In the Spotlight
Don’t Kill The Pharmaceutical Golden Goose
Gilbert L. Ross, M.D., 11-18-04
What a Fall it's been - in every sense of the word - for drug giant Merck: late September saw its withdrawal of the blockbuster anti-arthritis and pain-relieving drug Vioxx. Then, last week, a new report revealed that a Merck vaccine against the virus that causes almost all cervical cancer was completely effective in a 4-year trial among over two-thousand patients.
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Support for Cholesterol Regimen
The New York Times, 11-11-04
Call it the one-two punch against heart disease. A new drug regimen combining a traditional cholesterol lowering drug (a statin) in addition to a B vitamin (Niacin) has shown that it can “slow the progression of heart disease more effectively than either medicine alone” according to a new study.
While statins lower “bad” or LDL cholesterol, the vitamin Niacin has long been known to raise the amount of HDL or “good” cholesterol in the bloodstream, “which helps remove fats from the blood.” However, high doses of the vitamin have adverse effects that have made it unworkable as a drug - until now. The Niacin drug used in this study, Niaspan, is an extended release form of the vitamin that reduces the incidence of adverse effects. In the study quoted here, patients “who had suffered a heart attack or who had other signs of hardened arteries” received either Niaspan and a statin or just a statin. After a year, the combined Niaspan/statin group had “fewer heart attacks, strokes, and deaths” than the group receiving only statin treatment.
Dosanjh threatens to cut off Web drugs
The Globe and Mail, 11-11-04
The Canadian Federal Health Minister, Ujjal Dosanjh, has announced “that he will ensure the safety of the Canadian drug supply, even it if means choking off the flow of cheap Internet drugs to the United States.”
The Canadian government is even considering restrictions on doctors who write prescriptions that allow Internet pharmacies to ship drugs to the U.S. “Mr. Dosanjh said it is unethical and unprofessional for Canadian doctors to sign prescriptions for cross-border shoppers from the United States without seeing the patients themselves.” The central problem, according to the minister, is that the Canadian market is too small to indefinitely sustain a large demand for imported drugs in the U.S. In short, “Canada cannot be the drugstore for the U.S.”
The economics here is pretty straight forward: if demand in the U.S. rises significantly for Canadian drugs, the Canadian supply will tighten and prices will rise for Canadian consumers. And since Canadian politicians don’t have to worry about a backlash from American seniors, they won’t allow that to happen. Of course, U.S. policymakers who support drug importation have long known that large scale importation was really untenable – but they are using it as a very effective stalking horse for imposing price controls on the U.S. market.
Pfizer chief urges new consensus on healthcare.
Financial Times, 11-11-04
“People are so angry and frustrated that they are reaching out to all sorts of wacky ideas.”
The debate over health care in America has become so volatile that the CEO of one of the largest global pharmaceutical corporations feels like he has to speak out lest “wacky ideas” become the order of the day.
Pfizer CEO Hank McKinnell is advocating for a bipartisan government commission that will “take a broad look at how treatment is provided, and its costs to patients and companies” and help the U.S. reach a consensus on how health care is paid for and delivered.
We understand his concern. Pharmaceutical companies are under fire around the world not really for their greed (although that is the buzzword in some circles), but for their efficacy. Drugs for AIDS, heart disease and dozens of other ailments have been wildly successful, and dozens more life-saving drugs are on the way. But the more effective these drugs are, the more patients demand them – and the burden falls heaviest on governments that have trained their citizens to think of health care as an entitlement that is or ought to be free. The consequence is that demand for health care is rising sharply as pharmaceutical companies become more adept at healing our aches, pains and anxieties – and governments gripe as their own health care costs spiral out of control because they have insulated patients from the only known way of adjusting supply to demand: prices.
Consider, for instance, the following anecdote. Pfizer and other drug companies are increasingly advocating for public health agencies to implement disease management programs “designed to show that preventive medicines and improved patient management can reduce illness and expensive [hospital] stays.” The idea is that these programs will show that drug treatment saves money for government programs versus other types of care, and thus is well worth the investment. In Florida, Pfizer is running an experimental disease management program that has already saved the state $41 million over two years by targeting “impoverished patients on state medical aid” and showing that “better patient management and medicine use could prevent long term problems.” In exchange for guaranteeing savings for the state, Pfizer has asked for a higher price on its medicines. Fair, right?
Florida has already said that it will demand price concessions no matter what the program’s outcome. And that’s the bottom line. Improved health care is a nice outcome for government agencies, but it doesn’t help them balance their budgets at the end of the day.
Consumers are the only group that directly benefits from improved health care quality, and if they experience that quality they will support it with their wallets and pocketbooks. Until that day comes, governments will rely on price controls, mandates, and other wacky ideas to support “free” health care.
Firm offers discounted generic medicine to low-income families
The Cleveland Plain Dealer, 11-10-04
Express Scripts, a pharmacy benefits management company that “runs drug benefit programs for millions of Americans” has introduced its own program for low-income individuals (Rx Outreach) and families without health insurance. The program offers “generic drugs as next-to-nothing prices” which, in some instances, will even be lower than those offered across the border in Canada.
Express Scripts will offer the plan in the 10 states in which it has operations and will offer “any of 54 generic medicines made by 17 pharmaceutical companies”; Express Scripts will offer the generics at $18 for a 90-day supply, or $30 for a six-month supply, provided the drugs are purchased through mail order. Express Scripts claims that they are offering this benefit as a public service, not as a marketing or public relations ploy.
Six of one, half-dozen of the other if they both have the same effect. As we move towards full implementation of the Medicare drug benefit in 2006, companies like Express Scripts have every incentive to compete for Medicare customers on issues like price, quality, and, of course, its stature as a good corporate citizen. This is certainly the kind of competition that we all benefit from and the nation can use more of it.
W.H.O. Panel Backs Gene Manipulation in Smallpox Virus
The New York Times, 11-12-04
There are only two laboratories in the world where the smallpox (variola) virus is known to exist: at the Centers for Disease Control in the U.S. and the Novosibirsk lab in Russia.
The operative word is “known”. Other countries are suspected of keeping clandestine stocks of the virus as a potential bioweapon, and there is ongoing evidence that terrorist groups (particularly Al Qaeda) have attempted to acquire or manufacture chemical and biological weapons. Given the murderous potency of smallpox, it is undoubtedly quite attractive to any terrorist group with an apocalyptic agenda.
In light of the real (albeit remote) chance of a smallpox attack, the World Health Organization has taken the unprecedented step of authorizing the U.S. and Russian labs to genetically alter the smallpox virus in an effort to speed up the search for drugs that can treat the disease. The research will be subject to “whole load of provisos and conditions” but it is indicative of how serious the threat of bioterrorism is that the W.H.O. authorized the work at all.
Tiny Antennas To Keep Tabs On U.S. Drugs
The New York Times, 11-15-04
Pharmaceutical companies and the FDA are working together on an initiative to bring inventory management technology (and the same technology underlying electronic highway toll booth systems across the country) to the drug wholesale industry in an effort to stem a rising tide of counterfeiting and theft in America’s prescription drug supply chain.
The technology, known as known as Radio Frequency Identification (RFID), is “basically a bar code that barks” – an electronic id tag that helps to make “supply chains more efficient and more secure.” “Computer chips embedded into stickers” will be inserted into selected bottles of frequently counterfeited or stolen medications like Oxycontin or Viagra. The tags then “emit numbers when prompted by a nearby radio signal.” Although the technology is still in its infancy, it will allow pharmaceutical companies that employ it to track drugs as they migrate through the drug supply chain from manufacturer to the shelf of your neighborhood pharmacy.
Prescription drug crimes are expanding as amateur thieves give way to professional syndicates. “We’ve seen organized crime start to get involved,” said William Hubbard, an associate FDA commissioner. “With some drugs costing thousands of dollars per vial, the profit potential [for criminals] is huge.” At least initially, RFID tags will only be used on a handful of medications at high risk for abuse; however, as the technology becomes less expensive it will be possible to cheaply and easily ensure that every drug Americans take is exactly as safe, effective, and legal as it claims to be.
NEWS AND ANALYSIS: Do New Drugs Always Have to Cost So Much?
The New York Times, 11-14-04
What is a price, really? Prices are the signals that markets use to determine how highly valued a given commodity is. Low-prices equal low-value; high-prices equal high-value. The milk that goes into your ice cream isn’t genetically destined to become a creamy dessert; it could also wind up in your coffee, or dozens of other alternative uses. But ice cream companies buy milk at prices that guarantee them a profit on their final product; if coffee drinkers are willing to pay more, more milk goes to them. If someone was to fix the price of milk for ice cream arbitrarily lower than milk for coffee (because ice cream is so valuable it ought to be cheaper), ice cream makers would inevitably stop making ice cream and start selling café lattes. Lower prices do no mean you get more of a valuable commodity; most of the time it means you get less.
This is usually what happens when policymakers start mulling about better ways the government can fix prices in health care markets. The money that goes into drugs can just as easily be used to finance hundreds of other investments. Lowering the price for drugs just tells the market: this isn’t that valuable. Spend your money elsewhere.
Still, hope springs eternal. Consequently, this article examines a number of ways researchers and governments can exert more influence on drug prices, from buying patents outright from companies, to doing the research themselves, to setting up a fund to compensate drug companies “based on how much their new drugs improve the quality of life and how often they are used.”
But this just returns us to the central problem with all government pricing: what is valuable to a bureaucrat is not necessarily (and not often) what is valued on an open market. What is more valuable to consumers: penicillin or Viagra? Depends on which consumer you ask.
But shouldn’t many drugs cost less? Perhaps. But that would entail letting consumers control more of their own health care dollars and letting them decide if they want to pay full price for Viagra, or Celebrex, etc. – and those drugs would have to compete with other consumer preferences for ice cream, Starbucks, and X-Box games.
Then we could save insurance or government funding for the really hard cases: cancer, AIDS, Alzheimer’s etc., where the drugs are very expensive – and very valuable.
Preparing for Vioxx Suits, Both Sides Seek Friendly Venues
Wall Street Journal, 11-17-04
Whether the Vioxx cases are won or lost depends largely on where they are held. Plaintiffs’ lawyers will try and place as many suits as possible in state courts, where they can expect a friendly reception from juries and judges in very carefully selected forums. Defendants, on the other hand, generally (although not always) prefer federal courts which tend have more experience dealing with complex litigation and are more likely to interpret rules of evidence narrowly. Where will the cases wind up? No one really knows yet. But if venue is so important to the resolution of the issues, whatever happens to the issues themselves? The utter debacle that was the breast implant litigation against Dow Chemical shows a medical liability system run amok, a system that doesn’t offer fair compensation to truly injured patients or protection for manufacturers who obey the law and operate according to detailed state and federal regulations.
Whatever the outcome of the Vioxx suits, we are long overdue for a no-fault system for the pharmaceutical industry, one of the most heavily regulated industries in the world. This system would be modeled on the vaccine injury compensation fund run by the Department of Justice, and would offer real compensation for injured victims without threatening the viability of companies that contribute mightily to the public health.
Punitive damages or tort liability could be reserved for those rare instances where there has been outright fraud on the FDA, and provide a powerful but fair incentive for companies to disclose all the known risks of a medicine or medical device as soon as they can be reliably identified.
Commentary: Health Care: Beyond Markets
Washington Post, 11-11-04
This op-ed has a startling thesis: American health care is too awkward, expensive, and patchy because there is too little government oversight of health care markets and prices.
I doubt that any doctor who has ever tried to get reimbursement from Medicare would embrace that conclusion. Or a single male who paid for an expensive health insurance policy through his employer that included a mandated benefit for in vitro pregnancy services – along with the attendant extra cost – thanks to his state insurance commissioner. Medicare, Medicaid, and the Veteran’s Administration are riddled with tens of thousands of health care rules, regulations, and price caps, representing perhaps 44% of all health care dollars spent in the U.S.
According the author, “Americans face a one-in-six chance of exclusion from insurance coverage.” True, insurance coverage is a problem, but if you are Canadian you have about the same odds of not getting in to see your doctor or a specialist when you most need them. The average waiting time between seeing a primary care physician in Canada and a specialist is about 15 weeks – nearly 4 months.
We agree that the U.S. market is riddled with inefficiencies – not because it is a market, but because it is socialism with a market face, i.e. expenses are covered largely through third party payors who fund health care based on price, not quality. That, at least, the U.S. and Canada have in common.
On the Contrary: Open Season on Others' Ideas
Daniel Akst, The New York Times, 11-14-04
This article is worth reading for its focus on what may be one of the defining characteristics of our postmodern technological age: free-riding (through illegal music and movie downloads, drug importation, etc.) on the investments and innovations of others.
On the topic of drug importation, Akst says that “the discovery by American patients and politicians that Canada is a cheaper place than the local pharmacy for buying medications was a sign that, inevitably, Americans would rather join the growing legions of global free riders than underwrite health care innovation for everyone else.” Future medical innovations depend on rewards for those who produce them, i.e. profits, and anything that diminishes those profits diminishes incentives to bring new products to market.
The logical outcome of a copyright- and patent-free world: we will all become consumers in a world defined by generics – generic music, generic books, generic medicines. In that world, everything would be cheap, but, as the old saying goes, you get what you pay for.
BOOKS: Why Canada isn't the answer to health care
Elizabeth Whelan, Washington Times, 11-14-04
This is a book review of Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer, by Sally Pipes, President and CEO of the Pacific Research Institute, a San Francisco based think tank.
Whelan says that Pipes knows that “for most Americans access to health care and inexpensive drugs are considered an entitlement” that all should receive at “little or no cost”. As a former Canadian herself, Pipes catalogues the serious shortcomings of Canada’s single payor system, and this allows her to illustrate how government regulations and interference in health care markets adversely impacts medical care in the U.S.
Pipes also puts America’s health care crisis into perspective: most Americans spend only about 6% of their income on health care costs (about the same as dining out and entertainment) and seniors only spend about 3% on prescription drugs – not what you would call terrific hardships. Her prescriptions for improving American health care are elegant and simple. Educate the public about real health care costs and convince them that health care isn’t an entitlement; increase use of health savings accounts (HSAs) and high deductible insurance policies; and complete real medical malpractice reform. Taken together, her advice would significantly improve the cost and quality of health care for all Americans.
AIDS Policy in Shambles
James K. Glassman, Scripps Howard News Service, 11-15-04
Glassman chronicles the embarrassment now enfolding the World Health Organization and AIDS activists who embraced the practice of supplying generic AIDS drugs to developing countries without vetting them for safety and efficacy first. All of the drugs made by generic Indian drug manufacturers have been removed from the W.H.O. preferred medicines list because there is no reliable evidence (to date) showing that they are in fact bioequivalent to the patented medicines they were supposed to mimic.
“The use of unverified generics – which are copies of drugs developed and patented by research pharmaceutical companies in the U.S. and Europe – has been aggressively promoted by UN agencies like the World Health Organization and by nongovernmental organizations like Doctors Without Borders.” Glassman thinks that the strategy of relying exclusively on generics is not being driven by a concern over patient health but by “animosity toward the United States and [pharmaceutical companies].”
The FDA has set up a fast-track process for generic AIDS drug approvals for the $15 billion President’s Emergency Plan for HIV/AIDS, but, so far, no generic companies have applied. What does that tell us about the confidence generic companies have in their research and products?
A prescription for sanity
Mortimer B. Zuckerman, U.S. News & World Report, 11-22-04
We could all use one. Zuckerman’s piece is a well-crafted piece of cold-blooded rationality – a rarity these days. Zuckerman starts out by noting that “the tendency to demonize the drug companies badly confuses just what’s going on in our society”. What is happening is that total drug spending is rising as more prescription drugs are applied to more ailments – not surprising since, according to many public authorities, Americans are widely under-treated for common maladies ranging from depression to heart disease.
Zuckerman notes that Canadian importation may be a “superficially attractive notion”, but “if profits are sharply cut, there will be less money for research and development. Forcing down American drug prices would, by some estimates, produce a cutback on [drug] R&D of as much as 25 to 30 percent.”
His final words of wisdom: “instead of worrying about restraining or reducing drug costs, we should be focusing on staying healthier and achieving better health outcomes. That’s the heart of the matter.”
The Effect of Drug Vintage on Survival: Micro Evidence from Puerto Rico’s Medicaid Program
Frank R. Lichtenberg, NBER Working Paper No. w10884, 11-18-04
Lichtenberg, a distinguished health economist at Columbia University, examines “micro data on virtually all of the drugs and diseases of over 500,000 people enrolled in Puerto Rico's Medicaid program” and finds that “people using newer drugs during January-June 2000 were less likely to die by the end of 2002” based on the relative age (i.e. vintage) of the medications they were prescribed. Overall, “the actual mortality rate is about 16% (3.7% vs. 4.4%) lower than it would have been if all of the drugs utilized in 2000 had been pre-1970 drugs.”
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