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Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 08-25-2004

Bookshelf: Fighting Disease Is Only Half the Battle
Wall Street Journal, 8-25-04

This is a very well written and lucid dissection of Marcia Angell's new book, The Truth About the Drug Companies, which seems, by all accounts, much less about truth and more about eviscerating the role of market incentives in medicine.

As Miller acknolwedges, there are many pharmaceutical industry practices that could be changed for the better but, in "large part these strategies are the result of the industry's being the victim of government policies, not the beneficiary." When it comes to regulation, incentives are everything, and big pharma reacts exactly as you would expect it to given the regulatory incentives it labors under. Angell's prescription, a fatal one for medical innovation, is not to reform the regulations, but to turn the industry into a quasi-governmental entity. This would be the worse of all possible worlds, and we should avoid it as such.

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15 Illnesses Drive Up Costs Conditions Linked to 56% of Increase in Health Care Bills
Washington Post, 8-25-04

In a new study published in Health Affairs, Emory University health economist Kenneth E. Thorpe revealed that 15 conditions accounted for over half (56 percent) of the $200 billion increase in U.S. health care spending from 1987-2000. Five conditions (heart disease, pulmonary conditions, mental disorders, cancer, and hypertension) accounted for one-third of the increase.

However, Thorpe was careful to note that some increased expenses, for instance on prescription drugs and angioplasty for hearth disease, decreased overall costs. "Higher spending on heart attacks, low-birth weight babies, cataracts, and depression has benefits that out weigh the costs", Thorpe noted. Thorpe's prescription? "[A] stronger emphasis on prevention and following 'best practices' guidelines" that would reduce total costs and improve patient health.

The problem America faces now is that health care is reactive, rather than preventive or "proactive" because of the way financial incentives for third party payors are structured. If you are sick, providers get paid for every test and treatment, regardless of their true effectiveness. If you never get sick, insurers get to keep the premium. The answer: put consumers in charge of their own health care through HSAs. That would give consumers better incentives to improve their own health (through exercise and diet) and put pressure on providers and insurers to offer improved care.

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IN BRIEF
Washington Post, 8-25-04

Human Genome Sciences (Rockville, Maryland) has begun phase 1 clinical trials (which test safety and establish dose-tolerability) of a new anticancer drug, HGS-TR2J. HGS-TR2J is a monoclonal antibody that is designed to bind to the TRAIL (tumor necrosis factor apoptosis inducing ligand) 2 receptor in solid malignancies. In layman's terms, the drug is a targeted antibody that will, hopefully, cause cancer cells to self-destruct. "Numerous nonclinical studies have shown that cell lines derived from a broad array of solid and hematological human tumors, including lung, colon, breast, multiple myeloma, prostate and pancreas, are sensitive to killing by apoptosis (programmed cell death) induced by native TRAIL or by agonistic antibodies to TRAIL Receptors." HGS-TR2J, and a wide range of other chemotherapy drugs in development are designed to attack cancers without affecting healthy tissues. More information on the clinical trial is available at http://www.hgsi.com/news/press/04-08-24_HGS-TR2J.htm.

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Record Level of Americans Not Insured on Health
The New York Times, 8-27-04

Much has been made of the latest increase in the number of Americans who lack health insurance (45 million as of 2003, an increase of 1.4 million from the year before). Still, about 12 million of those people were "members of families with annual incomes of $50,000 or more, including 6 million in families that made at least $75,000 a year", families that could presumably at least afford a high-deductible policy if they chose to.

More affordable policies would flourish if there was a market for them. That market should grow now that health savings accounts (HSAs) are now available in principle to over 200 million Americans. These accounts, which allow Americans to accumulate tax-free savings for routine medical expenses in conjunction with a high-deductible insurance policy, are the future of American health care. They should become popular as more employers offer them to their employees and consumers become more comfortable with treating health care the same way they treat other routine expenses. Government can accelerate this trend by letting consumers purchase insurance from any provider across the country, and empowering small businesses and other civic organizations to act as intermediaries to bargain for better rates on behalf of their members. What looks like a crisis now, is really a tremendous opportunity in disguise. Policymakers should act boldly to seize it.

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Drug Makers Sued on Pricing; Fourteen pharmacies accuse the companies of charging more for medicines in the U.S.
Los Angeles Times, 8-27-04

Some American pharmacies are losing business to their cross-border competitors as a result of foreign price controls on prescription drugs. Consequently, they are striking back using America's favorite method for resolving acrimonious political disputes: litigation.

A group of California pharmacies has sued "more than a dozen drug manufacturers for conspiring to keep U.S. prices well above those same drugs in Canada and other countries." Interestingly, these countries all have price controls on prescription drugs, so the pharmacies' suit amounts to a complaint that drug manufacturers aren't unilaterally imposing price controls on themselves in the U.S.

But if lower prices are de facto better, why stop there? Why not use the courts to impose price controls on the pharmacies themselves? That would make prescription drugs even cheaper, and give U.S. pharmacies an even greater advantage over their rivals in Canada and Mexico. After all, what's good for the goose is good for the gander.

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Glaxo grants 3rd AIDS drug license in South Africa.
Reuters News, 8-27-04

Glaxo has granted a South African generic drug manufacturer a license "to manufacture, import, and sell antiretrovirals containing [Glaxo's] two patented products zidovudine, also known as AZT, and lamivudine." The firm, Feza Pharmaceuticals, plans to import the drugs for now, but hopes to manufacture them locally once it gains clearance from South African regulators.

Licensing generic versions of AIDS drugs is one way that large pharma firms can both help developing nations afford valuable medications and still recoup a fraction of their investment costs.

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Project FDA.

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