PNHP

Health care spending for 2004

Health care spending for 2004

Health care spending for 2004

Health Affairs
February 11, 2004
Health Spending Projections Through 2013
By Stephen Heffler, Sheila Smith, Sean Keehan, M. Kent Clemens, Mark
Zezza, and Christopher Truffer

Projected spending for 2004:

National Health Expenditures (NHE): $1.7936 trillion

NHE per capita: $6,167

NHE, as percent of GDP: 15.5%

The current combination of sharply accelerating health spending, labor markets that have yet to fully recover, and rising budget deficits may be reviving thoughts about cost containment. Although it is unclear what direction new efforts to restrain health costs might take, historical behavior suggests that a continued escalation in health spending of the magnitude of recent experience will likely spur efforts to contain ths growth. The form that these efforts take can be expected to shape the nature of health care financing and delivery over the coming decade.

http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.79

Comment: Health care spending continues to increase well in excess of the rate of inflation. Dramatic changes in health care financing are already taking place as each sector attempts to contain its own health care costs. The sector with the least control is also the most vulnerable: patients with significant health care needs.

Rather than shifting funding to individual patients, making health care less and less affordable, let’s adopt a system that will remove financial barriers to beneficial care. A single, publicly administered system could contain costs while ensuring that care would always be there for those who need it.

Health insurance for all is possible

The New York Times
February 10, 2004

Health Insurance for All

To the Editor:

The Senate majority leader, Bill Frist, states that “it is impossible” to have all Americans covered by health insurance (news article, Feb. 7). Infact, it would be impossible if we were to follow the incremental strategies that have dominated the health care reform process in the past decade.

But that process has been broadened to include consideration of the single-payer model. Numerous studies have shown that a publicly administered, single insurance system would not only cover everyone but also provide comprehensive benefits. And it would provide economic mechanisms that would address the nation’s greatest concern about health care: ensuring affordability for each individual and for society as a whole.

We should no longer allow our politicians and policy makers to dismiss the most effective and affordable model of reform simply because of concerns about political feasibility.

DON McCANNE, M.D.
San Juan Capistrano, Calif.
Feb. 7, 2004
The writer is a former president of Physicians for a National Health
Program.

Physicians believe that single-payer would provide the best care

Archives of Internal Medicine
February 9, 2004
Single-Payer National Health Insurance
Physicians’ Views
By Danny McCormick, David Himmelstein, Steffie Woolhandler, David Bor

We surveyed a random sample of physicians in Massachusetts… When asked which structure would provide the best care for the most people for a fixed amount of money, 63.5% of physicians chose a single-payer system; 10.7%, managed care; and 25.8%, a fee-for-service system.

Conclusions: Most physicians in Massachusetts, a state with a high managed care penetration, believe that single-payer financing of health care with universal coverage would provide the best care for the most people, compared with a managed care or fee-for-service system. Physicians’ advocacy of single-payer national health insurance could catalyze a renewed push for its adoption.

http://archinte.ama-assn.org/cgi/content/abstract/164/3/300

Doctors Support National Insurance- Boston Globe

Doctors Support National Insurance
63% inMass.Survey Support Single-Payer Care
By Liz Kowalczyk, Globe Staff,2/10/04

A majority of Massachusetts doctors support national health insurance, and most said they would be willing to accept a 10 percent cut in fees in return for less paperwork, according to a new study about physicians’ attitudes toward health insurance.

While the four physicians who conducted the survey — all of whom are affiliated withHarvardMedicalSchool– are members of a nonprofit organization that has long pushed for universal health coverage, their results were published today in a respected medical journal, the Archives of Internal Medicine. The study is part of a growing body of research into physicians’ views toward national health insurance that is sparking debate on the topic as the number of uninsured Americans has grown to 41 million.

 A study published three years ago in the New England Journal of Medicine showed a majority of medical school faculty and doctors-in-training believed a “single-payer system”– where one government entity manages and pays for everyone’s medical care — would provide the best care to the most patients for a fixed amount of money. They chose that option over managed care or fee-for-service, in which insurance companies pay doctors and hospitals based on the treatment. Managed care and fee-for-service are the two most common types of private insurance.

The study published today was based on a survey of 904Massachusettsdoctors and included doctors at teaching hospitals as well as those who see patients in private offices.

About 63 percent chose single-payer as the best system; 26 percent picked fee-for-service, and just 11 percent favored managed care. About 67 percent of doctors agreed somewhat or agreed strongly that they’d take a 10 percent reduction in fees in return for “a very substantial reduction in my paperwork.” And 57 percent said they agreed with a salary system if salaries are “guaranteed to be within 10 percent of their previous incomes.”

Psychiatrists and primary care doctors showed the strongest support for a single-payer system, while surgeons favored it the least. Just 47 percent of surgeons believed a single-payer system would provide the best healthcare to the most patients. Dr. Steffie Woolhandler, one of the authors and a physician at Cambridge Hospital, said surgeons earn 50 to 100 percent more than other doctors. “This may explain their lower support for tinkering with the payment system,” she said.

Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health, said the study has a key weakness: The authors did not give doctors enough choices. In other words, the terms “single-payer” could mean different things to different physicians. The authors remarked in their study that they believe most physicians are familiar with the general term as referring to some type of national government health insurance system.

 
But a study three months ago published in the Annals of Internal Medicine reported that 49 percent of 1,650 doctors surveyed support government legislation to establish national health insurance. But only 26 percent of the physicians favored a program in which government would pay for all healthcare. Instead, doctors wanted tax credits or employer mandates to achieve universal coverage. Blendon also points out that managed care and a single-payer system are not mutually exclusive. A single-payer system could include a managed care component to tightly manage and control care and costs.

 “Physicians would like to see people covered, but given a choice how to do it, they might pick other ways,” he said. “There’s no question, though, that they’d like to get rid of managed care.”

 Liz Kowalczyk can be reached at kowalczyk@globe.com.
© Copyright 2004 Globe Newspaper Company.

 

Why Canadians Are Healthier

Why Canadians Are Healthier
By Judy Foreman 2/10/04

My fellow Americans: Want a health tip? Move toCanada.

An impressive array of comparative data shows that Canadians live longer and healthier lives than we do. What’s more, they pay roughly half as much per capita as we do — $2,163 versus $4,887 in 2001 — for the privilege.

Exactly why Canadians fare better is the subject of considerable academic debate. Some policy wonks say it’sCanada’s single-payer, universal health coverage system. Others point to Canadians’ different ethnic mix. Some think it’s because they use fewer illegal drugs and shoot each other less with guns, though they do smoke and drink with gusto.
 
Still others think Canadians are healthier because their medical system is tilted more toward primary-care doctors and less toward specialists. And some believe it’s something more fundamental—a smaller gap between rich and poor. Perhaps it’s all of the above. But there is no arguing the basics.

 “By all measures, Canadians’ health is better,” said Dr. Barbara Starfield, a university distinguished professor at Johns Hopkins Medical Institutions. Canadians “do better on a whole variety of health outcomes,” she said, “including life expectancy at various ages — 1, 15, 20, 45, 65, 80, you name it.”

According to a World Health Organization report published last year, life expectancy at birth in Canada is 79.8 years versus 77.3 in the United States (Japan’s is 81.9.). Canada now ranks fifth in life expectancy at birth (after Japan, Sweden, Hong Kong and Iceland), while theUnited States ranks 26th, according to the United Nations Human Development Report.

“There isn’t a single measure in which the US excels in the health arena,” said Dr. Stephen Bezruchka, a senior lecturer in the School of Public Health at the University of Washington in Seattle. “We spend half of the world’s health care bill and we are less healthy than all the other rich countries.

 “Fifty-five years ago, we were one of the healthiest countries in the world. What changed? We have increased the gap between rich and poor. Nothing determines the health of a population [more] than the gap between rich and poor.”

Infant-mortality rates also show striking differences between theUnited States and Canada, according to Dr. Clyde Hertzman, associate director of the Centre for Health Services and Policy Research at the University of British Columbiain Vancouver. To counter the argument that racial differences play a major role, Hertzman compared infant mortality for all Canadians with that for white Americans between 1970 and 1998. The white US infant mortality rate was roughly six deaths per 1,000 babies, compared to slightly more than five for Canadians.

Maternal mortality shows a substantial gap as well. According to data published last year by the Organization for Economic Cooperation and Development, an international think-tank, there were 3.4 maternal deaths for every 100,000 births among Canadians compared to a 9.8 among all Americans.

And more than half of Canadians with severe mental disorders received treatment, compared to little more than a third of Americans, according to the May-June 2003 issue of Health Affairs.

Dr. Steffie Woolhandler, an associate professor at Harvard Medical School, general internist at Cambridge Hospital and staunch advocate of a single-payer system, said she believes “the summary of the evidence has to be that national health insurance has improved the health of Canadians and is responsible for some of the longer life expectancy.”

On the other hand, there are some causes of death that wouldn’t be much affected by having the government pick up the health care tab—like homicide. And theUnited States, Bezruckha said, has “the highest homicide rate of all the rich countries.”

 “Other things might be differences in seat-belt usage,” said Robert Blendon, a professor of health policy and political analysis at the Harvard School of Public Health. “We are also disproportionate consumers of illegal drugs, much more than Canada, so it’s cultural. The health of Americans would be better if we had universal health care, but there are some things that a single-payer system wouldn’t fix, but which would leave one country looking healthier in the statistics.” In some respects, the health care system is “the tail on the dog,” said Dr. Arnie Epstein, chairman of the department of health policy and medicine at the Harvard School of Public Health. “It’s other aspects of the social fabric of different countries that seem to have a major impact on how long people live.”

 Like ethnicity, In the United States, African-Americans and Latinos “face problems of housing, stress and low income which have nothing to do with a single-payer system,” Blendon said.Canada has a large number of Asian immigrants, he said, but they, like Asian immigrants in the United States, tend to do well on health care measures.

The bottom line is that Canada is doing something right, even if “the reasons are not totally understood,” said Kominski of UCLA.

 So, should we all move to Canada? Probably. But it’s just too cold.

Judy Foreman is a freelance columnist who can be contacted at foreman@globe.com.

Political cowardice is stunting the dialogue on solving the nation's health-care crisis

Feb 9, 6:53 PM
FLORIDA TODAY
Health care for all

Political cowardice is stunting the dialogue on solving the nation’s health-care crisis

Weapons of mass destruction haven’t turned up in Iraq, a potential time bomb for the presidential election. But another massive problem — call it a giant fragmentation bomb — is exploding in plain sight.

The issue is out-of-control health care costs, and though polls show Americans put it right up there with national security as a priority, politicians continue to run away from it.

More than 43 million Americans lack health-care coverage across the nation, including 70,000 in Brevard County. Many of them are employed by small businesses that can’t afford to offer benefits.

Employer health-care costs, up 32 percent since 2000, are predicted to rise by double digits for the next 5 years, meaning more businesses may drop health coverage.

That will add more to the ranks of the uninsured unless serious reform is addressed and soon.

Make no mistake, anyone can fall through the cracks as affordable coverage disappears. More than 100,000 Florida children are stuck on waiting lists for the state’s KidCare program for low-income families.

And, in 2003, dozens of elderly Brevardians who lacked insurance had to be turned away at the Embers, an adult-care facility in Cocoa, administrator Sandy Rutherford says.

That caused job disruptions for their children, just one example of ripples from lack of insurance spreading to families and communities.

Employers also hold back on hiring or use part-timers when health costs skyrocket — worsening the job market and continuing the uninsured spiral. Children without medical care don’t achieve as they should at school.

Those snowballing consequences are one reason a panel at the National Academy of Sciences recently called for universal health-care coverage for all Americans by 2010.

That’s a goal achieved by every other wealthy, industrialized nation and it’s time it deserves the most serious discussion in Washington, with input from citizens.

But politicians from across the spectrum shun that hot potato, preferring the Band-Aid approach when open-heart surgery is needed.

President Bush touts a mix of tax credits, health savings accounts, and letting small businesses join pools to bargain for better insurance rates. Those proposals are inadequate, and demonstrate the administration’s failure to grasp the breadth of the nation’s health-care crisis.

The remaining Democratic contenders for the White House really aren’t any better, dodging the politically perilous question of universal coverage.

Shame on them all for creeping around this important issue, letting fear of powerful insurance and medical lobbies drive out the possibility of confronting this issue the way it must be — head on.

This election year, the public must demand clear answers from both Republicans and Democrats about the future of health care in the nation, including why universal coverage by 2010 isn’t up for debate.

Medical students investigate U.S. and Canadian health care systems

Study Tour Provides Hands-On Experience for Medical Students Reston, VA

The American Medical Student Association (AMSA), the nation’s largest, independent medical student organization, announces “Sea-Couver,” a hands-on study tour in Seattle, Wash. and Vancouver, British Columbia that provides the opportunity to compare the U.S. and Canadian health care systems. Medical students will gain first-hand knowledge of health care delivery in the two countries by touring clinics, talking with patients, and learning from physicians, medical students and policymakers.

The students will compare the Canadian single payer health care system to the multi payer, market-based U.S. system. The United States, while spending over $1.6 trillion on health care annually, remains the only industrialized nation that does not guarantee health care for all citizens. Canada spends far less on health care and guarantees coverage for all its citizens. In addition, students will discuss and compare health care quality indicators, access to care disparities, prescription drug costs, drug re-importation and medical education and physician satisfaction.

A highlight of the tour will be a discussion with Dr. Bob Evans, Professor of economics at the Centre for Health Services and Policy Research at the University of British Columbia. Dr. Evans, Director of Population Health with the Canadian Institute for Advanced Research, is considered one of the founders of the field of health care economics and is the single most influential academic in Canadian health care policy.

“Universal health care in America is long overdue,” says Lauren Oshman, M.D., M.P.H., AMSA National President. “Future physicians need to be more knowledgeable about universal health care in our own country and in Canada. By providing students with the ability to compare the positives and shortcomings of the two health care systems, they will be better positioned to educate their colleagues about the two systems, and to build a health care system that better serves our patients and the public.” At the end of the excursion, students will present their findings at their individual medical schools and facilitate additional education for future healthcare providers.

For over 50 years, AMSA has empowered medical students to continually improve our health care system locally, statewide and nationally for the benefit of our future patients. For more information on AMSA’s Universal Health Care initiative, see http://www.amsa.org/hp/uhcinitiative.cfm. For more information on AMSA’s mobilization on universal health care and the upcoming presidential election, see http://www.amsa.org/election2004.

Media Contact:
Kim Becker
Director of Public Relations
American Medical Student Association (AMSA)
1902 Association Drive
Reston, VA 20191
Phone: (703) 620-6600 ext. 207
Fax: (703) 620-5873
Email: prel@www.amsa.org

Political cowardice is stunting the dialogue on solving the nation’s health-care crisis

Feb 9, 6:53 PM
FLORIDA TODAY
Health care for all

Political cowardice is stunting the dialogue on solving the nation’s health-care crisis

Weapons of mass destruction haven’t turned up in Iraq, a potential time bomb for the presidential election. But another massive problem — call it a giant fragmentation bomb — is exploding in plain sight.

The issue is out-of-control health care costs, and though polls show Americans put it right up there with national security as a priority, politicians continue to run away from it.

More than 43 million Americans lack health-care coverage across the nation, including 70,000 in Brevard County. Many of them are employed by small businesses that can’t afford to offer benefits.

Employer health-care costs, up 32 percent since 2000, are predicted to rise by double digits for the next 5 years, meaning more businesses may drop health coverage.

That will add more to the ranks of the uninsured unless serious reform is addressed and soon.

Make no mistake, anyone can fall through the cracks as affordable coverage disappears. More than 100,000 Florida children are stuck on waiting lists for the state’s KidCare program for low-income families.

And, in 2003, dozens of elderly Brevardians who lacked insurance had to be turned away at the Embers, an adult-care facility in Cocoa, administrator Sandy Rutherford says.

That caused job disruptions for their children, just one example of ripples from lack of insurance spreading to families and communities.

Employers also hold back on hiring or use part-timers when health costs skyrocket — worsening the job market and continuing the uninsured spiral. Children without medical care don’t achieve as they should at school.

Those snowballing consequences are one reason a panel at the National Academy of Sciences recently called for universal health-care coverage for all Americans by 2010.

That’s a goal achieved by every other wealthy, industrialized nation and it’s time it deserves the most serious discussion in Washington, with input from citizens.

But politicians from across the spectrum shun that hot potato, preferring the Band-Aid approach when open-heart surgery is needed.

President Bush touts a mix of tax credits, health savings accounts, and letting small businesses join pools to bargain for better insurance rates. Those proposals are inadequate, and demonstrate the administration’s failure to grasp the breadth of the nation’s health-care crisis.

The remaining Democratic contenders for the White House really aren’t any better, dodging the politically perilous question of universal coverage.

Shame on them all for creeping around this important issue, letting fear of powerful insurance and medical lobbies drive out the possibility of confronting this issue the way it must be — head on.

This election year, the public must demand clear answers from both Republicans and Democrats about the future of health care in the nation, including why universal coverage by 2010 isn’t up for debate.

Frist says that it is impossible to cover all Americans

The New York Times
February 7, 2004
Frist Expects Congress to Try to Expand Health Coverage
By Robert Pear

The Senate majority leader, Bill Frist, said on Friday that “it is impossible” to have all Americans covered by health insurance, but he predicted that Congress would take incremental steps to expand coverage this year.

“It is impossible to get everybody covered,” Dr. Frist said at a meeting with journalists. “It’s impossible to get to 100 percent.”

Comment: Dr. Frist understands the single-payer model. But it is difficult to understand how a physician with traditional ethical values could have such a blatant disregard for the truth. But then an individual who could care less about those who would suffer under his inadequate proposals probably wouldn’t agonize over telling a little fib. After all, what is that fib compared to the tens of thousands of young adults that will die because of lack of coverage under his proposals?

How can a physician who dedicates his life to preserving the health and life of each individual patient under his care be so callous when it comes to policy decisions that will negatively impact the health of millions of would-be, should-be, but can’t-afford-to-be patients?

Subject: Business needs to co-opt concept of universal health care San Francisco Chronicle
February 8, 2004
Health care, the flashpoint
By David Lazarus

The dismal state of the U.S. health care system will be an uninvited guest at the table when representatives of SBC workers and management sit down this week to attempt to avert a crippling strike.

The talks, to be held at a Pleasanton hotel, will focus to a large extent on whether telecom giant SBC will be able to stick employees with a portion of the company’s almost $2 billion in annual health care costs, according to sources familiar with the matter.

SBC’s regional contracts with nearly 100,000 employees nationwide expire in
April. Officials at the employees’ union, the Communications Workers of America, say a strike is virtually certain if SBC tampers with existing medical benefits. Union locals are already signing up workers for possible strike assignments.

For its part, SBC told company managers in a recent internal memo that they
must be prepared to take over key operations in the event of a strike. Managers’ vacations scheduled for April and beyond have been canceled.

All this rancor could be avoided if the United States abandoned its broken system of corporate welfare and switched instead to a Canadian-style system of publicly funded universal health care.

And that’s essentially what labor leaders representing about 30,000 California and Nevada workers plan to tell SBC when the two sides meet in Pleasanton on Thursday.

“Universal health care is the ultimate solution,” said Bill Harvey, a union negotiator. “SBC and other major corporations should be fighting side by side with us to tackle health care problems.”

Corporate America is gradually waking up to the fact that runaway health care costs are having a devastating impact on companies, workers and customers.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2004/02/08/BUGMD4QTRH1.DTL&type=printable

Comment: Support for the cause of universal health care is no longer limited to advocates of health care justice. It has now become an economic necessity for the business community and an idea that they need to co-opt. A publicly-funded universal health care system would meet the progressive goal of universal access to comprehensive health care, and it would meet the conservative goal of making health care affordable. We really don’t have any other option.

Most Physicians Endorse Single-Payer National Health Insurance

EMBARGOED UNTIL 4:01 PM, EST
February 9, 2004

Contacts: Danny McCormick, M.D., M.P.H.
Tel (617) 665-1032
Beeper (617) 546-9422
Steffie Woolhandler, M.D., M.P.H.
Tel (617) 665-1032 or 497-1268
Beeper (617) 546-0577

Most Physicians Endorse Single-Payer National Health Insurance
According to Harvard Study

Nearly two-thirds (64%) of physicians favor single-payer national health insurance, far more than support managed care (10%) or fee-for-service care (26%) according to a Harvard Medical School study published today in the Archives of Internal Medicine. National health insurance (NHI) received majority support from physicians of virtually every age, gender and medical specialty – even among surgeons, a plurality supported NHI. The breadth of physician support for NHI was highlighted by the fact that even most members of the American Medical Association and the Massachusetts Medical Society favor the single payer approach Despite this high level of support, however, only about half (51.9%) of physicians studied were aware that a majority of their fellow physicians support NHI.

The researchers surveyed a random sample of 904 Massachusetts physicians drawn from the AMA’s Master File of all doctors. The survey included questions about views on health care financing and medical practice issues. Eighty-nine percent believed that it is the responsibility of society, through its government, to provide everyone with good medical care, regardless of their ability to pay. Physicians also favored physician payment under a salary system (56.8%), and would be willing to accept a reduction in fees for a reduction in paperwork (67.1%). Doctors overwhelmingly (70.3%) rejected allowing the insurance industry to continue playing a major role in the delivery of medical care.

“The perception that physicians oppose national health insurance often serves to reinforce political barriers to health care reform. Our finding that a large majority of physicians actually support single-payer national health insurance could provide the impetus for national health insurance, particularly if physicians began to publicly advocate for their views” said Dr. Danny McCormick, a study author and researcher at Harvard Medical School.

Dr. David Bor, a study co-author who is an Associate Professor of Medicine at Harvard Medical School and Chair of the Department of Medicine at The Cambridge Health Alliance commented: “At first I was surprised at our results. But when I reflected on my own clinical experience with publicly funded programs like Medicare, I realized that I and many other doctors are convinced that the government can do an excellent job administering health insurance. The plain fact is Medicare works better for patients-and for doctors-than most private insurance plans.”

“Most doctors are fed up with the health care system. It’s not just the paperwork and insurance hassles, but knowing that many of our patients can’t afford to fill the prescriptions we write for them. And millions of people who are uninsured avoid care altogether until they’re desperately ill. That’s why more than 10,000 physicians have endorsed a proposal for national health insurance that appeared in the JAMA last August. This survey shows that the overwhelming majority of doctors now support NHI..” said Dr. Steffie Woolhandler, another study co-author and Associate Professor of Medicine at Harvard Medical School.

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Physicians for a National Health Program (PNHP) is a research and education organization with more than 12,000 physicians representing every state and specialty. PNHP was founded in 1987 and has physician spokespeople across the country. For a local spokesperson, call the national headquarters at 312-782-6006. Visit us online at www.pnhp.org

McCormick D, Himmelstein, DU, Woolhandler S, Bor DH, “Single-Payer National Health Insurance: Physicians’ Views”, Archives of Internal Medicine. 2004 February 9; 164:300-304

Will Lower Drug Prices Jeopardize Drug Research ?

Will Lower Drug Prices Jeopardize Drug Research?
Donald W. Light, University of Medicine & Dentistry of New Jersey
Joel Lexchin, School of Health Policy and Management, York University, Toronto, Ontario, Canada

This documented fact sheet provides evidence that all drug research by large firms, net of taxpayers’ subsidies, is paid for out of domestic sales in each country, with profits to spare. Prices can be lower without jeopardizing basic research for new drugs. More exposure to global price competition would encourage more innovative research and less of the derivative me-too research that now dominates.

In the U.S., the FDA Commissioner, Mark McClellan, and the drug industry are responding to pressures for lower costs by mounting a large campaign to pressure all other affluent countries to raise their prices to U.S. levels. They claim that lower prices do not pay for drug research costs, but we provide evidence that this is untrue. Ultimately, however, such nationalistic arguments are based on regarding basic research and new discoveries, which can happen anywhere, and the cost of trials, which are carried out in the countries deemed most commercially advantageous, as part of national companies and national accounts, when in fact they are part of a global economy for pharmaceutical products.

FDA Myths
1. FDA Commissioner, Mark McClellan, holds that other affluent countries like Canada and the UK set their prices for patented drugs so low that they do not pay for research and development (R&D) (McClellan 2003). We can find no evidence to support that claim.

On the contrary, audited financial reports of major drug firms in the UK, show that all research costs are paid, with substantial profits left over, based solely on domestic sales at British prices (Pharmaceutical Price Regulation Scheme 2002). Likewise, 79 research drug companies in Canada submitted reports showing their R&D expenditures have risen more than 50% since 1995, all paid for by domestic sales at Canadian prices (Patented Medicine Prices Review Board 2002). Sales to the U.S. and elsewhere are in addition to the positive, domestic balance sheets.

2. FDA Commissioner McClellan says that European or Canadian prices are “slowing the process of drug development worldwide” (McClellan 2003). There is no known verifiable evidence to support this claim. In fact, drug research has been increasing steadily in Europe as well as in the U.S., with some countries having a more rapid increase than the U.S. (Patented Medicine Prices Review Board 2002).

3. FDA Commissioner McClellan says that “price controls discourage the R&D needed to develop new products” (McClellan 2003). But there is no known verifiable evidence to support this claim.

R&D expenditures have been growing rapidly, though it is becoming more and more difficult to discover breakthrough drugs on targets not already hit (Harris 2003). The truth kept from Americans is that first-line treatment for 96% of all medical problems requires only 320 drugs (Laing et al. 2003). In wealthy countries, more drugs might be appropriate to treat people who do not respond to first-line agents.

4. FDA Commissioner McClellan charges that efforts to negotiate lower prices for patented drugs by other countries (and by major employers, unions and governors in the U.S.) are “no different than violating the patent directly” to make cheap copies (McClellan 2003). This charge echoes the drug industry and implies that large buyers seeking better value should be considered a criminal act.

5. FDA Commissioner McClellan paints a picture of other wealthy countries driving down their prices to marginal costs, but the widening gap between prices for patented drugs in the U.S. and other countries is due to drug companies raising U.S. prices, not other countries lowering theirs (Sager and Socolar 2003; Families USA 2003).

6. The “free-rider” problem that McClellan emphasizes can be solved by U.S. prices coming down to European levels, where they will cover all R&D costs, plus profits that are higher than those in most industries.

7. Drug company profits, after all R&D costs, have long been more than double the profits of Fortune 500 corporations. In recent years they have jumped to triple and even quadruple the profits of other major companies (National Institute for Health Care Management 2000). The global firms spend two and a half to three times more for marketing and administration than for research (Families USA 2001).

8. Americans pay for more R&D than any other country because the United States accounts for more sales than any other country. But while the U.S. accounts for 51% of world sales, it took 58% of global R&D expenditures invested in the US to discover only 43% of the more important new drugs (NCEs) (European Federation of Pharmaceutical Industries and Associations 2003). This means that other countries are helping to pay for the large, inefficient U.S. R&D enterprise, the opposite of what the editors of Business Week claimed (Business Week editors 2003). William Safire’s claim of a “foreign rip-off” as Americans pay for the world’s R&D is contradicted by the facts above (Safire 2003).

Research is misdirected by the industry, against patients’ interests
9. Most drug innovation provides little or no therapeutic advantage over existing

Independent review panels plus a major industry review conclude that only 10 – 15 % of “new” drugs provide a significant therapeutic breakthrough over existing drugs and involve a new chemical or molecule (Barral 1996; Prescrire International 2003; National Institute for Health Care Management Research and Education Foundation 2002). Other industry-sponsored figures are much higher but not reliable.

10. The FDA approves drugs that are better than nothing (placebo) but does not test them against the best existing drugs for the same problem. Most research is for “new” drugs to treat problems already treated by other drugs.

11. About 18% of the drug industry’s research budget goes to basic research for breakthrough drugs. About 82% goes to derivative innovations on existing drugs and to testing.

The long-standing survey of basic research by the National Science Foundation estimates that basic research has increased to 18% of the total research and development (R&D) budget for the pharmaceutical industry. It used to be less (National Science Foundation 2003). Industry-sponsored figures based on secret unverifiable data are much higher but not reliable (DiMasi, Hansen, and Grabowski 2003). The 85-90% of “new” drugs that have little therapeutic gain reflects equal protection from competition for much less investment and risk.

12. Congress has repeatedly extended patent protection for drugs beyond what other industries enjoy, despite much higher profits year in and year out. Government protection from normal competition is now more than 50% greater for the drug industry than a decade ago (National Institute for Health Care Management 2000). These incentives reward research into derivative large markets, rather than to finding effective treatments for diseases that have none.

13. These facts constitute the Blockbuster Syndrome: the lure of monopoly pricing and windfall profits for years spurs the relentless pursuit for drugs that might sell more than $1 billion a year, regardless of therapeutic need or benefit. Research projects for the disorders of affluent nations proliferate, as do clinical trials. Doctors are paid like bounty hunters to recruit patients for thousands of dollars each. Most patients get the misimpression that the experimental drug will be better than existing ones (Wolpe 2003). The corruption of professional judgment, ethics and even medical science follow (Williams 2003; Wazana 2000; Barnett 2003; Lexchin, Bero, Djulbegovic et al. 2003; Bekelman, Mphil, and Gross 2003; Villanueva, Peiro, Librero et al. 2003; Fletcher 2003).

Drug research costs much less than claimed
14. Drug companies claim to spend 17% of domestic sales on R&D, but more objective data reports they spend only 10% (National Science Foundation 2003). Thus, only 1.8% of sales goes to research for breakthrough new drugs (18% x 10%) (Love 2003).

15. Taxpayers pay for most research costs, and many clinical trials as well.

In 2000, for example, industry spent 18% of its $13 billion for R&D on basic research, or $2.3 billion in gross costs (National Science Foundation 2003). All of that money was subsidized by taxpayers through deductions and tax credits. Taxpayers also paid for all $18 billion in NIH funds, as well as for R&D funds in the Department of Defense and other public budgets. Most of that money went for basic research to discover breakthrough drugs, and public money also supports more than 5000 clinical trials (Bassand, Martin, Ryden et al. 2002). Taxpayer contributions are similar in more recent years, only larger.

16. The average amount of research funds the drug industry needs to recover appears to be much less than the industry’s figure of $800 million per new drug approved (NDA).

The $800 million figure is based on the small unrepresentative subsample of all new drugs. It excludes the majority of “new” drugs that are extensions or new administrations of existing drugs, as well as all drugs developed by NIH, universities, foundations, foreign teams, or others that have been licensed in or bought. Variations on existing drugs probably cost much less because so much of the work has already been done and trials are simpler.

About half of the $800 million figure consists of “opportunity costs”, the money that would have been made if the R&D funds had been invested in equities, in effect a presumed profit built in and compounded every year and then called a “cost.” Drug companies then expect to make a profit on this compounded profit, as well as on their actual costs. Minus the built-in profits, R&D costs would average about $108 million 93% of the time and $400 million 7% of the time.

The $800 million estimate also does not include taxpayers’ subsidies via deductions and credits and untaxed profits (DiMasi, Hansen, and Grabowski 2003; DiMasi, Hansen, Grabowski et al. 1991). Net R&D costs are then still lower.

Contrary to some press reports from the industry, screening for new compounds is becoming faster and more efficient and the time from initial testing to approval has shortened substantially (Kaitin and Healy 2000). The large size of trials seems more due to signing up specialists to lock in substantial market share. Advertising firms are now running clinical trials (Bassand, Martin, Ryden et al. 2002; Peterson 2002; Moyers 2002).

17. Because clinical trials have become a high-profit sub-industry, trial “costs” appear to be much more than is necessary.

An international team of experts estimates that clinical trials could be done for about $500 per patient rather than $10,000 per patient, a 95% reduction (Bassand, Martin, Ryden et al. 2002). The most detailed empirical study of trial costs also concludes that costs can be much less than reported (The Global Alliance for TB Drug Development 2001).

U.S. drug prices very high

18. Americans seem unaware how much more they are paying for drugs than other countries, in the name of the “free market” where prices are controlled by corporations. So-called “price controls” abroad are negotiated wholesale prices. Corporate price controls in the U.S. are un-negotiated monopoly prices, which then large buyers negotiate down.

According to a detailed analysis, American employers and health plans pay at wholesale 2.5-3.5 times the prices in Australia and other countries with comparable prices for patented drugs (Productivity Commission of Australia 2001). There is no evidence that these prices do not cover research costs. U.S. generic prices shadow patent drug prices and are also 2.5-3.5 times more.

19. High American prices are essentially monopoly rents charged to employers in every other industry. They shift profits from other industries to the drug industry.

20. If American prices were cut in half, research budgets would not have to suffer unless executives decided to cut them in favor of marketing, luxurious managerial allowances or high profits. They probably would not, because R&D gets such favorable tax treatment compared to other expenses. Lower prices would save other Fortune 500 companies billions in drug benefit costs, and drug company profits could come into line with the profits of the companies who pay for their drugs.

Realign incentives to reward true innovation
21. Current incentives strongly reward derivative innovation. We get what we reward.

22. Because the U.S. is by far the biggest spender, it has by far the most R&D and new drugs. Four other industrialized countries, however, devote more of their GDP to R&D for new drugs than the U.S. (Patented Medicine Prices Review Board 2002).

23. Officials of drug companies commonly claim that nearly all new drugs are discovered in the U.S. However, the industry’s own studies (and others) show that over the past quarter century, the U.S. has accounted for less than or about the same as its proportionate share of international new drugs, not more and certainly not nearly all (Barral 1996; European Federation of Pharmaceutical Industries and Associations 2000). Until 2002, even the U.S. pharmaceutical industry was investing an increasing percent of its R&D budget in highly productive research teams abroad (Pharmaceutical Research and Manufacturers of America 2002).

24. Americans are getting less innovation and paying a lot more. Competing countries profit from these American self-delusions by covering their R&D and keeping their own drug prices reasonable, while leaving drug companies to make bonanza profits from the monopoly American market.

25. Price competition has been the greatest spur to innovation for over 200 years. Price protections reward derivative and me-too innovation as well as excessive costs and a focus on blockbuster marketing. If we want lower prices and more breakthrough innovations, we need to change the incentives to reward those goals (Baker and Chatani 2002).

Authors’ Disclosure Statement
In 1996, JL received funding from Sandoz (now part of Novartis) for travel and accommodation to attend a meeting in Basle, Switzerland with Sandoz executives to discuss marketing practices.

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Higher Premiums Mean Higher Profits: Why Your Health Care Insurance Is More Expensive

Higher Premiums Mean Higher Profits: Why Your Health Care Insurance Is More Expensive
by Milton Fisk January 2004

Cost shifting is the name of the game as management grapples with the rising expense of employee health care. Employers are having employees pay more out of pocket through higher deductibles, larger drug co-pays, and higher premiums.

Read the full article at http://www.labornotes.org/archives/2004/01/articles/e.html