WEBVTT - Something Far More Insidious. Craig Gottwals talks to Armstrong & Getty 0:00:00.200 --> 0:00:02.400 Right now, we're joined by good friend of the Armstrong 0:00:02.440 --> 0:00:05.800 and Getty show, Craig got Walls, Craig the healthcare guru, 0:00:06.200 --> 0:00:11.640 attorney at law, benefits expert about the sixty minutes slash 0:00:11.640 --> 0:00:15.240 Washington Post story slash virtually everybody reporting on the generic 0:00:15.480 --> 0:00:20.279 drug cartel deal, the overpricing of generic drugs as the 0:00:20.280 --> 0:00:23.480 big drug manufacturers were working with each other to screw 0:00:23.600 --> 0:00:27.720 you and me. Craig joins us, Hello, Craig, how are you, sir? Um? Well, 0:00:27.760 --> 0:00:29.880 how are you? Gentlemen? Terrific? Is this one of those 0:00:29.880 --> 0:00:32.040 deals where you were watching sixty minutes and screaming at 0:00:32.040 --> 0:00:35.440 your TV? Or did they mostly get it right? Now? 0:00:35.520 --> 0:00:38.240 You know, I both the Washington Post in sixty minutes 0:00:38.479 --> 0:00:41.800 generally got this one right. But they don't. They don't 0:00:41.880 --> 0:00:44.760 understand exactly why. And you get then when I was 0:00:44.840 --> 0:00:47.840 when I was listening to your interview yesterday on the radio, 0:00:47.920 --> 0:00:54.840 and you listen to no because you actually I think 0:00:54.960 --> 0:00:56.880 one of you asked the question. One of you said, 0:00:57.520 --> 0:01:00.320 why two thousand and twelves and lo what happened? And 0:01:00.160 --> 0:01:02.960 and he you know, his his answer was legitimate, and 0:01:02.960 --> 0:01:06.080 that well, Medicare and Medicaid are the largest purchases of healthcare, 0:01:06.080 --> 0:01:08.360 and they moved incredibly slow, and they're not catching fraud, 0:01:08.520 --> 0:01:12.240 which was accurate. But there was something far more insidious 0:01:12.280 --> 0:01:15.240 going on that I didn't expect your reporter to know. 0:01:15.280 --> 0:01:17.240 But okay, so this, this is why, all of a 0:01:17.280 --> 0:01:20.600 sudden two thousand twelve, these companies started rigging the market 0:01:21.080 --> 0:01:23.480 to raise the prices on generic drugs just because they 0:01:23.480 --> 0:01:26.399 wanted to make more money. Why did it happen then, Well, 0:01:26.720 --> 0:01:29.080 it happened in two thousand twelve, and more importantly, the 0:01:29.160 --> 0:01:31.800 reason it started to not be caught in two thousand 0:01:31.800 --> 0:01:35.640 twelve was if you recall, um, we had a small, 0:01:35.800 --> 0:01:41.800 little forty page regulation, federal law that mainly took effect 0:01:41.800 --> 0:01:45.800 in two thousand twelve. We affectionately called that Obamacare. Hence 0:01:45.840 --> 0:01:47.720 the artists that used to be known as Craig the 0:01:47.720 --> 0:01:53.760 Obamacare lawyer. Um. Deep within, that's right, deep within, darkest, 0:01:53.920 --> 0:01:58.520 dankest Obamacare is a price control mechanism. It's referred to 0:01:58.560 --> 0:02:01.920 as the Medical Lost Race You mandate or MLR mandate. 0:02:02.000 --> 0:02:05.800 And what that says, in effect is if an insurance 0:02:05.800 --> 0:02:08.400 carrier takes a hundred dollars from you, they have to 0:02:08.480 --> 0:02:11.440 spend eighty five of those dollars on medical claims, and 0:02:11.480 --> 0:02:14.800 they only get to keep fifteen percent of those dollars 0:02:14.840 --> 0:02:18.280 to pay their expenses and their profit margin. So it's 0:02:18.280 --> 0:02:22.200 a price control mechanism. Okay. And in the past, prior 0:02:22.240 --> 0:02:26.640 to Obamacare, insurance carriers used to care about keeping costs 0:02:26.720 --> 0:02:30.000 down because the lower they kept cost, the more profit 0:02:30.040 --> 0:02:32.160 they can they could keep, the more they could compete 0:02:32.200 --> 0:02:35.760 on price with their competitors. However, once you put this 0:02:36.000 --> 0:02:39.920 MLR mandate in their handcuffed, it's basically so simple as 0:02:40.000 --> 0:02:43.120 to say, whatever you think this customer's claims are going 0:02:43.160 --> 0:02:46.080 to be next year, you price their premium as fifteen 0:02:46.160 --> 0:02:48.239 percent more than claims, and all you can keep is 0:02:48.280 --> 0:02:50.680 fifteen percent. And oh, by the way, if you screw 0:02:50.760 --> 0:02:53.160 up and you actually end up keeping seventeen percent, you 0:02:53.160 --> 0:02:56.400 have to rebate two percent back to the policy holders. 0:02:56.440 --> 0:02:59.600 So it's nothing but a price control mechanism. Now, if 0:02:59.639 --> 0:03:03.400 you all your child you're only allowed thirty percent of 0:03:03.400 --> 0:03:05.280 a bowl of ice cream, are they going to reach 0:03:05.320 --> 0:03:09.680 for the large bowl or the small bowl? Right? Go on, 0:03:10.000 --> 0:03:12.640 They're they're gonna grab for the large bowl, right so 0:03:12.680 --> 0:03:18.120 there to spend more. It's an it's an incentive for 0:03:18.160 --> 0:03:21.560 the insurance carriers to look the other way when claims 0:03:21.560 --> 0:03:23.919 are higher, because they're only going to get to keep 0:03:24.880 --> 0:03:27.760 more than claims. So if claims is a bigger number, 0:03:28.040 --> 0:03:31.040 they're cool with it. So my starting go ahead. Well, 0:03:31.200 --> 0:03:35.360 I was gonna say, so, is this a um the 0:03:35.400 --> 0:03:37.400 people who wrote Obamacare? Did they know this was going 0:03:37.480 --> 0:03:39.280 to happen and they were paid off or cool of it? 0:03:39.360 --> 0:03:41.600 Or is this just one of those unintended consequences we 0:03:41.640 --> 0:03:44.080 thought we the world and we just we're just smart 0:03:44.160 --> 0:03:45.760 enough to figure out how we were going to get gamed. 0:03:46.360 --> 0:03:48.720 Oh that's it that it's absolutely the latter. This is 0:03:48.760 --> 0:03:51.560 a no good deed goes unpunished. Anybody who tries to 0:03:51.600 --> 0:03:54.680 create a utopian heaven on earth always screws up. Well, 0:03:54.720 --> 0:03:58.080 and this is go ahead, finish your your thought. Well 0:03:58.280 --> 0:04:01.120 this is it. I mean you, when this first came out, 0:04:01.120 --> 0:04:02.560 a lot of us even thought, well, that's not a 0:04:02.560 --> 0:04:04.240 bad idea to keep, you know, to make sure that 0:04:04.320 --> 0:04:08.240 insurance companies aren't those evil insurance companies aren't profiting more 0:04:08.280 --> 0:04:11.520 than they should. But what happened was the unintended consequence 0:04:11.640 --> 0:04:14.360 was oh okay, well then we don't really care about 0:04:14.680 --> 0:04:19.120 fraud or customer service or airs or high claims. So 0:04:19.800 --> 0:04:24.760 whereby prior to you would have had insurance carriers screaming 0:04:25.120 --> 0:04:27.520 at the top of their lungs if they saw drug 0:04:27.560 --> 0:04:31.040 manufacturers Quinn tupling the price of a of a generic 0:04:31.080 --> 0:04:36.040 drug overnight after insurance companies really didn't care. In fact, 0:04:36.080 --> 0:04:37.880 some of them might have saw it and thought, that's fine, 0:04:37.920 --> 0:04:41.000 we can just price that much higher. That is clearly 0:04:41.160 --> 0:04:44.880 a key, if not the key part of this whole story. Absolutely, 0:04:44.960 --> 0:04:47.800 but it wasn't comfortable for the left leaning reporters to 0:04:47.839 --> 0:04:52.000 dive into that, or perhaps they just didn't know. But yeah, obviously, 0:04:52.040 --> 0:04:55.120 so the insurance companies are thinking, great, we get of 0:04:55.160 --> 0:05:00.279 a much larger number. Go ahead and jam, jam people 0:05:00.320 --> 0:05:02.320 all you want. We get more money that way. Craig 0:05:02.320 --> 0:05:04.719 god Laws is Craig the healthcare guru. This is a 0:05:04.800 --> 0:05:08.080 perfect time to reintroduce to folks who aren't familiar with it, 0:05:08.160 --> 0:05:11.760 the term rent seeking, which is when you get government 0:05:11.800 --> 0:05:13.960 involved in all these things, and these bureaucrats think they're 0:05:13.960 --> 0:05:16.240 so clever and they try to build their utopia through 0:05:16.640 --> 0:05:20.400 thousands of pages long legislation. The experts go to work 0:05:20.480 --> 0:05:25.080 and between fifteen minutes and six months later, they figure 0:05:25.120 --> 0:05:27.800 out how to game the system. So instead of spending 0:05:27.800 --> 0:05:31.359 their time and energy to innovate, to better serve their customers, 0:05:31.400 --> 0:05:33.680 to do their jobs better, they spend their time and 0:05:33.800 --> 0:05:36.560 energy figuring out how to game the system and how 0:05:36.600 --> 0:05:39.480 to rip off the government. You see it in folks 0:05:39.480 --> 0:05:42.560 who came over from the Soviet Union. They are so 0:05:42.800 --> 0:05:45.000 good at gaming the system because that was the most 0:05:45.040 --> 0:05:49.400 important life skill. Yeah, that's well said, that's exactly right, 0:05:49.800 --> 0:05:52.799 and and it's on the drug. So this is carriers, right, Okay, 0:05:52.960 --> 0:05:54.960 so you know you say, well, who should have seen this? 0:05:55.040 --> 0:05:57.440 You guys asked the question, Well, carriers would have seen this. 0:05:57.560 --> 0:06:01.160 But see now you created a system where carrier don't care. Now, 0:06:01.400 --> 0:06:05.200 even more insidious, you probably had very very smart generic 0:06:05.240 --> 0:06:09.799 drug manufacturers pouring through Obamacare and realizing, wait a minute, 0:06:10.040 --> 0:06:12.320 carriers aren't going to be as sensitive when we increase 0:06:12.400 --> 0:06:14.760 prices because that just means their profits can go up 0:06:14.800 --> 0:06:17.719 to So I don't think it's any accident that this 0:06:17.800 --> 0:06:21.200 all started in Yeah, and obviously, like the first time, 0:06:21.240 --> 0:06:23.440 the race prices and nobody said anything, and then you 0:06:23.480 --> 0:06:25.320 all got to get them raise prices again even further, 0:06:25.360 --> 0:06:27.160 and nobody said anything. Pretty soon you caught on, Hey, 0:06:27.160 --> 0:06:30.039 we there's no market force stopping us from doing this, 0:06:30.279 --> 0:06:32.680 no market force, are legal force stopping us from doing 0:06:33.160 --> 0:06:34.680 So what do you expect to do with this? What 0:06:34.720 --> 0:06:36.680 do you expect to happen now? I mean, now that 0:06:36.720 --> 0:06:39.279 the jig is up, if this lawsuit ends up ending 0:06:39.360 --> 0:06:43.800 up the right way, will generic drug prices just collapse overnight? 0:06:43.880 --> 0:06:46.480 Because I mean they jammed them up for no reason 0:06:46.560 --> 0:06:49.839 other than pure profit. Yeah, they're gonna drop. They're gonna 0:06:49.920 --> 0:06:52.800 drop precipitously. Jack. I I heard your frustration with that 0:06:52.880 --> 0:06:56.760 question yesterday too. And the only the only mechanism in 0:06:56.800 --> 0:06:59.400 place that would that would cause them to maybe not 0:06:59.480 --> 0:07:02.560 drop as dramatically as we would like, is that um 0:07:02.960 --> 0:07:06.279 drug prices in general are the fastest growing component of 0:07:06.360 --> 0:07:09.400 healthcare prices. So they're going up at twenty five percent 0:07:09.440 --> 0:07:12.840 per year. Generic Yeah, generics aren't quite that bad. They're 0:07:12.880 --> 0:07:15.520 more like ten percent per year. So if we've got 0:07:15.520 --> 0:07:18.880 an inflation effect, a natural inflation effect of ten percent 0:07:18.920 --> 0:07:22.880 per year going back to when when now seven years later, 0:07:22.960 --> 0:07:25.000 we dropped those prices, we're not going to drop them 0:07:25.040 --> 0:07:28.280 as low as they were in maybe you know, halfway 0:07:28.280 --> 0:07:30.680 back kind of saying, so listen, we're running running out 0:07:30.680 --> 0:07:32.880 of time, but let's spend like sixty seconds on this, 0:07:32.920 --> 0:07:34.760 because I have a feeling you're familiar with this. I 0:07:34.840 --> 0:07:36.880 just became hip to it when I can't remember. A 0:07:36.880 --> 0:07:39.720 listener or somebody pointed it out to us that one 0:07:39.720 --> 0:07:44.120 of the reasons a drunk drug company gets exciting new 0:07:44.200 --> 0:07:47.400 approval lad for instance, you know, we'll call it uh 0:07:48.320 --> 0:07:52.240 uh you know Armstrong and Gettysia, which has been a 0:07:52.280 --> 0:07:56.840 baldness treatment. Turns out it helps with dry eyes. It 0:07:56.920 --> 0:07:59.720 increases the tearing of your eyes. So they've sought FDA 0:08:00.000 --> 0:08:03.760 oval as a dry eye remedy. That's to keep it 0:08:03.800 --> 0:08:07.160 from going generic. I didn't know that, right. If they 0:08:07.200 --> 0:08:10.560 if they can, if they can discover another valid purpose 0:08:10.600 --> 0:08:13.280 for that drug, they can they can gain another allotment 0:08:13.320 --> 0:08:15.120 of whatever it is six to eight years, where they 0:08:15.120 --> 0:08:16.960 can keep it as a brand name drug under that 0:08:17.000 --> 0:08:20.640 purpose as well. Now, and so I could see as 0:08:20.680 --> 0:08:22.640 a drug company and their way ahead of me on this. 0:08:22.720 --> 0:08:25.960 Obviously they do it for a living, but identifying a 0:08:26.240 --> 0:08:30.640 side effect that some people might want it gives you. 0:08:30.960 --> 0:08:33.680 It gives you hives. Some people like it gives you 0:08:33.760 --> 0:08:36.559 severe headaches. What if you've never had a headache and 0:08:36.640 --> 0:08:40.680 you wonder, what are they like my room hauler highs 0:08:40.760 --> 0:08:45.680 Jack Exactly So Craig the healthcare guru, Craig got Walls. 0:08:45.720 --> 0:08:49.040 If you need help with benefits for your largish company, 0:08:49.080 --> 0:08:53.280 is happy to help you out at what benefit underscore 0:08:53.320 --> 0:08:57.760 Revolution Revolution Revolution dot com. That's the one, I'm sure 0:08:57.760 --> 0:08:59.960 of it. Or just email us we'll put you in touch. Craig. 0:09:00.040 --> 0:09:03.040 It's always enlightening. Thanks budd Thank you, gentlemen. We'll talk 0:09:03.040 --> 0:09:05.560 to you later. While so drugs, even on their own, 0:09:05.600 --> 0:09:11.960 are going up per year. That's incredible. There are just 0:09:12.080 --> 0:09:16.200 so many examples of these well meaning government policies that 0:09:16.240 --> 0:09:18.600 are going to rein in these big, mean corporations. But 0:09:18.640 --> 0:09:23.560 they find their way around it moments later. But those laws, 0:09:23.559 --> 0:09:26.679 with all their unintended consequences and their costs and their 0:09:26.720 --> 0:09:30.760 restrictions on freedom, they stick around forever. You know, there 0:09:30.760 --> 0:09:35.640 there are solutions to America's health care problems. Gigantic one 0:09:35.720 --> 0:09:39.240 size fits all ish legislation, that's not it.