SHORT TAKES #12: BIG BUSINESS RIP-OFFS: DRUGS AND PET CARE
Here are short takes on three important stories that have gotten little attention in the mainstream media. Each provides a quick summary of the story, a hint as to why it’s important, and a link to more information. The first item describes the invasion of private equity firms into the pet care business. The other two describe U.S. drug pricing by the big pharmaceutical corporations.
STORY #1: Some private equity, vulture capitalism firms (see this previous post for why this terminology is appropriate) have targeted the pet care sector because they know that pet owners are willing to spend lots of money on their pets, especially when pets have medical or health issues. Over the past decade, private equity firms have spent billions buying up veterinary practices and now own almost 30% of them. The private equity firms make big and quick profits by increasing prices, reducing quality of care, and making working conditions onerous for veterinarians. (This mimics what private equity firms have done in the health care system for humans. See previous posts here and here.) Since 2014, prices for veterinary services have risen by 60%. At least one of the private equity firms is also buying up pet insurance companies. [1]
Veterinarians at private equity-owned practices have reported being overworked and pressured to sell pet owners expensive tests and procedures that may, in some cases, not be needed or appropriate. Some of the private equity managers tie veterinarians’ pay to the amount of revenue they generate.
I urge you to contact President Biden and ask him to direct the Federal Trade Commission (FTC) to take strong action to stop private equity acquisitions in the pet care industry and to rein in private equity firms and their practices in general. You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414.
I also urge you to contact your U.S. Representative and Senators to ask them to support the Stop Wall Street Looting Act, which would rein in the private equity industry’s vulture capitalism. You can find contact information for your US Representative at http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.
STORY #2: The huge pharmaceutical corporation, Novo Nordisk, has been spending millions on lobbying and campaign contributions seeking to increase coverage of its weight-loss drugs, Ozempic and Wegovy, by Medicare and Medicaid, as well as to block regulation of their prices. Both drugs have the same active ingredient, semaglutide. In 2017, Ozempic was approved for adults with Type 2 diabetes (aka late onset or adult diabetes) to aid in appetite and weight control. In 2021, Wegovy was approved for weight loss. (Interestingly, neither of these drugs has been approved for use by people with Type 1 diabetes, the chronic life-long version of diabetes (aka juvenile or insulin-dependent diabetes.) Medicare and Medicaid only cover Ozempic for Type 2 diabetes patients and Wegovy only for patients with cardiovascular risks. Novo Nordisk is lobbying for expanded coverage that would include other patients.
Novo Nordisk has been spending about $4 million per year on lobbying since 2017. In 2023, it spent over $5 million on lobbying, hiring 77 lobbyists from 13 firms, 54 of whom had come through the revolving door, i.e., had previously been in government jobs. [2]
Since the 2013-2014 election cycle, Novo Nordisk-affiliated entities have averaged over $600,000 in campaign contributions in each of the five two-year election cycles. In the current 2023-2024 election cycle, its political action committee (PAC), executives, and employees had already made $500,000 in campaign contributions by June 30. This adds up to more than $3.5 million over 12 years.
Novo Nordisk has also engaged in aggressive marketing to increase the use of the Ozempic and Wegovy, spending $471 million on marketing them in 2023 alone. Their marketing campaign has been very successful and it’s estimated that 15.5 million Americans (6% of the population) have now used one of these injectable weight-loss drugs. This has led to shortages for the diabetics who need them the most.
Novo Nordisk charges about $1,000 per month for Ozempic injections in the U.S. In Canada, this costs about $150 and in Germany around $60, because prices there are regulated.
STORY #3: On the issue of drug prices in general, a 2021 RAND Corporation study found that drug prices in the U.S. average 2.56 times the prices in 32 comparable nations. For name brand drugs, it’s 3.44 times as much. In August 2022, President Biden signed the Inflation Reduction Act that allows Medicare to negotiate drug prices. (Price negotiation had been prohibited by the Medicare drug benefit law signed by President G. W. Bush.) Every Republican in Congress voted against the Inflation Reduction Act and Vice President Kamala Harris cast the tie-breaking vote that allowed the bill to pass in the Senate and go to Biden to be signed into law.
Medicare recently announced agreements with pharmaceutical companies for negotiated prices on ten drugs. The new prices are from 38% to 79% less than the current list prices. These prices would have saved the government about $6 billion last year if they had been in effect. About 9 million people use these ten drugs and will save about $1.5 billion a year in out-of-pocket costs after the new prices go into effect on January 1, 2026. [3]
[1] Perez, A., 8/7/24, “‘Life and death’ for pets: Elizabeth Warren targets firm buying veterinary offices,” Rolling Stone (https://www.rollingstone.com/politics/politics-news/elizabeth-warren-targets-private-equity-firm-veterinary-offices-1235075465/)
[2] Cook, M., 7/25/24, “Ozempic-producer Novo Nordisk on track for record spending on lobbying in 2024,” Open Secrets (https://www.opensecrets.org/news/2024/07/ozempic-producer-novo-nordisk-on-track-for-record-spending-on-lobbying-in-2024/)
[3] Richardson, H. C., 8/15/24, “Letters from an American blog,” https://heathercoxrichardson.substack.com/p/august-15-2024