Healthcare spending among government and individuals alike, has been one of the hottest push-button issues of the last 20 years, and just as fiery now, if not more so. More than one-sixth of the U.S. economy is devoted to health care spending and that percentage continues to rise every year, outpacing inflation.
One of our favorite blogs, Zero Hedge, published a somewhat spurious analysis of government lobbying called, Who Spends The Most Dollars Lobbying Washington, DC? The author notes that healthcare companies lobby Washington as a payoff to protect their own profitability, and the dollars at stake are enormous.
"[B]etween Pharmaceutical and health product industry, hospital and nursing homes, health professionals and health services, HMOs, or more broadly Pharma/Healthcare/HMO, the total lobby dollars spent between 1998 and 2012 was a staggering $5.3 billion, or nearly three times greater than the second most generous industry: insurance, and well above Oil and Gas at $1.4 billion, and Securities and Investment at $1.0 billion."
They reference this chart from OpenSecrets.org:
I'm no fan of government lobbying groups or their collective efforts - that's for sure. However, that said, to be fair to the industry, lumping hospitals, drug companies, and HMOs among others into one lobbying group is purely ridiculous. They are separate groups seeking to accomplish complete separate agendas. It would be the equivalent of lumping together a group of oil & gas drillers, public utilities, alternative energy groups, gasoline wholesalers and electric transmission companies and calling it "Energy."
When divided into respective groups, Pharmaceutical/Health Products still leads the pack, but at a less egregious margin. Since 2000, pharmaceuticals remained one of the top lobbying efforts consistently year after year. Although the author takes some of the data to absurdly wild and out-of-context conclusions about ROI, the fact remains that lobbyists for the pharmaceutical industry spend lots of cash to protect their constituents. One could interpret it as payment to keep their seemingly "monopolistic" practices, or payment to prevent populist action that leads to unintended consequences.
Clearly spending on healthcare has metastasized as seen in this chart through 2004, and the dollars have only gotten worse. Good for the industry, bad of consumer…
…Or is it? Arguments can be made, such as this one in Forbes, that "health is wealth," and spending on healthcare is a sign of economic growth. Others use increased life expectancy as a valuable barometer.
Either way, a number of issues emerge regarding healthcare and the welfare of the state. Who receives and who pays for healthcare remains a prickly political issue despite landmark passage of Obamacare. Therefore, it should not be surprising that companies are spending dollars to have the ear of their favorite politician. I'm not sure it means buying political monopolies, but rather protecting interests in an ever-changing and often "easy-pickins" dynamic.
The cost of pharmaceuticals plays an important role in this debate. We have conducted an analysis on the historical profitability of the industry, and its effect on the aggregate ROE, and will re-publish on Seeking Alpha shortly. If companies are protected by their lobbying efforts, one would expect to see it in their financial results. The analysis of those numbers may not answer everyone's questions, but you may come away surprised by the results.