Tag Archives: drug prices

A Doctor’s Prescription

As the primary battles heat up, “Medicare for All” (or in Mayor Pete’s more “do-able” formulation “Medicare for All Who Want It”) has become perhaps the hot-button issue.

The Trump Administration continues to wage war on the Affordable Care Act, a/k/a Obamacare–part of Trump’s determination to erase anything and everything Obama accomplished– and thanks to Mitch McConnell’s success in placing partisans on the federal bench, that attack may succeed.

Anyone who follows the news, or has a Facebook feed, knows what we “consumers” think, and polling confirms that large majorities of Americans would welcome some form of national, universal healthcare. But what about doctors? What do medical professionals who have to work within today’s uneven patchwork of a system have to say?

I asked my cousin, the cardiologist whose insights I periodically share.

I encourage you to click through and read his post in its entirety, but I want to share several observations that I found particularly telling. The first is his reminder that we don’t go “shopping” for healthcare the same way we shop for a new pair of shoes.

Although comparison shopping makes sense when we buy a product like an automobile, such market forces do not apply to health care. Negotiation of prices of various treatments is seldom available, especially not for the complex needs of the desperately ill who consume a large share of resources. Multiple private insurance plans obscure this issue even further.

He then cites a recent study that found a significant part of the variation in medical spending–and more than half of all Medicare spending– to be determined by capacity rather than by medical need.

And speaking of cost…

In contrast to the ACA’s requiring private insurers to spend at least 80-85 percent of their revenue on delivery of health care, more than 98 percent of Medicare’s expenditures are so devoted. Estimates vary, but one-quarter to one-third of our current costs are driven by insurance company overhead, profits, and the administrative costs. Roughly half of these costs would be recovered under single-payer and could instead be devoted to the delivery of meaningful health care.

And then there are drug prices.

Drug prices must be controlled:  Acceptable drug lists vary widely among health plans. Negotiated prices depend strongly upon the buyers’ purchasing volume. Only a single-payer system enables the kind of unified bulk purchasing of drugs and medical devices that would give the buyer adequate power. A model for this structure exists today here in the Department of Veterans Affairs (VA). Due to governmental authority to negotiate drug prices for the VA, it pays roughly half the retail price of drugs.

I italicized that last sentence, because it astonished me. No wonder other countries allow government to negotiate drug prices–and we can all guess why Congress expressly forbids our government to do the same.

But what about doctors’ pay? Shouldn’t doctors’ incomes compensate them for those years of medical training and residencies? Wouldn’t we lose medical personnel under a national system?

A recent analysis found that a single-payer model does not lead to a loss in physician income, allowing for care-givers to receive adequate reimbursement of expenses plus fair profits, while ensuring value for taxpayers. Streamlined billing under single payer would also save physicians vast overhead costs, enhanced by reducing the need for the many employees to fulfill the varied requirements and forms of the private insurance companies. Moreover, physicians might best be compensated with regular salary-type payments rather than the current “fee for service” model, which encourages excess medical tests and procedures that drive up costs without providing better outcomes.

And finally, what about private insurance? Opponents of a single-payer system warn that people who love their current coverage (these are people I’ve yet to encounter, but I’ll assume for the sake of argument that someone, somewhere, actually likes Anthem, et al) would lose it. My cousin seems to be recommending Mayor Pete’s “Medicare for All Who Want It” approach. He also makes a point that Kamala Harris made in a recent interview:

The population of the U.S. would likely require additional tiers of care provided by private insurers, which might add extra services to basic care such as private room selections, lower waiting periods for non-urgent problems, elimination of co-pays, long-term care, dental care, etc.

The bottom line: the doctor has diagnosed America’s current approach to healthcare as deathly ill and probably terminal. You can read his prescription in its entirety at the link.

The Public Good

Americans need to reclaim the concept of the public good, and nowhere is that more important than in health policy.

Law Professor Fran Quigley has a new book coming out that examines the interface–or more accurately, the lack of an interface–between Big Pharma, Congress and the common good. Quartz recently published a review of the book, and began by referring to the infamous “Pharma Bro,” Martin Shkreli, who purchased a life-saving drug that had been on the market for some time, and jacked up the price astronomically–because he could.

Shkreli is not an outlier, according to Indiana University law professor Fran Quigley’s new book Prescription for the People. The pharmaceutical industry jacks up prices on life-saving drugs to extort windfall profits from desperate patients as a matter of course. That’s an immoral way to treat medicine, Quigley argues. The solution? Stop treating medicine as private property—and start treating it as a public good, like education or infrastructure.

It’s one thing to allow private companies and markets to set prices for items like big-screen TVs or cars, Quigley explains via email. In those cases, “purchasers can compare prices and walk away from the transaction if they wish.” But a patient with cancer or a child diagnosed with Type II diabetes can’t just walk away. “That kind of choice is not present when the good in question is life-or-death and there are no options for comparison shopping,” he writes.

 One of the great virtues of Quigley’s book is its explanation of the major role government plays in drug research. Big Pharma has long justified high prices by citing the costs of R & D; as Quigley points out, much of that research is funded with our tax dollars–but drug companies, not taxpayers, enjoy the return on that investment.

Furthermore, drug companies don’t actually funnel the bulk of their profits into research and development. Case in point: Reuters has reported that Pfizer made $45.7 billion in revenue in 2014, of which it spent $14.1 billion on sales and marketing and $8.4 billion on research.

The book details the various ways in which drug companies’ concern for the bottom line takes precedence over concern for the public’s health, and it goes into considerable detail about the perverse public policies that have facilitated those companies’ profitability.

The genesis of those favorable policies? Follow the money.

How did we get to this point? “In the last 40 years, the pharmaceutical industry has deployed billions of dollars of lobbying and political campaign contributions” to change laws to their benefit, Quigley says. One of their most remarkable successes was the 1980 Bayh-Dole Act, which allowed corporations to patent publicly-funded research. This means that pharmaceutical corporations essentially receive monopolies to sell government-created products, “truly one of the most bullet-proof business models in modern history,” Quigley says.

Quigley also takes aim at current patent practices.

The US should even consider ending medicine patents altogether, Quigley argues. “The patent system fails miserably in making medicines available to those who need them,” he says. Studies show that 70% of newly marketed drugs make no therapeutic advances on existing medicines; they are “me-too” drugs that try to carve out a portion of already existing markets for things like cholesterol medication, without bringing any improvements to the table. Furthermore, patents prevent competitors from building on previous research. Expanding grants for patent-free, open-source research would focus medical research on innovation, and make research findings available to everyone immediately, Quigley argues.

Quigley is not the only observer who faults the current patent system; economist Dean Baker goes considerably farther:

Are corporate patent and copyright monopolies a form of government-licensed private taxation? Dean Baker of CEPR thinks so: “Government-granted patent and copyright monopolies are actually much more important in determining future flows of income than debt. In the case of prescription drugs alone, patent and related protections raise the price of drugs by close to $370 billion a year over the free market price, a bit less than 2.0 percent of GDP. This is considerably larger than the current interest burden of the debt, which is approximately 1.6 percent of GDP, net of money refunded from the Federal Reserve Board to the Treasury. These monopolies are effectively like privately collected taxes.”

The book is Prescription for the People.

I know Fran Quigley, I know both his passion and his meticulous attention to fact and evidence. He’s a clear writer and a clear thinker. You should buy the book.

Socializing Risk, Privatizing Profits: Big Pharma Edition

My friend Fran Quigley has an important article in Truthout about the skyrocketing prices of lifesaving drugs. The current outrage over a steep hike in Epipen prices makes it particularly timely.

As Fran notes, We the Taxpayers provide research dollars to support drug development (socializing the risk that any particular line of research will hit a dead-end). Big Pharma spends more on marketing than on R and D, charges what the market will bear and then some for the drugs it does develop–and pockets the profits.

It is hard to overstate the level of dysfunction in the US medicines system. The headline-producing greed of “pharma bro” Martin Shkreli was just the most dramatic example of a pharmaceutical industry whose patent monopolies grant it immunity from market forces while its political clout shields it from government regulation. Taking full advantage of taxpayer-funded research, drug corporations make record profits, even by Fortune 500 standards, and pay their CEOs as much as $180 million a year. Those corporations spend far more on incessant marketing to consumers and physicians than they do on research — part of the reason they have largely failed to develop new medicines that address the most deadly illnesses and diseases.

The United States is alone among western democracies in not negotiating drug prices. Medicare and Medicaid represent huge portions of pharmaceutical company customers, but Congress has consistently defeated measures that would allow government to use its leverage to bargain on prices. As a result, as Fran points out, “One in every five US cancer patients can’t afford to fill their prescriptions, and many seniors on Medicare are forced to cut their pills in half to stretch their supply.”

Congressional reluctance to push back against inflated prices and unwarranted price hikes can be attributed to politicians’ disinclination to kill the goose that lays the golden egg: each year, Big Pharma ranks among the biggest spenders on both lobbying and campaign contributions.

A ballot initiative in California–the Drug Price Relief Act– is taking aim at this status quo.

The initiative, recently certified by the California Secretary of State as Proposition 61, calls for state agencies to be blocked from paying more for a prescription drug than the price paid by the US Department of Veterans Affairs. Unlike the Medicare program, the VA is free to negotiate the price it pays for drugs and as a result, pays as much as 42 percent less than Medicare and usually significantly lower than state Medicaid programs. The primary force behind the ballot measure, the AIDS Healthcare Foundation, says the law could save Californians hundreds of millions of dollars a year in lower government costs and lower individual co-payments. The California Legislative Analyst Office says it cannot provide an accurate estimate of the savings, concluding that it is impossible to predict how pharmaceutical companies would react to this first-ever restriction on state drug spending…A July 2016 poll conducted by the initiative campaign, Californians for Lower Drug Prices, showed over two-thirds of voters supporting the ballot measure.

Predictably, the measure is being opposed by the pharmaceutical industry, which is pouring big bucks into a campaign against it. It will be very interesting to see what happens–both in other states and nationally–if the ballot measure succeeds.

There’s an old saying that pigs get fed, but hogs get slaughtered. California voters will decide which category best fits Big Pharma.

Stay tuned….