|Selected news articles which highlight important policy issues.||
News: Weekly Archives
News for the week of 06-22-2006
Big Buyers Push for Steep Cuts from Drug Makers
Why are pundits and reporters always chasing stories about drug prices? Part of the reason is that, until recently, drugs tended to be the least insured part of American health care, and that Americans without health insurance (e.g., big negotiators who buy drugs in bulk at discount) had to pay full price for their medicines.
This generated a lot of resentment, even though drugs (branded and generic) account for a relatively low percentage of overall U.S. healthcare spending. The problem, then, is an insurance problem, not a drug price problem.
How good are insurers and government programs at pushing down drug prices? Pretty darn good and getting better, according to this story from the Wall Street Journal:
Earlier this year, the U.S. Department of Veterans Affairs made Levitra its preferred impotence pill, toppling Viagra from the spot it had held for years. The VA decision boiled down to cold cash.
Here‘s a reason to love the much maligned “me-too” drugs: they drive price competition. Since drug companies are often working on similar drugs that hit the market in quick succession, companies are forced to compete with each other for market share and price inevitably becomes one of the flashpoints in that battle.
The drawback of course, is that consumer desires and incentives for big programs don‘t align perfectly. Consumers might very well prefer the expensive drug A to the cheaper bulk purchased drug B. Drug A might also turn out to lower total health care costs in the long run. But that‘s an argument in favor of more consumer control over healthcare spending, a discussion for another day.
4 Diabetes Drugs Are Seen Raising Hope and Profit
Hope and profit are not words that most Americans associate with healthcare. But they should. This article chronicles how companies are rushing to bring new diabetes treatments to market, giving hope to millions of diabetics that they can better control their illness.
New drugs alone will not reverse rising rates of Type 2 diabetes, a condition that affects about 20 million Americans and is closely tied to obesity and lack of physical activity. And doctors caution that for the foreseeable future, diabetes will remain a progressively worsening disease that can cause devastating complications.
The best of all possible worlds is, of course, not to develop diabetes in the first place. But for Americans who cant control their illness using currently available treatments, these drugs offer new hope.
How a Hospital Stumbled Across an Rx for Medicaid
The U.S. leads the world in healthcare innovation—and healthcare spending. One reason for our disproportionate spending is certainly that third party payers—like Medicaid—can be penny wise but pound foolish. As researchers like David Cutler at Harvard have pointed out, the U.S. healthcare system generally rewards providers for intensity of treatment, not the quality of treatment or disease prevention.
This story, on a Medicaid disease management program for congestive heart failure, offers instructive lessons on how we can lower total costs without impeding quality.
The unusual [New York State Medicaid] program is the result of a deal between Mount Sinai and the state, and it could offer a way to help ease the U.S.‘s seemingly intractable health-care crisis. The hospital provides free preventive care to poor East Harlem residents in exchange for higher Medicaid reimbursement rates at its outpatient clinic. It also expects to fill the beds that become free with better-paying patients. Combined, that will more than make up for the hospital‘s lost revenue. The state, for its part, hopes the program will help reduce its ballooning Medicaid expenditures by cutting down on expensive trips to the ER.
Getting more providers and payers to think holistically about patient care is the key to resolving this problem. But we won‘t get there until there is a real paradigm shift in how we think about healthcare spending. Mt. Sinai shows how spending more resources on managing the most expensive patients can actually save money in the long run.
Drug Prices Up Sharply This Year
The AARP and USA Families are in the habit of releasing periodic reports alleging that the branded drug industry in the U.S. is engaged in ruthless price gouging of Americans. This is yet another report along these lines, as predictable as you‘d expect:
AARP, which represents older Americans, said prices charged by drug makers for brand-name pharmaceuticals jumped 3.9 percent, four times the general inflation rate during the first three months of this year and the largest quarterly price increase in six years.
For a counterpoint to AARP‘s argument, readers should peruse another article we mentioned in this issue of MPT. In short, AARP seems to be engaging in gratuitous industry bashing—perhaps because, thanks to its deal with UnitedHealth to offer Medicare Part D coverage, it too is now one of the big buyers negotiating with drug companies for lower prices.
Benjamin Zycher, a senior fellow at the Manhattan Institute, offered this observation in response to the AARP report:
Only a day after the AARP reported sharp increases in reported drug prices, the Wall Street Journal reported that generic competition has driven down the price of a leading cholesterol drug, and that “big buyers push for steep price cuts from drug makers”. The larger reality is that official prices differ from those actually paid, in substantial part because of negotiations; drug prices under Medicare Part D, negotiated by the pharmacy benefit managers, have proven lower than projected only a year ago.
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