Obama's healthcare plans run into the sand

If the Obama administration thought that controlling both houses of Congress, backed by a popular mandate for change on the back of last year’s elections, would get them what they wanted, then the stiff resistance to modest healthcare reforms is a revealing story of where power in America really resides.

The powerful insurance industry makes huge profits from healthcare, along with the drug companies, and they are not about to see this power eroded any time soon. Together with the Republican Party, the industry is determined to sink Obama’s plans – or water them down so much that they make little difference. In fact, the right wing is planning to wreck the Obama presidency altogether, predicting that healthcare plans will be his Waterloo.

Democrats in Congress have also taken fright, refusing to pass legislation before the summer recess despite pleas from the White House. Some are even comparing Obama’s dilemma to that of the Clinton administration, which eventually caved in to vested interests and abandoned healthcare reform.

Most Americans under 65 get healthcare through insurance policies connected to their jobs. But 46 million who have poorly-paid jobs or work for smaller firms don’t have any cover at all while those with insurance often find it is inadequate and have to find money from their own pockets. About 22,000 Americans die each year because they lack health insurance.

Obama’s plan is to build on what exists by expanding eligibility for government insurance schemes for low-income workers, creating a new scheme for the insured and requiring employers to provide coverage or pay a tax to the government. The programme would not take effect until 2013 while millions would still remain outside the schemes, notably immigrants without papers. The overall estimated cost to the state of the Obama plan is a massive $1 trillion.

The idea of just allowing consumers to choose between a government plan (people would still have to pay) and private health insurance is sufficient to draw the fire of big business. The Chamber of Commerce has announced a major campaign of rallies and advertising to crush the White House plan for a competitive public option.

Advocates of radical change are increasingly dismayed. Bill Moyes, a senior writer for Public Broadcasting Service, says: “Meanwhile, supporters who want to scrap the present system for fundamental change are staring glumly though the fog of war at a battlefield in total disarray. They fear that in the White House's desire to get a bill – any bill – passed by Congress, it will have been so compromised, so bent to favour the big interests, that it will be less Waterloo than watered down, a steady diluting of the change they had hoped for and that America needs.”

The pharmaceuticals are celebrating lobbying successes, including no cost-cutting steps, no cheaper drugs to be allowed across the border from Canada, and protection against competition from generic drugs for 12 years after they go on the market. These concessions were achieved through right-wing Democrats on Senate committees.

Early in his presidency, Obama admitted that he hadn’t realised how little real power the White House exercised. He was then talking about the financial and economic crisis, when interests inside and outside Congress watered down his stimulus package. Obama has tried to mobilise public opinion in favour of healthcare changes but that may not be sufficient to turn the tide.

America’s state structures, and its major political parties, are inextricably connected to big business. And the Obama presidency is not going to challenge these anytime soon, even though the most reactionary forces in America are determined to wreck his administration within its first year in office. A veritable political crisis is brewing in Washington.

Paul Feldman
Communications editor

Health needs conflict with drug profits

So the Office of Fair Trading has revealed what everyone in the health service has known for 50 years: successive governments have sustained the compromise which trades the needs of the NHS and its patients against the profits of the pharmaceutical companies. The OFT's study, carried out since 2005, identified several drugs where it said prices were "significantly out of line with patient benefits". Treatments for blood pressure and cholesterol were among those identified. Some treatments which are prescribed in large volumes are up to 10 times more costly than other drugs offering similar benefits. The news broke on the day that it was revealed that 132 NHS trusts are heading to overspend by £1,318m, and are being forced to cut services and reduce staff. At the moment, the PPRS (pharmaceutical price regulation scheme) agreed every five years between the Department of Health and the drug companies effectively "caps" the amount of profit any one company can make. But within that company's profit margin - calculated according to their investment in the UK as well as the range of drugs they make - new drug prices can be set as high as the company wishes. This has led to prices as high as £30,000 or £40,000 a year per patient for a the latest drugs, sending the total NHS drugs bill soaring to £11 billion a year – twice the level of five years ago.

This conflict between health need and profit is being played out throughout the world. Thailand's minister for health Dr Mongkol na Songkhla, says price talks with major drug firms had become "easier" since Bangkok issued compulsory licences allowing generic drug production on two HIV/AIDS drugs and a medicine for heart disease. The licences allow Thailand's government to make or buy copycat versions of medicines needed for public health measures. Drug makers have reacted angrily. A lobby group for the industry representing 38 foreign drug makers in Thailand has said the action is completely unprecedented and it believes another 11 drugs would soon be targeted. Mongkol too has suggested other "essential medicines" to fight cancer, heart disease and other leading causes of death in Thailand were being examined. As he says, the majority of the population in Thailand cannot afford patented drugs. Mongkol has rejected industry arguments that high prices are necessary because drug companies need to invest heavily in research and develop new medicines. The corporations, he says, could compensate by cutting inflated marketing costs. The OFT report will not change the basic arrangements in Britain, whereby a handful of transnational corporations actually restrict the development and sale of drugs in order to ratchet up profit margins. The real question is, if 1.3 million people can work in the not-for-profit £96 billion budget NHS, with the majority of basic research done in publicly-funded universities, why can’t drugs be produced in the same way? We need Big Pharma like we need a hole in the head.

Gerry Gold, economics editor