I must say that my eyes nearly popped out of my head when I read this piece in the New York Times on Sunday What might it mean? Read below the fold for some thoughts from Australia. There are, clearly, political AND policy implications to a story like this.
Firstly, political: $US150 million is a shedload of money in anyone's language. One could argue: better the money being spent on our side, rather than AGAINST us, which is probably exactly what would happen if the final bill is grossly displeasing to the drug industry. With apologies to Lyndon Johnson
It may be better having them inside the tent pissing out than outside the tent pissing in.
On the other hand, in the same NYT edition, Frank Rich, whose judgement on matters like this I tend to trust, points out some obvious potential flaws in the politics of the deal. Furthermore, I see that Robert Reich also has some good political arguments against the deal. (And thanks to GreenSooner for finding the link). All I can say is, over to you Americans for the final call on the politics.
Secondly, policy: I have argued elsewhere that some features of the current health insurance system are so insane and damaging as to constitute a clear and present threat to the USA itself, or at least it's status as a leading economy. I refer firstly to the system whereby employers are frequently forced to provide health care to their employees, unlike in Canada or Australia, where emplyees are insured through Medicare. This makes locating your business on US territory less competitive. Secondly, the possibility that insurers have to deny cover for pre-existing conditions, meaning that, for example, a middle aged person with high blood pressure who is thinking of going into their own business has to worry they will be left high and dry in case of health problems. I believe President Obama is aware that these flaws in your system threaten the US economy, big time.
So, no question, effective health care reform needs to get done. The question is, can effective reform be compatible with getting lobbying support to the tune of $150 million from the drug industry. A REALLY good question, in my opinion.
Three things to bear in mind:
1/ Health costs are a huge issue and they do need to be contained.
2/ Anyone who says they have all the answers to containing health costs is a quack.
3/ Whatever else, though, containing drug costs is likely to be essential in containing overall costs
With respect to be the first point, I present a table, courtesy of the National Center for Policy Analysis which I urge all readers to read, mark and inwardly digest.
Per capita growth of government health spending and GDP 1970-2002
Health Care Growth GDP Growth
Australia 4.1% 1.8%
Austria 4.0% 2.4%
Canada 3.1% 2.0%
Germany 3.6% 1.5%
Japan 4.9% 2.4%
Norway 5.3% 3.1%
Spain 5.1% 2.3%
United Kingdom 3.7% 2.1%
USA 5.1% 2.0%
Average 4.1% 2.1%
As an approximation, if the gap between health care spending growth and GDP growth is two percentage points, health spending as a percentage of GDP will double in 35 years. If the gap is three percentage points, doubling will take 24 years. Note that, at present, the USA is going to perdition faster than any of the other countries listed, especially since you spent 15 %of GDP on health at a time when Australia was getter better health outcomes while spending 9%. But most countries could be in the manure in the time it takes a college graduate to reach retirement age if nothing is done and are therefore prudentially concerned.
With respect to containing drug costs, there are two, somewhat related, issues. The first, which clearly concerns Robert Reich as well, is drug prices. As an Australian, I am very proud of the Pharmaceutical Benefit Scheme (PBS), and I urge American readers to follow the link and find out how it works. (The website appears not to have been updated for several years and the figures are out of date, but there have been no fundamental changes to the scheme).
The essential point is that the PBS is a monopoly buyer of essential drugs, and it has a fearsome reputation in the drug industry for hard nosed negotiation. Introducing a PBS type scheme is precisely what President Obama has promised the drug industry not to do. Does that move make cost containment through restraining drug costs impossible?
Actually, not quite, as I hope to demonstrate. There is a second issue, that many expensive drugs currently being promoted by drug companies and prescribed by doctors, allegedly in the "best interests of patients" are, in fact, of dubious efficacy and cost effectiveness compared with less expensive alternatives. Consider two examples:
Antiplatelet agents: Aspirin as a means of reducing the stickiness of platelets, the blood cells that make clots is a really effective way of reducing risk of heart attack and stroke in persons at risk. But not to zero,and the drug industry promotes adding another drug, Clopidrogel. But a bg study in the New England Journal of Medicine shows that this practice is, to say the least dubious. There was, in fact, a suggestion of benefit from clopidrogel but a suggestion of harm from side effects. But, if you buy the figures presented the risk of an "event" (heart attack, stroke etc) was 7.3% over 28 months on aspirin alone versus 6.8% on aspirin plus clopidrogel. The risk of severe stomach blleding was 1.3% on Aspirin alone and 1.7% for Aspirin plus Clopidrogel.
So, if you give take 1,000 patients currently on Aspirin and add Clopidrogel for 28 months, 68 will have an "event", 927 will be fine and five will be saved an "event". However, 17 will have major stomach bleeding, of whom 13 would have had that anyway, and 983 will be fine. So a lot of people have to take a lot of tablets before one of them experiences any benefit or harm (these are the concepts of "number needed to treat" and "number needed to harm". Before accepting any long term prescription as a preventative measure, ask your doctor to quote these numbers. They should have them at their fingertips if they know their science.)
Lithium versus Olanzapine in bipolar disorder: Bipolar disorder is an awfull chronic psychiatric disorder and not that rare (maybe affecting 1-2% of the population. Both Lithium (tremor, bad taste in mouth, possible long term kidney damage) and Olanzapine (massive weight gain and risk of Type II diabetes) can have problems, but they are probably equally effective in the prevention of relapses. (Take the link with a grain of salt; it is a drug company sponsored paper, it shows a slight reduction in risk of mania, a slight increase in risk of depression and remember the concepts of number needed to treat and number needed to harm. And note, also, that the quoted average weight gain on Olanzapine is unbelievably low.)
And how much cheaper are the less expensive alternatives? For the USA, I frankly have no idea. But the table below lists the monthly costs, in 2006, of the drugs mentioned to Australian taxpayers through the PBS
Aspirin 150 mg per day $2
Clopidrogel 75 mg per day $82
Lithium 1 gram per day $10
Olanzapine 20 mg per day $400
(As I write, one $A is worth $US0.83, to enable conversion to your currency, but the costs are three years old, so you could take the prices quoted as being in $US just to be sure) The two examples are among the most egregious, but it is easy to find examples of effective drugs being replaced by drugs that are five times as expensive.
So to summarize, the difference between Austraian prices and US prices, which, I have heard, is considerable, is the PBS effect that Presicent Obama has foresworn for the sake of getting the $150 million spent in favor of his program and not against it. But the difference between the expensive drug and it's less expensive alternative has more to do with regulating the way the drug industry promotes it's product. So, as we say in Australia "game on".
Drugs basically are expensive (and profitable) whilst they are in patent, and become inexpensive pretty much as soon as the patent expires. Check out the link to a story on what is likely to happen when Lipitor, the most widely prescribed cholesterol drug, goes off patent. Gee whizz, I wonder if the drug industry will come up with a replacement? (one likely candidate has already bitten the dust). But, as we have seen, if your doctor prescibes an expensive, in patent, drug where an effective, out of patent, alternative exists, you, the patient, are getting a bill of goods.
So why do doctors do such things. No doubt some do so because, basically, they are not very good doctors. But more importantly, the marketing tactics of the drug industry have been a huge concern for years.
Some of this is simply dodgy presentations of the science, such as misuse of the journal articles I have quoted above. This type of thing is hard to regulatem but probably not impossible.
But the drug industry, conveniently, presents some much easier targets for law and ethics enforcement, like employing attractive young women as representatives, and, even, paying kickbacks to doctors. There is a role for Attorneys-General in the containinment of drugs costs. Hopefully for progressive Americans, they would, presumably, be outside the scope of the weekend deal.
So basically, rationality is telling us to be sceptical about dealings between the progressive side of politics and the drug industry. Beware of Romans bearing gifts. Remember, good policy makes good politics at the end of the day. So be concerned, but not yet despondent.