Wednesday, June 10, 2009

Libertarians and Walgreens: Ironies and outrages

Irony Number One: I couldn't boycott Happy Harrys/Walgreens if I wanted to do so, because I don't shop there and I never have. So it would be really difficult to send them less business than I have during the past twenty years.

Outrage Number One: The State of Delaware [with lots of bloggers lined up with torches and pitchforks] is out to punish a private business for doing something completely legal. Forget jason's asinine contention that Walgreens deserves to be punished because its a baaad corporation, since he--unlike Dana Garrett--never raised this issue in previous years when Al Levin was selling out to them for bazillions of dollars. Forget kavips' ridiculous comparison of American patriots boycotting goods forced on them by British government policy to people who want to boycott Walgreens in order to implement a government policy. Forget the idea of a public boycott of Walgreens which is completely legal, moral, and certainly the prerogative of any private citizen who wants to engage in it.

What we're seeing now is the idea that government should be able to punish private enterprises who have not broken any laws. It was never legally contingent that any pharmacy handling State employees' health care should also handle Medicaid prescriptions. Government certainly has the power to do so, but is it right?

Walgreens, as DHSS never gets tired of quoting, takes in $18 million per year filling Delaware Medicaid prescriptions, and makes several billions of dollars of profit nationwide. What DHSS would like you to think is that the $18 million figure represents net profit to the corporation. It doesn't. Walgreens owning filings document that the corporation made a 3.38% net profit last year. Even though I know that prescription profit margins are less (like gasoline sales, they are essentially almost a loss leader to get you into the store), that means that the most the net on $18 million in Medicaid scrips would be is $608,400. The DHSS proposal would reduce payments to Walgreens by $1 million. In other words, under the meme of shared sacrifice the government is mandating that Walgreens accept a loss of nearly $400,000 for the privilege of continuing to operate this business.

This was not something that even good old Al Levin was willing to accept back in 2002, as much as he'd like to confuse the issue today. [I would print out the exact quotes, but right at the moment DE Online is for some reason refusing to show my browser the entire article.] Levin argues that the rates proposed by the State on 2002 would have made Delaware's the lowest reimbursement rate in the nation, while the rates today are on part with what Walgreens accepts in PA and higher than Walgreens takes for Medicaid in RI. This is not the slam dunk condemnation that it appears to be to the faithful. What Levin is saying, first of all, is that he was morally justified in refusing to accept the lowest reimbursement rate in the nation, but that Walgreens is not justified at balking at the second lowest reimbursement rate in the nation. Moreover, comparing the scale fo the business done with PA (12.4 million people) and RI (1.1 million people) with that of Delaware (.85 million people) is tricky. There are, for example, economies of scale that would allow Walgreens to operate an eke out a profit at that rate in a PA population base 14.5 times larger than Delaware's.

Moreover, as the WNJ admitted this morning: the State is very likely to be asking for further reductions in the reimbursement rate in the future.

Irony Number Two: The State of Delware could save more money in the long term by doing what a number of other states do: adopt regulations requiring dispensing pharmacists to use the lowest cost multiple source medication every time that a doctor does not require the brand name. We don't do this. As a result, ironically, sometimes when the brand-name medication is actually the cheapest, our state regulations require the dispensing pharmacist to use a higher-cost generic. What kavips and others continually ignore is the fact that Delaware's government, through failure to adopt common-sense cost-saving legislation (and its idiotic attempt to strangle online pharmacies) actually created the more profitable Medicaid business in some brand name medications that it is blaming Walgreens for.

Outrage Number Two: The same State officials--both elected and appointed--who are getting up their faux anger over Walgreens' decision--which will not, ironically, cost the State a dime or do more than minimally inconvenience people who might have to OMG make a phone call to change their accounts from one pharmacy to another--are the same State officials who have advocated driving over ten thousand State workers onto public assistance as part. They're the same State officials who wimped out on eminent domain last year. They are the same State officials who spent the past several years refusing to look at reasonable cost-cutting measures in State government (while dramatically expanding the State workforce). They are the same State officials who have sat on the LEAD Commission Report for the past five years and done absolutely freaking nothing to harvest the tens of millions of dollars in cost savings that report suggested.

They are the same State officials who claim not to have the money for public education while (because New Castle County has such a large proportion of legislators and cronies with children in private or parochial schools) subsidizing a whole variety of services for private schools out of State funds.

So spare me the angst of Senator Margaret Rose Henry who calls Walgreens immoral while pulling down a Del Tech salary and making possible the obscene salary of Lonnie George--her boss.

And spare me the self-righteous anger of the bloggers who cover all of these stories and--like our intelligence community before 9/11--make little or no attempt to connect the dots.

Irony Number Three: Some of my blogging friends have criticized those of us who focused on the proposed regressive across-the-board cuts for State employees as not paying attention to the fact that the State employee cuts were only $92 million out of an $800 million package. These are, in many cases the same people now focusing their moral outrage on a savings of only $1 million in an $800 million package. In other words: we should all be outraged over an issue that affects .125% of the package, but we should just gulp down an issue that affects 11.5% of the package.

And we should ignore the fact that our legislators and appointed officials are pimping the Walgreens' issue to cover the fact that they have not done their own jobs. It is always easier to blame somebody else, ain't it?

Irony Number Four: Suddenly, to hold a different opinion and defend it is unpatriotic. This is, unfortunately, not just a State-wide phenomenon, but a new collectivist ideal sweeping the nation. If you don't agree with this particular solution, you're not only part of the problem, you're un-American.

It was offensive and dangerous when Bushco used it; it is equally offensive and even more dangerous when the folks who portrayed themselves as change use it as a mantra to steamroll all opposition on domestic issues while pursuing a foreign policy completely consistent with Bush-era practices of unilateral American miltiary interventionism and no accountability.

Irony Number Five: That pointing out that the State is behaving badly makes me a corporate shill, when I have been quite clear of my distrust of all large organizations--governmental or corporate.

But in the new atmosphere of forced shared sacrifice by people who are not sacrificing a damn thing themselves (our leaders), facts apparently do not matter.


Brian Shields said...

I said this over at Kavips' blog and received no response:

Why not legislate generics primarily, AND lower the reimbursement rate to match it?

Shirley Vandever said...

Thank you, Steve.

Anonymous said...

Before we move to total, when allowed by M.D.,generics let us research this by reviewing the 'purity' of the generics. We know that off shore pharma (China, Mexico, Isreal, etc.) have reputations' of using 'fillers', including poisons, and lack quality control on quantity and quality of ingredients.

If you think this critique is doubtful: swallow away; but think of the children who have no say in the matter.

Anonymous said...

I hope A. Levin did not get hurt when he jumped over the fence from demanding more for scripts to now taking the stand that it is adequate. Of course if he needs a pain killer he could get it on the State's nickel but maybe not at Happy Harrys.

tom said...

All manufacturers, generic or not, use fillers & binders in some of their pills. Doing so is a necessary part of the manufacturing process.

Do you intend to produce evidence that manufacturers in certain countries routinely add poisons to their drugs, or is this just anonymous slander?

Steve Newton said...

Generics are already Federally regulated; Walgreens now has to use those produced in the US or Canada unless they have FDA approval otherwise.

Moreover, the GAO has studied online pharmacies in the US and Canada and found them to be just as careful about quality as the man behind the counter in your neighborhood.

Mark H said...

Steve, as usual great writing. I'd just like to point out that:
1) I may have been a bit hasty :) when I said over at DL that if Markell had a set he'd cut off Walgreen's from State Employee's plans. Although I'm still probably going to boycott them (my Ward is on Medicaid and if I can't fill her prescriptions there, I'm not seeing the sense of jumping around to different pharmacies), it may be a temporary thing. But, in light of this, I'd suggest that for next year's reimbursement cycle, it's understood that if you accept Medco for State Employees, then you must accept Medicaid. That way it's clear going in what is expected.
2) You are exactly right concerning the State Legislators who are playing the wah wah card, when most of their decisions are what got us in this mess.

Again, as usual, your writing has at least made me think a bit which is never a bad thing :)

kavips said...

Just for the record even though pointed out as one of the bad guys in Steve's post, (which temporarily and ironically lumps Steve in the same camp as Thurman Adams, Charlie Copeland, Harris McDowell and Tony Deluca for a moment), I agree with much of what Steve says.

Our opinions are not that far apart for the most part. We differ in the strength of our Libertarian values. I perhaps am the more Libertarian because I think that boycotting any private business because it will not allow itself to become part of "the solution" is my right and I intend to exercise it.

Steve sides with the private business.

But we agree with the assessment that these costs are a tiny part of our budget problem...

( and Brian, sorry I did not get a chance to respond... Things move too quickly and I missed your comment. It is a good idea and will need help to pass before July 1st. You are chosen.. After all, you are the one who did it with the Insurance Commissioner) :)