Medical Progress Today
  Volume 1, Number 11
  September 30, 2004


In the Spotlight

The rush to black label (or blackball) SSRIs.
Sally Satel, MD, 9-30-04

Last June, Eliot Spitzer kicked off a long hot summer for SSRI[1] drugs with his lawsuit against makers of the antidepressant Paxil. The New York Attorney General accused GlaxoSmithKline of "concealing" evidence that Paxil led to an increased risk of suicide in children. As autumn sets in, the controversy isn't showing any signs of cooling off anytime soon, especially since the FDA is itself now in the hot seat.[2]

Continue reading . . .

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Featured News:

Rush for Medical Scans Raises Concerns on Cost
The Boston Globe, 9-18-04

Featured Commentary:

The Nation: Venture Medicine: Health Care Costs Are a Killer, but Maybe That's a Plus
Steve Lohr, The New York Times, 9-26-04

Featured Research:

Effects Of Generic-Only Drug Coverage In A Medicare HMO
Health Affairs, September 2004


News

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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U.S. drug agency alleges intercepted Canadian prescription drugs unsafe, made elsewhere
Associated Press Newswires, 9-28-04

Customs agents in Miami this week intercepted "439 packages of prescription drugs ordered by Americans from the website www.CanadaRX.com." Many of the packages had suspicious or incorrect labeling, and had come from as far a field as Singapore, Japan, and New Zealand. The FDA alleged that CanadaRx had opened a division in the Bahamas to purposefully evade regulation by Canadian and American authorities.

When drugs are purchased online, some Internet pharmacies may try to substitute cheaper drugs from foreign wholesalers to increase their profit margins, raising the possibility that consumers are unknowingly paying more for inferior quality drugs. Fraud is an ever present possibility since drugs purchased abroad must often be repackaged and relabeled to meet U.S. standards; this opens a wide avenue for drug substitutions, mislabeling, or outright fraud. Until these safety concerns can be addressed, Internet sales will be accompanied by the risk of fraud or worse.

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Dr. McClellan's Medicare Rx - Deft Political Hand Reshapes Health-Insurance Behemoth
Wall Street Journal, 9-28-04

Dr. Mark McClellan, former FDA Commissioner and current Administrator of the Centers for Medicare and Medicaid Services, is a quiet but persuasive reformer who is trying to nudge America's titanic federal health care programs into the 21st century, primarily by insisting that government health coverage should be cost-effective, and based on real information about what treatment works and why.

This means getting America's fragmented system to become increasingly quality based, rather than driven solely by cost-control approaches, and to increase the amount of information available to Americans about their health care options. Says Dr. McClellan, "If we learn more about when certain treatments don't work, then doctors and patients aren’t going to want to use them and we're not going to have to pay for them." As a physician and an economist, Dr. McClellan is a champion of the viewpoint that the most effective care is often also least expensive in the long run. If he can instill that culture in the government’s enormous Medicare bureaucracy, while convincing seniors to embrace competition and choice, he will manage to revolutionize American government without ever holding elected office.

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FDA Will Warn on Antidepressants: Labels Will Say the Drugs Increase Youth Suicide Risk; 'Black Box' Alert Considered
Wall Street Journal, 9-24-04

The FDA will require all antidepressants to carry some kind of highly visible warning about the risk of increased suicidal tendencies in young people, but it has not yet decided if it will heed the advice of an FDA Advisory Committee to place a "black box" label on the drugs, the most serious step short banning the drugs outright for pediatric use or withdrawing them from the market.

The FDA's concern is that the black box may cause some physicians and parents to avoid the drugs entirely, leaving them with few effective options for treating severe pediatric depression.

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Insider Challenges Drug Industry on Imports
The New York Times, 9-24-04

As detailed in yesterday’s MPT Special Edition, Does Importation Save Money and Lives? Not in Europe, a Pfizer executive from Europe has taken it upon himself to speak his conscience and support the legalization of drug importation in the U.S. Currently importation, called parallel trade, is legal in Europe, where wholesalers are allowed to re-import drugs from low-cost markets like Greece, to high-cost markets like the U.K.

Still, studies have shown that the national governments in the E.U. save very little from parallel importation because the price differentials between markets are captured as profits by the wholesalers who repackage and ship drugs. While slashing profits for pharmaceutical companies may play well in certain audiences, the fact is that with reduced profits companies have fewer incentives to pursue research on new medicines.

In the long run, that means lost lives and poorer patient health; contra Dr. Rost, isn’t that a real safety issue?

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When the Insured Struggle to Pay for Health Care
Wall Street Journal, 9-23-04

Perhaps as many as "57 million, or one third of U.S. working age adults dealt with some kind of long-term illness, such as diabetes, heart disease or depression." Even when they have health insurance, people with chronic illnesses can be vulnerable to soaring health care costs, as rising premiums force their employers to pass more costs along to them.

However, part of the problem lies with how the U.S. structures health care. Insurance coverage by employers is fully tax deductible, while expenditures by employees are not. This robs employees of the power to shop for better values in insurance markets by seeking out insurers who offer plans tailored to their illnesses, or even to purchase supplementary insurance that would provide a safety net in addition to insurance paid for by employers.

Equalizing the tax laws so that all out of pocket health care expenditures (or at least insurance purchases) are tax deductible would help to close this gap, as would changes in federal law that would allow consumers to shop for insurance nationally, spurring much needed competition and innovation in insurance markets. Putting more responsibility, and consequently more power directly in patients hands would greatly help to alleviate the perverse incentives that simultaneously driving up premium costs for employers and prevent people from adequately insuring themselves against unforeseen health expenditures.

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Low-Income Nonapplicants to Get Medicare Drug Cards
The New York Times, 9-23-04

The Bush Administration has taken an important step in insuring that the newly enacted Medicare discount cards reach the people who need them most by automatically enrolling as many as 1.8 million low-income Medicare seniors into the program. Low-income seniors who use the card and its attached $600 subsidy can cut their out of pocket costs by as much as two-thirds (according to a recent study by the American Enterprise Institute). Hopefully, this move will help to raise public awareness of the program and convince seniors that it represents a real opportunity, not a risk.

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Critics: Legalization Will Lead To Job Losses
The Boston Globe, 9-23-04

The critics are probably right. Two new studies, focusing on state job losses due to drug importation, show that "[importation] would wipe out thousands of jobs in states like Massachusetts that depend on pharmaceutical and biotechnology research." One study, conducted by the Beacon Hill Institute at Suffolk University and the think tank Institute for Policy Innovation, shows that Massachusetts would lose nearly 4,000 jobs and $246.9 million by 2010.

A similar study, from the University of Michigan (and sponsored by Pfizer), shows that Michigan could expect "job losses of 20,000 to 133,000 over the next decade, corresponding with overall declines in pharmaceutical research and development of 25 to 75 percent."

Critics of these studies who accuse the pharmaceutical companies of greed and sour grapes should take a closer look at Europe – where pharmaceutical R&D and its attendant high-paying jobs have fled to the U.S. as price controls and parallel importation became increasingly prevalent there. Given the European experience, there is no reason to expect that Americans wouldn't experience a similar trend, with investment shifting to China, India and other low-cost, high-tech developing markets. (For more information on Europe’s self-inflicted wound, see Europe's Pharmaceutical 'Free Ride' Might Not Be So Free after All.)

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Rush for Medical Scans Raises Concerns on Cost
The Boston Globe, 9-18-04

Patients in many parts of the U.S. can get quick access to some of the most sophisticated diagnostic tests in the world: magnetic resonance imaging, positron emission tomography, and computed tomography scans. In Massachusetts alone, there are 145 MRI scanners, perhaps as many as in the entire country of Canada.

So far, so good, if patients and doctors only used these services when they were really needed, and not as placebos meant to assuage a patient's vague fears or pad hospital bills. However, since health care in the U.S. is given to one party, prescribed by another party, and paid for by a third party, there are perverse incentives to over-consume or over-utilize health care.

No one disputes that these tests are powerful, and in many, cases, even cost effective. Still, the country may spend as much as $96 billion this year on these sophisticated tests, a 28 percent increase since 2000. As a result, "insurers and employers worry that the jump in imaging and advertising are leading to unnecessary scans as it becomes more convenient for doctors to refer patients to a [diagnostic] center and as more physicians install machines in their own offices." In Massachusetts, "insurers generally pay providers between $500 and $1,400 for an MRI scan", making them a lucrative option for those who own them.

The alliance between doctors and patients to splurge on expensive, but only marginally useful tests, drives up health care costs across the board. The solution? Patients need some skin in the game, and must become responsible for routine health care costs so they can ultimately decide if $1,000 in out-of-pocket costs for an MRI is money well spent or just an overpriced sugar-pill.

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Commentary

The Free-Market Cure : Republicans, not John Kerry, could provide the right medicine for our health-care system.
David Gratzer, National Review Online, 9-28-04

If the GOP wants to get serious about health care reform, it must offer a comprehensive vision for the transition to a consumer based system by deregulating insurance markets, stream lining health care regulations, and offering the states block grants to experiment with new individual based market driven models. "American health care has reached a crossroads: Either government's role will continue to expand, or health care will evolve away from bureaucracy. We know where Kerry stands. The president has begun to offer an alternative. He must make his case strongly and clearly, not simply for the sake of his re-election, but for the future of American medicine.

Cut Off at the Bypass For Most People, Stents and Drugs Are Usually Safer, Better
Washington Post, 9-28-04

For all of the national angst about rising health care costs, there is real good news to be had from improved health care, for instance angioplasty and drug treatment replacing the riskier, and ultimately more expensive forms of open-heart bypass surgery.

While Bill Clinton's open-heart surgery for a triple-bypass may have made news, this author points out that bypass is actually the riskier procedure compared to new techniques where stents, or drug coated stents, are threaded into a patient’s veins to clear obstructions. Consequently, "the bypass operation, which involves sawing open the chest, is a 40 year old procedure that is usually unnecessary." Today, doctors are increasingly coming to the opinion that the least invasive treatments are often the preferred method. "Over the past year, in fact, New York State has seen three times more stent procedures than coronary bypass operations." The new "conventional wisdom", is that doctors should use a "combination of limited intervention and medication, an improved understanding of the disease process, aggressive risk factor modification, and intensive medical therapy." Today, that means that many Americans at risk of heart disease (15 to 20 million) take statins, cholesterol lowering drugs and "retard the development of coronary blockages to the point" where patients may not need any physical interventions at all. In many ways, President Clinton's case was an exception to the new rules of medicine, rules that are saving more lives and expense than the procedures they replace.

The Nation: Venture Medicine: Health Care Costs Are a Killer, but Maybe That's a Plus
Steve Lohr, The New York Times, 9-26-04

America is spending more on health care, and will continue to do so, even if all the waste and mismanagement is squeezed out of the system, because "modern medical technology has made it possible to do more for more people." America is the wealthiest nation in the world, and Americans have shown themselves more than willing to foot the bill for the latest technological improvements, including more new drugs, diagnostics, and more hip and knee replacement surgeries for America's affluent senior citizens. Mr. Lohr quotes a study from Frank Lichtenberg, a Columbia University researcher, showing that "40 percent of the increased longevity in 52 countries over the last 20 years can be attributed to new drugs." In general, who would quibble with better health and longer lives? After all, "having longer, higher quality lives is a luxury that we as a society can increasingly afford." Lichtenberg added, "What would you rather be spending it on? More plasma TVs?"

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Research

Effects Of Generic-Only Drug Coverage In A Medicare HMO
Jennifer Christian-Herman, Matthew Emons, Dorothy Georg,
Health Affairs , September 2004

Are new drugs generally more effective than older, generic medications? Or can older drugs be relied upon as less expensive substitutes for newer, patented medications. This study, published online in Health Affairs, examined a California HMO whose drug coverage switched to a generic-only benefit. The study found that "the change was associated with reduced health plan pharmacy cost, increased out-of-pocket pharmacy costs for members, increased overall hospital admissions, changed-drug use patterns, and a negative impact on quality for certain conditions", namely congestive heart failure (CHF), coronary artery disease, diabetes, and antidepressant medication use.

The authors think the results "warrant further study", particularly since "pharmacy cost savings may be eroded by increased total medical costs for these members, especially in light of increased hospital admissions." The impetus to use cheaper, generic drugs as first-line medications is tempting given the financial constraints facing both private and public insurance programs; however, policymakers should remain aware that newer medications may be more cost-effective than older treatments, and work hard to ensure that short term cost pressures do not overwhelm other cost/quality considerations.

The Value of Life and the Rise in Health Spending
Andrew J. Hall, Charles I. Jones,
NBER Working Paper 10737, September 2004

Debates over health care spending usually only go in one direction: how do we decrease spending. However, Americans have shown their willingness over time to spend "a rising share of total economic resources on health and have enjoyed substantially longer lives as a result."

These authors argue that Americans increased willingness to pay for health improvements may stem from a "rational response to changing economic conditions – notably the growth of income per person." The researchers "estimate parameters of social preferences about longevity and the consumption of non-health goods and services' and show that the rising value of life causes Americans to discount non-health spending and "move up the marginal-cost schedule of life-extension." In short, "[The] intuition for this result is that life is extremely valuable, and as we get richer and richer, the most valuable channel for our spending is to purchase additional years of life." Indeed, it seems like the old adage that health is wealth is also inversely true: with rising wealth, Americans will spend more on health.

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Medical Progress Today is published by the Center for Medical Progress at the Manhattan Institute for Policy Research.

For more information about Medical Progress Today, please contact the managing editor, Paul Howard, at phoward@manhattan-institute.org, or via telephone at 212.599.7000, x319.

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HOME

SPOTLIGHT

The rush to black label (or blackball) SSRIs.

NEWS

What is a health savings account and what are its benefits?
U.S. drug agency alleges intercepted Canadian prescription drugs unsafe, made elsewhere
Dr. McClellan's Medicare Rx - Deft Political Hand Reshapes Health-Insurance Behemoth
FDA Will Warn on Antidepressants: Labels Will Say the Drugs Increase Youth Suicide Risk; 'Black Box' Alert Considered
Insider Challenges Drug Industry on Imports
When the Insured Struggle to Pay for Health Care
Low-Income Nonapplicants to Get Medicare Drug Cards
Critics: Legalization Will Lead To Job Losses
Rush for Medical Scans Raises Concerns on Cost

COMMENTARY

The Free-Market Cure : Republicans, not John Kerry, could provide the right medicine for our health-care system.
Cut Off at the Bypass For Most People, Stents and Drugs Are Usually Safer, Better
The Nation: Venture Medicine: Health Care Costs Are a Killer, but Maybe That's a Plus

RESEARCH

Effects Of Generic-Only Drug Coverage In A Medicare HMO
The Value of Life and the Rise in Health Spending
Center for Medical Progress 
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