No doubt some of you saw Monday’s story in the New York Times reporting that health insurance companies have begun forcing very sick patients to pay as much as 20 percent to 33 percent of the cost of some of priciest drugs on the market. As a result “patients may have to spend more for a drug than they pay for their mortgages, more in some cases, than their monthly income.”
But this isn’t just a tale about insurers letting patients down. As with so many health care stories, there is more than one villain in this piece, and plenty of blame to spread around.
First, let me re-cap the background to the Times’ report. Normally, insured patients are not required to shell out a percentage of what a drug costs. Instead, they just chip in a flat co-pay of $10, $20, or $30, depending on whether the insurer lists the drug on tier 1, tier 2 or tier 3. But now insurers have invented a new category—tier 4—for hundreds of super-expensive drugs used to treat diseases like multiple sclerosis, hepatitis C and some cancers. Since some of these drugs can cost $100,000 or more a year, a 33 percent co-pay can add up to $33,300.
Insurers began this practice with the infamous Medicare Advantage plans that we wrote about on HealthBeat the other day. Eight-six percent of Medicare Advantage (MA) plans now require whopping co-pays for tier 4 drugs, so read the fine print before signing up for an MA policy. And now, tier 4 is showing up in insurance policies that people under 65 buy on their own, or through their employers. This is the fastest growing segment in private insurance, Dan Mendelson of Avalere Health, a research organization in Washington, told the Times.
By shifting costs to patients who are dying or in pain, insurers are
violating the most basic principle of “insurance.” The point of
insurance is to protect individuals against financial catastrophe by
letting them buy into a pool that spreads the risk of getting sick:
those who are lucky enough to remain healthy help pay for those who
have the misfortune to be struck down by disease. It is bad enough to
have MS; the victim should not also face financial ruin—especially if
he thought he had insurance.
But insurers say they are sticking it to the very sick in
response to “employers who are looking for ways to keep costs down.” If
MS patients cover more of the cost of the drugs they need, premiums
won’t climb as high. Employers explain that they just can’t afford
paying for insurance that would cover $100,000 drugs—and apparently
they’re comfortable letting an employee with cancer worry about how he
or she is going to come up with $30,000.
Who Sets the Prices?
This raises another question: why does any drug cost $100,000 a
year? The answer: because this is what pharmaceutical companies choose
to charge. If you have cancer or MS, you’re not in a position to
haggle. In our health care system, drug makers are the price-makers;
desperate patients are the price-takers.
Back in June of 2006 I described
how big pharmaceutical companies were taking a new interest in cancer
drugs. Writing on Matthew Holt’s THCB, (www.theheatlhcareblog.com), I
quoted a New York Times article which pointed out that, a few
years earlier, companies like Pfizer, Glaxo and Wyeth had relatively
little interest in what they saw as a "niche market." While a great
many people die of cancer, the disease takes so many different forms
that each market is relatively small. Big Pharma would rather focus its
research on diseases with a broad base. Drug-makers also tend to prefer
drugs that customers can be counted on to take for many years. (There
is a saying in the pharmaceutical industry: "A pill that cures is good.
A pill that you take every day is better.")
Cancer patients tend to "die within months," the Times pointed out, curtailing profits. But then, someone in the pharmaceutical industry had an epiphany: it doesn’t matter how small the market is if there is no limit to what you can charge.
“Companies have discovered that some patients will tolerate prices
of tens of thousands of dollars a year,” the Times reported, “making
drugs for even rare cancers into big moneymakers. Gleevec, which is
used primarily for two obscure cancers—chronic myelogenous leukemia and
gastrointestinal stromal tumor—had sales last year of $2.2 billion."
About nine months later, the Wall Street Journal reported
that the biotech industry was leading the way in this area, producing
cancer drugs that fetched astronomical sums and generated huge profit
margins. Indeed, prices had skyrocketed to a point that even a
prominent Wall Street analyst was worried. According to the Journal,
Morgan Stanley’s Dr. Steven Harr was urging Genentech to pare what it
was asking for Avastin; at that point the drug was commanding roughly
$47,000 for an average 10 month course of treatment for colorectal
cancer. Harr feared that patients wouldn’t be able to afford such
prices, and that if drug-makers didn’t show some restraint, the
government might intervene, and begin regulating prices.
As the Journal explained, while market forces can keep prices
at reasonable levels in many sectors of the economy, this is not how
the market for the most important—and most expensive—health care
products works. In other areas, if consumers find prices too high,
they’ll postpone buying until competitors come forward with rival
products, offering lower prices. But when it comes to cancer, Harr
acknowledged, consumers don’t have that option: "market structure
effectively provides no mechanism for price control in oncology other
than companies’ goodwill and tolerance for adverse publicity."
Since then, the pharmaceutical industry has demonstrated that, when it comes to “adverse publicity” it can be quite stoic.
What is the $$$$ Drug Really Worth?
One final question: just how good are these tier 4 drugs? One
might assume that, given the price tag, they must be magic bullets. One
would assume wrong. There is no relationship between the potency of the
drug and the price. Price is based on what the manufacturer thinks the
market will bear. And while our health care system leaves drug-makers
free to charge whatever they wish, it does not insist that they prove
that their products are effective. (The FDA requires only that the
manufacturer test the new product against a placebo—demonstrating that
it is, in effect “better than nothing.” Pharmaceutical companies are
not asked to test their remedies against existing, less pricey drugs.)
Consider Procrit, a tier 4 drug which treats anemia by increasing patients’ red blood cell count. This week the Washington Drug Letter
reported that two Congressmen—House Energy and Commerce Committee
Chairman John Dingell and Subcommittee on Oversight and Investigations
Chairman Bart Stupak —are looking into Johnson and Johnson’s marketing
practices for the drug. An April 7th report from the Letter notes that
the lawmakers “may have used ‘misleading’ TV and print
direct-to-consumer (DTC) ads that include ‘unsubstantiated’
quality-of-life claims to market Procrit.” Why questionable? Check out
this ad:
The J&J ad recommends Procrit for cancer patients undergoing
chemotherapy, promising that it will improve their quality of life. But
the truth is that Procrit belongs to a class of drugs called
erythropoiesis-stimulating agents (ESAs) which were first approved for
the treatment of patients with chronic renal failure.
And just last month a FDA report
stated that: “Based on data provided to FDA, there is no evidence that
ESAs improve quality of life or cancer outcomes” and that “mounting
evidence of documented effects on survival, tumor progression, and
thrombotic events [i.e. blood clots]…require a re-assessment of the net
benefits” of Procrit and similar drugs. This “mounting evidence”
included studies showing that drugs like Procrit increase the risk
of death in cancer patients with anemia, that kidney dialysis patients
tend to over-medicate, and that the drugs actually increase tumor
growth and reduce survival.
For many, this is not a life-enhancing drug. The ads are selling
false hopes. This makes the fact that some patients are shelling out
$400 to $600 a week to pay 20 or 30 percent of a $2,000 weekly
injection all the more cruel. For as Harvard’s Dr. Jerry Avorn points
out in Powerful Medicines, these patients are paying, not only in
dollars. We also should consider “the emotional cost to the cancer
patient who learns that his fatigue and weakness are due to the
malignancy itself and will not disappear with a $2,000 dose of Procrit
as the television commercial implies.”
But it’s not just Procrit. Dingell and Stupak’s investigation
extends to Neupogen, another cancer drug that the Times mentions as one
of the tier 4 drugs. Neupogen increases white blood cell and immune
cell counts—at a cost of $2,420 to $4,240 a month. The bad news is
that Neupogen’s manufacturer, Amgen, is under Congressional scrutiny
for bundling Neupogen with other drugs—in other words, marketing
Neupogen part of a drug cocktail and offering discounts to those who
prescribe to multiple Amgen-made drugs. The result, says Congress, has
been “excessive and dangerous off-label use” of Amgen products,
according to the Washington Drug Letter.
Then there is Avonex, a multiple sclerosis (MS) drug that falls
under tier 4. Though there’s no major scandal surrounding Avonex,
there’s still a major problem—namely, that we don’t really know who
needs it. In March, the International Herald Tribune reported that MS is “perplexing and hard to treat.” As far as we know, reports the Tribune,
“up to 20 percent of patients who have a relatively mild form of MS may
not need drug treatment, but it is impossible to predict who they are.”
Meanwhile, prescriptions for Avonex run from $9,000 to $11,000 per year
for a patient. That’s a lot to pay for a treatment you might not need.
Very likely the drug should be available, free of charge, in clinical
trials so that patients who want it can try it out while researchers
find out more about the drug.
Meanwhile, Biogen, the manufacturer of Avonex, probably welcomes the
fact that insurers are hiking co-pays—because that makes it less likely
that insurers will simply drop the high-priced drug from the list of
products they cover. Back in October, the insider publication Silicon Investor reported
that “Avonex provides 60 percent of Biogen’s revenue,” but that “some
analysts predict sales of the 11-year-old medicine will start to shrink
soon.” Avonex’s U.S. sales have been falling recently, and according to
Silicon Investor, by next year, Avonez will be “just one in a growing
portfolio of MS drugs”—many of which hail from competitors like
Novartis and Genzyme Corp. In other words, Avonex needs a boost, and
from the company’s point of view, off-loading costs onto consumers is
better than seeing Avonex outright disappear from insurance plans. Is
this a coincidence? Maybe.
Cerezyme, an enzyme replacement drug used to treat Gaucher disease
(an enzyme deficiency that forms fatty deposits in organs), is another
tier 4 drug that raises some serious questions. First the price is
extortionate. Gaucher disease affects only 6,000 people world-wide, and
so to make up for the small market Genyzme, Cerezyme’s manufacturer,
“has long charged more than $300,000 a year for typical patients” the New York Times reported last month.
The price turns Cerezyme into a new sort of “blockbuster” drug—one that
generates $1.1 billion in annual sales for its manufacturer. The pool
of treated patients is so small that Genzye can exploit “a monopoly position to charge what the market will bear to treat desperate patients with no other option.”
That,
in a nutshell, is the story about the new tier 4 pricing system:
desperately ill patients will wind up going broke because, under our
for-profit health care system, private insurers are allowed to make
decisions about what they will and won’t cover based not on the quality
of the product, but on the price. For-profit insurers can do this even
while taking Medicare dollars to cover Medicare patients. The same
system lets employers turn their backs on employees who most need their
employer-based coverage by urging insurers to shift costs to some of
their sickest employees. And finally, unlike any other developed
nation in the world, we let drug-makers gouge patients while peddling
sometimes ineffective, often unproven, and almost always over-priced
products.
Frontline on PBS has an interesting show this week comparing health plans in different countries. The producer wanted to emphasize his major point – that people elsewhere don’t go bankrupt paying for health care, so he glossed over several issues.
One that is relevant to this discussion is what happens with the boutique drugs in other countries? It’s clear that the patient doesn’t have to worry about the cost, but what about the system? A quick mention was made of plans or insurance companies negotiating with the drug companies, but no details were provided.
A decade or so ago the drug companies were perfectly willing to let HIV patients in poor countries die rather than offer drugs at affordable prices. I think the situation has improved somewhat due to both bad publicity and the willingness of some countries to ignore the patent laws.
These specialized drugs don’t get the same type of attention, so how much leverage can a government administered plan outside the US apply?
Criticism of these drugs because they don’t prolong life is taking too narrow a focus. Some have value if they improve the quality of life, even if it is only for awhile. If these drugs were not so expensive there would be no discussion.
Aspirin doesn’t “cure” headaches, but most people would prefer taking it and having the headache stop sooner rather than suffering until it passed on its own. No one gives this a second thought since aspirin costs pennies a dose.
So the issues is, does the drug improve the quality of life and/or is it being used for off-label treatments without adequate clinical data? Procrit is a good example, it seems to work well for kidney failure, and may work for some people on chemotherapy, but is this second use borne out by data and if so, is it being over prescribed?
Another issue, perhaps for another time, is what happens to doctors in these countries who are forced to accept below (US) levels of compensation? We see many cases of third world doctors moving to the US or UK, but the earnings difference is quite extreme in this case. What happens with doctors from Germany or Japan? Is there a brain drain as well, even though the earnings difference may only be 100% or so?
Another question that needs an answer is who is responsible for overseeing the terms of health plans? Can they just change their terms arbitrarily or is there some sort of state or federal approval needed?
If there is why have the new drug pricing schemes been approved?
The existence of “profit-motive” in drug selection has been one of the major factors working against the “individualization” of cancer chemotherapy. While being faced with a large number of choices of otherwise equally acceptable therapies, medical oncologists select treatments which generate the most income for private practices or generate the least inconvenience for the clinical research institutions.
Big Pharma had relatively little interest in the “niche” market.” But thanks to advances in biology and genetics, upcoming and existing technologies for personalizing cancer diagnosis and drug treatments are very real. The key hurdle for these technologies is overcoming the pharmaceutical industry’s prevailing “blockbuster” economic model of the last twenty years.
Big Pharma can no long focus its research on diseases with a “broad base.” The spate of blockbuster “miracle” drugs has failed to show statistical survival benefit in a majority of patients. These drugs actually do work miracles, in “some” patients, but not all. How do the drug companies respond when tests show their drug to be highly effective, but only in 10-15 % of the potential patient population, a fraction of affected patients? Charging significantly more for those therapies will only work to a point.
Pharmaceutical companies had been attracted to studies looking at the maximum tolerated dose of any treatments. Cancer sufferers have been taking doses of expensive and potentially toxic treatments that are possibly well in excess of what they need. Many of the highly expensive “targeted” cancer drugs may be just as effective and produce fewer side effects if taken over shorter periods and in lower doses. We should make the search for minimum effective doses of these treatments one of the key goals of cancer research.
” .. And finally, unlike any other developed nation in the world, we let drug-makers gouge patients while peddling sometimes ineffective, often unproven, and almost always over-priced products ..”
So .. increase public subsidization of patient pharms by $20,000,000,000.00?
Or let those folks die?
Which one?
No, we start regulating the market…what they can charge, the “diseases” they’re allowed to manufacture…the kickbacks they give providers to peddle their wares, the waste encompassing RX’s written, filled and not needed, etc. I watched “Sicko” and I have a question, why was the medication so much cheaper in Cuba?
Great post. Thank you for delving into this topic more deeply. Minor detail…each of the disease-modifying drugs for Multiple Sclerosis, including Avonex, cost approximately $23,000 annually.
U of Google, that is the funniest thing I’ve heard in a long time.
“No one gives this a second thought since aspirin costs pennies a dose.”
Not if you go to an emergency room and have no insurance. Tylenol gets mighty pricey where someone can gouge and justify it as supporting other, less profitable, endeavors.
This happens when all we think of is how to pay for something, instead of how best to do it. When we argue over reimbursement instead of care. When we insist that every person must prove him or herself worthy, monetarily, of the attention of a doctor.
It’s that simple.
Your point about incentives to use Tier 4 drugs at maximum dose is well taken, although there can be cases where maximum doses make sense: this is when medicine becomes an art.
Especially with drugs that will be taken for a long time or a lifetime, a fruitful area of research is to have trials on the dose. A reality, though, is that for a long-term drug, you may not know if reducing the dose decreases survival.
While I haven’t read the latest research, Goucher’s Syndrome is a nasty genetic disease. A genetically engineered drug, starting in the six-figure annual dose cost, completely suppresses the problem of the missing protein. There have been studies that, cautiously, seem to show that there is no loss of benefit by reducing the dose.
There have been several false hopes that various drugs for HIV, which reduced the viral load to undetectable levels, might be a cure rather than a treatment. Sadly, none of them have proven to be such — no one knew where the virus was hiding, but a few months after treatment was stopped, viral load went up. Restarting the drug often zeroed it out again.
There’s a saying that scientific progress happens more often when someone says “Gee, that’s odd. I wonder why it does that?” rather than crying “Eureka!” I suppose it’s just as well the latter isn’t common, as society may not be ready for naked, dripping Greek mathemeticians in the streets.
A good example of a “that’s funny”, which, I suspect, can be generalized more than it is, can be taking controlled advantage of drug interactions. Without getting into a lot of pharmacology, suffice it to say that certain drugs decrease the excretion of other drugs, while some accelerate it. With the first, you are worried about toxic buildup. With the latter, you can’t get an adequate therapeutic level.
A couple of examples, the first of which is something that should be a model for outcomes research. It’s not that rare for immunosuppressed patients, such as post-transplant cases, to develop unusual infections, such as normally worry-free fungi. When an antifungal drug (ketoconazole, from memory) was used with an antirejection drug (again from memory, tacrolimus), the antirejection drug levels went into toxic ranges. Of course, the antifungal drug was stopped, until some bright doctor said “I wonder if we could work out a table of reduced antirejection drug dose — with lots of side effects — if we give a controlled amount of the antifungal drug, even if there’s no fungal infection?” The answer was yes.
In the other direction, several drugs, such as the third-line anti-asthma drug, theophylline, accelerate the excretion of assorted hormones. Women on oral contraceptives and theophylline started getting pregnant. Unfortunately, the rate of excretion of both drugs is so variable that there’s no practical way to give them together.
It would be interesting to see if legislators and healthcare economists are looking at deliberate ways to lower doses.
Thanks for your comments–
I’ll be in the office and respond this afternoon.
In the meantime– Barry,
your comment is so ignorant, that I feel compelled to respond. Let me suggest that you . read the fascinating article below on Cuba.
First, drugs are cheap in Cuba, becauase Cuba, like the rest of the developed world, refuses to pay exorbitant prices to fund the drug industry’s marketing and advertising.
(Pharma spends twice as much on advertising as they spend on research and most of what they spend on reserach is to develop “me too” drugs. This is all well-documented in Dr. Jerry Avorn’s excellent book, Powerful Medicines.
I urge you to read it.
The U.S. pays 2 to 2 1/2 times more than other developed countires for drugs simply because Pharma
makes enormous contributions to our very expensive political campaigns.
Meanwhile–and this is the interesting part,
Cuba makes an enormous contribution to providing medical care for the world’s poor. Healh Care is Cuba’s biggest export as described in this article:
Cuba Exports Health
“Some 14,000 Cuban doctors now give free treatment to Venezuela’s poor and 3,000 Cuban medical staff worked in the aftermath of last year’s Kashmir earthquake. Cuba has plans to heal those poorer than itself.
By Hernando Calvo Ospina
When Hurricane Katrina ripped through the southern United States in August 2005, the authorities were overwhelmed and the governor of Louisiana, Kathleen Babineaux Blanco, appealed to the international community for emergency medical aid.
The Cuban government immediately offered assistance to New Orleans and to the states of Mississippi and Alabama, also affected by the storm, and promised that within 48 hours 1,600 doctors, trained to deal with such catastrophes, would arrive with all the necessary equipment plus 36 tonnes of medical supplies.
This offer, and another made directly to President George Bush, went unanswered. In the catastrophe at least 1,800 people, most of them poor, died for lack of aid and treatment.
In October 2005, the Kashmir region of Pakistan experienced one of the most violent earthquakes in its history, with terrible consequences in the poorest and most isolated areas to the north. On 15 October an advance party of 200 emergency doctors arrived from Cuba with several tonnes of equipment. A few days later, Havana sent the necessary materials to erect and equip 30 field hospitals in mountain areas, most of which had never been previously visited by a doctor. Local people learned of Cuba’s existence for the first time.
To avoid causing offence in this predominantly Muslim country, the women on the Cuban team, who represented 44% of some 3,000 medical staff sent to Pakistan in the next six months, dressed appropriately and wore headscarves. Good will was quickly established; many Pakistanis even allowed their wives and daughters to be treated by male doctors.
By the end of April 2006, shortly before their departure, the Cubans had treated 1.5 million patients, mostly women, and performed 13,000 surgical operations. Only a few severely injured patients had to be flown to Havana. Pakistan’s President Pervez Musharraf, an important ally of the US and friend of Bush, officially thanked the Cuban authorities and acknowledged that this small nation in the Caribbean had sent more disaster aid than any other country.
First medical brigade
Cuba set up its first international medical brigade in 1963 and dispatched its 58 doctors and health workers to newly independent Algeria. In 1998 the Cuban government began to create the machinery to send large-scale medical assistance to poor populations affected by natural disasters. After hurricanes George and Mitch blew through Central America and the Caribbean, it offered its medical personnel as part of an integrated health programme. The Dominican Republic, Honduras, Guatemala, Nicaragua, Haiti and Belize all accepted this aid.
Cuba offered massive medical assistance to Haiti, where healthcare was chronically inadequate. In 1998 Cuba even approached France, Haiti’s former colonial power, with a proposal to establish a humanitarian association to help the people of Haiti. The French government did not respond (although, finally, in 2004, it sent troops). Since 1998 Cuba has sent 2,500 doctors and as much medicine as its fragile economy permits.
This free aid – the Cuban government funds the personnel – has been effective. The willingness of the new barefoot doctors (1) to intervene in areas where their local equivalents refuse to go, because of the poverty of the clientele or the danger or difficulty of access, has persuaded other countries, especially in Africa, to apply for assistance.
Between 1963 and 2005 more than 100,000 doctors and health workers intervened in 97 countries, mostly in Africa and Latin America (2) By March 2006, 25,000 Cuban professionals were working in 68 nations. This is more than even the World Health Organisation can deploy, while Médecins Sans Frontières sent only 2,040 doctors and nurses abroad in 2003, and 2,290 in 2004 (3).
The most seriously ill patients are often brought to Cuba for treatment. Over the decades these have included Vietnamese Kim Phuc, the little girl shown in the famous war photograph running naked along a road, her skin burned by US napalm. Cuba also took in some 19,000 adults and children from the three Soviet republics most affected by the Chernobyl nuclear accident of 1986.
In June 2001 the United Nations General Assembly met in special session to discuss Aids. Cuba, with an HIV infection rate of 0.09% compared with 0.6% in the US, made an offer of “doctors, teachers, psychologists, and other specialists needed to assess and collaborate with the campaigns to prevent Aids and other illnesses; diagnostic equipment and kits necessary for the basic prevention programmes and retrovirus treatment for 30,000 patients”.
If this offer had been accepted, “all it would take is for the international community to provide the raw materials for the medicines, the equipment and material resources for these products and services. Cuba will not charge and will pay the salaries in its national currency” (4).
The offer was rejected. But eight African and six Latin American countries did benefit from an educational HIV/Aids intervention project which broadcast radio and television programmes, treated more than 200,000 patients and trained more than half a million health workers.
There are currently some 14,000 Cuban doctors working in poor areas of Venezuela. The two governments have also set up Operation Milagro (miracle) which, during the first 10 months of 2005, gave free treatment to restore the eyesight of almost 80,000 Venezuelans, transferring those suffering from cataracts and glaucoma to Cuba for operations (5). More widely, the project offers help to anyone in Latin America or the Caribbean affected by blindness or other eye problems. Venezuela provides the funding; Cuba supplies the specialists, the surgical equipment and the infrastructure to care for patients during their treatment in Cuba.
So far no other government, private body or international organisation has managed to put together a global medical programme on such a scale or to offer such a level of assistance to those in need of care. Operation Milagro’s goal is to operate on the eyes of a million people every year.
A few hours before he took up office as president of Bolivia in December 2005, Evo Morales signed his first international treaty, which was with Cuba, setting up a joint unit to offer free ophthalmological treatment. As well as the national institute of ophthalmology in La Paz, recently equipped by Cuba, there will be medical centres in the cities of Cochabamba and Santa Cruz. Young Bolivian graduates from the Latin American School of Medicine (ELAM) will take part in the programme.
ELAM was founded in 1998, just as Cuba began to send doctors to the Caribbean and Central America. It operates from a former naval base in a suburb of Havana and trains young people of poor families from throughout the Americas, including the US. There are also hundreds of African, Arab, Asian and European students. Cuba’s 21 medical faculties all participate in training. In July 2005 the first 1,610 Latin American students graduated. Each year some 2,000 young people enroll at the school, where they receive free training, food, accommodation and equipment in return for a commitment to go back home and treat their compatriots (
You might also want to see this article about Cuba’s medical mission by the highly respected Council on Hemispheric Affairs here
http://www.coha.org/2006/10/30/cuban-medical-diplomacy-when-the-left-has-got-it-right/
And let’s not forget the move by Wellpoint (now Anthem) and its direct effort to move Claritin from a prescription med (covered by insurance) to OTC (not covered). While some of this was an effort by pharma to address the medication moving off patent, (as now with Zyrtac)…Wellpoint made a spirited effort to encourage the FDC to approve this change as it would shift the cost from the insurer to the consumer. More of the same…but not as dramatic in terms of orphan drugs/disease or high cost.
Thank you Maggie, now I don’t feel stupid for asking why drugs are cheaper in Cuba. I also think part of their marketing campaign includes all the well-placed “charitable” contributions they make to organizations like, say, fybromyalgia consumer groups, or the WHO, or even consumer patient safety organizations. I heard last week “pre-diabetes” is another new disease in the pipeline, can’t have a pill unless it treats something, soon we’ll have “pre-diabetes” and pre-something else. How about restless leg syndrome? Good one. Now that I think of it, over the past two years an inordinate number my relatives have been diagnosed and treated for sleep apnea.
Thanks everyone — below, replies to individual comments and questions
Robert–In other developed countries (Europe, UK, Canada, Australia, Japan, etc.) the governments (or regional committees) negoatiate for lower prices, looking at the benefit the drug provides and comparing it to what we already have on the market.
If the drug is too expensive, and the benefit too small (or there is no evidence of benefit) the governemtn won’t cover it.
Surviving longer is not the only benefit governments look at; they also look at quality of life.
Overall patients in these countires don’t seem to suffer. Outcomes for many major diseases are as good or better than outcomes in the U.S.
In the U.K., in particular, most people seem to feel that NICE is making fair decisions and object when someone tries to interfere with their decisions. See my post here:http://www.healthbeatblog.org/2008/03/obstacles-to–1.html
One thing to keep in mind is that while some people might do better if their government covered more medications, some people in the U.S. are harmed because we cover so many medications that a) have not been proven to be effective b) have risks that the companies hide (Vioxx) or c) are overprescribed.
See the last paragraph of Gregory’s post right above yours.
Are more people in the U.S. hurt by being over-dosed than the percentage of people hurt in some countries by not having immediate access to the newest drugs? It’s impossible to say because we don’t have good records on how many people are over-dosed.
Data does not support use of Proscrit for people on Chemo. That said, it could have a placebo effect. The drug is supposed to make you feel more energetic, less tired, and part of that is a state of mind. Insofar as its pscyhological, if you had seen that TV ad which told you: take this and you won’t feel so tired, I’d bet some patient don’t feel so tired because they believe the ad, not because proscrit is having the chemical effect the ad claims.
Meanwhile as the recent FDA report points out,Proscrit may hasten death from Cancer.
In terms of doctors leaving places like Germany: a fair number of doctors have left recently, but not becuase of money. They’re going to the U.K and Sweden (where pay is no higher, perhaps lower) becuase they find Germany too bureaucratic–too much paper work. (As you may know, the Germans like to dot every i and cross every t)
Some German doctors come to the U.S. but only for short-term stays.
Overall, Europeans just don’t like our healthcare system for the same reasons many U.S. doctors and nurses don’t like it–
hospitals too chaotic, too
commerical, hard to give patients the best care, etc.
As for salaries, wealth is always a relatively matter. You feel you aren’t earning enough if people around you are earning more. As I
pointed out in an earlier
post (http://www.healthbeatblog.org/2007/11/the-truth-about.html) European countries are largely middle-class. Not many very wealthy people, and they don’t allow people to fall into extreme poverty–social safety nets protect them.
Thus doctors in Europe are less likely to be unhappy with their income than doctors in the U.S. who compare themselsves to CEOs making $10 million.
Also doctors in European countries don’t come out of med school with huge loans–the govt pays for their education. As a result, many feel a loyalty to their country (or the EU as a whole) and feel it would be dishonorable to take that free medical education and then move to the U.S. to
try to earn more money.
Finally, insurers are regulated by states, and as far as I know, they don’t have to have new pricing schemes approved in most states. Though they certainly should be regulated regarding prices–as should drug-makers.
Gregory–Thanks for a very good comment. I think much of what you say supports my feeling that we need to take drug research out of the hands of for-profit companies and put it back in the hands of NIH and academic reserachers who have NO financial connection to for-profit drug makers.
How do we pay for it? Let
drug-makers pay for the true value of that research when unbiased reserachers have finished doing the groundwork for a new product–and let the academic reserachers set the standards in terms of how high the dose should be, which small group of people should be taking the drug, etc. No more false advertising or false promises.
Basically, drug companies would do what they used to do– package and distribute the product. But someone else should be deciding what reserach we do and how reserach dollars are spent, based on medical need rather than what they think they can sell to large numbers of people.
Lisa Lindell– drugs are cheaper in Cuba in part because, like other countries, they negotiate with drugmakers and refuse to pay top dollar. (See my reply to Barry.)
Also, in Cuba the govt subsidizes a good part of the cost.
Lisa Emrich– Thanks for the kind words–and the dollar figure.
Neimon- you’re basically right
HC Berkowitz–You are right that prescribing is an art as much as a science, and we do need more research experimenting with lower doses.
Particularly in the case of elderly people, gerontologists know that often standard doses are too high. Also, we need more research on doses for children. Drug companies don’t like to do it because it delays getting the product to market.
Maggie:
I have no medical expertise, but here’s a typical report on Procrit which shows that it does “something” for chemo patients.
That the “something” may not be effective enough to make a difference in how the people feel is a different issue. I don’t know how sensitive these patients are to a small change in hemoglobin levels.
http://www.medicalnewstoday.com/articles/44523.php
Is this drug used the same way elsewhere? Once again it seems treatment choices are being influenced by cost, rather than what might be best for the patient. Even the UK model which you seem to like is a cost/benefit decision, not just a benefit one.
The solution, of course, is to rein in costs and then doctors would be free to decide strictly on using their professional judgment.
I see many ways that costs could be controlled, none of which would be liked by the drug industry. For example there could be mandatory licensing requirements, there could be restrictions on the marketing of me-too drugs, there could be limits on advertising and there could be changes in patent protection.
When I was working under gov’t grants it was understood that the gov’t would own any “intellectual property” developed using its money. This was eliminated awhile back and now we have no more Sabin’s and Salk’s developing things for the greater good, rather than for self enrichment.
Robert–
You wrote;
“I see many ways that costs could be controlled, none of which would be liked by the drug industry.
“For example there could be mandatory licensing requirements, there could be restrictions on the marketing of me-too drugs, there could be limits on advertising and there could be changes in patent protection.
“When I was working under gov’t grants it was understood that the gov’t would own any “intellectual property” developed using its money. This was eliminated awhile back and now we have no more Sabin’s and Salk’s developing things for the greater good, rather than for self enrichment”
I agree completely.
Why I like NICE:When I was at this int’l healthcare conference in Berlin, I heard a presentation by the head of implementation at NICE and was very, very
impressed.
Then I interviewed a professor from the London School of Economics who specializes in healthcare (and also is personally affected by NICE’s decisions ) and he was very positive about NICE. He also struck me as a pretty skeptical person, so I was impressed by his endorsement.
On Proscrit– I found this
post (cut and pasted below) on a blog written by an oncologist, and it seemed to me to sum up all of the uncertainty about
Procrit, and why being “first in line” to get a new drug (the way Americans often are) may not be such a good thing:
Want Some Procrit?
Is there anyone who wants to be the first in line for a new drug?
Not me.
I don’t want to be last, but I don’t want to be first, either. Here’s why.
Many patients with cancer develop anemia. Often it is the “anemia of cancer,” a condition in which the bone marrow seems to have problems generating the normal number of red cells. Some chemotherapy agents also suppress the bone marrow, and this is called “chemotherapy-induced anemia.” Both types of anemia have the same result: patients can become sluggish, short of breath, and mildly depressed.
Someone discovered that the effects of cancer and of chemotherapy can be overcome by giving large doses of erythropoietin (EPO), a substance normally produced by the kidneys which stimulates red cell production in the bone marrow. Using recombinant gene technology, scientists figured out how to manufacture EPO, and they marketed it under the brand names Epogen and Procrit. Epogen was primarily aimed at the kidney failure market (because kidney failure results in decreased EPO production leading to anemia in those patients, too). Procrit was aimed at others, especially cancer patients. You may have seen the advertisements on TV. I know a lot of my patients did — they all asked me for it.
Well, this seemed to hold great promise. Before Procrit, patients just had to get used to feeling lousy. Every now and then, when things got bad enough, we would have to send them for blood transfusion. Then, instead, with Procrit, we could boost their red cell production and eliminate the need for transfusions. Moreover, we could keep their hemoglobin levels closer to normal, and studies showed that this increased patients’ overall sense of well-being. It was great! Jehovah’s Witnesses, who do not believe in receiving blood transfusion, really liked the stuff because it made it safer for them to have surgery. So look what science hath wrought, right?
Not so fast.
Problem #1: The stuff is darned expensive. And to make a long story short, the cost of giving Procrit probably exceeds the cost of simply transfusing people (which is expensive, too). One pharmacist put it this way, “I’m not sure patients have a right to spend this much of the taxpayers’ money just to feel a little better.” Medicare (think “socialized medicine” again) agreed and decided the answer is that patients do not have that right, and as of right now, Medicare will no longer pay for EPO prescribed for the “anemia of cancer.”
Problem #2: EPO can cause blood clots. Whoops! People with cancer already have an increased risk of clotting. Patients on chemotherapy have an even higher risk. And, as it turns out, those on EPO may have the highest risk of all. Is it worth the risk just to feel a little better?
Problem #3: Now scientists have discovered that there are EPO receptors on some cancer cells. Oh, oh. Does that mean that EPO might actually make cancer cells grow faster and stronger? Maybe. The FDA has now required a “black box warning” for patients with head and neck cancers receiving radiation therapy and patients with metastatic breast cancer who are on chemotherapy.
The answers are not all in, so we have not stopped using Procrit and Aranesp (another form of EPO) altogether. But we are sure thinking about it more before we recommend it.
So next time you see an ad or read about the latest and greatest treatment, think twice about where in the line you want to be.
Robert–
You wrote;
“I see many ways that costs could be controlled, none of which would be liked by the drug industry.
“For example there could be mandatory licensing requirements, there could be restrictions on the marketing of me-too drugs, there could be limits on advertising and there could be changes in patent protection.
“When I was working under gov’t grants it was understood that the gov’t would own any “intellectual property” developed using its money. This was eliminated awhile back and now we have no more Sabin’s and Salk’s developing things for the greater good, rather than for self enrichment”
I agree completely.
Why I like NICE:When I was at this int’l healthcare conference in Berlin, I heard a presentation by the head of implementation at NICE and was very, very
impressed.
Then I interviewed a professor from the London School of Economics who specializes in healthcare (and also is personally affected by NICE’s decisions ) and he was very positive about NICE. He also struck me as a pretty skeptical person, so I was impressed by his endorsement.
On Proscrit– I found this
post (cut and pasted below) on a blog written by an oncologist, and it seemed to me to sum up all of the uncertainty about
Procrit, and why being “first in line” to get a new drug (the way Americans often are) may not be such a good thing:
Want Some Procrit?
Is there anyone who wants to be the first in line for a new drug?
Not me.
I don’t want to be last, but I don’t want to be first, either. Here’s why.
Many patients with cancer develop anemia. Often it is the “anemia of cancer,” a condition in which the bone marrow seems to have problems generating the normal number of red cells. Some chemotherapy agents also suppress the bone marrow, and this is called “chemotherapy-induced anemia.” Both types of anemia have the same result: patients can become sluggish, short of breath, and mildly depressed.
Someone discovered that the effects of cancer and of chemotherapy can be overcome by giving large doses of erythropoietin (EPO), a substance normally produced by the kidneys which stimulates red cell production in the bone marrow. Using recombinant gene technology, scientists figured out how to manufacture EPO, and they marketed it under the brand names Epogen and Procrit. Epogen was primarily aimed at the kidney failure market (because kidney failure results in decreased EPO production leading to anemia in those patients, too). Procrit was aimed at others, especially cancer patients. You may have seen the advertisements on TV. I know a lot of my patients did — they all asked me for it.
Well, this seemed to hold great promise. Before Procrit, patients just had to get used to feeling lousy. Every now and then, when things got bad enough, we would have to send them for blood transfusion. Then, instead, with Procrit, we could boost their red cell production and eliminate the need for transfusions. Moreover, we could keep their hemoglobin levels closer to normal, and studies showed that this increased patients’ overall sense of well-being. It was great! Jehovah’s Witnesses, who do not believe in receiving blood transfusion, really liked the stuff because it made it safer for them to have surgery. So look what science hath wrought, right?
Not so fast.
Problem #1: The stuff is darned expensive. And to make a long story short, the cost of giving Procrit probably exceeds the cost of simply transfusing people (which is expensive, too). One pharmacist put it this way, “I’m not sure patients have a right to spend this much of the taxpayers’ money just to feel a little better.” Medicare (think “socialized medicine” again) agreed and decided the answer is that patients do not have that right, and as of right now, Medicare will no longer pay for EPO prescribed for the “anemia of cancer.”
Problem #2: EPO can cause blood clots. Whoops! People with cancer already have an increased risk of clotting. Patients on chemotherapy have an even higher risk. And, as it turns out, those on EPO may have the highest risk of all. Is it worth the risk just to feel a little better?
Problem #3: Now scientists have discovered that there are EPO receptors on some cancer cells. Oh, oh. Does that mean that EPO might actually make cancer cells grow faster and stronger? Maybe. The FDA has now required a “black box warning” for patients with head and neck cancers receiving radiation therapy and patients with metastatic breast cancer who are on chemotherapy.
The answers are not all in, so we have not stopped using Procrit and Aranesp (another form of EPO) altogether. But we are sure thinking about it more before we recommend it.
So next time you see an ad or read about the latest and greatest treatment, think twice about where in the line you want to be.
Robert.
Anemia drugs are approved to treat patients whose weakness and fatigue is caused by the side effects of cancer chemotherapy. They stimulate production of oxygen-carrying red blood cells, which can boost patients’ energy and strength. I believe the main issue over anemia drugs is safety, how big a dose to safely boost concentrations of hemoglobin.
Besides these drugs being a growth factor, raising the risk of heart attacks, strokes and death is the danger at “high doses” for cancer patients. The “overuse” may be the most contributing factor.
The FDA has said there is “serious” cardiovascular risks for patients who took “higher than recommended” doses of these drugs. Also, patients who don’t respond well to initial anemia therapy (hyporesponders) are exposed to the highest heart risks.
The drugs have been heavily advertised and there was evidence that they have been overused, in part because medical oncologists can make monery by using more of the drug. The profit motive can influence some doctors’ decisions. Entities like U.S. Oncology got caught with their hands in the cookie jar!
In other words, they do “something” for cancer patients, but the overuse of them is more harmful than helpful.
The profit incentive needs to be removed from the choice of drug treatments. Take physicians out of the retail pharmacy business and force them to be physicians again!
Maggie
The problem is that few drugs work the way oncologists think and few of them take the time to think through what it is they are using them for.
There is emerging evidence that “pharmaceutical” EPO can feed the growth of tumors in cancer patients (it IS a “growth factor” afterall).
A “growth factor” is about twenty small proteins that attach to specific receptors on the surface of stem cells in bone marrow and promote differentiation and maturation of these cells into morphotic constituents of blood.
Blood is a circulating tissue composed of fluid plasma and cells (red blood cells, white blood cells, platelets). Problems with blood composition or circulation can lead to downstream tissue (which is made up of cells) dysfunction.
Scientists at the Weizmann Institute of Science have come across the possible mechanism behind the “growth factor.”
http://cancerfocus.net/forum/showthread.php?t=989
This can’t be the same “Barry” that made so many thoughtful and informative posts on this blog. Michael Moore “framed” the outcome…so drugs are NOT cheaper in Cuba? Are you saying they manufacture their own by stealing the patent?
Economist or no, I don’t see how anyone can make an intelligent arguement to spend more money on drug development so they will cost less. In my un-scientifically documented world, I see very expensive robotics and IT hard at work in the drug development industry, they appear to have plenty of money already…I don’t see the same technology at work in patient care delivery…we can’t get even legible prescriptions. And further, if you think all nations should bear the costs of developing these very profitable drugs, then they should reap the benefits as well, they can take all those profits and provide healthcare to all their citizens.
Gregory & Lisa–
Gregory–
Thanks for the information. I do think it would be better if oncologists didn’t make more money or less money depending on what drugs or therapy they prescribe.
I do believe that the vast majority of doctors absolutely want to do what is best for their patients, but I think it’s a terrible idea to create this potential conflict of interest in the profession. It’s always going to have some subconscious influence on practice.
Lisa–No, the “Barry” who commented below is definitely not the “Barry Carrol” who often comments on this post.
The person who often comments here is, as you say, a very thoughtful, intelligent person. We don’t always agree–but, by and large, I respect and appreciate his comments.
The retail drug chains tell me that spending in the U.S. for specialty drugs (the very high cost drugs that are the subject of this post) is approximately $60 billion and is growing about 20% per year. For employers anxious to rein in healthcare costs, I can see where they might (I think wrongly) decide to sharply raise co-pays on these Tier 4 drugs as a way to insulate the vast majority of their employees who don’t need the drugs from increases in their health insurance costs. I don’t think insurers are the villain here. Rather, they are just responding to what their employer customers are telling them they want.
It is also worth noting that many employer provided insurance policies have lifetime coverage caps of as low a $1 million. My own employer had a $1 million cap at least since 1993 (when I started working there) through the end of 2006 before finally raising it to $5 million. We also have always had percentage of the cost co-pays. Until the start of 2007, we paid 50% of the cost for conventional drugs bought at retail but very low flat dollar co-pays for chronic medications ordered by mail. We now have three tiers ranging from 20% of the cost with no minimum for Tier 1 to 50% of the cost with a $225 maximum for Tier 3. Plenty of companies are considering moving toward percentage of the cost co-pays because it tends to reduce utilization. At the same time, 65% of all prescriptions are now generics, and mail order co-pays remain very reasonable ($20 for generics and $40 for brands for a 90 day supply) at our company which I think is fairly typical.
Patent protected biotech specialty drugs, which have no substitutes, are priced essentially the same throughout the developed world according to executives at Novartis and other drug companies I’ve heard speak at conferences. The only leverage government payers (or insurers) have in these cases is to refuse to cover them if the price is deemed too high relative to the benefits. Of course, then you have to be prepared to absorb the heat from sick patients who think they would benefit from the drugs. I’ve said before that I think $300,000 per year for Cerezyme to treat Gaucher’s Disease, for example, is unreasonably burdensome to taxpayers.
It’s a difficult issue to strike the right balance between providing enough potential for profit to foster innovation and attract capital to deliver drugs to the marketplace at prices that patients and payers can afford. I don’t see how we could expect companies to incur the huge expense to develop these drugs and then require them to issue mandatory licenses at comparatively low cost. I would be more than willing to see NIH get into the drug research business in a serious way and get full value for licenses that result from its discoveries. I would caution, however, that drug research has a high failure rate, and one of the challenges in any R&D organization is to know when to pull the plug on projects that are not panning out. This is a difficult process under the best of circumstances, but without the potential for profit within the constraints of a fixed R&D budget, it would be doubly difficult to pull the plug, especially if the project in question has a powerful champion within the organization.
Separately: Lisa, no, I’m not the “Barry” that made the comment that you referred to. I always sign my posts with my full (and real) name. Thanks for the kind words about my other posts.
Once medical research is framed as an appropriate activity for for-profit firms then the possibility of rational discussion is lost.
I grew up in the post-sputnik panic in the US. There was no thought at the time that major scientific R&D would be left to the private sector. The world had just seen what government-run, big science, could do in the Manhattan Project and this was the model adopted for other areas.
The model was simple: government agencies awarded grants and/or ran scientific laboratories. The projects were reviewed by fellow scientists and monitored by a professional staff at the agencies. Any discoveries or patents that might emerge would be owned by the government and could then be licensed to commercial firms. This worked very well for many decades, but the libertarian revolution came along and turned everything on its head.
Now research is done with an eye to how profitable the end product may be. Patents are issued for the smallest advance and are spread all over the lot making coherent licensing difficult. And, of course, prices have gone through the roof.
This change is based strictly on ideology and greed, any objective evaluation of the present system would show that real progress has slowed, not increased.
The only exception to this pattern was in the few corporate R&D labs that existed. These included those at IBM, AT&T and RCA. The most famous result of this arrangement was the transistor. But most of these labs either have closed down or have shifted from fundamental research to applied engineering.
The present system doesn’t work, it produces too many useless products, is driven by profit, not science, and inhibits basic research since the chances for profit are more remote.
The US may be blinded by this ideology, but parts of the rest of the world isn’t. The blue laser (used in the new DVD players) was invented in Japan.
Imagine what will happen when a lab in China or India discovers a treatment for cancer and then refuses to allow the US and EU to use it. Think of the economic advantage for a country whose health costs go down dramatically if it can eliminate a disease that others still are burdened with.
This is not an implausible scenario. The west inflicted economic pain on poor countries over HIV treatments.
The simplest answer is the best. Instead of fiddling with cost structures, prescription policies and the like, basic research should be put back into the lab. Drug manufacturing would then revert to being an industrial process, like beer. Coors has no problem making money off brewing beer even though there are no secrets involved. The same would be true of drug manufacture.
Firms that licensed a drug from the government would not have the development costs and would still make a decent (not obscene) profit as a manufacturer.
At some point the world has to relearn the lesson that the blind pursuit of maximum profit is not the best model. Even Adam Smith understood the faults of monopoly capitalism.
Robert,& Barry Carol–
Thanks much for your comments:
Robert wrote:
“The simplest answer is the best. Instead of fiddling with cost structures, prescription policies and the like, basic research should be put back into the lab. Drug manufacturing would then revert to being an industrial process, like beer. Coors has no problem making money off brewing beer even though there are no secrets involved. The same would be true of drug manufacture.”
Very well put– and
I agree completely.
Barry:
You write:
“Patent protected biotech specialty drugs, which have no substitutes, are priced essentially the same throughout the developed world according to executives at Novartis and other drug companies I’ve heard speak at conferences.
You add: “The only leverage government payers (or insurers) have in these cases is to refuse to cover them if the price is deemed too high relative to the benefits. Of course, then you have to be prepared to absorb the heat from sick patients who think they would benefit from the drugs. I’ve said before that I think $300,000 per year for Cerezyme to treat Gaucher’s Disease, for example, is unreasonably burdensome to taxpayers.”
Barry– Unfortunately, when talking to the conferences that you attend, executives
from NOvartis, etc., often don’t tell the truth.
One would think that they would have to be truthful–after all, many of the money-mangager and investors who attend these conferencess are very intelligent and have enough at stake that one would expect that they would call drug-mmakers like Novartis on their half-truths and lies .
But the truth is that the majority of investors want to hear good news–and don’t want to question it.
Very, very few (if any) of the investors who attend these conferences go back home and inevestigate what the U.K., Germany or Sweden pay for any of these drugs.
And very, very few money mangers go home and do the research needed to find out which if these drugs are effecive.
Baryy, my guess is that you would do all of the due diligence that you could. But even if you do try to do the research, it can be very hard to tell which drugs are effective.
Drug-makers just aren’ required to provide the necessary evidence.
At the same time, I appreciate the fact that you agree that employers shouldn’t punish their sickest emplyees–and that the huge prices drugmaers ask for some of these drugs are simply unsconscionable.
BTW–I’m very glad tht Lisa pointed out that the “other Barry” wasn’t you.
I didn’t occur to me that he could me- (rather different writing style) but I can see how some readers might easily have been confused.
As I’ve posted on my blog, the NYTimes story should cause a reaction in Congress, the state legislatures and in the markets, especially the stock markets.
Insurers are skimming the market for low-risk clients and trying to meet employers’s demands for smaller increases in premiums. I guess actuaries run the insurance companies, and they’re pretty tone deaf when it comes to consumers and politicians. And their boards don’t realize the trouble their numbers guys are getting them into.
The insurers probably are thinking Tier 4 co-pays will change prescribing patterns, and they probably are correct. If so, look for demand for these drugs to shrink and prices to come down. Meanwhile, don’t buy pharma stocks.
Markets probably will correct this situation faster than politicians and regulators can. The idea that governments should run pharma research is resoundingly naive. Look at the conflict of interest scandals at NIH and how poorly run the peer reviewed medical journals are, and you’ll see that the NIH shouldn’t even be involved in medical research.
To cite Cuba as the ideal health care provider, well, I’m a guest here.
Donald E.L. Johnson wrote:
“The insurers probably are thinking Tier 4 co-pays will change prescribing patterns, and they probably are correct. If so, look for demand for these drugs to shrink and prices to come down.”
Please give an example of a case where the price a cancer drug, or a drug for MS came down, thanks to consumer pressure. (Or docs not prescribing)
As for the idea that govt should run drug reserach, it is far from naive.
One of the best recent suggestions comes from Howard Brody, M.D.
author of “Hooked: Ethics, the Medical Profession, and the Pharmaceutical Industry”
On his website, Brody explaines that “in HOOKED, I argue for even more than the usual arms-length contractual relationship between drug company and Academic Medical Reseracher; I urge instead a real firewall through the creation of an NIH-type research body that can take drug industry funds, and offer competitive grants to do the desired research, without money changing hands directly between the company and the academic investigators. If this idea of the neutral research institute were to become reality . . .”
Anyone interested in conflict of interst in drug
development and whether the problem stems from govt or the for-profit industry should take a look at his book.
I haven’t been keeping up with price structures since the implementation of the MMA of 2003, but I remember one of the very first consequences of that act with Eli Lilly and Co. and Pfizer Inc. They cut prices on cancer medicines after doctors said they couldn’t afford to administer office-based chemotherapy drugs under lower reimbursement rates that Medicare just adopted after the bill passed.
One example was Eli Lilly cutting the price of the pancreatic cancer drug Gemzar by about 7%. Good legislation can sometimes work to improve health care through improving market efficiency, as an alternative to government control.
Oncologists were paid and reimbursed for providing medical services and not receive the excessive level of windfall compensation from operating a retail pharmacy concession. But this was simply a correction of previously-existing overpayment for drug costs and underpayment for costs of administration. However, for the most part, the private-payors still go along with the chemotherapy concession.
Medical oncologists try to make a point that the profit they make from selling chemotherapy drugs does not all go into the pockets of the physicians. There are enormous numbers of uncompensated services that are provided to the patients that are not billable and which are not compensated.
However, after the new MMA bill, they would still be able to provide services. They’d just have less money left over after providing those services. All physicians (indeed all small businesspeople – which is what physicians are) have things they do in their business which are directly profitable and things they do in their business which are very unprofitable but unfortunately necessary.
Let’s take a simple example: sales and marketing.
Who is the “customer” of a medical oncologist’s services?
You might think the patient. True enough. But oncology is also a referral specialty. There is no shortage of oncologists. So oncologists have to be good doctors, who provide good services, or they will lose their referrals to oncologists who provide better services.
Now, oncologists are basically good people who are compassionate and who want to provide good care, in any case. But to imply that oncologists wouldn’t provide good care in the absence of being able to make money running a retail pharmacy is just not true. The motivation to supply good care ranges from the altruistic to the selfish (loss of referrals).