Anyone for Doughnut Holes?
Is the government doing enough to help us buy drugs at reasonable prices?
Last week, the US House Committee on Oversight and Government Reform released a report asserting that taxpayers pay as much as 30% more for prescriptions under Medicare Part D than under other government programs such as Medicaid. Medicare Part D is a privately administered program designed to help the elderly and disabled afford prescription drugs. When it was enacted in January 2006, drug companies were not required to provide discounts.
This always seemed wrong to me. Why shouldn’t the government, acting on behalf of the whole country, use its bargaining power to persuade drug companies to sell drugs more cheaply? That’s what Medicaid has done, and this arrangement has helped the poor. The poor obviously need the most assistance, but why can’t the elderly, disabled, and the rest of us benefit from the government’s negotiating power?
The answer, according to Richard Smith, a PhRMA vice-president, is that bargaining or price controls would seriously impair innovation. Smith cited a scholar at the American Enterprise Institute as a source for this claim.
Excuse my impolitic remark, but even without price controls, the pharmaceutical industry is not exactly setting new records for innovation at the moment. We’ve heard this argument before: the industry defends its prices by saying it must spend vast sums on research and development. If this is the case, why is the industry offering the government discounts through Medicaid?
I think pharmaceutical companies spend more money on marketing tchotchkes and direct-to-consumer advertising (a tactic of dubious help to patients, in my opinion) than they do on research.
This is a question that deserves further discussion, and I’m happy that the House Committee is investigating it. Our debate about drug pricing ought to include a wider range of perspectives and solutions. We can probably do a better job of helping patients without hurting industry.
“a tactic of dubious help to patients” – not true. Studies have shown that 30% of people who have serious such as hypotension or hypocalcaemia don’t know they have it. Direct to Consumer advertising serves to educate patients and provoke conversation with their doctor. In addition drug companies are for-profit companies who choose to develop new medications and advance medical research based on their ability to make money off what they make. Why do you think the US is the world leader in new drug research and medical technology? It’s a free market – keep it free.
Direct to consumer education through advertising informs patients and pays for new drug research and that’s always good for all of us. That’s how drug makers fund the search for a cure for AIDS and cancer. Drug research is not as cool as landing on the moon; the government is not going to pay for it; its paid for by the drug makers and they are not allowed to make money they will not spend money on the next big breakthrough.
Yes, DTC advertising can prompt patients to talk to their doctors. To the extent that they encourage us to monitor ourselves more actively, DTC ads are beneficial.
They don’t provide much medical information, though, and that’s for the best. Doctors are the ones to turn to for medical advice.
I doubt that DTC ads help people discover that they have a condition that they didn’t know they had. Vioxx, Claritin, Prozac, and Viagra are among the most heavily advertised drugs. I can’t imagine someone not realizing that he or she has allergies or pain.
It’s also possible that DTC ads create inappropriate demand. Some doctors might conceivably prescribe unnecessary medication to placate a patient who’s seen an ad.
The government does, in fact, pay for drug research. The National Institutes of Health funded research that yielded Novartis’s Gleevec and the epilepsy treatment felbamate. If the government were unwilling to fund drug research, we could change its policies by voting and writing to Congress.
Negotiating lower drug prices through Medicare need not prevent drug companies from making money. I’m sure this is not a zero-sum game. Drug companies that must sell their medicines at reduced prices to foreign governments still turn a profit.
Thanks for your comment! I appreciate a healthy debate.
You have naive logic if you think price controls would do anything but result in less innovation. The profits pay for future products 5-10 years away including coverage of the many projects or candidates that are unsuccessful. The government through NIH and University grants does not typically pay directly drug research, it supports the basic biological and medical research that often leads drugs and then only after extensive R&D investment by industry to a product (Plus if NIH is so responsible for drugs should they not bear part of the liability burden industry faces?). While I agree record of late from Pharma not outstanding IMO it been the focus on Blockbusters/Marketing and lack of scientific leadership that has created a poor situation to conduct effective drug innovation. Likewise the many Biotech failures are often sad stories of Academic types attempting to move beyond just bench research. I cringe as I see people who think they can do development get lost in the details of Manufacturing issues or running Clinical Trials.
Companies negotiate prices with Medicare (and others) because they have to be part of that formulary. If they follow the rules which have “loopholes” to allow “less” discounting should we not question the people who were short-sighted in creating the rules (i.e. Congress)? As usual certain people are now complaining that businesses know how to work the systems better than they do. House Investigations are Political affairs and customarily accomplish little of substance. I argue because of “limited profits” due to foreign price controls the US carries a higher burden to support the overall R&D maybe Congress should stand up in Fairer Trade Practices. Again back to original point if you want to change that dynamic you must be willing to accept the consequences.
I don’t care much for DTC and lots of Sales tactics myself however understand they must work to some degree and are bringing in the revenue to support current and future operations. R&D rarely brings in funds at all and surely not enough to supply a meaningful budget.
Thanks Erik. I agree with much of what you wrote.
DTC helps people discover more information about their health and explore alternatives even if they know about a condition they have. I have personally benefited from these ads. I realize Vioxx is used as an argument against DTC these days but the ads for Vioxx prompted me to go back to my orthopedist and ask him to try it using it which subsequently changed my quality of living (I am now using a different NSAID but I started with Vioxx).
I agree that the government helps in medication research and sometimes it even leads to significant advancement. My point is that the government is ill-suited to do that (although we are all grateful when they do). Free market is the way to advance technology in every field the federal government realizes this and that’s why the FDA supports initiatives such as the Critical-Path initiative.
It is not a zero-sum game and I agree that people in the US should never have to pay more than people in Europe (or anywhere else) for drugs developed and produced in the US. It is our job as consumers to do everything we can to get the best product at the best price. The government (state and federal) can help with that and it is our duty to encourage these initiatives. But if we want to have quality products we need to make it a fair game, we should let the manufacturers advance their business through advertising (under the existing strict regulations). That’s the way free markets work in my view.
If a doctor prescribes unnecessary medication to placate a patient then the problem is the doctor not DTC. If a patient doesn’t know (like I did) that there’s an alternative that can help him its not a problem with the patients but rather a problem FOR the patients.