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Healthy Skepticism Library item: 18827

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: Electronic Source

Edwards J
$928 for a Bag of Salt: How Drugmakers Rip Off Taxpayers
BNet 2010 Nov 2
http://www.bnet.com/blog/drug-business/928-for-a-bag-of-salt-how-drugmakers-rip-off-taxpayers/6309


Full text:

The most surprising thing about Louisiana’s new drug pricing lawsuit is the allegation, buried on page 12, that Baxter International (BAX) sold salt and sugar to Medicaid for $928 a bag. That fact alone tells you all you need to know about why healthcare costs in the U.S. are going up when they could be coming down: The law allows drug companies to rook state Medicaid and federal Medicare programs by preventing the agencies from negotiating drug prices:

Instead, both institutions must take a price based on the “average wholesale price” of a drug. Naturally, drug companies have developed a number of complicated schemes to make sure that the reported AWP is as high as possible while the actual price is made much lower, usually through a series of rebates. Medicaid and Medicare reimburse at the high rate and wholesalers pocket the difference. Drug companies strategize around that difference so that it functions like a kickback to wholesalers.

Baxter was probably selling saline solution and dextrose solution, in intravenous drip bags. They’re a little more difficult to produce and package than tabletop salt and sugar, but not much. The AWP of saline (to rehydrate patients) and dextrose (for acute hypoglycemia) is just $1.71 to $2.75 a bag. That’s a 41,000 percent markup, Louisiana claims.

It’s also interesting to note that Baxter was one of at least three generic drug makers named as defendants in the suit. (Among the others were Watson (WPI) and Ranbaxy.) Usually it’s the large, branded drugmakers who bear the brunt of pricing litigation. This time it’s the generic makers, whose products are often sold at pennies per pill. Even the discount sellers can allegedly play this game, it seems.

Louisiana spends $850 million a year on Medicaid. It would cost taxpayers nothing if the law was changed to allow states and the federal government to negotiate more aggressively. It would only lead to savings and lowered public spending on healthcare. Washington, unfortunately, is so broken that there is bipartisan agreement that such a change will never be made, which is why healthcare reform was passed without such a provision.

 

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Far too large a section of the treatment of disease is to-day controlled by the big manufacturing pharmacists, who have enslaved us in a plausible pseudo-science...
The blind faith which some men have in medicines illustrates too often the greatest of all human capacities - the capacity for self deception...
Some one will say, Is this all your science has to tell us? Is this the outcome of decades of good clinical work, of patient study of the disease, of anxious trial in such good faith of so many drugs? Give us back the childlike trust of the fathers in antimony and in the lancet rather than this cold nihilism. Not at all! Let us accept the truth, however unpleasant it may be, and with the death rate staring us in the face, let us not be deceived with vain fancies...
we need a stern, iconoclastic spirit which leads, not to nihilism, but to an active skepticism - not the passive skepticism, born of despair, but the active skepticism born of a knowledge that recognizes its limitations and knows full well that only in this attitude of mind can true progress be made.
- William Osler 1909