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Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 09-29-2004

What is a health savings account and what are its benefits?
Associated Press Newswires, 9-29-04

Good question. This is a short primer on the newly enacted HSAs, which many experts believe can help to contain rising health care costs by putting consumers in charge of paying routine health care costs. The HSAs are essentially tax free 401k style accounts that must be accompanied by a high-deductible insurance policy. Individuals must cover all medical expenses up to the plan deductible, often $1,000 or $2,000 per year; insurance covers almost all costs beyond that threshold.

Any funds left in the account at the end of the year can be rolled over into the next year and continue to accumulate interest. The core idea behind the account is that in order to spur health care productivity, insurers and providers must be directly accountable for providing health care value to consumers, who can take their health care dollars elsewhere if they don't receive fair value for their money. Right now, consumers are locked into health care choices made by their employers and the government, effectively choking off demand-side incentives from the health care system.

For more about how consumer driven health care is playing in national politics, see the article by Manhattan Institute Senior Fellow David Gratzer, The Free Market Cure.

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Kucinich Wants Government to Oversee Drug Research
The Cleveland Plain Dealer, 9-29-04

Apparently not satisfied with having driven his home city into bankruptcy when he was mayor in the 1970s, now the former enfant terrible has set his sights on the pharmaceutical industry. His proposal would "create a federal Institute for Biomedical Research and Development" which would "oversee pharmaceutical research by government labs, and universities and private companies working under government contracts. Their research would be made public, and the formulas they develop for new drugs would be available to any manufacturer" approved by the FDA.

One major problem in pharmaceutical research is under funding of the basic research on which specific discoveries rely. It's human nature – people will act when they get a benefit from it, so basic research, research that does not directly lead to a saleable product, would be perennially under funded if we relied solely on private companies to finance it. That's why we have the National Institutes of Health.

If Kucinich's proposal became law, private companies would produce fewer drugs because they could not own the formulas for the products they develop with the publicly-financed basic research. Investors' capital would flow toward other fields not encumbered by this encroachment on property rights. It's basic economics, but perhaps it's not surprising that a man who ignored economic realities while mayor remains ignorant of them today.

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FDA Says Intercepted Canadian Drugs Unsafe
Associated Press Newswires, 9-30-04

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Health and Money Issues Arise Over Who Pays for Weight Loss
The New York Times, 9-30-04

Obesity is a calling card for our age, and increasingly health care professionals are calling for something to be done to reduce it. In one sense, it's hard to complain with these calls. People who are overweight are at more risk for a host of chronic diseases and conditions like diabetes and heart failure that are harmful to the person and costly to treat. In a world where health care costs are rising dramatically, it makes sense at one level for insurers - including the government - to begin to pay for weight loss treatments if doing so will help them avert larger costs down the road.

But in another sense, this is putting the cart before the horse. Insurance works best when people pay a sum of money to protect themselves against a rare hazard the onset of which they have little control over. In health care, and in obesity in particular, people have a great deal of influence over their conditions. Economists have long argued that when people do not bear the costs for their actions, they are likelier to engage in risky behavior. The technical term for this is moral hazard, but think of it this way - if you knew nothing serious would happen to you if you drove too fast, would you still obey the speed limit?

In our third party payment, group coverage world, people are not charged different health insurance premiums for their risky behavior. A 300-pound person pays the same as a 150-pound person, even though the heavier person is likelier to create higher costs down the road. Rather than initiate payment for weight loss treatments, many of which don't work in the long term anyway, perhaps policymakers should let basic economics work in everyone's favor by permitting rate discrimination even in group policies on the basis of clear behavior-related health risks like smoking and obesity. When people have to pay the piper, they often stop signing the tune.

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Vioxx's Removal May Not Affect Care Much; Other Drugs Can Be Used, Experts Say
Washington Post, 10-1-04

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Coping Without Vioxx – Recall of Merck’s Pain Drug Sparks Hunt for Alternatives; Just How Safe is Celebrex?
Wall Street Journal, 10-1-04

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Promise and Peril of Vioxx Cast Harsher Light on New Drugs
Washington Post, 10-3-04

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Vioxx Recall Raises Questions on FDA's Safety Monitoring
Wall Street Journal, 10-4-04

These articles discuss the ongoing questions of the FDA's role in overseeing the safety of the nation's drug supply and it role in permitting drug companies to advertise their wares to individuals, known among the pillerati as "direct-to-consumer advertising". They raise the usual arguments – the FDA doesn't monitor existing drugs closely enough to ensure their ongoing safety and shouldn't let uneducated consumers hear about drugs whose risks and benefits they cannot possibly understand or evaluate.

On the advertising point, blaming ads for overprescription (if it occurs) is like shooting the messenger. Patients demand these drugs in part because they do not have to pay for them – a faceless insurance company does. And doctors give in to patients because they know that saying yes helps them keep patients while costing them or their patients nothing. If we moved away from third party payment as the basis for non-medical costs, consumers would have to decide for themselves if the latest drug fad was worth the expense – just as they do with every other product in their lives.

When it comes to drug safety, one has to remember that benefits come with risks. As the Post article notes, "The process for getting a new drug approved in the U.S. is rigorous but it isn't designed to detect every possible risk. That would require studies so large and long that few new medicines would ever hit the market."

Still, more could be done to monitor drug safety in practice. Millions of people take prescription drugs daily, but their experiences are rarely recorded except by their physicians. That means every day data of real world experiences is being collected and hidden, much like the Ark of the Covenant was stored away in some government basement in the first Indiana Jones movie. FDA could move to collect that data and obtain the details of each patient – redacting names and other information that would identify a single individual – and run studies to see if certain harms (or benefits) arise among patients with certain characteristics. This technique, called Clinical Practice Improvement – would dramatically cut the time and expense that traditional clinical trials entail, and lead to the sort of revolution in medical safety and treatment protocols that other information-driven techniques have created in other sectors of the economy.

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Generic Maker Pulls HIV Drugs From WHO Use
Wall Street Journal, 10-4-04

The Bush administration has expressed concerns that generic combination AIDS drugs produced for use in poor nations have not proven their bioequivalence to patented drugs - at least not to the satisfaction of U.S. regulators - and until those concerns are met, the government’s $15 billion AIDS initiative would only purchase FDA approved drugs. This position has only met with scorn and derision from international AIDS activists, who accuse the U.S. of being a shill for the pharmaceutical industry.

However, recent events have vindicated the U.S. position. In August, the World Health Organization, which maintains a list of drugs recommended to treat AIDS, delisted 5 medicines from generic Indian manufacturers - two from Cipla and three from Ranbaxy - after finding discrepancies “between lab data examined during the inspections and lab data that the companies had previously submitted to the WHO to prove equivalency.”

Now the other shoe has dropped and Ranbaxy has withdrawn “all of its generic HIV treatments” from the WHO list, “saying that it can’t be sure the drugs are exact replicas of patented treatments they seek to copy.” The drugs haven’t been pulled off the market - and may still turn out to be safe and effective. But that’s not the point. The entire purpose of regulatory agencies is to ensure the safety and effectiveness of all medicines, no less for generics than for patented drugs. To waive these requirements for generic AIDS drug manufacturers risks substandard medications reaching patients in desperate need of real help. Unfortunately, this issue seems to have been forgotten in favor of a harangue against intellectual property rights. Perhaps now real attention will be paid to the issue.

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