurance companies down to just 3 will impact the entire American population negatively.

The two mergers, which were announced in 2015, are now undergoing reviews by both federal and state regulators charged with making sure they do not restrict competition and hard consumers. Sebelius said that “part of the premise of the Affordable Care Act” was to engender the kind of competition that mergers can threaten.

“Creating a marketplace structure and encouraging additional companies to come into the market [was] certainly part of the overall strategy” of the Affordable Care Act, she said.

“Competition actually is a great price lever, and competition gives not only more choices to consumers but typically better prices to consumers.”

Executives for the companies have argued that the mergers will bring greater efficiencies and cost savings, ultimately benefiting consumers.

"It's going to increase choice, not decrease choice. It's going to increase affordability, not decrease affordability," said Cigna CEO David Cordani, who Bloomberg News says could reap a personal $58 million windfall if the deal goes through, depending on the personnel changes at the new company. That payout is second only to the $131 million that could be made by Aetna’s CEO Mark Bertolini, who told congressional lawmakers in September that a merger “will enable us to offer more consumers a broader choice of products and access to higher quality and more affordable health plan options.”

Sebelius is no stranger to the supercharged regulatory debates around healthcare mergers: as Kansas insurance commissioner in 2002, the Democrat blocked Anthem’s proposed acquisition of Kansas Blue Cross Blue Shield in what at the time was seen as a precedent-setting case . Back then, she said the transaction “would cost Kansas businesses, small employers and families millions of dollars.” Campaigning on the issue in her first successful bid for governor, she called Anthem “an aggressive, for-profit holding company whose primary objective is to beat its national competitors” -- which, she said, “may be fine for Anthem, but it's simply wrong for the health care and economic security of the people of Kansas.” (Anthem challenged her move in a lawsuit and won an initial victory, only to see it overturned by the state’s Supreme Court, which backed Sebelius).

Fourteen years later, Anthem has only grown bigger: It went on to merge with Wellpoint, and now stands to become the single largest health insurer in American history-- with 53 million customers-- if its acquisition of Cigna is approved. That proposed transaction was supported by the company’s shareholders, just as it was by Cigna’s shareholders-- and just as Aetna and Humana shareholders supported their separate merger.

Sebelius, however, said that shareholders and regulators face different questions when they consider approving mergers.

“Overwhelmingly the shareholders have signed off on this with all four companies, and so they clearly are confident that these mergers will produce more profitable insurance companies,” she said. “What the regulators want to know-- and it sort of gets flipped-- is what happens to consumers? Is this bad or good for consumers? And they are not necessarily the same answers.”

Following an IBT investigative report last week, consumer and ethics watchdog groups have criticized Connecticut Democratic Gov. Dan Malloy for appointing a former longtime Cigna lobbyist to the regulatory position now leading 26 states’ review of the Anthem-Cigna deal. Sebelius said that in general, questions about potential conflicts are “appropriate.”

“There’s always a concern about whether there is conflict or whether there are interests involved,” she said. “The connection with the specific company involved is maybe a little unusual, but it is not at all unusual to have a state regulator who actually has been deeply involved in the industry and it does bring a level of expertise. I think it is appropriate to ask, and I’m sure this question will be asked all along, are there any conflicts? Are consumers going to be adequately represented?”

She added that regardless of the controversy over the Malloy administration’s appointment, others in Connecticut such as U.S. Sen. Richard Blumenthal-- a former state Attorney General-- have in the past made sure that mergers get the scrutiny they need.

“I don’t think there are any shortage of people who will be engaged and involved in the Connecticut situation,” she said.

It sounds very similar to an argument over healthcare raging in Vladimir Putin's Russia, where his prime minister, Dmitry Medvedev, was caught on camera being confronted by angry pensioners demanding higher pensions to cover the increased costs of medicine and food. "There's no money, but take care," he told them cavalierly. In a similar exchange with the public, Putin told angry questioners about rising costs of medicine-- gargantuanly rising, like on a Shkreli level-- that he tries to steer clear of medicines "by leading a healthy lifestyle." If eating fresh fruits and vegetables and fish are part of that, it's also out of reach for increasing numbers of Russians as they watch the prices rising for food stables out of reach.

Medicine sales have fallen for the first time in Russia since 2008: Analysts recorded a 10 percent drop in drug sales in the first quarter of this year. During a severe economic crisis, a growing number of Russians can no longer afford to buy medicine.

The figure is the latest indicator of falling living standards in Russia, and has alarmed some experts, who say that medicine is the last commodity for people to cut back on. Writing in Slon magazine, Yevgeny Gontmackher said more and more Russians are turning to home remedies to cure illnesses.

Russia's deteriorating health care system will also have long-term effects. Staff cuts in hospitals and growing pressure on doctors mean an increasing number of Russians, especially in remote regions, are losing access to free medicine.

...[Marina Krasilnikova, an economist at the Moscow-based Levada Center] says medicine sales show that life is about to become much harder for families with chronically ill family members and pensioners.

"The prices just keep soaring," says Irina Kuninskaya, a woman buying prescription drugs for her 78-year-old mother in a Moscow pharmacy. "With my mother's miserable pension and my income falling, we don't know how to feed the family anymore," she says.

The drugs Kuninskaya bought are foreign-made. She expressed hope that Russia would soon be able to produce affordable medicine of the same quality.

The Russian government has tried to boost self-sufficiency in drug production by limiting imports of foreign substances for pharmaceutical companies. Moscow introduced new laws last year forcing Russian companies to import less from European companies in a bid to increase the amount of Russian-made drugs on the market from 30 percent to 50 percent by 2020.

While there may be more domestically produced drugs in Russian pharmacies, many prices are, in fact, rising faster than those of imported medicine. According to a study by Moscow's Higher School of Economics, the price of Russian-made essential medicines rose by 28.9 percent in 2015, compared to just 4.9 percent for imported drugs. In that same year, prices for life-saving medicine, whose prices are regulated by the government, rose by as much as 32 percent.

The Kremlin has said it will crack down on pharmaceutical businesses not selling products at the regulated price. Starting this week, pharmacies not adhering to these rules could be shut down for up to 90 days.

But Russian pharmaceutical companies say they cannot compete in a foreign-dominated market. The crash of the ruble meant foreign substances used in drug production became more expensive, further straining Russian companies. During the call-in with Putin, the owner of a pharmaceutical company from Samara asked the Russian president to scrap government price restrictions. "We are forced to sell goods at the same price as six years ago," he said.

Pensioners are perhaps the group most affected by increasingly expensive medicine in Russia. This year, the government increased pensions by only 4 percent, set against double-digit inflation in food and medicine.

What would Putin-admirer Donald Trump say? Probably something derogatory about Pocahontas.