Chicago Tribune
May 8, 2004
Voice of the People
Medicine prices
By Ida Hellander, MD, Executive director; Quentin Young, MD, National
coordinator; Physicians for a National Health Program

Chicago — This is regarding “The high price of drugs” (Editorial, May 2). It’s true that reimportation of drugs from Canada is “no long-term solution,” but it’s equally shortsighted to keep Medicare from negotiating drug prices with the pharmaceutical giants.

In fact, that’s the only long-term solution to ensuring that all Americans receive both lifesaving medications and value for their tax dollars. We don’t need to import drugs from Canada; we need to import Canadian drug prices. There is no reason to expose us to the costs and risks of physically exporting and then reimporting drugs when our sole intent is to bring our drug prices closer to those of Canada.

We need to negotiate with pharmaceutical firms, demanding that they provide much greater value for their products. Much of their research is wasted on products that are designed to restart the patent clock.

And then they waste funds on intensive marketing to convince physicians and the public that these more expensive products should be purchased when they are often no better than existing, but less profitable, generic products.

Medicare currently negotiates rates for physicians, hospitals, laboratories and other health-care providers. The process may not be perfect and needs continual fine-tuning, but the results are that we receive greater value for our Medicare investment. There is absolutely no reason that the pharmaceutical industry should be exempted from this process.

The claim that negotiated prices would bring an end to innovation and research is totally without merit. There is absolutely no way that the global pharmaceutical industry is going to walk away from its share of the $1.8 trillion that we are currently spending on health care. The growth in medical technology continues unabated even though profits on their products are limited by rate setting of both government and private insurance programs.

Pharmacy benefit managers are no substitute for Medicare using its purchasing power on behalf of seniors. PBMs don’t drive the best bargains for consumers; they switch patients’ medications to boost profits–their own. Some PBMs are under investigation for taking tens of millions of dollars in “rebates” from pharmaceutical companies in exchange for increasing sales of “preferred” brands (regardless of their cost). Do they pass on the savings? Do pigs fly?

Americans are already spending more than enough to provide comprehensive health care for everyone, including full access to beneficial drugs. But we need to eliminate the waste in our system. If we had a single, universal insurance system, such as Medicare for All, we would be in a position to sit down with the pharmaceutical firms and demand that they provide us with real value for our health-care investment.

http://www.chicagotribune.com/news/opinion/letters/chi-0405080062may08,1,1798244.story?coll=chi-newsopinionvoice-hed

The Fraser Institute
May 2004
How Good is Canadian Health Care? 2004 Report
By Nadeem Esmail and Michael Walker with Sabrina Yeudall

Conclusion

This study has attempted to provide answers to a series of questions that are important to resolve if Canada is to make the correct choices as it amends its health care policies. The study is strictly comparative and examines a wide number of factors for the member countries of the OECD in arriving at the answers to the questions posed.

Taking this empirical approach to health care provides clear direction for health care reform in Canada.

* Canada and Iceland have the most expensive health care systems amongst the
industrialized nations that have comprehensive, universal access to health
care.

* Canada ranks first in only one of seven health care outcome categories and does not rank first in any of access to care, supply of technologies, or supply of physicians.

* No country in the industrialized world other than Canada outlaws a parallel private health care system for their citizens.

* All four countries that out-perform Canada on the cumulative rank for mortality amenable to health care, potential years of life lost, mortality from breast cancer, and mortality from colorectal cancer have private health care alternatives to the public system and some form of user fees at the point of access; none spends more than Canada after age adjustment.

The comparative evidence is that the Canadian health care model is inferior to others in place in the OECD. It produces inferior access to physicians and technology, produces longer waiting times, is less successful in preventing death from preventable causes, and costs more than any of the other systems that have comparable objectives. The models that produce superior results and cost less than Canada’s monopolistic, single-insurer, single-provider system have user fees; alternative, comprehensive, private insurance; and private hospitals. Canada should follow the example of these superior health care models.

http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=658

Comment: This new report from The Fraser Institute is important because it will be distributed widely and used intensively by the opponents of both national health insurance in the United states and of the Canadian medicare system. It is important to understand the report and to be able to respond to it.

At the outset, the report attempts to set an erudite tone by providing a series of calculations, complete with Greek letter symbols, indicating that an adjustment of Canada’s health expenditures based on the age of their population results in the conclusion that Canada (tied with Iceland) has the most expensive health care system amongst the industrialized (OECD) nations that have universal access to health care. For purposes of this conclusion, the United States was conveniently excluded on the basis that it does not have a universal system.

A careful examination of the seemingly complex but very simple calculations
demonstrates that Canada’s costs were adjusted upwards because they would
have spent more if more Canadians were over age 65. This ignores the fact
that this increased spending is fictional and does not warrant their conclusion that Canada is the “highest spender.”

Another flaw is that they made the assumption that everyone over 65 suddenly requires a more intensive level of services. It is really only at the end of life when there is an abrupt increase in costs for a significant number of patients. And Canadians, being egalitarian, have accepted that each person is entitled to one but only one end to his or her life. It doesn’t matter at what age that occurs. There is no reason to falsify the level of spending based on such specious logic.

That should be adequate to completely destroy the credibility of this report. But then the report does include some well established economic theory that seems to lend some credibility to the report, even though the extrapolations by the authors are not warranted. But there are other major problems with this report.

The authors draw the conclusion that the “Canadian health care model is inferior to others in place in the OECD.” To reach this conclusion, citing numerous previously published reports, they compared Canada’s performance to other OECD nations with comprehensive, universal health systems. They used Canada’s ranking in these studies. Since these are all industrialized nations with comprehensive systems, an average rank should be evidence of success of the system. In most of the lists, Canada was in the upper half.

In fact, the cumulative rank was fifth, relatively high on the list of OECD nations. The conclusion that the Canadian model is inferior is refuted by the evidence included in their report.

The most outrageous conclusion of their report is that Canada should introduce user fees, private hospitals, and alternative, comprehensive, private insurance since these are features of superior systems. Not only is their data inadequate to establish the fact that other nations have superior systems, but they also failed to provide any cause and effect relationship between quality systems and privatization and cost sharing. The failure to provide any credible support to their conclusion unfortunately reduces their paper to the equivalent of gobbledygook.

USA TODAY, Editorial/Opinion
5/4/2004
Follow Canada’s example
By Quentin Young

Forget about importing Canadian drugs. We need to import Canadian drug prices.

How does Canada and most other developed nations get 40% to 80% discounts on brand-name drug prices? The same way the Department of Veterans Affairs does: It uses its purchasing power to negotiate lower prices. This is a healthy use of market forces to secure the best deal.

Each of these nations has universal health coverage. In contrast, Americans are saddled with a screwy for-profit insurance system and suffer the world’s highest out-of-pocket health costs, and drug purchases top the list.

High drug prices have serious consequences for the sick. Prescriptions go unfilled. Patients cut pills in half to make them “last longer.” The undertreatment of diabetes and hypertension leads to amputations, strokes, heart failure and other devastating complications. The hundreds of dollars a month needed to treat chronic conditions are big factors in personal bankruptcy.

In addition to harming many patients, high drug costs batter businesses, which bear much of the cost of workers’ medications. There is increasing disgust by business leaders with drug firms’ exorbitant profits, which are four-fold higher than those of every other sector of the economy. Overpriced drugs raise costs for U.S. industry, compromising our international competitiveness.

The drug industry is dominated by a handful of giant global corporations that spend more on marketing than research and, year after year, make at least as much in profits. The claim that they need high prices to cover high research costs is bogus. The government has guaranteed their profits by extending their 20-year patents and protecting them from real competition.

Medicare negotiates prices with physicians, hospitals, laboratories and other health care providers. The drug companies, however, are exempted from this process in the new Medicare drug bill, ensuring that drug prices will continue to skyrocket.

The U.S. health system is in disarray. The economic mess, epitomized by the drug-cost crisis, makes a convincing case for a single-payer national health insurance system. Such reform would make prescribed drugs an ensured benefit and drive down expenditures by allowing the government to bargain for the best prices and highest quality.

Quentin Young, M.D., is national coordinator of Physicians for a National Health Program (www.pnhp.org).

http://www.usatoday.com/news/opinion/editorials/2004-05-04-oppose_x.htm

Editorial opinion of USA TODAY (concluding remarks):

Two in three Americans favor lifting the ban on reimporting drugs, an Associated Press poll in February found. Still, taking advantage of foreign price controls amounts to putting a Band-Aid on a deep wound.

Letting the free market work is a better remedy for making prescription drugs more affordable for all Americans.

http://www.usatoday.com/news/opinion/editorials/2004-05-04-our-view_x.htm

For an article on the federal buying power of the VA (“America’s best discount drugstore is run by the federal government.”):

http://www.baltimoresun.com/business/bal-bz.vadrugs05may05,0,902614.story?coll=bal-business-headlines

Comment: The United States has much more of a “free market” in pharmaceuticals than any other nation, and everyone agrees that the market has been very ineffective in providing affordable access to drugs for tens of millions of patients with significant health care needs. You almost feel embarrassment for the editorial staff of USA TODAY when you read that they propose the really dumb solution of allowing the continuation of the market model that utilizes measures designed to excessively benefit the pharmaceutical industry while avoiding its responsibilities to a major segment of the nation’s patients.

In negotiations with a single-payer national health insurance program, pharmaceutical firms would be assured of fair profits and adequate funds for research. We need their industry, but we don’t need their excesses. Let’s set up our own public insurance program and then negotiate with them. They’ll get a fair deal, and we will too.

Health Affairs
May/June 2004
U.S. Health Care Spending In An International Context
Why is U.S. spending so high, and can we afford it?
By Uwe E. Reinhardt, Peter S. Hussey and Gerard F. Anderson

From the ‘Abstract’:

Using the most recent data on health spending published by the Organization for Economic Cooperation and Development (OECD), we explore reasons why U.S. health spending towers over that of other countries with much older populations. Prominent among the reasons are higher U.S. per capita gross domestic product (GDP) as well as a highly complex and fragmented payment system that weakens the demand side of the health sector and entails high administrative costs. We examine the economic burden that health spending places on the U.S. economy.

From the section ‘Pricing Low-Income Americans Out Of Health Care’:

This prospect (projected premium for family coverage of over $20,000 one decade from now) puts U.S. policymakers at a crossroads.

One approach would be to persuade the upper half of families in the nation’s income distribution to help purchase adequate health insurance for families in the lower third. One may call it the “universal health insurance” road. It would, of course, involve added taxes and transfers flowing through government budgets, which would bring with them additional government regulation, especially if the aim were to structure the U.S. health system as a one-tier system in which sick people have roughly the same health care experiences regardless of their own ability to pay.

The alternative option would be to embrace as official policy, both in employment-based health insurance and in public insurance programs, a multi-tier health system in which a person’s health care experience would be allowed to vary by his or her ability to pay for health care. In such a system families in the upper half of the income distribution would have a noticeably superior health care experience than families in the lower half would have. This is certainly already the case for U.S. families with good health insurance and those without it.

The emerging political battle at this crossroads is unlikely to be styled in stark terms such as “rationing by income class” or “one-class” versus “two-class” medicine. Instead, it will be styled as a debate over “market competition versus government regulation”; as a simple, technocratic quest for greater “efficiency”; or as the dubious dichotomy of “rationing versus markets,” even though textbooks in economics instruct the reader that market prices are just another way of rationing scarce commodities, on the basis of ability and willingness to pay. At its core, then, the debate over health care, in the United States as elsewhere, is less a pure macroeconomic issue than an exercise in the political economy of sharing.

http://content.healthaffairs.org/cgi/content/abstract/23/3/10?etoc

Comment: This article answers the questions posed in only 16 pages. It should be downloaded and retained as a resource that can be used to dismiss the myths on affordability while defining precisely the actual economic issues that we are facing.

Download this article now. It should be read in its entirety and retained as an essential reference in your health policy library.

Martha Livingston, Ph.D., Associate Professor of Health and Society, SUNY College at Old Westbury, responds to the message on the insurance industry effectively classifying female gender as a preexisting disorder:

I’m going to bring this to my last women’s health class of the semester tonight; what better way to illustrate the points we’ve been making all semester?

Years ago I had a button, which I’m planning to have duplicated, that says:

“Life: a preexisting condition spread by sexual contact which is invariably fatal.”

JAMA
April 21, 2004
Reinvention of Health Insurance in the Consumer Era
By James C. Robinson, PhD, MPH

The new products and policies will test the limits of US individuals’ willingness to assign responsibility for financing health care to those individuals who use it and exempt those who do not.

On the positive side, a shift in decision-making responsibility from the employer to the employee and from the insurer to the enrollee will create a social consciousness of the imperative to establish priorities as to who will receive which services now, which later, and which never. A greater sense of personal responsibility among patients for their own health and health care will attenuate some forms of cost inflation and support the prevention and treatment of many chronic conditions. But individual patients require financial subsidies, valid information, and empathetic support if they are to grapple successfully with the difficult challenges of illness and medicine. During the long term, the insurance industry will need to combine its contemporary focus on consumers with a commensurate focus on physicians, administrative simplicity, and the social pooling of risk if it is successfully to balance limited resources and unlimited expectations in health care.

http://jama.ama-assn.org/cgi/content/full/291/15/1880

Comment: Success will require “administrative simplicity” and “the social pooling of risk.” But those will never come from the insurance industry. We’ll have to accomplish those by adopting our own public program of universal insurance.