Economic Fascism
by Prof. Thomas J. DiLorenzo
Truth Seeker, Volume 121 (1994), No. 3
... These exact sentiments were expressed by Robert Reich
(current U.S. Secretary of Labor) and Ira Magaziner (current federal government's health care reform "Czar") in their
book Minding America's Business. In order to counteract the "untidy marketplace," an
interventionist industrial policy "must strive to integrate the full range of targeted government
policies-procurement, research and development, trade, antitrust, tax credits, and
subsidies-into a coherent strategy...."
A successful industrial policy, write Reich and
Magaziner, would "require careful co-ordination between public and private
sectors. Government and the private sector must work in tandem. Economic success now depends to a high degree on coordination,
collaboration, and careful strategic choice," guided by government.
A third defining characteristic of economic fascism is that
private property and business ownership are permitted, but are in reality controlled by government through a
business-government "partnership." ...
Now that socialism has collapsed and survives nowhere but in
Cuba, China, Vietnam, and on American university campuses, the biggest threat to economic liberty and individual freedom
lies in the new economic fascism. While the former Communist countries are trying to
privatize as many industries as possible as fast as they can, they are still plagued by
governmental controls, leaving them with essentially fascist economies: private property and
private enterprise are permitted, but are heavily controlled and regulated by
government.
(Read
the full article)
Dr. DiLorenzo is Professor of Economics at Loyola College,
Baltimore, Maryland, and guest editor for The Freeman.
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The Boston Herald
Thursday, August 1, 2002
Candidates seize political opportunity
Analysis/by Steve Marantz
The politics of prescription drugs took hold of the
gubernatorial campaign yesterday as several drug chains threatened to stop serving many of the state's neediest
patients and candidates scrambled to exploit the issue.
Democrat Robert Reich made an aggressive effort to close
ground with front-runner Shannon P. O'Brien - appointing himself as a mediator between the drug companies, the
Swift administration and lawmakers.
With acting Gov. Jane Swift calling on the drug chains to
show restraint, Reich telephoned executives at Walgreens Co., Brooks Pharmacy and CVS and proposed an "interim"
solution that would continue service for Medicaid recipients while protecting
a profit for the chains.
Reich said he asked the executives to lower their profit to
5 percent from 10 percent until lawmakers could hold a hearing - and they agreed. He said his proposal mirrors the
Medicaid reimbursement rate in Rhode Island.
"Let's not worry about who to blame, whether it's the
Legislature, the governor or the drug companies - let's just solve it," Reich told a group of elderly residents at a Lower
Mills apartment building.
A Walgreens spokesman confirmed that the company is
considering Reich's proposal.
"If that is put forward it would cause us to re-evaluate our
stance," said Michael Polzin. "We indicated (to Reich) that as a temporary solution while this gets resolved we would
re-evaluate."
A spokesman for Brooks declined to comment. CVS could not be
reached. But a Swift administration spokesman said legislative action
would be required to change the reimbursement rate - a detail Reich overlooked.
"We can't arbitrarily set the rates," said James
Borghesani.
Moreover, Reich's plan would cost money - $2.5 million per
month - not in the budget passed last week, Borghesani said.
Meanwhile, other Democratic candidates touted their drug
credentials. Senate President Thomas F. Birmingham was pushing a measure last night that would temporarily freeze the
reimbursement rate at its current level.
Birmingham operatives deflected blame to the House for the
cut in drug reimbursements and pointed out that Birmingham has been a longtime backer of bulk purchasing and the
Advantage Prescription program, which lowers costs to seniors.
Warren Tolman's campaign blamed the Medicaid drug crisis on
a "failure of leadership" and called for a single-payer system that would eliminate Medicaid and allow the state to
negotiate drug prices.
O'Brien called for several cost-reduction measures,
including preferred pricing, bulk purchasing and increased efforts to access federal dollars and programs.
O'Brien spokesman Adrian Durbin said she would have vetoed
the provision reducing reimbursements and brought the drug chains to the table "in a way that ensures pharmacies'
viability while assuring our neediest citizens of receiving the medicine they require."
GOP candidate Mitt Romney will unveil his health care
proposals next week, spokesman Eric Fehrnstrom said.
The congressional delegation, in a letter to Swift, urged
that the drug reimbursement not be cut because it would cost the state matching federal dollars. The delegation said it is
working to increase federal funding of Medicaid while seeking legislation to provide a comprehensive
drug benefit under Medicare.
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Associated Press
Thursday, August 1, 2002
BOSTON (AP) The impasse between the state and its three largest
pharmacy chains deepened Wednesday as acting Gov. Jane Swift threatened possible legal action and a
last-ditch legislative effort to freeze Medicaid cuts fell through.
In the final hours of the legislative session, the Senate
unanimously approved a two-month delay in reducing Medicaid reimbursements to pharmacies.
House Speaker Thomas Finneran, D-Boston, opposed the
initiative, however, and said his chamber would not vote on the bill before the midnight adjournment.
Earlier in the day, Swift called on CVS, Walgreens and
Brooks pharmacy to delay their planned withdrawal from the Medicaid program until after a public hearing on the 11 percent
reduction in reimbursement rates.
"This is a good time for a little corporate responsibility,"
Swift said Wednesday. She asked citizens "to join me in pleading with these multi-billion-dollar corporations who have
done business profitably in the commonwealth for many years in not abandoning our neediest
citizens."
Swift said her administration was exploring "legal options"
to stop the chains from withdrawing until a hearing could be held and had asked Attorney General Tom Reilly "to
join us in pursuing some good corporate responsibility."
A spokeswoman for Reilly said he was "reviewing all
options."
The three companies announced plans to withdraw from the
assistance program this week because of cuts in the reimbursement rate. Together, they operate more than half of
Massachusetts' pharmacies and fill about 60 percent of the prescriptions for the 900,000
Medicaid patients.
The reduction for Medicaid prescriptions took effect Monday,
when Swift signed the state budget without vetoing the contested pharmacy portion.
The Senate proposal would have delayed the cuts until Oct. 1
at a cost to the state of about $7.5 million. In the meantime, it would have required a public hearing to be conducted by
Sept. 1 with a report to be issued within 20 days.
"In the interest of protecting the poor, I don't think we
can afford to call the bluff of the chains," Senate Ways and Means Chairman Mark Montigny said. "It's serious enough that
we need to take this action to prevent the impending crisis."
Finneran said, however, that the legislature should not
undermine ongoing negotiations between the Swift administration and the pharmacies.
CVS and Walgreens had previously rejected the administration's request to delay
withdrawing from the program for 60 days.
Walgreens spokesman Michael Polzin said its 90 stores would
stop filling Medicaid prescriptions Aug. 31, to give patients time to find an alternative provider. A 60-day delay,
he said, is out of the question.
"Pharmacies can't do that and lose money on each prescription they fill," Polzin said.
CVS and Brooks have not set a timeline for withdrawal.
The three companies operate 555 of the state's 1,014 drug
stores.
Stop & Shop Supermarkets, which operate 80 of the additional
pharmacies, said Wednesday they would also withdraw from the program unless the state agreed to freeze the
reimbursement rates at its prior level during the 60-day hearing process.
As the news of the impasse rippled throughout the state, the
poor and chronically disabled residents on Medicaid expressed fear they would lose access to essential medications.
"People are living off these drugs to save their lives,"
said Kelly Potter, 26, of Boston, who obtains her insulin and high blood pressure pills at CVS. "Where am I going to get my
medicine from?"
While states across the country have tried to achieve
Medicaid savings by reducing the pharmacy reimbursement rate, this is the first time the cuts have prompted large chains to
withdraw from the program, according to the National Association of Chain Drug Stores.
The state budget, approved by the Legislature this month as
it confronted a $2.4 billion decline in tax revenue, saves $60 million next year by reducing the reimbursement rate for
Medicaid prescriptions by 11 percent.
Despite overtures from CVS, Swift refused to veto that
provision, or another that will raise $36 million next year by adding a user fee on non-Medicaid prescriptions.
If the pharmacies pull out, Mildred Gooding of Boston is
worried that she would no longer be able to find the insulin she has taken every day for five years.
"I know that if my sugars go way up, I could have a stroke
or a heart attack or something," said Gooding, 57. "We've got to have the medicine."
Associated Press Staff Writer Jack Hagel contributed to this
story.
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The Boston Globe
Thursday, August 1, 2002
Late change blocked on Medicaid
Rate reduction for pharmacies is left to stand
By Chris Reidy, Globe Staff and Chris Tangney Globe Correspondent
House Speaker Thomas M. Finneran last night blocked a
last-ditch effort by the state Senate to delay a cut in Medicaid reimbursements to pharmacies, saying the drugstores
have for too long enjoyed high profits at the expense of taxpayers.
"I don't think the taxpayers should provide a 10 percent
profit margin for every drug transaction that we make," Finneran told reporters late last night as the Legislature
adjourned its formal session for the year.
Senate leaders had pushed for a 60-day postponement in the
reduction of the reimbursement rate, after another chain, Walgreen Co., said it would no longer fill prescriptions under
the program for the poor.
"In the interest of protecting the poor, I don't think we
can afford to call the bluff of the chains," Senate Ways and Means Chairman Mark C. Montigny said.
But Finneran was unmoved, saying the Swift administration is
engaged in negotiations with the pharmacies and that he does not favor any delay in the implementation of the Medicaid
changes.
"The pharmacies will have their chance to make the case that
these changes are unsustainable," Finneran said.
The speaker's remarks dashed hopes that the Legislature
would find an immediate solution, despite the Senate's unanimous approval of a bill calling for the two-month delay.
The prescription reimbursement has caused a major collision
between the drugstore chains and state leaders. Acting Governor Jane Swift yesterday lectured pharmacy chains on
"corporate responsibility," and Democratic gubernatorial candidate Robert
Reich attempted to broker a compromise. Meanwhile, Walgreen Co. became the third chain to announce it
would no longer participate in the program, saying it would stop filling
Medicaid prescriptions Aug. 31 unless there was a "significant change" in the formula.
"We would lose money on every Medicaid prescription under
the new proposal," said Walgreen spokesman Michael Polzin. Swift had requested that the drugstores continue filling
prescriptions for Medicaid recipients for 60 days while the reimbursement issue is revisited in
as-yet unscheduled hearings.
As part of a budget measure that Swift approved Monday, the
change in reimbursement rates would save the state an estimated $60 million a year at a time when the state is facing a
decline in tax revenue of $2.5 billion.
Under the old rate, Massachusetts pharmacists were reimbursed on prescriptions for
Medicaid recipients at 10 percent above the so-called wholesale acquisition cost of a
drug. The new rate would reimburse pharmacists at 2 percent below that cost.
CVS Corp. and Brooks Pharmacy, which between them operate
about 465 pharmacies in Massachusetts, have said they will take similar action but have not announced withdrawal
dates. The Stop & Shop Supermarket Co., which operates pharmacies in 79 of
its 109 Massachusetts stores, wrote a letter to state officials asking that the new rate not be imposed
until after the hearings. "We continue to evaluate the financial implications
associated with the new reimbursement regulations," wrote John J.
Fegan, vice president of pharmacy for Quincy-based Stop & Shop. "They do not look favorable."
The state's Executive Office of Health and Human Services is
still working on a timetable for when the new rate would go into effect, a spokesman said.
Hoping to break the impasse, Reich said he contacted
executives at CVS, Walgreen, and Brooks, which together provide 60 percent of the prescriptions to Massachusetts Medicaid
recipients, according to the office of health and human services.
From his conversations with pharmacy executives, Reich said
he concluded that the big chains might be willing to continue to do business in Massachusetts, at least on a temporary
basis, if they were reimbursed at roughly 5 percent above the wholesale acquisition cost of a
drug.
After Reich's call, CVS spokesman Todd Andrews said, "Our
focus remains on working with the governor's office and the Legislature to reach a solution. Regretfully, our position is
unchanged." The Swift administration had no comment on Reich's proposal.
There are just over a thousand drugstores in the state.
According to the Massachusetts Pharmacists Association, about 220 of them are independently owned.
One independent, Sutherland Pharmacy in the Brighton
neighborhood of Boston, said it faces the possibility of going out of business if the new reimbursement rate becomes
permanent.
"If you're selling product below cost, you can't pay your
bills," said co-owner Jay Leary, who noted that Medicaid accounted for about 95 percent of his prescription drug
business.
Swift said she was exploring "legal options" to force
pharmacies to continue filling Medicaid prescriptions.
"This is a good time for a little corporate responsibility,"
Swift said before asking residents to "join me in pleading with these multibillion-dollar businesses who have done business
profitably in the Commonwealth for many years in not abandoning our neediest citizens."
Earlier in the day, CVS said its second-quarter earnings
declined by 11 percent. Still, the chain based in Woonsocket, R.I., had a profit of $176.4 million on sales of $5.99 billion
for the three-month period ending June 29.
During a conference call with Wall Street analysts, CVS
chairman and chief executive Tom Ryan gave assurances that the chain's withdrawal from the Massachusetts Medicaid business
would have little effect on the chain's bottom line.
"While we regret the pullout of the program, they really
left us with no choice," Ryan told analysts. "This business was not very profitable anyway. So we expect this to have a modest
impact on operating profit."
According to Leary, the independent pharmacist, it's a myth
that big chains pay a lot less when purchasing drugs.
Like some other pharmacists, Leary said that rising Medicaid
costs are the result of drug companies increasing their prices, and that the state should be looking for savings from these
companies and not just from pharmacies.
Montigny said the Legislature might have to grapple with the
issue later this year, during an informal session. That would be unusual because only noncontroversial issues are considered
in informal session. And Finneran's opposition makes such consideration all the more
unlikely.
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Associated Press
Thursday, August 1, 2002
BOSTON (AP) Money for full-day kindergartens, community health
centers and insurance premiums for state workers and retirees topped the list of veto overrides approved by
lawmakers in the waning minutes of the Legislature's formal session.
House Speaker Thomas M. Finneran recommended the overrides,
which he said totaled about $71 million of the $355 million in budget vetoes issued by acting Gov. Jane M. Swift
on Monday.
Citing the state's precarious fiscal situation, House
leaders had said they would show restraint when deciding what vetoes, if any, to override.
"When all is said and done we, in general, concur with the
governor's attempt to bring the budget in balance," Finneran said Wednesday.
Advocates had pressured lawmakers to override more of the
vetoes, including cuts to anti-smoking initiatives, breast cancer research, anti-suicide programs for gay and lesbian
youth and cultural support programs.
The three vetoes restored $28 million for the state's
full-day kindergarten program, $5 million for community health centers and $38 million to block an increase in how much state
workers must pay for health care premiums.
The overrides leave just under $300 million in the state's
rainy day fund for next year, Finneran said.
Lawmakers also overrode several smaller vetoes, including
funds for the New England Board of Higher Education, State Police patrols, and health insurance for retired teachers.
House leaders had been wrestling for days about whether to
override the vetoes.
Earlier in the day, Finneran had offered House members three
options. Under one proposal, they would have agreed to take up none of the vetoes. Under a second, they would do
limited vetoes.
A third proposal would have required the House, Senate and
Swift to agree to cut discretionary spending across the board by up to 2 percent, a move that would save about
$175 million.
Under the proposal, lawmakers would have had to come back in
September and restore $175 million in vetoes during an informal session.
The proposal met with skepticism and was eventually
abandoned.
"I don't think there are many members who would find that
palatable," said state Rep. James J. Marzilli, D-Arlington.
Swift defended her vetoes to the Legislature's $22.9 billion
state budget plan, saying they were needed to help keep the budget in balance and protect state savings.
The state's revenues for July fell by about $50 million,
according to House Ways and Means Chairman John Rogers, D-Norwood, who said the dip was additional proof that the state
was not out of its fiscal crisis.
Officials from the state Department of Revenue said new tax
collection numbers released Wednesday showed July revenues only fell about $4 million below expectations.
Under the Legislature's rules, all vetoes begin in the
House. Any vetoes had to be taken up before midnight Wednesday, the end of the Legislature's formal session.
In an unusual move, the House and Senate unanimously agreed
to continue past midnight to take up additional bills.
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State House News Service
Thursday, August 1, 2002
House plans after midnight
Speaker Finneran said by the official clock says our session
should end. The minority leader has agreed to let us continue for the following matters. But it requires unanimous consent of
members to continue. Rep. Marini has agreed to let us consider all land takings which require
roll calls, completion of the transportation bond, the DCAMM bond, and the following four
vetoed items: emergency assistance and family shelters, methadone clinic sitings, MCAS test
question notification deadlines, and reduction in the Rep. Joe Moakley Center on the
Bridgewater State campus. Those matters only are what the GOP has agreed to. I also
intend to honor Rep. Hodgkins with his final remarks in the House....
The House adjourned at 1:47 am in memory of Brian J.
Honan. It will next meet Monday at 11 am in an informal session.
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