Healthy Skepticism Library item: 1505

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: Journal Article

Krugman P.
A Serious Drug Problem
The New York Times 2005 May 6;

Full text:

There was a brief flurry of outrage when Congress passed the 2003 Medicare
bill. The news media reported on the scandalous vote in the House of
Representatives: Republican leaders violated parliamentary procedure,
twisted arms and perhaps engaged in bribery to persuade skeptical lawmakers
to change their votes in a session literally held in the dead of night.

Later, the media reported on another scandal: it turned out that the
administration had deceived Congress about the bill’s likely cost.

But the real scandal is what’s in the legislation. It’s an object lesson in
how special interests hold America’s health care system hostage.

The new Medicare law subsidizes private health plans, which have repeatedly
failed to deliver promised cost savings. It creates an unnecessary layer of
middlemen by requiring that the drug benefit be administered by private
insurers. The biggest giveaway is to Big Pharma: the law specifically
prohibits Medicare from using its purchasing power to negotiate lower drug
prices.

Outside the United States, almost every government bargains over drug
prices. And it works: the Congressional Budget Office says that foreign drug
prices are 35 to 55 percent below U.S. levels. Even within the United
States, Veterans Affairs is able to negotiate discounts of 50 percent or
more, far larger than those the Medicare actuary expects the elderly to
receive under the new plan.

After the drug bill’s passage, Jacob Hacker and Theodore Marmor of Yale
University estimated that a sensible bill could have delivered twice as much
coverage for the same price.

Needless to say, apologists for the law insist that the prohibition on price
negotiations had nothing to do with catering to special interests – that it
was a matter of principle, of preserving incentives to innovate. How can we
refute this defense?

One way is to challenge claims that the pharmaceutical industry needs high
prices to innovate. In her book “The Truth About the Drug Companies,” Marcia
Angell, the former editor in chief of The New England Journal of Medicine,
shows convincingly that drug companies spend far more on marketing than they
do on research – and that much of the marketing is designed to sell “me,
too” drugs, which are no better than the cheaper drugs they replace. It
should be possible to pay less for medicine, yet encourage more real
innovation.

Another answer is to point to the haste with which key players in the drug
bill’s passage cashed in – making the claims that they wrote a
pharma-friendly Medicare bill out of genuine concern for the public’s
welfare look ludicrous.
Let’s look at just two examples.

Billy Tauzin, who shepherded the drug bill through when he was a member of
Congress, now heads the Pharmaceutical Research and Manufacturers of
America, the all-powerful industry lobby group, for an estimated $2 million
a year. In his new job, he’s making novel arguments against allowing
Americans to buy cheaper drugs from Canada: Al Qaeda, he suggests, might use
fake Viagra tablets to get anthrax into this country.

Meanwhile, Thomas Scully, the former Medicare administrator – who threatened
to fire Medicare’s chief actuary if he gave Congress the real numbers on the
drug bill’s cost – was granted a special waiver from the ethics rules. This
allowed him to negotiate for a future health industry lobbying job at the
very same time he was pushing the drug bill.

If all this sounds like a story of a corrupt deal created by a corrupt
system, it is. And it was a very expensive deal indeed. According to the
Medicare trustees, the fiscal gap over the next 75 years created by the 2003
law – not the financing gap for Medicare as a whole, just the additional gap
created by legislation passed 18 months ago – will be $8.7 trillion.

That’s about three times the amount President Bush proposes to save by
cutting middle-class Social Security benefits.

In fact, I have a suggestion for Mr. Bush. One way to prove that he’s really
sincere about addressing long-run fiscal problems, that his calls for
benefit cuts aren’t just part of an ideological agenda, would be to put
Social Security aside for a while and fix his own Medicare program. Oh,
never mind.

Nonetheless, someone will eventually have to take on the health care special
interests. Who might do that? I’ll write about that in the next installment
of this series.