The Boston Globe
September 25, 2001
“Kennedy to Launch Drug Program” by Rick Klein

“Former US Representative Joseph P. Kennedy II today will launch a private drug-discount program that could save elderly and poor consumers thousands of dollars in medication costs.”

“Kennedy said he has negotiated substantial discounts in drug prices with drugstore chains through his nonprofit Citizens Health Corp., a subsidiary of Citizens Energy Corp.”

“Kennedy’s announcement comes after several years of failed attempts to get the state to move forward with its own bulk-purchasing program. The Legislature has required the administration to establish bulk purchasing each of the past two years, but no major steps have been taken.”

“In the summer, the administration of Acting Governor Jane Swift appeared ready to embrace the concept, at least on a limited basis. But those efforts now appear stalled However, Swift administration sources said they will meet to discuss whether they can work with Kennedy’s plan to offer discounts to seniors enrolled in Prescription Advantage, the new state-sponsored drug insurance plan for the elderly and disabled.”

Alan Sager, Ph.D., a professor at the Boson University School of Public Health:

“This sounds like a well-intentioned effort that could help some people, and on balance, it’s probably worth doing. Unfortunately, it can tackle only a very small share of the problem of unaffordable medications.”

http://www.boston.com/dailyglobe2/268/metro/Kennedy_to_launch_drug_program+.shtml

Comment: Joseph Kennedy’s effort to improve access to pharmaceuticals, through private efforts to make them more affordable, is most admirable. But what will happen? Other efforts to contract discounts will compete. With no other mechanisms to contain costs, the pharmaceutical industry will merely grant discounts from an artificially inflated wholesale or retail price. An example of the perversity of this process is the current process by which pharmaceutical firms grant Medicare a discount from the Average Wholesale Cost (AWP) which has proven to be an artificial construct that the industry has used to assure that high drug prices are maintained.

Also, other entities will be demanding the same discounts, including federal and state programs, such as Prescription Advantage, pharmacy benefit managers, and any other element that must pay for pharmaceuticals. Lacking control of the process, the balloon phenomenon is operational – push in here and it bulges out there – shifting costs so that the industry does not have any net reduction in revenues. Who pays for these shifting costs? They are funded by everyone who requires prescription drugs, but the funding is inequitable at a time that we are attempting to improve equity in our health care system.

Fee controls through contracting by health plans and through government action have been relatively effective in limiting the profits of physicians, hospitals, laboratories, and radiological services to a level that have allowed fair but not excessive profits. This is because the joint private and government control of these sectors of health care is almost complete. On the other hand, the pharmaceutical industry still has a large sector of patients that do not have a private or government intermediary to control the market. This sector includes a major segment of the Medicare beneficiaries, the uninsured, those covered by privates plans that do not offer pharmaceutical benefits, and those that must purchase a significant amount before their plans kick in. This has left the pharmaceutical industry with an intact balloon, allowing unlimited cost shifting.

Pharmaceutical costs are the greatest inflationary element in health care today. When other sectors of health care are subjected to price controls, why should this industry be insulated?

Is there room for price reductions that will allow fair profit for the pharmaceutical firms? Clearly there is. This industry has also been egregiously wasteful in administrative and marketing costs, much of which could be eliminated. Drugs should be selected based on medical benefit. Physicians should be updating their knowledge through legitimate continuing education rather than by accepting sales pitches of this industry. Copy cat drugs should be funded based on their real value rather than based on their patents and success of their marketing programs. R & D should be directed to new breakthroughs rather than for the purpose of extending patents via copy cats. Perhaps the most important change that needs to be made is to make drugs available to every person that genuinely needs them. The marginal costs to expand production to meet this need are almost negligible. Diluting average costs with this very low cost expansion of production would have the greatest impact on reducing the per prescription price of drugs.

The United States has one of the least equitable health care systems of all industrialized nations. Inequity is particularly a problem in our allocation of pharmaceuticals. The solution is simple. Establish a publicly administered, universal health insurance program. Require the pharmaceutical industry to end waste, to produce value, and then to negotiate for rates that meet their legitimate costs and still provide a fair profit. The pharmaceutical industry would thrive, but, much more importantly, more patients would thrive.

News Release
Congressman Pete Stark
September 21, 2001
Rep. Pete Stark Statement on Medicare HMOs’ Abandonment of America’s Senior Citizens and Persons with Disabilities”

Congressman Pete Stark:

“Independent analyses have long shown that we over-pay private plans under Medicare, relative to what their costs are. Just last year, we enacted legislation that gives Medicare HMOs an additional $32.5 billion over the next 10 years. We are told that it would go into extra benefits, but it has not. Instead, it is lining shareholder and CEO pockets, while Medicare beneficiaries are again left in the lurch. It is unconscionable to spend more of our scarce resources on this part of the program when millions of Medicare beneficiaries lack coverage for prescription drugs. We need to be working to improve Medicare for all beneficiaries.”

Comment: Increased funding of Medicare HMOs is an issue that has survived the reshuffling of legislative priorities. House Ways and Means Chairman Bill Thomas, on September 21, released a statement that indicates that they intend to move forward with legislation that would increase funding for Medicare HMOs. This is with the concurrence and support of Thomas Scully, Administrator of the Centers for Medicare and Medicaid Services (CMS, formerly the HCFA).

The Ways and Means Committee release is available at: http://waysandmeans.house.gov/press/2001/september/9-21-01.htm

In spite of misleading rhetoric, the facts are not in dispute. Initially, Medicare HMOs were successful in directing marketing to a relatively healthy subset of Medicare beneficiaries, thereby escaping much of the economic burden of higher cost, less healthy patients. Since they were awash in unspent taxpayer dollars, they were required to either return the excess funds, or spend them on patients or on their own industry. Thus those that joined HMOs experienced greater benefits, especially the inclusion of pharmaceuticals, and lower out-of-pocket expenses. And there were still plenty of funds left to enrich the shareholders and administrators of these plans. But studies did confirm that the taxpayers were not receiving value for this investment because of diversion of funds away from patient care and into inefficient, private health plan bureaucracies.

In response, Congress slowed the rate of increases in payments to HMOs. In the meantime, their HMO patients were growing older and more expensive, squeezing the profit margins for the HMOs. Congress then granted additional funding, but not enough to allow the HMOs to continue with their extravagant bureaucratic wastes. Thus HMOs continue to withdraw from unprofitable markets. As a result, those Medicare beneficiaries that joined HMOs are losing the extra benefits of pharmaceutical coverage and lower out-of-pocket costs.

The response of Rep. Thomas and others is to support legislation that will provide funding for these benefits, and provide adequate profit margins for the HMOs. There are two very important issues here. One is that they are perpetuating an inefficient system that is wasting taxpayer funds by diverting them away from patients and into the HMO industry. This violates a fundamental duty of Congress to reduce waste of taxpayer dollars.

The other issue relates to the fact that Medicare beneficiaries should have pharmaceutical coverage and lower out-of-pocket costs. But that should apply to all Medicare beneficiaries, not just to HMO plan members. Thomas and his colleagues want to limit those benefits to individuals that will join the organizations owned by his friends in the industry. What better marketing leverage could you have than to provide a gift of taxpayer funds to managed care companies for extra enticements for patients, while prohibiting the entitled patients that remain in the more efficient, traditional Medicare system from receiving those same benefits?

Medicare was established as an equitable system. It is a blatant abuse of the legislative process to end equity by granting tax payer funded enticements to be used for unfair marketing advantage of an abusive managed care industry.

Congress has a moral obligation to correct both of these wrongs. They need to end the waste of taxpayer dollars diverted to inefficient private bureaucracies. And they need to assure equitable access to care for all Medicare beneficiaries by preventing financial barriers to care. They can do this best by adding a pharmaceutical benefit and by reducing out-of-pocket expenses. If they did this, the superfluous HMO bureaucracies would go away. Then maybe we’ll be ready to seriously consider Medicare for All.

The Washington Post
September 22, 2001
“Federal Insurance to Rise 13.3%” by Stephen Barr

“Health insurance premiums for federal employees and retirees will rise an average 13.3 percent next year, the Bush administration said yesterday. The 2002 rates are nearly 50 percent higher than what government workers paid in 1998.”

“The federal program, which provides health insurance coverage to about 9 million government workers, retirees and family members worldwide and more than 800,000 people in the Washington area, often serves as a bellwether for premium increases in the private sector.”

“The Federal Employees Health Benefits Program is the largest employer-sponsored program in the nation, annually providing more than $24 billion in health care benefits. Employees may choose from about 180 health plan options and, depending on the plan, the government usually pays from 70 percent to 75 percent of the total premium.”

Colleen M. Kelley, president of the National Treasury Employees Union:

“Clearly, something is wrong when a health care plan of this size fails to use its marketing clout to help keep premiums in line.”

http://www.washingtonpost.com/wp-dyn/health/A6618-2001Sep21.html

Comment: Something’s wrong? The largest health benefit program in the nation, with 180 competing health plan options for nine million individuals, has not been effective in using market competition to control costs? Hasn’t this been an adequate test of the theory of containing costs by having health plans compete in the marketplace? How much more testing of this failed premise are we going to tolerate? We’ve had enough. It is time to seriously consider a proven method of cost containment, which, much more importantly, has the greater advantage of introducing equity to our health care system: a publicly-administered program of universal health insurance.

American Enterprise Institute
Health Policy Discussion
“Is Inequality Bad for Our Health?”
An event scheduled for October 11, 2001

From the invitation for this event:

“A popular topic in public health research today is that inequality, and in particular income inequality, is one of the most powerful determinants of health and the most important limitation on the quality of life in modern societies.

“While a few studies have provided evidence that the greater the disparity of wealth in a society, the less healthy the population, many researchers have gone well beyond what might be warranted by the weight of evidence alone. The World Bank, World Health Organization, and National Institutes of Health have even lent more credibility to the ‘income inequality as health determinant theory’ and its far-reaching implications such as the restructuring of important sections of our economic system.

“Jeffrey Milyo of the Irving B. Harris School of Public Policy, University of Chicago, will critique the income inequality hypothesis, its validity and its applicability.”

The invitation is available at: http://www.aei.org/inv011011.htm

Comment: So the American Enterprise Institute wants to refute the notion that income inequality is a determinant of health. We can anticipate the probable content of the presentation of Jeffrey Milyo by examining some of his work. The papers cited are available at: http://www.harrisschool.uchicago.edu/wp/author.html#milyo

In the following paper, Jeffrey Milyo and his colleague, Jennifer Mellor, conclude that “we find no consistent association between income inequality and individual health status.”

“Income Inequality and Health Status in the United States: Evidence from the Current Population Survey” By Jennifer M. Mellor and Jeffrey Milyo Abstract: Several recent studies have identified an association between income inequality and aggregate health outcomes; this has been taken to be evidence that inequality is detrimental to individual health. We use data from the 1995-1999 March Current Population Survey to examine the effect of income inequality on individual health status for both the general population and those individuals in poverty. We find no consistent association between income inequality and individual health status. Our results contradict recent claims that the psycho-social effects of income inequality have dramatic consequences for individual health outcomes.

In the following paper, they hedge a little bit by saying, “while the poor may suffer the most from inequality, it is claimed that the rich also suffer… ”

“Is Inequality Bad for Your Health?” By Jeffrey Milyo & Jennifer M. Mellor Abstract: “A number of recent studies suggest that income and social inequalities have detrimental consequences for population health. While the poor may suffer most from inequality, it is claimed that the rich also suffer, and as a result, redistributive policies may not be zero-sum. Perhaps for this reason, the inequality hypothesis has been met with great enthusiasm. In this paper, we review the basic arguments and evidence that inequality has a causal effect on health and find them wanting in many aspects.”

And in the following paper they concede that “none of this should be construed as a refutation of the claim that relative deprivation may have physical consequences.”

“Re-Examiniing the Evidence of an Ecological Association Between Income Inequality and Health” by Mellor and Milyo An excerpt from the paper: “None of this should be construed as a refutation of the claim that relative deprivation may have physical consequences. However, there are serious shortcomings in the current articulation of the inequality hypothesis, and in the way most authors have tested it.”

What is this all about? Conservatives are very concerned about the prevailing rhetoric that income inequality negatively impacts lower income individuals, especially their health status. This theory provides strong support for distributive policy, using a portion of “excess” wealth to meet our egalitarian desires for health care equity. Because of their strong opposition to distributive policy, they wish to refute the rhetoric of the egalitarians, and replace it with their own rhetoric. They wish to build on prior rhetorical successes such as, “I’m from the government and I’m here to help you.”

Milyo and Miller do present selected data that would suggest that income inequality, as an isolated finding, does not necessarily correlate with impaired health status. A wealthy community, including individuals with massive megawealth, might have significant income inequality, but, because of the paucity of very low income individuals, may not have impaired health status. Whether or not their conclusions are valid, their findings will allow the conservatives to establish the new rhetoric that “income inequality is not a health determinant.” This is very important rhetoric because most individuals will extrapolate the unwarranted conclusion that low income is not a determinant of health.

Newt Gingrich will be the discussant for this event. Hopefully, someone reading this message will attend, and present to him the following posit. Although income inequality alone possibly may not correlate with impaired health status, no person, not even Milyo, disputes that fact that low income is strongly correlated with impaired health status. Clearly, there is a pressing need to improve the status of low income individuals, whether through funding of public programs or through private or regulatory distributive policies. (Don’t hold your breath waiting for adoption of private distributive policies.) Where, in society, should the funding come from, if not from the more affluent individuals who could not possibly experience any change in quality of life through distributive policy? Or should we just concede that we are not egalitarian, and let the unfortunate fend for themselves?

America is better than that. Let’s clobber their rhetoric before it is disseminated.

Los Angeles Times
September 19, 2001
by Ronald Brownstein

At the moment the first fireball seared the crystalline Manhattan sky last week, the entire impulse to distrust government that has become so central to U.S. politics seemed instantly anachronistic.

The erosion of faith in the federal government has been probably the most profound change in America’s political landscape over the last generation.

Yet given the critical responsibility of safeguarding the skies, private companies apparently have cut corners and cut costs as they inevitably balanced concern about the general welfare with their need to generate a profit. Now, the widespread assumption is that the federal government, unconcerned with profit, will provide a more thorough and effective defense against hijackings or bombings.

The lesson is twofold. While government indeed can learn about efficiency from the best businesses, some public services–education comes to mind–are still best provided by public institutions that don’t need to turn a profit. And while U.S. industry has proved brilliant at creating wealth and inspiring innovation, it’s naive (or disingenuous) to expect private companies to operate entirely in the public interest.

It’s simply misguided to see the federal government as something divisible from America, when it is in fact the tool through which we meet collectively the challenges that we can’t handle alone. It obscures that basic truth to suggest we must choose between trusting government or the people. “In time of crisis,” notes Reed (Bruce Reed, chief domestic policy advisor under President Clinton), “we realize that the people and government are one and the same.” The tragedy is that it took so much private pain to remind us that sometimes public actions through government aren’t the problem–they are the solution to our problems.

http://www.latimes.com/news/nationworld/nation/la-000075207sep19.story

Comment: Public administration of universal health insurance? By the government? After all, it’s our government… our insurance… our health.

American Journal of Public Health
September, 2001
by Kate E. Pickett, PhD, et al

“Approximately 13% of pregnant women in the United States smoke, with serious health consequences for themselves and their infants.”

“We surveyed coverage of prenatal tobacco dependence treatments in health maintenance organizations (HMOs) in California to assess the availability, accessibility, use, and effectiveness of services offered to pregnant smokers.”

“MediCal managed care plans were more likely to provide coverage for face-to-face services (individual and group counseling) compared with commercial HMOs. In California, members of MediCal managed care plans may have better access to the most effective, clinically intensive tobacco dependence treatment services, because providers of MediCal managed care are mandated to identify and intervene on risk conditions identified during pregnancy.”

“Our findings suggest that in 1997, most California HMOs were not covering the extended or augmented psychosocial interventions that have been recommended for all pregnant smokers by the US Public Health Service. Although managed care offers the potential for increasing the availability and accessibility of such services for plan members, this survey suggests that that potential is not being realized. In addition, many California HMOs are unable to judge the use or effectiveness of these services and can neither track the costs and benefits of existing programs nor determine the need for additional services.”

http://www.ajph.org/cgi/content/full/91/9/1393

Comment: Because of the purported “success” of managed care health plans in controlling costs, the California state administration decided to utilize managed care organizations for MediCal, California’s Medicaid program. MediCal has been somewhat of a challenge for managed care organizations, both because of federal mandates for coverage (“bureaucratic government interference”) and because of chronic underfunding of the Medicaid program. The private managed care plans have had fewer controls on benefits and greater funding, allowing them to “excel” in managing care partly by putting in place preventive programs that will improve outcomes of their patient-beneficiaries. Smoking cessation programs during pregnancy represent an optimal use of health care resources, and provide an opportunity for managed care plans to prove that they deliver on their promise of higher quality care and more preventive services.

Although both utilize managed care, the underfunded MediCal program, with “excess government interference,” significantly outperformed the private managed care plans in this crucial preventive program. This was at a time (1997) when the private plans were fully developed and operational and were still flush with cash. If less funding and more government oversight produces a better outcome, isn’t it time to take a closer look at the overall structure of our health care system? How about a publicly administered, universal health insurance program? Any takers?

The American Prospect
September 10, 2001
by Marcia Angell, M.D.

Marcia Angell, M.D., senior lecturer in social medicine at the Harvard Medical School and the former editor-in-chief of the New England Journal of Medicine:

Faced with the likelihood of a large increase in the number of Americans without health insurance, many policy makers and interest groups are coalescing around the same solution: refundable tax credits to enable the uninsured to purchase private insurance. (A refundable tax credit is like a cash subsidy.) In insurance terms, this is essentially a defined contribution (contributing only a fixed amount toward the premium, and requiring workers to pay the rest). Often billed as a method to increase workers’ options, this is really inflation protection for employers.

Tax credits for the uninsured are a bad idea for several reasons.

First, even the most generous of the proposed tax credits would not buy an adequate policy.

Second, the influx of federal money would probably cause premiums to rise even faster than current projections. Unless premiums are regulated (which nobody proposes), tax credits for the uninsured would be a windfall for the insurance industry.

Third, tax credits would tend to drive out other types of coverage. Employers could use them as an excuse to drop health benefits altogether or shrink them further. That would be particularly likely if premiums rose steeply as a result of the tax credits.

Fourth, most of the tax-credit proposals require individuals to fend for themselves in the notoriously treacherous market for individual coverage. Some companies would likely offer cut-rate plans for the amount of the tax credits, but those plans would have very large out-of-pocket payments and very narrow benefits.

Finally, complex administrative requirements, including the need to monitor the insurance market and ensure that criteria for eligibility are met, would probably generate a huge and expensive new government bureaucracy. That would siphon off still more of the U.S. health dollar for overhead, which is already an exorbitantly high fraction of the total.

Compare the tax-credit idea with Medicare (which is a public, single-payer system embedded in the private, market-based system). Medicare offers defined benefits, not defined contributions; that is, all beneficiaries are entitled to certain services. The program provides a uniform set of benefits to nearly everyone who qualifies, and it does so far more efficiently than the private sector’s employment-based system. Furthermore, by regulating prices as well as benefits, Medicare limits what providers charge. Certainly, Medicare has plenty of room to improve. It could make the benefit package more appropriate for seniors and it could control inflation better (although it does better on this score than the private sector). But the essential mechanisms for doing both are in place.

No system can work if it doesn’t cover virtually everyone automatically and regulate prices as well as benefits. No matter how many ways we try to shift costs and plug holes, we will sooner or later have to face that fact. Otherwise, we continue to chase a rapidly receding quarry: health care that is both adequate and affordable. Precisely what makes the tax-credit idea attractive to conservatives– the preservation of the private market–is what will doom it in practice. We had better come up with another solution, because the problem is about to get a lot bigger. Universal Medicare, anyone?

http://www.prospect.org/print/V12/16/angell-m-2.html

Comment: Repeating the words of Sen. Jay Rockefeller, at a Senate Finance Committee hearing on tax credits:

“… the tax credit is the wrong approach. It is the wrong approach, period. That’s all there is to it. It will not work. It will not work at the figures that are being offered by you… the figures that’ll come in part from the other side, maybe some from our side. It won’t work. And I think we have to decide on this committee do we want people to get health insurance or do we not?”

Breaking news: Kaisernetwork.org reports today that “those measures with greater chances of passing include the allocating $28 billion over three years to reduce the number of uninsured through tax credits and CHIP and Medicaid expansions… ”

Further comment: Increasing income eligibility levels for the CHIP and Medicaid programs is very important as a temporary, urgent measure that would provide immediate relief of unmet medical needs. Concurrently we must continue unrelenting advocacy for comprehensive reform. But right now, the tax credit issue is on the front burner. It is imperative that we snuff it out immediately!

Jeannie Brewer, M.D. is a board member of California Physicians Alliance, the California chapter of Physicians for a National Health Program. She has multiple sclerosis and will be uninsurable once her COBRA benefits run out. This is her response to the messages on tax credits for health insurance:

“I am just one small example, but I pay almost $600 a month for health insurance for me and my newborn daughter and even that will disappear in 2 years, and I will not be able to purchase insurance no matter what the tax rebate/credit/incentive is. We need a single payer plan, period.”

Alliance for Health Reform Briefing
August 10, 2001
Washington, DC

Gary Lauer, President and CEO of eHealthInsurance, an on-line broker for health insurance:

“We are the largest source of health insurance for individuals and families in the country. We’re the largest producer of health insurance for many if not most of the largest carriers as well.”

“So what we did is we sampled randomly 20,000 active customers.” “We found that the average premiums that these 20,000 individuals and families are paying are in the range of $1,200 to $1,500 per person per year.”

“… based on this, what it tells us is that tax credits may, in fact, have an important impact for people who bought health insurance.”

“If you take the Reach Act for example (one of the tax credit proposals), $1,000 per year for individuals and $2,500 for families, we found… that 75 percent selected policies with annual premiums that are within 75 to 100 percent of the tax credit limit that’s proposed.”

“Tax credits so far are the best proposal that we’ve heard to help address a large portion of the uninsured. There are other people who are uninsured who obviously this is not going to help. There are people who have got very, very serious medical conditions either presently or historically, there are some people who are very economically challenged, you know, many of the high risk pools in states, other kinds of things need to be done for those and we feel very strongly about that. But you’ll find that we believe close to half of the uninsured today can afford health insurance or may be able to afford health insurance through tax credits.”

“You know, what we find is that there are some individuals and families who simply are uninsurable – just the way the system is today, they’re uninsurable. And we feel very strongly about high risk pools as a way to really help and support those people.”

“We find that about 80 percent or 4 out of 5 of our applicants actually get health insurance coverage. … one out of five goes uninsured through eHealthInsurance is not able to get coverage.”

“It’s safe to say that I won’t disclose information on income (of those insured) at this point. I’ve been asked about this previously. We’re going to go back and take a look at that and see if there’s a way to segment that without compromising anything.”

http://www.kaisernetwork.org/health_cast/uploaded_files/transcript081001.pdf

Comment: What a fantastic opportunity this is for Mr. Lauer’s company. His market is composed of a population subset that uses the Internet for making purchases. So he begins with individuals that are Internet sophisticated, mostly financially secure, and generally younger and therefore healthier than average. His insurance products exclude the chronically ill (by underwriting) and lower income individuals (by affordability) anyway. His carriers are elated to have directed to them this highly select segment of the market. He suggests that he is filling a void for the uninsured, although I suspect that more traditional brokers would suggest that he is merely attracting their former clientele. The fact that he refuses to disclose the income levels of his clients makes me suspect that he is not really filling the void for low income, uninsured individuals after all.

We continue to hear strong support for tax credits as an answer to insuring the uninsured. Mr. Lauer’s company demonstrates that tax credits would be a great deal for young, healthy, affluent families, and an even better deal for his company. But the problem we need to address is insuring those with more modest incomes and with existing disorders. Tax credits would have very little impact on those with the greatest needs. Mr. Lauer’s solution is to shift those costs to the rest of us through taxpayer funded public programs and through high risk pools, while he walks away with the cream of the business which is funded by us through tax credits!

Another attendee of this meeting was quite perceptive:

Bob Griss, Director of the Center on Disability and Health, Washington, DC:

“And I really don’t understand why there isn’t more attention to a pool that everybody’s in, that covers everybody, because to me that is the missing seat on the panel.”

A message from Uwe Reinhardt, Ph.D., James Madison Professor of Political Economy, Princeton University:

Don:

I have just posted this message on the course website of my course in first-year economics. I’ll e-mail you Paul Krugman’s piece.

Sun, Sep 16, 2001 —

As part of this course, I shall from time to time link our course website to news articles or commentaries that are relevant to this course.

I have just posted there a commentary by my colleague Paul Krugman on the issue of the private- and public-sector mix in an economy. A vulgar theory with much political traction in this country is that “government” is a state apart from the American people, from which it follows that reducing government spending is always a good thing and that it is always better to let the private sector handle any chore rather than turning it over to that alien entity, our government. You can be very popular at country-club cocktail parties around the country by spouting this simplistic (and erroneous) theory. You can also hear it recited, time and again, by certain talking heads on TV.

In his commentary, Professor Krugman highlights the price we pay for such shoddy thinking. Properly trained economists appreciate that the private sector has a comparative advantage in the production and management of many functions, while the government is better at producing and managing other functions.

Ironically, you now hear even ultra-conservative commentators on TV demanding that airport security in this country be “federalized,” that is, be made part of the civil service. They also, of course, ask that another government agency, the US armed forces, bail us out of our current predicament. Coming this late in the game, it is a sad irony to hear such talk from government’s visceral critics.

One objective of this course is to make you more thoughtful citizens than the many vulgar “thinkers” (to use the term loosely) who believe that government is not part of us (and we part of it), but who think instead that government is an alien force that takes things away from us–either our money or our freedom. If you pay attention in this course, you will not need a major tragedy to understand the proper roles of the private and public sectors in a well-run country. We shall come back to this theme many times in this course.

Paul Krugman’s opinion article: http://www.nytimes.com/2001/09/16/opinion/16KRUG.html

Comment: Although Professor Krugman’s article discusses the role of government in relation to the tragedies of the past week, all of us concerned about health care reform will understand the extrapolations to our health care system. Although the private sector health care system functions well when accessed, a publicly administered universal health insurance program can assure that access.

*******************

I. Alan Sager, Ph.D., Professor of Health Services and Co-Director of the Health Reform Program at Boston University School of Public Health, on September 5, 2001, provided testimony before a subcommittee of the United States Senate Committee on Commerce. His topic: “Americans would save $38 billion in 2001 if we paid Canadian prices for brand name prescription drugs.” He describes “how to win those savings and use them to protect all Americans against high drug costs without hurting drug makers or drug research.”

Alan Sager, Ph.D.:

“Together we face two challenges: making all needed medications available to all Americans at affordable prices, while building a durable financial foundation under drug research and delivery in the United States. I am convinced that we can do both of these. One reason is that we already spend enough money to do so. But not if we continue business as usual.”

The full testimony (revised) is available at: http://dcc2.bumc.bu.edu/hs/ushealthreform.htm which brings you to a page, “US Health Reform.” Under “A. Prescription Drug Reform,” “3. Testimony,” click on “AMERICANS WOULD SAVE $38 BILLION IN 2001 IF WE PAID CANADIAN PRICES FOR BRAND NAME PRESCRIPTION DRUGS.”

*******************

II. Martin Donohoe, MD, FACP, Assistant Professor of Medicine and Senior Scholar at the Center for Ethics in Health Care at the Oregon Health Sciences University, has prepared an excellent series of slides in PowerPoint format on various aspects of the pharmaceutical industry, with special emphasis on ethical perspectives. The information provided is particularly valuable for those of us dedicated to health care reform. Dr. Donohoe has generously offered to make the series available to us. The slides are very easy to read and thus are valuable as a stand-alone information resource, not to mention their value in educational presentations. If you are interested, you can contact Dr. Donohoe at his e-mail address which appears at the end of his message below.

9/14/01

Dear Dr McCanne:

I am a member of PNHP and teach medical humanities and social justice ethics at Oregon Health and Science University in Portland; one area I often lecture on is the pharmaceutical industry (history, current practices, financial and legal issues, ethical issues, etc.) After serving on a panel at the Bioethics Summer Retreat earlier this year, a number of participants requested a copy of my PowerPoint presentation on the pharmaceutical industry. I offered to e-mail a copy of the presentation to anyone from the bioethics listserv who was interested and received over 50 responses.

Now that I see that PNHP is becoming more involved in the issue of pharm co marketing, I wonder if any members (or the organization) is interested in a copy of the presentation, which contains over 100 slides and covers the economics of the industry, drug R and D and marketing (incl data on advertising to physicians and DTC advertising), the history of drug regulation in the US, policy and ethical issues facing the FDA, companies under investigation for various violations (or who have pled guilty) and why, info on the worrisome sequelae of increasing collaboration between academia and industry, guidelines re gifts and speakers/CME, etc.

I am happy to share the slides and have no proprietary interest in the presentation, and hope it can be of help to those training students, residents, and practicing MDs. I feel there is too much competition and not enough cooperation in academic medicine/medical education.

The refs are literally a 2 and ½ foot stack in my office, and I will be working on the paper over the next year. In a nutshell, most of the info comes from mainstream med jnls (eg JAMA, NEJM, Annals Int Med, J Gen Int Med), with small amounts from Public Citizen’s Health Research Group’s Health Letter, PNHP’s newsletter, or “mainstream” newspapers (e.g., NY Times).

If you think other members of this list or PNHP may be interested, please let me know and I can send them copies as an attachment. I would rather they contact me so that I can at least keep track of who is getting it and for what purpose they hope to use it. If you are interested in using me as a speaker for PNHP in some way, let me know, as I have also run a session on the single payer system, using PNHP data and slides, for our house staff.

Martin

Martin Donohoe, MD, FACP Assistant Professor of Medicine and Senior Scholar, Center for Ethics in Health Care Oregon Health Sciences University General Internal Medicine (L-475)
3181 SW Sam Jackson Park Road
Portland, OR 97225
503/494-6495 (ph) 503/494-6344 (fax)
donohoem@ohsu.edu