Corporateering of the Year Award Goes to Medicare Profiteering Protections

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Washington D.C. The vote by the U.S. Senate to approve a Medicare prescription drug benefit that prevents government bulk purchasing of drugs, “is the most outrageous example of corporations’ interests being prioritized over society’s this year,” according to Jamie Court, author of Corporateering: How Corporate Power Steals Your Personal Freedom And What You Can Do About It (Tarcher/Putnam). “Corporateering,” a term coined by Court in his book which charts the prioritization of corporations’ commercial interests during the last twenty-five years, describes when large corporations prioritize their gain over the individual’s and society’s.

In addition to pharmaceutical companies, health insurers, HMOs and hospitals will receive a significant financial boost under the new program. See the analysis below for an overview of the legislation’s special interest hand-outs and campaign contributions from pharmaceutical companies, HMOs, health insurers and hospitals.

As a result of current bulk purchasing strategies, U.S. made prescription drugs are sold at one third of their price in Canada and are available at a huge discount to the U.S. Department of Veterans Affairs. However, a provision in the Medicare legislation prohibits the federal government from utilizing its potential bulk-purchasing clout to negotiate deep prescription drug discounts for Medicare recipients.

“Not allowing the government to use its bulk purchasing power to get the cheapest price for prescription drugs is a Congressional and Presidential blank check to the pharmaceutical industry to charge as much as they like, ” said Court. “This corporateering eclipses even Enron, Worldcom, and Tyco because it is the biggest public giveaway on Capitol Hill since the S&L bailout. Congress and the President have socialized costs and privatized gain for industries that are the most prolific campaign givers on the hill.”

The new Medicare prescription drug legislation, which will provide $400 billion over 10 years, will cover less than 1/4 of expected drug costs. Consumer advocates have argued that by allowing the federal government to negotiate bulk purchasing discounts under the new Medicare prescription drug benefit, as it currently does for veterans, seniors would pay less for their medications. Pharmaceutical companies, which have heavily lobbied for the bill, stand to gain a huge financial windfall under the proposed plan that prohibits such price negotiations.

“Any prescription plan that ties the hands of the federal government from using its market clout to negotiate cheaper drugs is absolutely unacceptable. This is bill is a thanksgiving feast for the nation’s most powerful special interests: the pharmaceutical industry, health insurers and hospitals,” said Jerry Flanagan of FTCR. “Seniors will likely pay more for prescriptions under the new plan, not less.”

The House of Representatives passed the legislation on Saturday 220-215. The measure will now be sent to President Bush for final action.

Analysis of special interest giveaways and campaign contributions:

Pharmaceutical Companies

The legislation removes the federal government’s ability to negotiate better prices for pharmaceuticals under the Medicare program. For decades the Department of Veterans Affairs (DVA) has used its significant bulk-purchasing clout to negotiate lower cost drugs for its 39 million members.

An analysis of the House of Representative vote by the Center for Responsive Politics (CRP) shows that pharmaceutical manufacturers contributed an average of $28,504 to the 204 Republicans who supported the bill, but just $8,112 to the 25 Republicans who opposed it.

The 16 Democrats who voted “yes” on the bill have raised an average of $16,296 from pharmaceutical manufacturers, while the 189 Democrats who voted “no” have raised an average of $11,791.

HMOs & Health Insurers

The Medicare overhaul bill takes the first steps toward privatizing the system by establishing a “competitive” pilot program between health insurers and traditional Medicare programs. The bill provides subsidies for health plans to give them an advantage over the more efficient Medicare system.

The legislation does contain any cost-controls necessary to ensure that health care dollars are spent on medical care; not HMO profits. Between 2001 and 2003 the nation’s six largest HMOs increased their earnings and profitability while dramatically decreasing spending on medical care.

The CRP analyses shows that health insurers gave House Democrats who supported the bill far more, on average ($22,376), than Democrats who opposed the measure ($9,692). House Republicans who supported the bill received an average of $19,286 from health insurers, while Republicans who voted against the industry have raised an average of $13,828.

HMOs gave Democrats who supported the bill an average of $11,654 and Republicans who voted for it an average of $11,576. Democrats who opposed the bill have raised an average of $6,840 from HMOs, as compared to the average $5,286 raised by Republicans who voted against it.


A total of $26.6 billion was awarded to hospitals:

* $25 Billion for rural hospitals and providers;
* $1 Billion for Emergency Rooms that treat large numbers of illegal immigrants;
* $600 Million in extra payments to hospitals for technology.

Senate President Bill Frist‘s family founded the hospital chain Columbia/HCA, which the government prosecuted for massive billing fraud. USA Today reported that U.S. Senate disclosure statements show he owned as much as $25 million in company stock. His wife has more than $1 million in stock. In total, the company, now called HCA, will pay more than $1.7 billion in civil and criminal penalties – the largest amount ever in a health-care fraud case.

According CRP, hospitals have contributed $3,102,958 to the House and Senate since 2002 — 38% to Democrats, 62% to Republicans.


The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit and non-partisan consumer advocacy group. For more information visit us on the web at or

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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