http://quote.bloomberg.com/apps/news?pid=10000103&sid=aVZqETId3eKE&refer=news_index The US Supreme Court ruled today that the state of Maine can implement its discount drug program. Basically, the program allows uninsured Maine residents to get prescription drugs at the same prices as the state's Medicaid program (which is very low pricing; ~20% to 25% off of the Average Wholesale Price (plus some pharmacies charge above the AWP so the discount could be even larger)). John Paul Stevens said that the ruling may not hold up to further scrutiny but so far investors are discounting stock prices of Pharma companies as a result of the ruling. The Pharma Index is off about 5%. Here is the issue: federal law requires drug companies to give their best pricing to Medicaid programs. So, large employers, Blue Cross plans, managed care companies and pharmacy benefit managers all get "less than best" pricing based upon their volume. The uninsured don't have any consolidated buying power so they get the worst pricing. But now they jump to the front of the line with the Medicaid plans. The upside is that uninsured patients will be able to more easily afford their prescriptions (the average AWP per claim at a retail pharmacy is about $70 so they'll save about $14 - $18 a month per drug they are taking). The downside is the precedent it would set. Forcing companies to provide federal pricing to individuals could become a political tool used in election years by politicians trying to appease a populace against a perceived "Big {fil in the blank} Industry". At the least, this may force Congress to deal with prescription drug prices and healthcare, in general, rather than just constantly talk about doing something. If not, other states may just adopt this program and each state will have their de facto "price list" for the uninsured. Murf
I earnestly wish that it were this simple. But even the politicians know it's not; they demagogue this issue to death, stick the pharmaceutical industry with the bill and then run to the voters to tell them what a great job they did. All this amounts to is the government passing a law which orders a private industry to sell their goods and services at a specific price. It's bad economics and it's bad public policy. Of course the THEORY is that the drug manufacturers will simply make less money: that this loss is simply a net loss to their bottom line. But of course that's just silliness; you and I will end up paying the bill through higher prices to those who pay. Bet the politicians won't mention this in their re-election campaigns. It's exactly what they've done to the medical industry as a whole: said "Look the law says you HAVE to deliver this service to our particular clientele (Medicare clients) and we'll only pay you bout 40% of your normal fee." This has driven insurance costs through the roof. Expect the same here. There is no free ride here. If we as a nation decide that it is our responsibility to pay for, or HELP pay for, other people's prescription drugs, then we have to admit that we don't have the money and create a specific tax so that we all know what the policy is costing us. Truth in government.
Of course Maine's proximity to Canada and its affordable pharmaceuticals has nothing to do with this.
Actually, with regards to prescription drugs, increases in utilization has been the main driver of cost increases over the last few years. The cost for drugs per person per month has generally risen about 15%-17% per year. Of that increase, increases in utilization contributes about 10% with inflation being about 5%. The other 0%-2% is due to change in the mix of drugs. So, while 5% inflation is high in relation to CPI, the reason for skyrocketing cost increases is more due to more people taking more drugs (i.e., higher utilization). Utilization is increasing due to increased indications of existing drugs, new prescribing guidelines for drugs (particularly cholesterol medications) and direct-to-consumer advertising (Prevention magazine did a study that showed that 85% of the people that request a specific drug from their doctor get that drug). So, don't place all of the blame on increasing drug prices. A lot of the reason for the cost increases falls elsewhere. Murf
It's a tough issue. On the one hand, Bill's right, you don't want to intervene in the market just for the hell of it. OTOH, 1) alot of the research for these drugs is provided free of charge by your tax dollars, 2) drug companies make a very good profit 3) the gvt. is already interfering in the market, through patent law 4) health care, by its nature, isn't the same as the market for grapes vs. oranges. In general, I trust the private market over gvt. action. But health care is one area where I don't. And the pharmaceutical industry, that's worse than the rest of it. Bill, I think that pharmaceutical companies give a pretty fantastic ROI. (I know for SURE they did a few years ago when I was somewhat of an activist on health care.) So it's not really certain that our prices will go up. If they just cut back on lobbying and marketing expenses (it's one thing to create a demand for, I dunno, 3 legged jeans. It's another to create a demand for Paxil.), and a more normal ROI, that would absorb alot of the reduction in revenues.
Absolutely true. I didn't mean to imply that there was only one factor at work here. I just get very tired of politicans telling us they can solve the problem through creating a government edict that somebody else pays the bill. Like I said, if our society as a whole decides that some people should get free or subsidized pharmaceuticals, fine; then let's be hinest and say it's going to cost our nation $X billion and here's YOUR share. And while I agree with your point about utilization, a big part of this is the ageing of the population, the "Graying" of America. And it's only getting worse. The drug companies are certainly not blameless either. Typically, somebody comes up with a breakthrough drug which is wildly expensive since they a) have no competition and b) have a right to recover the staggering development costs. Five years (or whatever) later, other companies can market equivalents or "generics." So the original manufacturers come up with a tweaked formulation, or a once-a-day instead of twice-a-day formulation and start over. It's a mulitfaceted problem not well suited to the five-second sound bite, which unfortunately is all most people ever get to hear.