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KerryCare for the Greatest Generation?

Robert Goldberg, Ph.D.
September 23, 2004

John Kerry calls his Medicare plan the "Compact with the Greatest Generation". But his proposals break faith with the American promise that today's elderly have come to expect: that their children, and their children's children, will have longer and healthier lives thanks to America's pursuit of medical progress.

American seniors are the healthiest in the world and have seen their disabilities diminish by the decade because of the continuing introduction of new medicines and techniques to treat morbidities associated with aging. Yet Kerry's pledge to impose price and premium controls on Medicare would eventually deliver second class medicine to the elderly by undermining market incentives to invest in future cures - as price controls have already done in Canada and Europe.

Studies by health demographer Kenneth Manton demonstrate that seniors in America are living longer and healthier lives over the past decade thanks to a continuing decline in the prevalence of stroke, cancer, dementia, heart disease and arthritis, in large part due to spending on new medicines and investment in biomedical research. Overall, the average decline in disability is about 2 percent a year, a trend Manton expects to continue - barring any change in access to new medical technologies. Similarly, Frank Lichtenberg, an economist at Columbia University, has shown that new drug consumption is associated with longer life, better health, and lower health care costs, particularly for Medicare beneficiaries.

Indeed, Manton has found that Medicare costs would have been nearly $30 billion higher in 2000 if seniors had not gotten healthier. Over the last 25 years, the total savings are significantly greater. Medicaid has also saved billions more because the percentage of American seniors in nursing homes is significantly less than predicted. And we haven't even counted yet the increases in income and tax revenues generated from workers who are more active and more productive as they age.

As president, John Kerry's programs could very well slow or reverse future health gains for the elderly. First, his proposal to put Medicare in charge of buying prescription drugs includes price controls and drug formularies that ration access to new medicines based on their price, rather than allowing doctors to prescribe medicines based on the rapidly growing number of available technologies that allow physicians to develop treatment programs based an individual's unique genetic profile.

Canada, France, Britain and Germany all have similar price controls - and long delays (up to two years) for access to the best new medicines. Studies by health outcomes expert Susan Horn have found that similar restrictive drug lists are associated with making seniors sicker and driving up health care costs. Over the long run, Kerry's restrictive "Compact" would lead to higher health care costs, less access to advanced care, and poorer quality of quality of life for Americans as they age.

Kerry also thinks that having the government directly purchase over 50 percent of all prescription drugs at government mandated prices would drive down prices and profit margins for pharmaceutical companies. He's right, it would, and has already done so in Europe and Canada where research on new drugs has declined and the number of new molecular entities developed there has fallen by nearly 50 percent since 1998. If President Kerry imposes the same constraints on American pharmaceutical companies, we can expect reduced investment in better medicines to treat the most expensive and debilitating diseases facing Medicare beneficiaries: Alzheimer's, Parkinson's, schizophrenia, diabetes, heart disease, cancer, stroke and lung disease.

Finally, Senator Kerry looks with envy at the savings that Europe and Canada enjoy on prescription drug prices and supports an importation bill that would force companies to make and sell an unlimited amount of their products in price controlled markets so that they could later be imported back into the United States via the Internet.

However, Europeans and Canadians free-ride on American innovation, paying a fraction of the full cost for drugs that are developed, marketed, and sold here first. If price controls are imposed on the American market (directly or surreptitiously, via the Internet) the European free ride would come to an end and the entire world (poor and rich nations alike) would have sharply reduced access to new medications for cancer, AIDS, TB and other dreaded killers.

Of course, Kerry should already know this. He unveiled his price control plan to a group of biotech executives in Massachusetts this past spring. They told him in no uncertain terms that price controls would cripple biotech investment. In an interview with the Boston Globe after the meeting, Richard F. Pops, chief executive of Alkermes Inc. of Cambridge and chairman of BIO, said that "[if] there are hints of price controls, capital for this industry will dry up."

John Kerry has said he wants to give Americans the same kind of health care that he has as a Senator. What he really means is the best health care available today, in our market-driven medical system. Sadly, through his proposed price controls and rationing, Kerry would lower the bar for almost all of America's seniors today and for generations to come.

Our children - and our children's children - deserve a better plan.

Robert Goldberg, Ph.D., is Director of the Manhattan Institute's Center for Medical Progress.

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