Pfizer Inc. (PFE) Chief Executive Officer Ian Read said his company, the world’s biggest drugmaker, will fight attempts to cut Medicare payments for medicines after the industry helped underwrite the U.S. health-care overhaul.
Drug companies contributed $112 billion in discounts and refunds to last year’s health-care law, helping Democrats make up for new spending in the bill. U.S. drugmakers led by Pfizer and Merck & Co. are concerned they will be asked to give more in the debt-limit deal President Barack Obama signed Aug. 2 that requires further negotiated cuts in government expenditures.
“We made a contribution to the Affordable Care Act that was substantial and fundamental,” New York-based Pfizer’s Read said in a telephone interview. “We are only 10 percent of the health-care spend in the United States, and we are the most efficient part of that.
Pfizer is trying to avoid contributing to Round 2. (We discussed some of the policy proposals on the table here previously). Some fact checking:
Statement: “Drug companies contributed $112 billion in discounts and refunds”
Fact: The number is based on the CBO estimate, but Pfizer’s contribution for the first six months of this fiscal year has only been $462 million ($924 million on an annualized basis)
From Pfizer’s most recent 10-Q, p. 44:
U.S. Healthcare Legislation
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the U.S. Healthcare Legislation), was enacted in the U.S. As explained more fully in Pfizer’s 2010 Annual Report on Form 10-K, this legislation has both current and longer-term impacts on us.
We recorded the following amounts as a result of the U.S. Healthcare Legislation: approximately $158 million in the second quarter of 2011 and approximately $324 million in the first six months of 2011, recorded as a reduction to Revenues; and approximately $69 million in the second quarter of 2011 and approximately $138 million in the first six months of 2011, recorded in Selling, informational and administrative expenses, related to the annual fee payable to the federal government (which is not deductible for U.S. income tax purposes) based on our prior-calendar-year share relative to other companies of branded prescription drug sales to specified government programs (the total fee to be paid each year by the pharmaceutical industry will increase annually through 2018). We are recording the annual fee ratably throughout the year.
Our 2011 financial guidance and 2012 financial targets (see the “Our Financial Guidance for 2011” and “Our Financial Targets for 2012” sections of this MD&A for additional information) reflect the expected full-year impact of the U.S. Healthcare Legislation.
These estimates also don’t account for the dynamic effects: companies can raise prices to offset the percentage-based rebates and fees.
Statement: “We are only 10 percent of the health-care spend …”
Fact: 11.7% in 2012, with a rate of growth exceeding NHE for almost every year
According to the most recent CMS estimates, US retail sales of prescription drugs in 2012 will be $275.7 billion, which is 10.18% of NHE (at Exhibit 1). But this number excludes major categories of US drug sales, including all drugs used in hospitals, prisons and long term care facilities. The cost of drugs is included in these separate categories, about another $50 billion in 2010, according to IMS Health. If the total US prescription drug market in 2012 will be about $330 billion, then prescription drugs represent about 11.7% of National Health Expenditures. The trend data is found on Exhibit 2.
Statement: “… and we are the most efficient part of that.”
Fact: The basis for this statement is unknown.