Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 05-10-2004

Taking Better Aim At Cancer: New studies point the way to more effective use of lung cancer drugs
Business Week, 5-10-04

Scientists have been trumpeting the potential synergy between the new science of genomics and drug development for several years now, promising that scientists would be able to develop drugs tailored to fit an individuals unique genetic profile and attack diseases like cancer and Alzheimer's without affecting healthy tissues. Until recently, however, this promise has largely gone unfulfilled. However, three new groundbreaking reports published recently have shed new light on how targeted cancer drugs like Iressa and Tarceva work, and scientists now have new tools at their disposal that can, using genetic information, help them pinpoint exactly which lung cancer patients will benefit the most from these new medicines.

This is a critical new development because targeted therapies, which attack cancer cells directly and avoid healthy tissue, have so far only worked in a small fraction of cancer patients. The new reports, released in April, show that Iressa blocks a protein called epidermal growth factor receptor (EFGR), which tumors use to fuel their fast, lethal growth. While only about 10% of cancer patients respond to Iressa, these reports show that patients who do respond all had mutations in the gene that produces EGFR that made their tumors especially vulnerable to Iressa treatment. This discovery should pave the way for doctors to further isolate other genetic cancer mutations that other targeted drugs can exploit. It also adds more impetus for the FDA to modify its approval process when evaluating targeted drugs like Iressa or Tarceva, which, although they may only help a minority of patients, produce valuable knowledge of the genetic basis of cancer and pave the way for further discoveries.

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Call for Medicare to Negotiate: Missed drug bargains? Some say government should extract lower prices from firms, just as veterans agency does, but opponents say free-market approach is best
Washington Bureau, 5-10-04

Monopoly power to set prices can work both ways--a single company supplying a product or service in a market has monopoly power, but so does a single (or the largest) purchaser. Called monopsony power, this gives the purchaser the power to set prices by virtue of it being the only, or the largest, buyer in its market. This article notes that some advocates are calling for Medicare to negotiate directly with drug manufacturers to obtain the lowest prices on prescription medications, following the Veterans Administration model. The problem is that this would give the government monopsony power, making it the largest purchaser of pharmaceuticals in the country--effectively imposing price controls on what is one of America's most productive and innovative industries. This article, while echoing some arguments for adopting the VA model, also notes the downside: restrictions on the number of drugs available to patients and doctors and putting cost-conscious bureaucrats in control of America's collective health.

Price controls for prescription drugs would have the same effect that price controls elsewhere: a flight of producers from the market with concomitant declines in quality and quantity.

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Herbal Drug Widely Embraced In Treating Resistant Malaria
The New York Times, 5-10-04

In the struggle against global disease, a penny saved is not always a penny earned. Although developing nations often suffer from the ravages of diseases that have long since been controlled or even eradicated in the developed world, the effort to provide cutting-edge medicines to treat these diseases often hinges more on politics and ideology than sound science. Malaria causes about 300 million illnesses a year, and at least one million deaths, 90 percent of them in Africa--yet global health authorities have been reluctant to embrace new drug regimes that, although more expensive than the outmoded drugs presently used, ultimately save more lives. For instance, last year, Unicef, the United Nation's Childrens Fund, opposed the use of artemisinin, a drug derived from a traditional Chinese herb, saying that there was too little of it available and that it was unproven--despite the fact that the drug was first widely used when the Chinese supplied it to Vietcong during the Vietnam War. A year later, however, Unicef and almost all global donor groups have endorsed the drug's use as a front line anti-malarial--after the British journal Lancet led a public outcry over the use of ineffective older medications when artemisinin was available. The hostility and suspicion of the global health community towards artemisinin (an unpatented drug) has mirrored that often deployed against patented drugs--showing that ideology, rather than patient health, still plays too great a role in deliberations about how best to treat diseases in developing nations.

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A Radical Prescription: While most companies look to slash health costs by shifting more expenses to employees, Pitney Bowes took a different tack; The results were surprising
Wall Street Journal, 5-10-04

Spend more on prescription drugs and you will save money. It seems counterintuitive, but medical economists and advocates of creating a prescription drug benefit for Medicare have long argued that treating many chronic health conditions through drug treatment saves money in the long run -- money saved from long hospital stays, increased doctor's visits, and emergency room treatment. This article provides evidence of a savings effect through prescription drug use by studying how on large employer, Pitney Bowes, saved money by subsidizing more drug utilization. After analyzing its employee health care costs, Pitney Bowes discovered that by subsidizing the employee co-pay for diabetes and asthma drugs they could encourage employees to take more effective drugs more regularly, thus avoiding expensive complications that would result in even higher health care expenditures. Since implementing their program, the median medical cost for a Pitney Bowes employee with diabetes has fallen 12%; the median expenditure for an asthma patient has declined by 15%. Savings in 2004 alone is expected to break $1 million, and savings are expected to continue in subsequent years. Pitney Bowes has courageously adopted a strategy of not just trying to keep prescription drug costs down -- which can lead to higher overall health care spending -- but actually increasing prescription drug spending by targeting chronic conditions, where drug treatment gives the most bang for the buck. As employers and state and federal governments collect better information about how best to treat chronic illnesses, we can expect to find further evidence that "expensive" drugs are cheap by comparison to the alternatives.

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Only in America A German Raised on Universal Health Care Learns About U.S. Care the Hard Way
Washington Post, 5-11-04

The grass, so the saying goes, is always greener on the other side of the fence. In this article, a German in America learns that the hard way that America's health care system--for all of its speed, thoroughness, and patient-centered care--suffers from one overwhelming deficiency: the moral hazard of a third-party payer system. In his recounting, a slight tingling sensation in his wife's right hand led the author and his spouse to consult with bewildering array of specialists who in turn ordered a blizzard of expensive tests. This culminated in a very large bill with a very minor diagnosis: a minor bout of carpal tunnel syndrome treated at the equivalent of over 2.5 years worth of patient care in Germany, which explains why Americans spend more on health care than any other OECD nation.

However, the author also noted that physicians in the U.S. were much more concerned about his wife, much more accommodating, and worked much more quickly than their peers in Germany would have. Treatment overkill notwithstanding, the American physicians did sort out the problem exponentially faster than the German system could possibly allow for. His story suggests that the problem lies in what economists call a classic moral hazard: American health care is conditioned to order the maximum number of tests because the insurer (an HMO or traditional fee for service provider, the third party in question)will pick up the bill for whatever the patient and doctor agree to. If patients were directly responsible for even a tiny fraction of the true costs of health care, they would have powerful incentives to economize and force doctors to make the most efficient treatment decisions available, rather than ordering a blitzkrieg of tests for even minor ailments. Stories like this one--from people familiar with European-style universal health care--help to show the advantages of the American system while also giving a glimpse of how its virtues can be preserved at significantly less cost.

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Makers of Drug-Coated Stents Fight For the Hearts of Cardiologists
The New York Times, 5-12-04

Whether markets provide health care or hot dogs, competition means more options -- at lower prices -- for virtually everyone. Critics allege that the creation of new drugs and medical devices for conditions where there are already older and cheaper alternatives available drive up health care spending without adding any real medical value. This article shows that competition in health care markets between old treatments and new market entrants has the same effect as it does in any highly competitive market: it results in improved products and lower prices as competitors jostle for market share.

This article documents that while Johnson and Johnson may have pioneered the drug-coated stent (used to prop open previously blocked arteries -- the drugs are used to inhibit arterial scarring that can lead to repeat surgeries), a rival company, Boston Scientific, two months ago introduced a rival stent that has already garnered the lion's share of new orders -- perhaps as much as 70% of the market. Doctors who prefer the Boston Scientific stent claim that it is easier to use, but in any case Boston Scientific is forcing Johnson & Johnson to cut prices and modify its own stent in an effort to catch up to its new rival. (Boston Scientific's stent costs several hundred dollars less than Johnson & Johnson's model -- putting intense pressure on the manufacturer to reduce prices or be forced out of the market). Experts believe that there is yet more room for stent improvement, and industry analysts expect other drug-coated stents to offer doctors and patients yet more options in the coming months and years. When the market is allowed to freely reward innovative companies with new ideas, manufacturers have powerful incentives to bring better products to market -- a "win-win" prescription for doctors and patients.

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House Panel Scolds NIH Chief, HHS Members Threaten To Pursue New Ethics Legislation
Washington Post, 5-13-04

In an industry that depends upon pooling knowledge from academic institutions, government agencies, and the private sector, prohibiting any financial involvement between scientists at the NIH and the private sector is a recipe for disaster. Such a rule would inevitably lock out the most talented scientists from the public sector, and promote an adversarial relationship between regulators and industry. The blue ribbon panel mentioned in this article has promulgated what seems to be a sensible rule: senior decision-makers at the NIH should be under relatively strict ethics guidelines not to regulate in any matter where they have a financial stake; but, by allowing other forms of consultation at lower levels at the NIH, the commission also recognizes the reality that building a Chinese wall between scientists and private industry would hamstring the innovative relationships that sustain America's leadership in the pharmaceutical and biotech industries.

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Companies Join to Offer Health Care to Part-Time Employees
The New York Times, 5-13-04

Over 50 of the nation's largest employers, including IBM, Sears, and McDonald's, are pooling their uninsured part-time employees into one large group to gain bargaining leverage with insurers. This should allow them to offer a range of insurance packages to part-time employees at affordable rates. Part time employees are often prohibitively expensive to insure, since insurers view them as higher risks than full time workers. Although the employers will not subsidize the coverage themselves, the large combined pool of potential clients should help to distribute risk and lower costs for millions of people who now lack health insurance. Under this plan, employers will offer part time employees tiered health care plans ranging from basic catastrophic coverage to more comprehensive HMO-style plans. This is a welcome private initiative that can help bridge the gap between insurance markets and the uninsured. Another, better step, would be for state insurance regulators to eliminate costly insurance mandates for small businesses and individuals that have wildly inflated insurance costs. Deregulation of state insurance markets would allow thousands of small businesses to pool resources in the same way that large employers do, and allow a wide range of options for people who currently have none.

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Abbott Laboratories Faces Heat Over Raising Price of AIDS Drug
Wall Street Journal, 5-13-04

When competitors enter a market with a new product, they expect a fair return on their investment - otherwise they wouldn't have entered the market to begin with. AIDS is one of the most politically sensitive diseases, and AIDS activists view drug manufacturers with a mixture of hope and loathing. Although the extended survival of AIDS patients is due to groundbreaking work by the pharmaceutical industry, AIDS activists often rail against the cost of medications and demand cheaper medications. Tensions are aggravated when, as in this case, Abbott labs feels that it has to increase the costs of one of its medications, Norvir, to market rates "to better reflect the drug's importance and value in treating HIV" and fuel further research. After Norvir's price increase, activists have demanded that the government exercise a compulsory license on the drug and allow it to be manufactured generically before its patent runs out. Whatever the outcome of this individual case, patients and doctors must realize that threatening to inflict price controls on a drug will scare away investors in future AIDS research - perhaps giving a boon to today's AIDS patients in the form of cheaper drugs, but denying them better treatments tomorrow.

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U.K. lets Zocor sell over the counter - Merck drug ruling sets stage for U.S.
The Star-Ledger, 5-13-04

Zocor - one of the class of cholesterol lowering drugs known as statins that have become powerful tools in controlling and preventing heart disease - has shifted to over-the- counter status in the United Kingdom thanks to a decision by the National Health Service. While this decision will undoubtedly have its critics, it also makes a new health care tool available to millions of patients who may benefit from preventative statin treatment, but who are borderline cases. Rather than setting a one size fits all government policy for statins by prescription only, physicians and patients can now evaluate the individual risks and rewards of statin treatment for themselves. Making Zocor available OTC will also give Merck ongoing incentives to market, research, and improve the delivery of one of its trademark drugs even after its patent expires. Since generic versions of Zocor will shortly be available as well, prices should fall overall - allowing society to benefit from wider statin use, and possibly reap significant cost savings as heart disease - and possibly other conditions treatable with statins - become better managed outside of the high-cost settings of physicians' offices and hospitals.

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Medical paper-pushers resist opportunity to improve care
USA Today, 5-13-04

American health care providers have largely been isolated from the IT revolution that swept American businesses in the 1990s. As it stands today, fewer than 10% of health care providers offer fully computerized patient records keeping, relying instead on paper records that complicate treatment over time and across providers, leading to higher rates of misdiagnosis and mistreatment. A RAND study released last week quantified the scope of the problem: "patients receive the wrong treatment nearly half the time because best practice guidelines promoted by medical authorities aren't followed." RAND's recommendations were for American physicians and hospitals to computerize systems for recording health data and assessing treatments. Recently, President Bush offered a Health Information Technology Plan for making electronic health records available for most Americans within 10 years, a critical component for increasing treatment efficiency and accuracy. The benefits of modernization could be enormous: studies have found that up to $300 billion every year is spent on health care that is inefficient or ineffective as a result of the balkanization of medical information amongst many tiers of health care providers using outdated technology.

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Statin Drugs May Help Multiple-Sclerosis Patients
Wall Street Journal, 5-14-04

Off-label use of FDA-approved medications has been widely embraced by doctors and patients, especially for conditions where there may be few, if any, officially approved medications. Recently, another off-label use has come to light where there are few traditional treatments available: cholesterol-lowering drugs called statins have shown promise in treating multiple sclerosis patients, according to a new study published in the British journal Lancet. The few treatments currently available for MS, a devastating disease of the central nervous system, are enormously expensive. Statins, now used to treat and prevent heart disease, are inexpensive, widely available, and very well tolerated medications with few side effects. Scientists suspect that statins may be very versatile drugs, and that many other off-label uses yet remain to be discovered. While much more research still has to be done, the Lancet study demonstrates the utility in encouraging off label research of medications already on market with proven safety and efficacy.

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US Closer to battle with Europe over drug prices
Financial Times, 5-15-04

Amidst all of the popular complaint over drug prices in the U.S., it shouldn't be forgotten that the U.S. serves as the world's global drug pipeline, supporting the majority of R&D and, thanks to an absence of price controls on prescription drugs, underwriting the cost of medications that help save lives across the globe. Were price controls to be applied to the U.S. market, drug R&D - and with it the next generation of miracle life-saving drugs - would undoubtedly be substantially curtailed. (IMS Health, one of the leading sources of research on the pharmaceutical industry, notes that the U.S. accounts for 54 percent of world's pharmaceutical sales and a larger proportion of profits. Profits, of course, drive research and innovation.) Since much of the world in effect "free rides" on American pharmaceutical innovation, American policymakers are starting to insist that other developed nations share more of the burden by lifting price controls. With U.S. and European populations aging rapidly, the pharmaceutical industry will be needed to keep productivity high and health costs low as populations become steadily more vulnerable to chronic health ailments.

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U.S. Plan Puts Generic AIDS Combinations on Fast Track
Washington Post, 5-16-04

Generic drugs may be cheaper than patented drugs - but generics don't represent the next generation of life-saving medicines and generic companies don't have any incentives to perform the expensive R&D necessary to provide better treatments for diseases like AIDS. But competition between generics and patented AIDS drugs for patients in Africa and other developing countries could be a win-win situation, if patented drugs are allowed to compete on a level playing field. As part of this level playing field, U.S. officials are insisting that generic AIDS drugs purchased with American funds for use in Africa meet FDA standards, while also encouraging manufacturers of patented AIDS drugs to combine their treatments into multi-drug pills to match generic suppliers. "We must apply real discipline to ensure that the products we provide in poor nations are safe and effective," says White House AIDS coordinator Randall Tobias. "The new expedited process provides us with a solid foundation for purchasing drugs that work."

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Project FDA.


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