Welcome to Medical Progress Today, a web magazine devoted to chronicling the connection between private sector investment and biomedical innovation, market friendly public policies, and medical progress. Every Thursday we will distribute our email newsletter chronicling the latest news and commentary that illustrates the intersection between medical progress and market driven public policies, along with timely research and original Spotlight articles on health care policy from some of America's leading health care experts.
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In the Spotlight
The Medicare Modernization Act 2003Many of you I'm sure, felt the passing of Ronald Reagan very deeply. The panorama in Washington reminded us of many things: our rich history, our deep convictions, our inherent optimism, and our profound gratitude for the public service of a great leader. But to me, more than anything else, it was a reminder of the power of ideas to shape the world. The core economic ideas of encouraging and rewarding free enterprise so that it could again become an engine of national and global growth; the core political ideas of democracy and freedom bringing better lives to people around the world; and the core security ideas of advancing peace through economic as well as military strength, all of these ideas will forever be associated with President Reagan. Even more importantly, I think they'll be associated with the best efforts of free peoples and free nations to make the world a better place. Few institutions have provided more steadfast support for ideas like these than the Manhattan Institute. Born of the fiscal crisis in New York City more than 25 years ago, the Institute is a champion of fiscal and urban reform that has helped restore New York City as a cultural and financial capital, and an intellectual capital as well.
Mark McClellan, 7-12-04
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New, Lower Goals Set for Bad Cholesterol -- Amid Evidence of the Benefits Of Drastically Lowering LDL, Government Urges Levels Below 70
Wall Street Journal, 7-13-04
As doctors take advantage of new statistical and diagnostic tools in their battle against heart disease, they are starting to revise cholesterol lowering treatment guidelines for patients who are at higher risk for heart attacks.
The latest "therapeutic option" (a notch below an actual recommendation) was issued by an NIH panel from the National Cholesterol Education Program and suggest that high risk patients lower their LDL cholesterol to 70-30% belowing the current recommentation. The panel also recommended that patients at moderate risk should consider drug therapy to lower their LDL levels below 100.
These recommendations could conceivably affect 29 million patients and their doctors; the problem is that most high risk patients are already on statin therapy, and of those only about half have managed to reach LDL levels below 100. More incremental gains can be achieved by increasing the statin dosages, since the drugs are widely considered safe. Nonetheless, there is still a real concern about side effects, and the potential cost, of significantly increasing statin dosages or combining statins with other cholesterol lowering drugs. One solution being considered is a new drug, Zetia, that blocks LDL from being absorbed by the body in the first place. A new combination pill with both Zocor (a statin drug) and Zetia is awaiting approval at the FDA.
Patients at risk for heart disease are benefiting from a growing array of therapeutic options, and will benefit more in the future as researchers continue to fine tune clinical guidelines and personalize drug treatment regimens.
Lack of AIDS Doctors In Poor Countries Stalls Treatment
Wall Street Journal, 7-13-04
A shortage of health care workers in poor nations struggling with the AIDS epidemic is slowing the effective distribution of cheap anti-retroviral drugs. For instance, in Cambodia, there are only 50 doctors trained to properly treat AIDS patients, or one for every 3,140 people who are HIV positive.
However, since inexpensive AIDS drugs are available, some patients are "self-treating, under-medicating, splitting prescriptions with infected family members, or just dropping out of treatment." The risk with self-medication is that, as with antibiotics, an incomplete or improperly administered course of treatment with anti-retroviral drugs can create drug-resistant disease strains-increasing the likelihood that current combinations of AIDS drugs will become useless in relatively short order.
The shortage of trained health care workers-particularly doctors and nurses-is primarily due to poverty and a lack of educational opportunities in poor nations; an aggravating factor is the ongoing exodus of medical personnel from developing nations to wealthier countries (like Britain, New Zealand, and Australia, among others), where pay and benefits are significantly better.
Unfortunately, solutions to this problem are equally scarce. There is no central coordination of efforts to increase the supply of physicians who can treat AIDS patients, nor are there enough Western physicians available to bridge the gap. Training and donor outreach efforts are also hindered by political strife and crime in many host nations. Still, without a sustained effort to expand health care capacity in host nations, access to cheap AIDS drugs may not be enough to stem the rising tide of AIDS victims.
Pressure Points: Attacking Rise in Health Costs, Big Company Meets Resistance: Pitney Bowes Finds Culprits, But Can't Beat Them All; $11,447 Knee Arthroscopy; Marketplace 'Wasn't Working'
Wall Street Journal, 7-13-04
Pitney Bowes is a company whose efforts to control health care costs and improve employee health has drawn widespread praise. Still, the company is barely treading water in its efforts to control runaway costs. For instance, last year employee hospital use (as measured by the average length of hospital admissions) was unchanged from 2002 levels-and total employee admissions were flat. Nonetheless, hospital costs rose nearly 10%, and average hospital costs per day rose a staggering 17%.
Why? In California, and throughout the nation, hospitals have consolidated into large groups to gain leverage in negotiating fees with HMOs and other insurers. In San Francisco, one hospital chain, the Sutter Health network, increased its average price for one service, knee arthroscopy, by 36%. Other culprits: "entrepreneurial doctors prescribing costly MRIs and CT scans" and new expensive drugs.
The problem facing Pitney Bowes is endemic to U.S. healthcare-patients are funneled by insurers into networks of providers who don't compete on quality. This basically means that employers looking to change providers shift from one network to another based on volume discounts, without being able to access any underlying improvements in productivity. But as providers consolidate, employers have less and less ability to even negotiate effective volume discounts. Until providers are forced to compete on quality of service, they will have few incentives to economize their operations and improve productivity. Without productivity gains forced by real competition, prices will continue to rise much faster than the overall rate of inflation.
One solution to this problem would to broaden the use of health savings accounts so that individuals have incentives to seek out the best care at an affordable price, regardless of a provider's network affiliation, and also make it easier for physicians to set up innovative clinics focused on treatments for specific conditions like diabetes or heart disease, where treatment specialization can radically increase productivity and drive down costs. More suggestions for consumer driven health care reforms can be found in this article by Regina Herzlinger: http://www.manhattan-institute.org/html/_jfsp-consumer.htm.
Generic AIDS Pill Gets Patent in Africa
Wall Street Journal, 7-13-04
Cipla, one of the world's leading manufacturers of generic drugs, is patenting its combination AIDS drug, Triomune, in South Africa and 17 other African nations grappling with the AIDS epidemic. Triomune contains a combination of three other drugs (lamivudine, stavudine, and nevirapine) that are under patent by, respectively, GlaxoSmithKline, Bristol-Myers Squibb, and Boehringer Ingelheim.
This is an interesting development, because anti-patent AIDS activists have long argued that patents on AIDS drugs have prevented them from being sold cheaply in developing nations. Apparently now that Triomune has become the combination of choice for leading AIDS donors supplying anti-retroviral therapy in Africa, Cipla has decided to protect its drug from competition from other manufacturers using the same formula, i.e. positioning itself as the monopoly supplier for this particular combination therapy.
It will be interesting to see how critics of the pharmaceutical industry respond to this development; perhaps they will argue that Cipla needs a patent to protect and recoup its investment in Triomune's development. Perhaps they will argue that Cipla's profits on its patented AIDS drug will help fund Cipla's pipeline for future AIDS treatments. Perhaps they will argue that patents spur innovation by encouraging entrepreneurial investment. All of these things may be true, and good arguments. But they apply to all drug manufacturers, not just those generic companies favored by industry critics. Cipla's move to patent Triomune smacks of rank hypocrisy--but at least hypocrisy is the tribute vice pays to the virtue of intellectual property.
Pfizer chief's speech disrupted by AIDS activists carrying mock corpses
Associated Press Newswires, 7-13-04
The visceral reaction of some anti-globalization activists against drug patents is driven at least in part by the belief that prices on patented drugs are arbitrary, based on nothing by corporate greed. At the recent international AIDS conference in Thailand, anti-globalization activists stormed the stage during a speech by a pharmaceutical industry executive and dumped mock bodies on stage symbolizing all of the people supposedly killed by the high prices of HIV drugs produced under patent.
Having a real debate on pricing for AIDS drugs-and making them affordable for developing nations-means recognizing that companies cannot invest in discovering new medicines without significant financial incentives. Research can be subsidized through public-private partnerships that reduces the costs of drug development and consequently lowers market prices, or the distribution of critical drugs can be widened through differential pricing, i.e. charging more for AIDS drugs in rich nations than poor ones.
But the issue of pricing cannot be brushed aside with a sneer or ignored by wishful thinking. Private sector innovation is the engine of wealth creation-and human health. Wealthy nations are healthy because they are wealthy: they can afford to spend lavishly on health care infrastructure, including R&D for drug development.
Unraveling intellectual property rights for patented drugs entirely would mean sabotaging the free market incentives that created the very drugs that activists want to appropriate. Corporations who make critical medicines have a responsibility to make those medications available at affordable prices to poor nations-but they also have a right to protect their inventions and recoup their investments. Jeremiads against corporations, which inevitably neglect these underlying facts, will only undermine research on new AIDS treatments.
Bush Seeks Policy Fix For Drug Imports
The Boston Globe, 7-13-04
Is it wrong for companies to charge different prices in different markets? Obviously not. The price a company charges in New York-or Calcutta-for a given product depends on a variety of factors, including competition, consumers' ability to pay, and currency exchange values. Differential pricing means that some products-for instance prescription drugs-are significantly cheaper in many poor nations than they are in rich countries.
The picture is further complicated in countries with price controls on drugs, where governments have monopsony power and can set prices or overturn patents if drug manufacturers refuse to sell at the price the governments are willing to buy. In other words, a company's choices-in Canada, Australia, or Europe-is basically limited to selling their produce very cheaply or abandoning the market altogether.
National governments, through price controls, subsidize their citizens use of prescription drugs-but this policy is not without its drawbacks. Countries with price controls often receive new medicines later than in the U.S., and use fewer state of the art medications overall. Restricting corporate profits also pushes research, development, and marketing of new medications to the U.S., which is more than happy to benefit from the infusion of high tech, high wage companies and their employees.
Nonetheless, this also means that the U.S. disproportionately funds global drug development, and U.S consumers pay more for prescription drugs than almost anywhere else in the world. The U.S. has reacted to this disparity by pushing for new bilateral trade agreements that would give companies more leeway to challenge price controls, and expand some intellectual property protections. This way, the costs of drug development would be shared over a wider base, hopefully lowering U.S. drug prices and encouraging more of a global market for prescription drugs.
Trade Agreement May Undercut Importing of Inexpensive Drugs
The New York Times, 7-12-04
One of the stated goals of the current U.S. administration is to address the imbalance in the prices that U.S. consumers pay for prescription drugs compared to other industrialized nations. Since the U.S. is the last developed market without price controls on prescription drugs, and since the U.S. is also responsible for the lion's share of global drug development and sales, U.S. consumers effectively underwrite global R&D-leaving other countries to effectively free-ride on the U.S. market.
With high drug prices an enormous issue in American politics, the U.S. has responded by making price controls in other nations the subject of bilateral trade negotiations-in this case, with Australia. Critics have responded by saying that the U.S. is trying to interfere in the domestic politics of other nations, but the reality is that the U.S. cannot single-handedly continue to serve as the engine and primary funder for global drug development. The developed world must find a way to more fairly distribute global pharmacuetical costs and benefits-unless the U.S. intends to implements drug price controls first, which some American policymakers are openly advocating.
Adopting price controls would have two effects: it would slow down global drug development as R&D plummeted, and it would drive investment and research dollars out of the U.S. to nations like India and China, both of which possess a tremendous base of highly skilled low-cost labor. This would be a set-back for global health and effectively cede leadership in this critical technological sector to America's economic competitors.
Seniors' Prescription Drug Costs: Rx for hope and frustration; Canada offers big savings, but U.S. reimportation bill stalls
Detroit Free Press, 7-10-04
Articles on prescription drug reimportation generally follow the format found here: heart-rending stories about seniors struggling to make ends meet, drug companies pouring millions of dollars into lobbying efforts to prevent drug importation, and the implicit conclusion that if Congress was serious about getting "big savings" for seniors, a prescription drug bill would've been passed long ago over the specious objections of pharmaceutical lobbyists.
Some speed bumps in this theory: the entire Canadian prescription drug market is a tiny fraction of the U.S. market-consequently, even widely expanded access to Canadian drugs would have a negligible effect on total U.S. prescription drug costs. According to an April 2004 report from the Congressional Budget Office examining current Congressional proposals for drug importation, "the importation of foreign-distributed prescription drugs would produce at most a modest reduction in prescription drug spending in the U.S.", something on the order of $40 billion over ten years "or by about 1 percent" of total U.S. costs. (Available online at http://www.cbo.gov/showdoc.cfm?index=5406&sequence=0)
Sound economics, not soapbox rhetoric, will help solve the problem of providing affordable prescription drugs for seniors and others without health insurance coverage. Focusing on prices, and not the underlying forces driving prices (the enormous cost and time required to develop and market a single new medicine) only obscures the real issues as stake and pushes policymakers away from real solutions.
AIDS Drugs' Fast Rise in Asia Risks Resistant Strains
The New York Times, 7-8-04
The issue of pricing for retroviral drugs remains an issue - but perhaps not the issue it used to be. Prices of AIDS drugs in developing nations have fallen by 90%; nonetheless, only 400,000 of the estimated 6 million patients in the developing world who need these drugs receive them. Why? At least part of the problem is the fact that "poor health systems in hard-hit nations were a major barrier." The underfunded public health sector sector in many developing regions means that even when cheap medicines are available, there isn't sufficient infrastructure in place to effectively distribute them. Or, as one expert observes, "There are countries in Africa that have grants to put people on treatment and not a single person has been put on treatment. If you have a public health structure that is not functioning, you are not going to solve the problem by shoving money at the public sector." Or as one researcher noted, "if there is a proliferation of the generic drugs, as many are calling for, where is the infrastruture to deliver them?"
In fact, all the emphasis on up-ending patent protections to drive down prices may actually distract attention from the infrastructure improvements that make ART therapy effective. For instance, in Asia, an area of the globe where experts are warning that the disease is spreading at an alarming rate, so many generic manufactuers are making ART pills that the there is a real danger that "misuse could create epidemics from drug-resistant strains of the virus." To date, at least 27 Asian companies are making HIV drugs for the local and global markets; still, only 3 companies meet WHO standards, with the rest either not meeting standards or lacking WHO review. Most distrubingly of all, "most Asian countries have far too few doctors and health workers trained to properly prescribe the drugs and monitor their use." Without adequate regulatory oversight and trained health care professionals to administer the drugs and monitor patients, the medications could be improperly utilized or poorly made, leading to weakened treatment regimes that encourage drug-resistant viral strains.
Addressing this imbalance requires recognition that price alone is not the only hurdle to overcome when it comes to treating the virus effectively. More effort needs to go into creating expanded health care capacity in developing nations, and establishing inspection regimes to ensure that generic AIDS drugs provided meet the highest standards - as the FDA has for the U.S.'s own global AIDS funding.
Pfizer to Offer Deep Discounts On Drugs for Uninsured People
Wall Street Journal, 7-8-04
Pfizer, the largest pharmaceutical company in the world, recently announced a plan to offer discounted Pfizer drugs to Americans without health insurance. Under Pfizer's program, uninsured families earning under $45,000 a year or individuals earning under $30,000 would quality for discounts averaging close to 40% on retail prices.
The program will no doubt be a valuable one and, perhaps, other companies will follow suit. Nevertheless, much more can be done to lower prices by introducing drug development reforms at the FDA; pushing other developed nations to move towards market pricing for drugs by ending price controls; and increasing information to physicians and patients on which drugs produce the most benefit for their cost. Taken together, this would make medicine much more market friendly rather than relying on arbitrary price cuts from manufacturers, which may or may not be sustainable in the long run, and which may not encourage the use of the best medications available to patients.
The Campaign to Fight AIDS: Ensuring Access to the Best Medicines
Center for Medical Progress Forum
Speaker(s): Robert Goldberg, Ph.D., Dr. Scott Gottlieb, Jerry Norris, Dr. Robert Orina Nyarango, Dr. S.L. Ramotlhwa, Dr. Amir Attaran, Karen Bush, Ph.d., Dr. Emilio Emini, Frank R. Lichtenberg, Dr. Mark Dybul
June 10, 2004 | New York, New York
How can first world nations best help save lives in the Third World, particularly those people suffering from HIV/AIDS? The U.S. government has embarked on a new plan to rapidly approve and help distribute a low-cost combination anti-retroviral therapy (ART) pill to treat HIV in the developing world. Speakers at this event contended that controlling AIDS in developing nations will require a multi-pronged approach that balances access to less expensive treatments with financial incentives for companies to invest in new, cutting-edge medicines; provides assurance to developing nations that generic medicines are as safe and effective as patented drugs sold in wealthy countries; and provides better healthcare infrastructure in host nations to deliver ART and monitor patient progress.
The Economics of Price Regulation and Innovation
Robert B. Helms, Ph.D.
AEI-Brookings Joint Center for Regulatory Studies
This paper examines the potential effects of price controls on drug development and theorizes that if a company operates in an environment with price controls it will react by reducing R&D investment; focus on developing drugs for the largest markets (rather than small or developing markets); and pursue products that would require less development time. Given the fact that the U.S. is the single most important, and last unregulated, market for pharmaceuticals, price controls in the U.S. would have a disproportionately large effect on global R&D investment. In short, "there is no doubt that price controls in the United States would have a detrimental effect on what has been, up to now, an extremely productive industry."