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Selected news articles which highlight important policy issues.

News: Weekly Archives

News for the week of 11-06-2006

Seniors Seek An Advantage
The Dallas Morning News, 11-6-06

Editor's Notes:

Now that the election is over, perhaps Congress can get back to some serious policy discussions; they could begin with Medicare reform. Amidst all of the partisan sniping over the Medicare Drug Benefit, policymakers have lost sight of how popular another free–market reform in Medicare—Medicare Advantage plans–has become.

Seniors have usually turned to "Medigap" insurance policies to supplement Medicare. But a growing number have found what they say is a more affordable option, "Medicare Advantage" plans.

The private insurance plans combine Medicare's basic benefits with additional physician and hospital coverage and, often, prescription drug coverage for a single premium.

Enrollment in the Advantage plans has jumped 27 percent in the last year, and experts expect the number to rise more when Medicare's open enrollment begins Nov. 15.

"Last year, the buzz was about the new drug benefit. This year, it's the Advantage plans," said Brian Poger, president of Senior Educators, a company that counsels Medicare recipients.

The Advantage plans are essentially a private version of Medicare.

Instead of paying beneficiaries' claims directly, the government pays insurers to oversee seniors' care. Lawmakers hope the private plans will contain health care costs and slow the growth of Medicare's spending as the 65–plus population doubles over the next 25 years.

Seventeen percent of Medicare's 43 million beneficiaries already belong to an Advantage plan, and the Bush administration projects the proportion will reach 30 percent by 2013.

To attract insurers into the market, Congress and the administration have raised the government's payments to Medicare Advantage providers to an average $10,000 per enrollee per year. The strategy seems to be working. More insurers will offer more plans with lower premiums and better benefits in 2007.

A sensible political compromise on health care should build on the success of Medicare Advantage plans. Transitioning the entire program over to private insurers, along with means testing for the wealthiest seniors and risk–adjusted premiums for seniors with the highest medical expenses, would be a good place to start. Legislators could then use savings from Medicare reform to offer tax credits to the uninsured to buy health insurance in a program modeled on the Federal Employees Health Benefit Program.

Under this framework, conservatives would get market–based reforms; liberals would get coverage for the uninsured; and fairness in entitlement programs would improve because the government could target additional help for those seniors and uninsured individuals that most need it.

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As Drug Prices Climb, Democrats Find Fault With Medicare Plan
The New York Times, 11-6-06

Editor's Notes:

The New York Times reports an ironic wrinkle in America's newest entitlement program, the Medicare Drug Benefit. To wit: Congress creates a program that gives millions of low–income seniors access to prescription drug coverage for the first time. Pharmaceutical companies, who now have millions more customers, benefit financially.

Pundits and groups like the AARP have gone on to accuse the industry of fleecing the government. This is the equivalent of the government giving low–interest loans to home buyers and then bashing the housing industry for benefiting from the ensuing building boom. It is doubly ironic in the case of the AARP, which offers its own drug plan and profits handsomely from participating in the federal program.

Should the Medicare Part Drug benefit have the same imposed price controls as the Veteran's Administration drug program or Medicaid? That is a political question that Congress should, and no doubt will, debate in the next few months. However, when it comes to pricing, the market has a much better record of moderating prices and encouraging innovation than governments that try to fix prices.

As the Washington Post noted last week, the current structure of the drug benefit may be helping Medicare find the right compromise between inexpensive drugs and high prices that will encourage innovation.

In the meantime, here is the New York Times' article:

Companies have raised prices on many top–selling medicines by 6 percent or more this year, double the overall inflation rate. In some cases, drug makers have received price increases of as much as 20 percent for medicines that the government was already buying for people covered under the Medicaid program for the indigent. Medicare also pays more than the Veterans Administration, which runs its own benefit program.

"Part D was a good thing for almost everybody," said Les Funtleyder, an industry analyst at Miller Tabak, a research firm in New York.

Drug makers have tried to play down their gains from the program because they do not want to be seen as profiteering in an election year, Mr. Funtleyder said. "You don't want to draw too much attention to how good it’s been."

Democrats claim the government could save as much as $190 billion over the next 10 years if it negotiated directly. Those savings could help shrink the "doughnut hole," the gap in Part D coverage that forces many beneficiaries to pay about $3,000 a year for drugs, said Brendan Daly, a spokesman for Nancy Pelosi, the Democratic leader in the House.

"What we're planning to do is give Medicare a chance to negotiate prices, and we'd use some of the savings to close the doughnut hole," Mr. Daly said.

Republicans say the savings estimates offered by the Democrats are vastly inflated. They note that Medicare has already cut its 10–year projection of the program's cost by $117 billion, though the program is still expected to cost taxpayers $516 billion over the next decade. Republicans also note that, in independent surveys, most seniors say they are happy with the benefit.

"The competitive marketplace has saved much more money than anyone has ever anticipated," said Leslie Norwalk, the deputy commissioner of the Centers for Medicare and Medicaid Services.

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New Hope on Gene Therapy
The Philadelphia Inquirer, 11-7-06

Editor's Notes:

A team of researchers at the University of Pennsylvania has used gene therapy to turn the tables on the AIDS virus in a handful of patients, according to this article in the Inquirer.

In theory, gene therapy may make traditional drug delivery systems redundant by correcting the causes of disease at their genetic roots. That day is, however, a very long way off. Still, after a number of serious setbacks, the technology is finally showing glimmers of its enormous potential as researchers show results in a few small trials.

A novel gene therapy that uses a genetic version of a Trojan horse has shown promise in fighting the AIDS virus, a coup in a field crippled by disappointments and setbacks.

The therapy is being tested at the University of Pennsylvania, where the 1999 death of Arizona teenager Jesse Gelsinger still casts a pall.

His death, the first in a gene-therapy experiment, triggered a nationwide halt in human testing of such treatments amid revelations of ethical and regulatory lapses.

Now, seven years after that disaster, a team led by Penn's Carl June and Bruce Levine has achieved a gene–therapy tour de force: It removed some infection–fighting "T cells" from five HIV patients, inserted a gene into the cells to stop the AIDS virus from reproducing, then multiplied the modified T cells and put them back in the patients.

The vehicle, or "vector," that the researchers used to deliver the protective gene to the cells was a genetically modified HIV virus—also a first.

The technology is still in its infancy, but we should commend Penn’s researchers for their persistence in the face of enormous technical challenges.

[permanent link]

Generic Biotech Drugs Backed
Los Angeles Times, 11-11-06

Editor's Notes:

This article, from the L.A. Times, opens by suggesting that Democratic control of Congress will smooth the road for so-called "generic" biotech drugs, which greedy biotech companies with an "unfair monopoly" have stymied.

What do you call a drug that costs as much as $100,000 a year but doesn't face competition?

If you're a consumer footing the bill, you might call it an unfair monopoly. If you're the biotechnology company selling the medication, it's a money machine that needs to be protected at all costs.

All this could change soon. Democratic control of Congress— gained through dramatic victories this week—is expected to lead to legislation allowing generic versions of popular biotech drugs, lowering their costs.

Unlike with most pharmaceuticals produced by traditional drug companies, there is no federal regulatory system to approve generic versions of biotech drugs.

Patent laws are the same for biotech drugs as for regular ones, generally giving 20 years of exclusivity from the filing of an approval application. The biotech industry largely took off in the 1980s, so the earliest biotech medications such as insulin and human growth hormones are already off patent in the U.S. Over the next several years, the list is set to grow substantially.

Some lawmakers, such as Rep. Henry A. Waxman (D–Los Angeles) and Sen. Charles E. Schumer (D–N.Y.), have been trying to pass generic biotech legislation for years. One obstacle: The biotech industry has aggressively lobbied Congress to hold off, and many members have agreed until now.

With Democrats gaining power, however, the industry isn't likely to stave off competition much longer.

A lot will depend on the influence of Waxman, chairman–elect of the House Committee on Government Reform, and others interested in seeing greater drug competition. In 1984, Waxman coauthored the law, known as the Hatch–Waxman Act, that allows the Food and Drug Administration to approve generic drugs.

But it applies only to traditional, chemically based medicines. Biotechnology drugs such as insulin and some cancer drugs are made using living organisms and manufactured inside bacteria or yeast cells in large bioreactors.

When the law passed, there weren't many biotechnology drugs on the market. Since then, more than 300 have been approved, as the underlying science has improved markedly and manufacturers were lured by the hope that their products might never face competition.

In an interview Wednesday, Waxman said he planned to introduce legislation early next year that would set up a clear approval process for generic biologics.

"Biotech drugs promise life–saving benefits, but at a cost so high, many Americans cannot afford them," he said. But he added that the "prospects for passing a generics biologics bill have improved significantly," and the issue "is one of my highest priorities for the next Congress."

The reality, which only surfaces mid–way through the article, is that quick access to the most complex and expensive biotech medicines is unlikely to happen anytime soon. Most biotechnology drugs, with a few notable exceptions, are so complex that the fast track the FDA uses for traditional generic drugs, which do not require new clinical trials, would be inappropriate and unsafe. In other words:

Even under the best circumstances, a generic version of a biotech drug will never be exactly the same as the original, as is the case with chemical drugs...Trying to re-create them and sell them to the public without doing extensive safety trials could be disastrous.

The problem with this debate is that the term "generics" as a blanket catchall for biotech medicines is a misnomer, given the complexities of the science involved in making sophisticated medicines like monoclonal antibodies. Rather than cheering on "generics," let's worry about getting the science right first.

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California Price Curbs Alarm Drug Makers
The Boston Globe, 11-11-06

Editor's Notes:

While the next Congress prepares to debate direct federal price negotiations for the Medicare Drug Benefit, Californians may get an early look at how government price controls affect the industry in their state. Last fall, legislation passed that allows the state to remove drugs' from the state's Medicaid formulary if drug makers don't offer "acceptable" discounts to millions of uninsured patients.

The law, which provides a glimpse of the type of government price controls the drug industry fears, seeks up to 60 percent price concessions from manufacturers to benefit 5 million California residents, including seniors enrolled in the federal Medicare prescription drug benefit.

California officials call the drug discounts voluntary. But the measure, which takes effect in January , includes language that allows the state in 2010 to remove treatments sold by companies that don't comply from its Medicaid list of approved drugs.

Some of the nation's largest drug firms have begun to negotiate prices with the state, and the ripple effect of those talks will soon hit smaller firms. Biotechnology companies, which a recent report says spend an average of $1.2 billion developing new therapies, say they could be among the hardest hit.

The law is intended to help California's low–income and underinsured residents by leveraging their collective purchasing power.

On average, the state hopes to lower the cash price of prescription drugs by 40 percent for branded products and 60 percent for generic products, said Nicole Kasabian Evans, a spokeswoman for the California Health and Human Services Agency .

Jim Greenwood, chief executive of the Biotechnology Industry Organization, said California aims to implement "arbitrary price controls" that could stifle innovation.

"At the end of the day, you have to have very healthy companies who have the resources to do the research and the development of these drugs," Greenwood said. "You're not going to get it on the cheap. And you're not going to get it under a system of European–like price controls that have stifled innovation."

It's too early to say exactly how the law will take effect, but it is certainly a bad precedent for other states to follow.

[permanent link]

New Push for Medical Legislation Expected
Baltimore Sun, 11-12-06

Editor's Notes:

The subtitle of this article should be something along the lines of "Get Ready to Rumble." With the 2008 presidential elections just around the proverbial corner—at least two presidential hopefuls in the U.S. Senate are likely to announce their candidacy in the next few months—the Democrats are eager to use their newly won control of Congress to hold public hearings highlighting their health care agenda en route to seizing the White House.

Democrats are expected to use their newfound powers running congressional committees to issue subpoenas for records and demanding that administration officials testify. Among possible committee chairmen are Rep. Henry A. Waxman of California, a longtime Food and Drug Administration watchdog, and Rep. Bart Stupak of Michigan, who has blamed his son's 2000 suicide on the drug Accutane.

"What they can try to do is portray a picture of FDA that might shock and dismay voters, to set the stage for the 2008 elections," said William Vodra, a former FDA lawyer who represents pharmaceutical companies. He expects Democrats to hold hearings on failings in FDA oversight of drugs.

Democrats might also hold hearings to accuse Republicans of political interference in scientific decision making. One line of inquiry may involve the FDA's approval of over–the–counter sales of the Plan B morning–after pill, whose repeated delays liberals blamed on conservative politics.

Republican sympathizers are already trying to undercut the expected Democratic moves, deriding them as political posturing.

"It will be like the worst days of the French Revolution, when everyone was worried they'd be found guilty and guillotined," said Peter J. Pitts, an associate FDA commissioner from 2002 to 2004. "It will ... have everything to do with scoring political points, not moving things forward."

An early, big fight will probably involve Medicare's prescription drug benefit for seniors, known as Part D.

This is not to say that partisanship, as opposed to bipartisanship, is always a bad thing: the nation is long overdue for a rousing tussle over the future of health care, if only to illuminate potential areas of compromise. Free market advocates can rightfully point out that increasing government regulation of health care in the U.S. and Europe has not brought us any closer to controlling health care costs, even as millions of Baby Boomers prepare to retire and join the Medicare rolls.

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US Buying More Generic AIDS Drugs
The Boston Globe, 11-12-06

Editor's Notes:

The Boston Globe notes that the President's much–maligned AIDS program has turned out to be as good as its word. After the FDA accelerated its approval process for generic AIDS medicines, the President's Emergency Plan for AIDS Relief has spent the lion's share of its funds on inexpensive generics—an outcome that critics had said would never happen:

Early data suggest that generics will account for 70 percent of AIDS drugs in three key countries, a sevenfold increase in one year, a direct result of US regulators determining that more than two dozen generic drugs are safe.

When Bush launched his $15–billion initiative in 2003 over five years to fight AIDS in 15 countries—12 of them in sub–Saharan Africa—activists protested the US policy to initially buy more expensive brand–name drugs made by pharmaceutical companies until regulators tested the quality of less expensive generic medicines.

Critics, gathering outside the White House in 2003 and inside the International AIDS Conference in Bangkok in 2004, said the policy meant that fewer people would be treated and showed that the Bush administration was bending to the will of big pharmaceutical companies.

But today some of those same activists give the administration credit for rapidly increasing the amount of generic drugs it buys.

Based on the first three months of this fiscal year, 70 percent of antiretroviral drugs bought in Nigeria, Haiti, and Zambia are expected to be generic. Last year, just 11 percent of AIDS drugs in the program's 15 countries were generics. The figures for this fiscal year will not be available until January, but senior US officials predict substantial increases in generics across the program.

Roughly 1.5 million people in poorer parts of the world are receiving antiretroviral medicines, which include both brand and generic drugs. Global health statisticians estimate that as many as 6 million people need the life–extending medication, but many do not know it because they have never been tested for HIV.

US officials delayed buying generics, which are copies of drugs made by pharmaceutical companies, because they wanted each drug tested by the Food and Drug Administration for safety reasons. In the last year, the FDA approved 29 generic AIDS drugs, including eight formulations for children.

This is all good news, and we should support greater access to these life–saving medicines in the poorest nations. Now for the potential cloud in the silver lining:

In recent years, the price of brand–name antiretroviral drugs also has plummeted, to roughly one–10th the cost on average five years ago, according to pharmaceutical company officials.

The reasons include rising demand; competition from generic–drug makers; and the effectiveness of global protests, which forced pharmaceutical companies to revisit policies on pricing and availability. Many large drug companies decided to slash prices for humanitarian and public–relations reasons.

They also either waived patents or shared drug formulations with generic manufacturers in the last two years. For many, it was a pure business decision: Profits were either slim or non existent.

In other words, there are enormous global pricing pressures on AIDS drugs. If these pressures remain high or even intensify, what incentives will remain, aside from humanitarian ones, for companies to invest in the development of new AIDS medicines to combat drug–resistant strains of the virus?

Thankfully, there is still at least one country willing to pay top dollar for new AIDS drugs: the United States. As long as Americans are content to foot the bill for the development of new medicines, the rest of the globe is happy to free ride on our investment. Is this arrangement sustainable indefinitely? We'll see.

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