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Wednesday, May 02, 2007

Possible Medicare Formulary Outreach.

Did I just find a headline more boring than "Worthwhile Canadian Initiative" ?

I don't know, but I am genuinely exited about the topic (too much coffee I guess).

I think the Medicare administration should be allowed to exclude an FDA approved pharmaceutical from its formulary if a committee of doctors agrees that there is a cheaper equally effective alternative. I also think that this should only be allowed after the medicare administration engages in good faith negotiations with the manufacturer lasting at least 60 days and ending in an impass (wording like the Taft-Hartley act wording on strikes). Finally I think the medicare administration should publicize it's list of FDA approved drupgs not in the formulary (that is for which it will not pay) with press releases, on the web and allong with all payments to physicians.

Finally, I really like the idea that congress could declare it's view that if physicians prescribe drugs not on the formulary they must receive consent from patients after informing them that the patient will pay, that the medicare administration will pay for another drug which they claim is just as good and that the physician doesn't agree with the medicare administration. Failure to receive such informed consent would (in congress's not necessarily authoritative view) expose the physician to civil liability for the cost of the drug.

An interesting issue in the US policy debate is the appalling giveaway to big Pharma in the Republican Medicare plan D bill which forbids the Medicare administration to negotiate the price it pays for pharmaceuticals. Needless to say, the public is strongly opposed to this provision. However, the public doesn't want restrictions on which pharmaceuticals are covered by Medicare plan D.

Thus the public seems to support the idiotic bill working its way through congress which will enable the medicare administration to negotiate prices but does not allow it to threaten to not pay for a pharmaceutical if the manufacturer demands to high a price. Aside from the question of whether such threatless negotiation is a contradiction in terms (and the even less interesting question of whether I will be able to resist the temptation to put it in "scare quotes") both I and people who know what they are talking about doubt that much public money will be saved via this bill.

I think it would be good policy to allow the medicare administration to exclude FDA approved drugs from its formulary (to not pay for them). However, it is clear that a bill to that effect will opposed by Pharma with adds in which an elderly actor and actress discuss how he is going to die because they can't afford a drug and medicare won't pay for it. Thus the bill would have to be carefully drafted. I (finally) get back to my suggestions.

The bit about liability for physicians sounds really fun but might be a way to get the AMA allied with Pharma and might not be a good idea. Maybe a sense of the house (or senate) resolution is too much and this should just be a talking point for individual policy makers and sympathetic commentators. The key thing is that people be convinced to blame their physician not congress when they get stiffed with the bill.

The point of my proposal is to make the threat of exclusion from the formulary as non frightening as possible to medicare beneficiaries while still scaring Pharmaceutical companies some. Plan D.2 will cost more than a program where a single bureaucrat can exclude an FDA approved pharmaceutical from the formulary but compromise is both good policy and necessary politically. If Democrats gain control (win the White House in 2008) it will be possible for the medicare administration to make an example of a pharmaceutical company with attendant bad publicity for both per encourager les autres to cut prices.

I'd say I have an idea which will save the US treasury billions while discouraging pharmaceutical companies from wasting R&D on copy cat drugs.

Update: Oh damn forgot to take my meds (this is literally true)


Anonymous said...

What an excellent set of posts.


Anonymous said...

September 14, 2004

A Doctor Puts the Drug Industry Under a Microscope

WASHINGTON - In many ways, Dr. Marcia Angell is an unlikely muckraker. A pathologist by training, she is the former editor in chief of The New England Journal of Medicine. She is also a senior lecturer at Harvard Medical School.

But just days short of her 65th birthday and her first Social Security check, Dr. Angell is taking on the American pharmaceutical industry with a new book, "The Truth About the Drug Companies: How They Deceive Us and What to Do About It" (Random House). "I don't worry about labels," Dr. Angell said in an interview at the Hotel Monaco, where she stopped during a book tour.

In a 1996 book, she noted, she argued "that there wasn't a shred of evidence that the breast implants were causing all the disease they were said to."

"I was said to be a tool of the pharmaceutical and device companies," Dr. Angell recalled. "I call them as I see them."

Q. Why produce an investigative book on the pharmaceutical industry?

A. Because everyone knows that prescription drug prices are sky-high. Americans pay far more for our drugs than people in other countries. The drug companies say, "We need high prices to cover our staggering research and development costs, and if you do anything to squeeze our prices, it will stifle innovation." The book was written to examine that argument.

Q. The pharmaceutical companies say their prices are steep because they spend somewhere in the neighborhood of a billion dollars per drug bringing them to market. Did your research support this assertion?

A. A group of economists - mainly funded by the drug companies - came up with the widely quoted figure on this. They said that it cost $802 million to bring a drug out. They, however, were looking at the most expensive drugs to develop: new chemical compounds developed entirely in house. Most new drugs aren't that at all. Most are what people call "me too" drugs, which are slight variations of older drugs already being sold.

According to these economists, the real cost of bringing out those rare original drugs is actually around $403 million. But they doubled it by factoring in how much money the companies might have earned if they'd invested that $403 million. Moreover, the economists did not figure into their total the many generous tax breaks these companies receive for doing research and development. This is a highly inflated figure.

The fact is that for the last two decades the drug companies have been hugely profitable. Last year there was a little wiggle downward, but in 2002, the 10 biggest American drug companies had a median profit of 17 percent of sales compared to a median of 3 percent for the other Fortune 500 companies. In the 1990's, profits ran between 19 and 25 percent. Prices are high to keep profits high....


Anonymous said...

September 6, 2004

Indicting the Drug Industry's Practices

Dr. Marcia Angell is a former editor in chief of The New England Journal of Medicine and spent two decades on the staff of that publication. If much of that time was devoted to reviewing papers on pharmacological research, it must have been spent in a state of near-apoplexy.

Her new book is a scorching indictment of drug companies and their research and business practices. "Despite all its excesses, this is an important industry that should be saved - mainly from itself," she writes.

This turns out to be one of her book's more forgiving pronouncements, since the rest of it is devoted to assertions of shady, misleading corporate behavior. If she is accurate in her assumptions about big drug companies' feistiness and tenacity, Dr. Angell is likely to be on the receiving end of angry rebuttals. She is sometimes vague enough to leave room for such attacks. ("I have heard that morale in some parts of the F.D.A. is extremely low, and I can certainly understand why it might be.")

But over all, Dr. Angell's case is tough, persuasive and troubling. Arguing that in 1980 drug manufacturing changed from a good business into "a stupendous one," thanks to changes in government regulations. She adds, "Of the many events that contributed to their sudden great and good fortune, none had to do with the quality of the drugs the companies were selling."

In the past, drug discoveries made through government research remained in the public domain. Beginning in 1980 those breakthroughs could be patented, even if their research was sponsored by the National Institutes of Health. As a consequence, Dr. Angell says, patent shenanigans have reshaped the drug business, as have the recent government regulations that expedite direct-to-consumer drug advertising. "Once upon a time, drug companies promoted drugs to treat diseases," Dr. Angell writes. "Now it is often the opposite. They promote diseases to fit their drugs." ...


Anonymous said...

A. The prevalence of the me-too's really says an awful lot about the lack of innovation within the pharmaceutical industry. If you look at the new drugs marketed over the last six years, 78 percent weren't even new chemical compounds. They were just new combinations or different formulations of old drugs. And 68 percent were classified by the F.D.A. as unlikely to be improvements over drugs already on pharmacy shelves.

At the same time, there are shortages of some important drugs that the pharmaceutical companies aren't much interested in making because they are not as profitable as the me-too's. But the companies don't have to turn out needed drugs, if they are not lucrative. And they don't....


Anonymous said...

March 12, 2006

A Cancer Drug's Big Price Rise Disturbs Doctors and Patients

On Feb. 3, Joyce Elkins filled a prescription for a two-week supply of nitrogen mustard, a decades-old cancer drug used to treat a rare form of lymphoma. The cost was $77.50.

On Feb. 17, Ms. Elkins, a 64-year-old retiree who lives in Georgetown, Tex., returned to her pharmacy for a refill. This time, following a huge increase in the wholesale price of the drug, the cost was $548.01.

Ms. Elkins's insurance does not cover nitrogen mustard, which she must take for at least the next six months at a cost that will now total nearly $7,000. She and her husband, who works for the Texas Department of Transportation, are paying for the medicine by spending less on utilities and food, she said.

The medicine, also known as Mustargen, was developed more than 60 years ago and is among the oldest chemotherapy drugs. For decades, it has been blended into an ointment by pharmacists and used as a topical treatment for a cancer called cutaneous T-cell lymphoma, a form of cancer that mainly affects the skin.

Last August, Merck, which makes Mustargen, sold the rights to manufacture and market it and Cosmegen, another cancer drug, to Ovation Pharmaceuticals, a six-year-old company in Deerfield, Ill., that buys slow-selling medicines from big pharmaceutical companies.

The two drugs are used by fewer than 5,000 patients a year and had combined sales of about $1 million in 2004.

Now Ovation has raised the wholesale price of Mustargen roughly tenfold and that of Cosmegen even more, according to several pharmacists and patients.

Sean Nolan, vice president of commercial development for Ovation, said that the price increases were needed to invest in manufacturing facilities for the drugs. He said the company was petitioning insurers to obtain coverage for patients.

The increase has stunned doctors, who say it starkly illustrates two trends in the pharmaceutical industry: the soaring price of cancer medicines and the tendency for those prices to have little relation to the cost of developing or making the drugs.

Genentech, for example, has indicated it will effectively double the price of its colon cancer drug Avastin, to about $100,000, when Avastin's use is expanded to breast and lung cancer patients. As with Avastin, nothing about nitrogen mustard is changing but the price.

The increases have caused doctors to question Ovation's motive — and left lymphoma patients wondering how they will afford Mustargen, which is sometimes not covered by insurance, because the drug's label does not indicate that it can be used as an ointment. When given intravenously to treat Hodgkin's disease, its other primary use, the drug is generally covered by insurance.

"Nitrogen mustard has been around forever," said Dr. Len Lichtenfeld, the deputy chief medical officer of the American Cancer Society. "There's nothing that I am aware of in the treatment environment that would explain an increase in the cost of the drug." ...


Anonymous said...

February 15, 2006

A Cancer Drug Shows Promise, at a Price That Many Can't Pay

Doctors are excited about the prospect of Avastin, a drug already widely used for colon cancer, as a crucial new treatment for breast and lung cancer, too. But doctors are cringing at the price the maker, Genentech, plans to charge for it: about $100,000 a year.

That price, about double the current level as a colon cancer treatment, would raise Avastin to an annual cost typically found only for medicines used to treat rare diseases that affect small numbers of patients. But Avastin, already a billion-dollar drug, has a potential patient pool of hundreds of thousands of people — which is why analysts predict its United States sales could grow nearly sevenfold to $7 billion by 2009.

Doctors, though, warn that some cancer patients are already being priced out of the Avastin market. Even some patients with insurance are thinking hard before agreeing to treatment, doctors say, because out-of-pocket co-payments for the drug could easily run $10,000 to $20,000 a year.

Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year.

"As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don't see any reason to be touching them," said William M. Burns, the chief executive of Roche's pharmaceutical division and a member of Genentech's board. "The pressure on society to use strong and good products is there." ...


Anonymous said...

Get it?

Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year....


Anonymous said...

Notice the change in philosophy of Roche drug makers; it's not our costs that are key to pricing but how much the durg is worth to you "punk."

The Clint Eastwood philosophy of drug pricing; "Are you feeling lucky, punk?"

Well, are you?


Anonymous said...

Note also the effect of the change in patent law in 1980 on drug company profits, but not drug company production. A fabulous investmjent all these years; best sector in the S&P since 1980, the best.

"Do you feel luck, punk?"


Anonymous said...

Yes, I can do the best Clint Eastwood, the best, and I feel awfully lucky actually. So don't mess with me, Punk,


Anonymous said...

Wait though, just wait till the interests vested in health care begin to push against any reform; understand, Punk? (I can't stop.)

Medicare Advantage

To the Editor:

We take offense at Paul Krugman's column, "The Plot Against Medicare." Not only was the column insulting, but it also ignored our goals to ensure adequate, affordable health care for the communities we represent.

Many African-American and Latino seniors prefer Medicare Advantage plans to traditional Medicare. Of those low-income seniors who make just enough to be ineligible for Medicaid but who lack access to employer-sponsored supplemental coverage, 54 percent of Latinos and 38 percent of African-Americans choose Medicare Advantage.

We are strong supporters of Medicare and have consistently fought for full financing. We reject the notion that additional benefits and options provided by Medicare Advantage should be scrapped so that the funds can be used elsewhere.

This is an immoral dichotomy; not only do we advocate for continued funding of Medicare, Medicare Savings Programs and Medicare Advantage, but we also advocate passionately for universal quality health care.

We will continue to support all programs that benefit our communities.

Hilary O. Shelton
Brent Wilkes
Washington, April 26, 2007
The writers are, respectively, director of the N.A.A.C.P. Washington bureau; and national executive director for the League of the United Latin American Citizens.


Anonymous said...

April 20, 2007

The Plot Against Medicare

The plot against Social Security failed: President Bush's attempt to privatize the system crashed and burned when the public realized what he was up to. But the plot against Medicare is faring better: the stealth privatization embedded in the Medicare Modernization Act, which Congress literally passed in the dead of night back in 2003, is proceeding apace.

Worse yet, the forces behind privatization not only continue to have the G.O.P. in their pocket, but they have also been finding useful idiots within the newly powerful Democratic coalition. And it's not just politicians with an eye on campaign contributions. There's no nice way to say it: the NAACP and the League of United Latin American Citizens have become patsies for the insurance industry.

To appreciate what's going on, you need to know what has been happening to Medicare in the last few years.

The 2003 Medicare legislation created Part D, the drug benefit for seniors — but unlike the rest of Medicare, Part D isn't provided directly by the government. Instead, you can get it only through a private drug plan, provided by an insurance company. At the same time, the bill sharply increased payments to Medicare Advantage plans, which also funnel Medicare funds through insurance companies.

As a result, Medicare — originally a system in which the government paid people's medical bills — is becoming, instead, a system in which the government pays the insurance industry to provide coverage. And a lot of the money never makes it to the people Medicare is supposed to help.

In the case of the drug benefit, the private drug plans add an extra, costly layer of bureaucracy. Worse yet, they have much less ability to bargain for lower drug prices than government programs like Medicaid and the Veterans Health Administration. Reasonable estimates suggest that if Congress had eliminated the middlemen, it could have created a much better drug plan — one without the notorious "doughnut hole," the gap in coverage once your annual expenses exceed $2,400 per year — at no higher cost.

Meanwhile, those Medicare Advantage plans cost taxpayers 12 percent more per recipient than standard Medicare. In the next five years that subsidy will cost more than $50 billion — about what it would cost to provide all children in America with health insurance. Some of that $50 billion will be passed on to seniors in extra benefits, but a lot of it will go to overhead, marketing expenses and profits....