July 17, 2007

The AP reports on a study in the Annals of Internal Medicine that argues that "older, cheaper diabetes drugs are as safe and effective as newer ones."

They may very well be, on average. But this is not an argument for having every diabetic in America suddenly switch to Metformin. There is no cookie-cutter recipe for diabetic care, and some patients may do better on newer medicines or experience fewer side effects.

What is the right mix of branded and generic drugs? Let the market decide.

In a consumer driven system, where consumers have more "skin in the game", patients will have powerful incentives to become smart shoppers among competing insurance offerings. Some insurers will offer more expensive plans with broad access to new medicines; others will offer low-cost plans that focus on cheaper generic drugs and wellness programs. The bottom line is that every consumer should be able to find a plan that fits their budget and medical needs.

Medicare Part D is an excellent example of the benefits of choice and competition in health care markets. Seniors can choose from a wide variety of prescription drugs plans, and the competition between plans has helped to keep premiums low. And many seniors have, in fact, chosen lower-cost plans that encourage greater use of generic drugs. Targeted subsidies for low-income seniors ensures that they too have access to good prescription drug plans.

At the same time, by eschewing price controls, Medicare Part D leaves significant financial incentives in place for pharmaceutical companies to innovate and bring new medicines to market that offer new (and hopefully improved) choices for consumers.

Posted by Paul Howard at July 17, 2007 06:45 PM

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