PNHP

Gouge the healthy and reject the sick

Gouge the healthy and reject the sick

Forbes.com
11/21/02
“Click Here for Coverage”
By Ratha Tep

Sunnyvale, Calif- based EHealthInsurance is the brainchild of an engineer named Vip Patel, 39, who started the company in 1997 after defecting from another Web healthcare start up, WebMd.

EHealthInsurance had a convincing business model. The company has formed partnerships with 135 insurance carriers, including Aetna, Cigna, Empire and HIP. It makes money as a broker, by taking an average 20% cut of the annual premium an insurer charges for those people that applied through its site and were approved for coverage. EHealthInsurance also gets 10% or so when policyholders renew their coverage, even if they don’t renew through EHealthInsurance’s Web site.

Vip Patel:

“I saw that the system that was in place for individuals seeking health insurance was broken and inefficient.”

http://www.forbes.com/best/2002/1202/005.html

Comment: Since EHealthInsurance sells health insurance in the individual market, which is subject to underwriting, individuals with significant chronic disorders are rejected by the insurers. Coverage is limited to only a healthy subset of applicants. And paying a 20% broker’s fee significantly increases the administrative waste that characterizes our system since this fee is in addition to the high administrative costs of the insurers and the administrative burden that they place on the providers.

Vip Patel recognized that the individual health insurance market was “broken and inefficient.” But instead of offering measures to fix the system, he has maneuvered himself into a position to take a major cut of the action, only compounding the defects of our current system. Adding to insurance costs for the healthy and denying the sick any coverage at all is not the type of innovative reform that we need.

The administrative cost of enrolling an individual in a single, universal public insurance program for life is less than negligible. Let’s eliminate the brokers along with the rest of the superfluous administrative waste in our system.

New voice in health-care reform

Maine Med ‘parent’ offers proposal

By JOSHUA L. WEINSTEIN, Blethen Maine Newspapers
Copyright © 2002 Blethen Maine Newspapers Inc.
December 11, 2002

PORTLAND — The state’s largest health-care provider offered a plan Tuesday to solve Maine’s health-care crisis. The proposal requires the cooperation of health-care organizations and professionals, the federal government, state government, insurance companies, employers and individuals.

MaineHealth — the parent company of Maine Medical Center, Spring Harbor Hospital, Community Health Services and other heath providers — says a coalition that includes unions, businesses and other organizations has already pledged to cooperate.

The “Health Care Challenge” is the latest health-care reform plan released recently. Anthem, the state’s largest private health insurer, offered a study in November, Gov.-elect John Baldacci has a plan and the Legislature is studying a single-payer, or universal, health-care proposal. Just last year, voters in Portland supported the concept of a single-payer system.

“There have been other plans to solve the health-care cost crisis, some more inclusive and comprehensive than others,” said Bill Caron, president of MaineHealth, during a press conference at DoubleTree Hotel in Portland.

“The Health Care Challenge is different because it lays out what each interested party can and must do to achieve the goal of quality, affordable health care for everyone. It recognizes that everyone must bear some of the ‘pain’ of reform, and that everyone must step up to the plate.”

The proposal recommends that:

l Health-care organizations and professionals — including MaineHealth affiliates — increase prices by no more than 6 percent in 2003 and limit profits to 3 percent.

l The federal government increase Medicare payments.

l The state increase Medicaid payments for physicians’ services by 10 percent during 2004 and every year thereafter until they are commensurate with Medicare payments.

l Insurance companies hold profits to 3 percent or less.

l Employers continue sponsoring health-insurance coverage and individuals adopt healthy lifestyles.

Bill Cohen, a spokesman for Anthem, complimented MaineHealth for entering the debate, and said, “we agree with a great deal of the plan.”

However, he wondered about the plan’s call for limiting profits to 3 percent.

“We want to … understand why they are suggesting that number, and do they totally understand the impact of that suggestion?” he said. “We can’t just, in a sense, endorse it, because you’ve got to understand how do you work through those conflicts, but, to their credit, they’ve put it on paper, they’ve put it out there. Now all of us need to come to the table and talk about it.”

Joe Ditre, the executive director of Consumers for Affordable Health Care, called the proposal “retro.”

He said that “it’s good that they are at least coming to the table, and saying it’s a problem,” but that “they still are talking about an employer-based system, they’re still talking about increasing their rate, basically giving them more money and the federal government and state government giving them more money.”

“Why perpetuate a very failed system?” he asked.

Ditre said it is significant, though, that MaineHealth and Anthem are getting involved in a public policy discussion.

“It says to me that both providers and insurers … are very nervous about what’s going on in our health-care system, and see the writing on the wall. I take this as a pre-emptive strike. MaineHealth wants to be involved and basically is staking its claim.”

Carl Leinonen, executive director of the Maine State Employees Association, one of the organizations that endorsed the Maine Health Care Challenge, called it “just one piece of the whole puzzle,” and said his organization “sees this as complementing and adding to other initiatives. Our efforts can provide positive support for the incoming Baldacci administration as it develops its specific health care proposals.”

Kevin Gildart, the vice president for human resources at Bath Iron Works, who also spoke at the press conference, said “the new millennium has begun with clear indications that managed care is in transition and that new answers and innovations are needed in health care.”

He said the challenge “is a significant first step” to fixing the problem.

Health insurance costs rise 14.7% this year, survey says

ajc.com
December 9, 2002
FROM NEWS SERVICES

New York — The average health coverage premium for U.S. employees rose 14.7 percent in 2002, the largest one-year increase since 1990, according to a national study.

Health insurance costs were $5,646 per employee, compared with $4,924 in 2001, according to the survey by Mercer Human Resource Consulting, based in New York. Annual insurance premiums have risen an average 7.5 percent per employee since 1990, when they rose 17.1 percent.

To limit costs, companies have been cutting back on the plans they offer and how many employees they cover, the study said. Companies with at least 500 employees were more likely than smaller businesses to trim expensive health-management organization offerings, said study author Blaine Bos.

“Everything larger companies did created disruptions for their employees,” Bos said. “[Employees] had to pay more out of pocket, and many were faced with losing the options they had elected.”

About one-quarter of 2,900 employers surveyed said workers will pay a larger share of health plan costs in 2003.

“The costs are going up, and employers can’t afford it,” said Stephen Harri, managing director of Aon Healthcare.

Health care costs have been on the rise for the past several years due to a combination of events. The public’s dislike of restrictive managed-care plans has forced health insurers to widen access to doctors and hospitals, which are charging higher fees.

Drug prices continue to surge, and new medical technologies are available for conditions once considered untreatable.

Kansas companies expect 13 percent health insurance increases

Witchita Business Journal
December 9, 2002

Large companies in a four-state region that includes Kansas expect their health insurance costs to increase 13 percent next year.

Mercer Human Resource Consulting surveyed 119 companies with 500 or more employees in Kansas, Iowa, Nebraska and Missouri as part of a national health benefits survey of nearly 2,900 employers.

Nationwide, the Mercer survey says, employers paid 14.7 percent more to insure their employees in 2002: from an average of $4,924 per employee to $5,646. In 2003, they expect their costs to increase another 14 percent.

In the four-state Great Plains Region that includes Kansas, employers said their per-employee health benefit increases in 2002 rose 8.5 percent: from an average of $5,053 to $5,484.

Deputy sickout is more than a labor issue

Visalia Times-Delta
December 5, 2002
Editorial

Frustration reigned Tuesday among several Tulare County offices.

It was illustrated by the sight of Sheriff Bill Wittman explaining the absence of 37 percent of his line staff who had called in sick to protest their stalled contract negotiations.

It was evident in the picketing by county employees who fear rising health-insurance costs will eat most of their paychecks next year.

And the frustration was reiterated again by Wittman, who noted that his deputies are the lowest-paid in the area and pay the highest percentage of their paychecks for health insurance.

But the issue that links them all and overrides the others is health care. It is ironic the deputies used a sickout to convey their frustration, because health care is at the heart of the matter.

When will we as a state and community realize that the lack of affordable health-care insurance and care options is building to a catastrophe that crosses all interests? This week’s events should tell us that, if nothing else.

We’ve seen the signs in the past couple of years as fewer health-insurance companies are willing to write insurance here. Doctors can’t afford to practice here because the reimbursement rate for public insurance is so low. Hospitals are forced to close. Clinics and emergency rooms are overflowing. Specialists can’t be lured to practice here. There is a shortage of nurses ….

And now it is evident from the crisis among public employees that even professional and middle-management workers can’t afford health-care coverage.

Also Tuesday night, a small group of people conducted its monthly meeting: “Health Care for All” promotes the adoption of a universal access, single-payer health-care insurance plan. It’s a radical concept that would eliminate private insurance plans in favor of one system that covers everybody and would be paid for partially with taxes now devoted to health care and partially through the premiums paid through existing plans.

That, too, is complicated. It will take a massive education effort to convince most people that it would be to their benefit.

But look what is happening with the alternative.

The deputy sheriffs are sending a message to our community: Unless we fix the health-care system, we as community will not be able to afford to protect ourselves. We will not be able to afford the public services we take for granted. We can’t continue to see expenses for health care rise without the dam bursting. Tuesday we saw the cracks appearing in that dam in the form of massive employee discontent.

http://www.visaliatimesdelta.com/news/stories/20021205/opinion/512457.html

Some Tentative First Steps Toward Universal Health Care

December 7, 2002
New York Times
By MILT FREUDENHEIM

orried that the growing number of uninsured patients will undermine the nation’s health care system, insurance executives across the country are pressing for new steps toward universal health care.

Many health plans are developing or offering insurance with lower premiums and slimmer coverage to attract customers who cannot afford more comprehensive policies. Executives at Blue Cross Blue Shield of Montana are pressing state legislators to raise the cigarette tax to subsidize basic coverage. Another insurer, Blue Shield of California, proposed a plan this week for health insurance for all state residents. And Dr. William W. McGuire, chief executive of the UnitedHealth Group, the largest private insurer, has written to every member of Congress calling for “essential health care for all Americans.”

Health insurers, which have long ranked high among the country’s most disliked businesses, frame many of their proposals in public policy terms. But they also have strong business reasons to become involved in the debate over helping the uninsured. They want to add young, healthy members to their insurance pools to spread the cost of caring for the sick. They are also eager to add members whose premiums would be paid with tax money or government subsidies.

Several insurance executives also said pressures generated by the uninsured were raising a threat to the system that could lead to government intervention if insurers did not develop a plan first.

“If we don’t do something in a darn hurry about the uninsured, the whole health care system in this country is going to collapse and the government will step in,” said Chuck Butler, a vice president of Blue Cross Blue Shield of Montana. “People will say, enough is enough.”

Dr. Jay Crosson, executive director of physician groups at Kaiser Permanente, the largest nonprofit insurer, said, “As insurance becomes less affordable, more and more people will be upset and frightened, and the industry will find itself drawn into the political process.”

Most health insurers are thriving, keeping ahead of rising hospital charges and doctor fees by raising premiums as much as 30 to 40 percent a year for small companies and 17 percent and higher even for large employers. But the increases, combined with disappearing jobs, are leading many people to drop health insurance and, not incidentally, adding to the unpopularity of insurance and managed care companies.

Each 1 percent increase in costs adds 300,000 to the 41 million uninsured, according to the Lewin Group, a health care research organization. Many of the uninsured are young and healthy workers in small companies. When they go without health insurance, costs per person soar for the sicker people who remain.

People who need care keep the coverage like “people buying fire insurance when the house is on fire,” said Randy Kammer, a vice president of Blue Cross and Blue Shield of Florida.

Some health insurers in the Southeast are finding that as many as one in 10 small-business customers are not renewing their coverage, according to Brian Klepper, executive director of the Florida-based Center for Practical Health Reform, a group of insurers, hospitals and employers.

But uninsured patients still go to hospitals, which then pass along the cost of unpaid bills in higher charges to health plans.

“The tragedy of our nation’s health care system,” said Dr. McGuire of UnitedHealth, “is that in spite of its many impressive features, it has ultimately failed to make even basic care consistently available to all of our citizens.”

Dr. McGuire is calling for building universal coverage around an agreed national definition of what constitutes basic acceptable coverage, “based on firm evidence” of the effectiveness and cost efficiency of the care. He has written to every member of Congress and dispatched UnitedHealth officials to promote his plan in Washington, D.C., and in Minnesota and other states.

On Tuesday, Bruce G. Bodaken, the chief executive of Blue Shield of California, one of the largest health plans in the state, called for a statewide universal health care system, to be financed by employers, individuals and a new tax, which he said could be a model for the nation. More than six million California residents have no health insurance.

Mr. Bodaken said in an interview and a speech at the Commonwealth Club in San Francisco that under his plan, all except the smallest employers would be required to offer basic coverage. Individuals who could afford it would have to buy their own policies, and a new tax would subsidize those unable to get coverage.

Blue Shield has commissioned an independent study of taxing alternatives, including raising the state income tax, sales tax, a tax on health insurance premiums or hospital and doctors’ fees and the tobacco tax.

“We absolutely have to solve this problem,” said Helen Darling, president of the Washington Business Group on Health, a group of large self-insured companies. “The number of uninsured will inevitably grow because of the rapid rise in health care costs. We know it’s going to get much worse.”

In Florida, 30 insurers, working with Tom Gallagher, the state insurance commissioner, plan to introduce several lower-cost standard and basic policies in the spring to attract small groups that have been dropping coverage. Some policies will include high deductibles and fewer state-mandated provisions like numerous visits to occupational and physical therapists, said Ms. Kammer of Blue Cross and Blue Shield of Florida.

In Montana, insurers have lined up bipartisan support in the legislature to raise cigarette taxes at next month’s session to subsidize health care for the uninsured. The package includes tax credits for employers with two to four workers, coverage for schoolteachers and for more children in low-income families, as well as prescription drugs for low-income elderly people, Mr. Butler said.

Only 2.9 million New Yorkers are uninsured, reflecting the state’s extensive public assistance programs. But Howard Berman, chief executive of Excellus, a Blue Cross holding company in Rochester, said that with a projected budget shortfall exceeding $6 billion, the state will be hard put to help if more residents lose their coverage.

“We need new products for middle-class people who have been priced out,” he said. “And we need more efficiency in the system to reduce costs.”

http://www.nytimes.com/2002/12/07/business/07CARE.html

Physicians lump HMO patients with MediCal and the uninsured

The Center for the Health Professions
University of California, San Francisco
California Physicians 2002: Practice and Perceptions
December 2002
By Kevin Grumbach, MD, et al

Only 58% of patient care physicians in the state are accepting new patients if the patient has HMO insurance coverage. The percentage of specialists with HMO patients fell from 77% to 62% between 1998 and 2001. The rate of physician participation in private HMO plans is approaching the historically low rate of physician participation in Medi-Cal, the state’s insurance plan for low income Californians. A privately insured HMO patient in California now faces almost as much difficulty as a Medi-Cal patient in obtaining a new patient appointment with a new doctor. The problem of lack of availability of physicians in many regions of the state is largely due to physicians not accepting patients with certain types of health insurance (or without health insurance altogether) rather than due to an absolute shortage of physicians practicing in California.

http://futurehealth.ucsf.edu/pdf_files/Phass2.pdf

Comment: In a personal communication, Dr. Grumbach comments:

“Definitely looks like managed care is in the retreat in CA. Only problem is that I think a lot of docs are hoping to return to the mythical ‘good old days’, basically charging patients directly, rather than are looking forward to a universal system under public administration. And the results from the Kaiser docs are interesting, suggesting to me that Kaiser Permanente has actually won over its physician staff with a model of managed care that seems to be more genuinely committed to quality of care and a strong culture of physician led group practice.”

Volenik says single-payer plan feasible

By: Stephen Betts
December 06, 2002

The chairman of a state panel looking at designing a state-run, single-payer health care system said a consultant’s report leaves him convinced such a system is doable.
      Paul Volenik, who represented Vinalhaven and North Haven in House District 129 for eight years until Wednesday, said the committee will make a formal presentation to the state Legislature next month.

      He said Thursday he is hopeful a single-payer system can be approved, whether it is this year or another year.

      The report by Mathematica Policy Research of Washi-ngton, D.C., finds that a single-payer system compared to the current system would either cost the same or cost 5 percent more, depending on the benefits provided under a single-payer system.

      Mathematica is projecting $8.3 billion will be spent on health care in Maine in 2004 and that will jump to $10.6 billion by 2008 under the current system.

      But Volenik noted that with the current system, 150,000 Mainers have no health insurance. He said even if a single-payer system costs 5 percent more than the current one, it would be worth it insure everybody.

      The consultants were conservative when calculating the administrative savings a single-payer system would reap, he noted. Eventually, there will be more savings as people with insurance become healthier and costs are lessened.

      The current way of financing health care, through taxes for Medicaid and privately financed insurance through businesses and individuals, would be replaced with a payroll tax, Volenik said.

      The tax could be 12 to 16 percent, he said, with one model calling for the employer to pay 8 percent and the worker 4 percent. This system would ensure that the people most able to pay would pay the most.

      He said businesses that do not contribute anything for their employees’ health insurance would incur greater costs. However, some businesses would pay less, as would employees, many of whom already pay a high price for coverage.

      For instance, a person earning $20,000 annually would have to pay $800 if the employee portion of the payroll tax was 4 percent. That $800 is less than what most people pay for their share of insurance premiums, he noted.

      Volenik was a major proponent of a single-payer system during his years in the Legislature. He convinced the state to form the 19-member Health Security Board, which has been meeting frequently and hired the consultant to work on a model for a single-payer system.

©Courier Gazette 2002

Provider cross-subsidy to uninsured declining

Center for Studying Health System
Change Mounting Pressures: Physicians Serving Medicaid Patients and the Uninsured, 1997-2001
Tracking Report No. 6
December 2002
By Peter J. Cunningham

Clouds on the Horizon

Continued financial pressures on physicians may decrease their willingness to serve Medicaid patients even further, potentially endangering access to care. States are experiencing serious budget pressures, and most are considering reducing or freezing Medicaid physician reimbursement to cut program costs. Rising health care costs as well as reductions in other provider payments may constrain physicians’ ability further to cross-subsidize free care to uninsured patients. And access to physicians is just one concern, as more general cost-containment measures being considered or implemented by states also could affect access to hospitals and prescription drugs among both Medicaid and uninsured patients.

http://www.hschange.com/CONTENT/505/

Comment: Our current system of funding health care is not capable of assuring access to health care for low-income and uninsured individuals. This problem would be eliminated by improving the allocation of the $1.55 trillion that we are already spending on health care. The administrative efficiencies of a single, universal, publicly-administered insurance program would provide enough recovery of wasted resources to fund comprehensive services for everyone.

SF Chron Letter to Editor: Market Share vs. Health Care

Market Share vs. Health Care

by Don Bechler

Blue Shield CEO Bruce G. Bodaken’s solution for achieving universal health care would have Californians paying more money while expanding Blue Shield’s market share. His employer mandate/public insurance model perpetuates administrative waste and a system in which multiple health plans try to insure the healthy and avoid the sick.

Let’s rid ourselves of the 300 insurance company and 69 government bureaucracies in California. Creating one publicly funded and PUBLICLY ACCOUNTABLE agency to finance all healthcare would rid us of the existing maze of bureaucracies. We would pay taxes in lieu of premiums, but they would be less than current insurance company premiums. This would mean a healthier economy with more money in the pockets of businesses and working people.

The State of California recently concluded a 1.2 million-dollar study called the Health Care Options Project. (www.healthcareoptions.ca.gov) It concluded that by removing the insurance industry from the health care loop, Californians could save 7.6 billion dollars a year while insuring everyone with better services including long term care and full prescription drug coverage. As insurance would not be tied to employment, you could change jobs and still keep your same doctor.
Bodaken dismissed the study saying he disagreed with it and that the Blue Shield Foundation would produce its own study showing how his plan would work.

State Senator Sheila Kuehl will soon introduce legislation for the plan that saves Californians money and produces high quality health care for all.

More money for Blue Shield is not the only choice.

Don Bechler
Chair
Health Care For All
San Francisco Chapter
415-695-7891

Jobless swell clinic's rolls

Posted on Mon, Dec. 02, 2002

MORE SPACE NEEDED IN MTN. VIEW TO SERVE UNINSURED
By Truong Phuoc Khánh
Mercury News

Every layoff in Silicon Valley leaves not only one more unemployed worker but also one more unemployed worker without medical insurance. As the jobless ranks grow, one free health care clinic in Mountain View — traditionally the medical refuge for the working poor — is seeing white-collar workers filing into its waiting room.

They come in for flu shots, cold medicine or a prescription for high-blood pressure. As is true at all nine RotaCare clinics in the Bay Area, the visits are free. The Mountain View clinic, which operates on a shoestring budget of $250,000 aided by a cadre of volunteer doctors, nurses and translators, is looking for another, larger facility to serve the growing uninsured population.

“There’s always been an uninsured immigrant population,” said Dr. Erica Weirich, a family practitioner who donates her time to treat RotaCare patients once or twice a month. “But recently, things have changed. We’re definitely seeing much more of a mix — individuals who have lost their medical coverage because they’ve been laid off.”

The first RotaCare clinic was formed by a local Rotary Club in Santa Clara in 1989 to provide free medical care to those without access to medical services.

The bulk of those who visit the clinic in Mountain View are immigrants and the working poor who labor in service-industry jobs without health benefits.

While Spanish is still dominant, a more diverse mix of languages can be heard at the clinic recently, from Farsi to Chinese to Russian.

“It’s like the U.N. in our waiting room,” said Barbara Avery, manager of outreach medical services for El Camino Hospital, a collaborator and sponsor of RotaCare. “You’re out of work for a year, things get very, very tight, and you’re sick. To go to a doctor for a medical visit may be more than they can afford.”

Nicole Patakova, 39, worked as a quality controller for a technology company until six months ago.

“Good job, good pay,” she said.

Her husband, also laid off from an electronics company this year, was recently diagnosed with high blood pressure. The couple came in the night before Thanksgiving.

Patakova said she felt uncomfortable being there.

“I’ve never used something like this,” Patakova said. “I’ve always worked in my life, and I’ve never needed help like this.”

Weirich recalled two nights earlier when a young man came to the clinic with a similar story.

“He’d been laid off, and he was actually there with a common problem, an infected ingrown toenail,” Weirich said. “And he was really embarrassed to be there. He said he used to have a personal doctor.”

Before 5 p.m. Wednesday, the waiting room was full. Mothers with young children. Senior citizens. Young couples who are pregnant.

Alongside first-timers such as Patakova were regulars who struggle with chronic ailments like diabetes and heart disease. Isabel Torres, 30, has been coming for six years to keep her diabetes manageable. Giovanni Arriola, 23, arrived in the Bay Area two months ago from El Salvador and had an earache.

The all-volunteer staff for the evening: two doctors, two nurses, one nurse practitioner, one nursing student, one medical assistant, one pharmacist and three Spanish translators.

Some services provided at the clinic are immunizations, tuberculosis testing, pregnancy testing, treatment for high blood pressure, diabetes, asthma, free medications and children’s physicals.

A major sponsor for the clinic is the Peninsula Community Foundation, but a one-year grant is running out and the clinic is seeking additional support to help it secure a long-term lease elsewhere.

RotaCare benefits not just those who walk through its doors, Avery said, but also the community at large.

“We don’t want emergency rooms flooded with patients coming in with an earache,” Avery said. “You don’t want to eat a salad prepared by a worker who has TB.”

Dr. Richard Brown's Testimony on Drug Prices at NY State Hearing

Testimony of the New York Chapter of Physicians for a National Health Program
Hearing of the New York State Assembly Committee on Health
Prescription Drug Prices in New York State, December 5, 2002

        My name is Richard J. Brown. I am a psychiatrist, recently retired, who has been in practice, both institutionally and independently, for over 35 years. I additionally received an M.S. in administrative medicine from a school of public health. My educational and working experiences have led me to look beyond my immediate clinical and administrative activities into the functioning of the health care system.
        I am on the Board of Directors of the New York Chapter of Physicians for a National Health Program, an organization advocating a publicly funded, publicly administered health care system that provides equal access for all residents to quality, affordable care. Our nation is the only industrialized country that does not provide this for all our residents; more than 40 million people in the United States are medically uninsured, and a similar number are underinsured.
        It is not that there isn’t enough money to provide health care for everyone. Our country spends more on health care (more than 14% of GDP) than any other country (10.5% of GDP is the most that any other country spends.) Yet we are way down on the World Health Organization’s performance list – only 37th — lower than Canada, Japan, and all of Europe. Ours it the only industrialized country without a national health program.
I am here to speak about the pharmaceutical industry and the cost of prescription drugs in this country and in this state. The prescription drug industry is costwise the fastest growing sector within the 14% of GDP utilized for health care. Drug spending is rising 15-20% a year – doubling every five years.
        Part of this increase is demographically driven. We are living longer, growing more numerous, and many of us require medicines for chronic conditions. The increase is also due to advances in the science and practice of medicine, including the development of newer drugs that help to manage high blood pressure, diabetes, elevated cholesterol, infectious diseases including HIV/AIDS, gout, depression and psychoses, among other diseases.
        But another part of this rising cost is attributable to unconscionable profit-taking and profligate promotional practices. The pharmaceutical industry’s average profit after all expenses including research and development, advertising, promotions, lobbying, political campaign funding, contributions to law makers, and anti-consumer lawsuits to maintain uncontrolled prices is 18-19% – that’s over three times the profit margins of the other industrial sectors.
        Looking more closely, we find that drug prices in this country average over twice those of the very same drugs in other countries. How does this happen? In every single country throughout the industrialized world except for the United States, drug prices are government controlled. Let me say that again: In Australia, in Canada, in France, in Germany, in Italy, in Japan the governments control drug prices. Also to be noted is the fact that direct-to-consumer advertising (DTCA) is banned in the European Union and Canada. Europeans visiting the U.S. are startled to see those ubiquitous “Ask Your Doctor” ads we find on TV and radio, in newspapers and magazines, and on billboards. While the industry claims that this advertising is “educational,” in yesterday’s New York Times it was reported that the General Accounting Office  Congress’s investigative arm – has found that “drug companies have repeatedly disseminated misleading advertising, even after being cited for violations, and millions of people see the deceptive ads before the government tries to halt them.” These ads are hard to escape in the United States, and as I have indicated, are not to be found in Europe or Canada.
        Promotions include lectures to physicians in expensive restaurants and often include paying the doctors up to $500 to help drive the point home that the drug being promoted is the Rolex of them all.
        The pharmaceutical industry has thus far been successful in blocking even weak federal legislation that would lower drug prices. These costs are borne by Medicaid, state programs, and private insurers, as well as by individual patients without drug coverage who sometimes have to compromise expenditures on food, clothing, fuel and other necessities of life.
        So far even modest attempts at reining in drug prices have failed at the national level. We in New York cannot afford to wait until this much-needed national reform is adopted. Other states either singly, or in partnership with other states, are beginning to take measures to control spiraling drug prices. It is high time for our great state of New York to take a leadership role in this endeavor; such a step would offer a decided benefit to our own people and to people around the country.
        As you review your legislative alternatives, I ask that you consider very seriously the necessity of controlling pharmaceutical prices in order to defend the public coffers and to make affordable drugs available to all New Yorkers.
        I thank you for this opportunity to testify before this Committee.