Krugman in a recent column entitled "A Serious Drug Problem" demonstrates how the Drug Companies were the biggest beneficiaries of Bush's Medicare Bill:
The new Medicare law subsidizes private health plans, which have repeatedly failed to deliver promised cost savings. It creates an unnecessary layer of middlemen by requiring that the drug benefit be administered by private insurers. The biggest giveaway is to Big Pharma: the law specifically prohibits Medicare from using its purchasing power to negotiate lower drug prices.
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According to the Medicare trustees, the fiscal gap over the next 75 years created by the 2003 law - not the financing gap for Medicare as a whole, just the additional gap created by legislation passed 18 months ago - will be $8.7 trillion.
But it gets even worse, on the flip.
According to
Alex Berenson of the New York Times:
A new tax break for corporations is allowing the biggest American drug makers to return as much as $75 billion in profits from international havens to the United States while paying a fraction of the normal tax rate.
The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25 percent tax rate, compared with the standard 35 percent rate.
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Those figures show that the drug makers have told the Internal Revenue Service for years that their profits come mainly from international sales, even though the prices of medicines are far higher in the United States and almost 60 percent of their sales take place in America.
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Though the companies stand behind their accounting, financial analysts and tax lawyers say that the drug makers' claim defies reality and that their profits come mostly from sales in the United States. But the I.R.S. lacks the resources to challenge the companies effectively, the analysts and lawyers say. As a result, the six major companies - Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, Wyeth and Lilly - collectively pay a federal tax rate of less than 15 percent on their worldwide profits, with some companies paying much less.
Already, four of the six drug makers have collectively announced plans to return $56 billion in profits to the United States. Two others say they are still considering but could repatriate an additional $18 billion. Had the six companies faced standard federal taxes on those profits, they would have paid $26 billion to the United States. Instead, they will pay less than $4 billion. Chris Senyek, an accounting analyst at Bear Stearns, said drug companies would probably make up about half of all the money repatriated by publicly traded companies.
A $22 billion dollar gift to the Drug Industry from the Bush Administration. and Kudos to Berenson and the NYT for exposing this fraud on the American public.
How about some legislation requiring these fat cats to reduce their drug prices by $22 billion and, then, we will call it even.