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(This Is The Third Segment in A Four Part Series) The following quote will give you an idea as to the importance of prescription drugs: “Empirical estimates of the benefits of pharmaceutical innovation indicate that each new drug brought to market saves 11,200 life-years each year. Moreover, new drugs save money by reducing doctor visits, hospitalizations, and other medical procedures, ultimately for every dollar spent on new drugs, total medical spending decreases by more than $7.” (http://www.realclearhealth.com/articles/2016/09/22/a_social_contract_for_the_drug_industry_110110.html. © 2016 RealClearHealth.com.) However, the cost of drugs in this country are a huge drag on both the economy and on our federal budget. Particularly since about half of all healthcare in this country is paid for by the government. In addition, we not only pay the highest drug prices in the world, but then, through our taxes, pay another $70 billion in medical and health related research. Therefore, politicians love to bash price-gauging drug companies. As candidates, they promise tough action, in congress, they hold televised hearings to berate drug company executives. The executives then leave the capitol building smiling. They know the tough talk and hard questions are for television audiences and the news media. Nothing substantive will change and profits will continue to soar! According to prescription-benefit manager Express Scripts Holding Co., from 2008 through 2014, the average price for commonly used brand-name drugs rose by 128%. All this power, however, comes at a cost. In 2016 alone, pharmaceutical lobbyists spent over $244 million of their clients’ money. Drug companies complain about: high R & D costs; the fact that relatively few drugs ever make it to market; the Food and Drug Administration (FDA) for a slow, costly and overly risk-averse approval process; market forces; price gauging by middlemen; and steep discounts demanded by the big insurers. In some respects, the drug companies have a point. “The costs to bring a new drug to market with FDA approval are now estimated at over $2 billion, and only 1 in 10 drugs that begin clinical trials are ever approved by the FDA.” (See the Real Clear Health reference above) There are several problems with our current paradigm in pharmaceutical research that emphasize weaknesses in our convoluted free-market/government interventionist system: · American exceptionalism insists that if it isn’t American then we can’t trust it. Therefore, we will test it to the Nth degree and make it American. Only then will it receive FDA approval. · Regulatory Capture puts pressure on regulators to maintain the status quo. The pharmaceutical lobby wants a return on the $244 million that they invest annually to protect their clients from competition. · The current system of patent protection for pharmaceutical research is outdated, monopolistic and excessively costly for both consumers and taxpayers. · The FDA, like other regulatory agencies, are prone to an unhealthy degree of risk aversion. They are scared-to-death of making a mistake or being criticized, so it’s easier and safer to just say no. Let’s take a look at research and development costs relative to marketing, revenues, profits: Company Total Revenue R&D Marketing Profit Margin J&J (US) 71.3 8.2 17.5 13.8 19% Novartis (Swiss) 58.8 9.9 14.6 9.2 16% Pfizer (US) 51.6 6.6 11.4 22.0 43% Taken from: http://www.bbc.co.uk/news/business-28212223. Unless otherwise noted, all figures are in billions of dollars. These companies all spent significantly more money on marketing than Research and Development. Speaking of marketing… Let’s assume that you are one of the 28 million Americans not covered by insurance. How much will you actually pay for some commonly advertised drugs? The following samples will give you a pretty good idea: · Cocentyx: is a drug used for psoriasis and psoriatic arthritis. A carton of 2 sensoready pens cost about $8,600. The total cost for the first month of treatment comes to $33,200. Thereafter, you will pay $8,600 per month. The first year of treatment will set you back $127,800. · Humira: is a drug used to treat rheumatoid arthritis. The cost per month is $4,700. Administered by bi-weekly injections. Total annual cost: $56,400. · Symbicort: is a drug used to treat asthma. One inhaler (120 doses) costs about $377. The cost per month: $188 or $2,256 annually. · Linzess: is a drug used to treat irritable bowel syndrome. You can expect to pay about $12.72 per pill or $382 per month. Annual cost $4,584. · Trulicity: is a drug used to improve blood sugar control in adults with type 2 diabetes. The maximum dosage is one, $189 injection per week. That comes to $756 per month and $9,072 per year. · Eliquis: Reduces the Risk of Stroke and Systemic Embolism in Patients with Nonvalvular Atrial Fibrillation. The dosage is two $8 tablets daily. The monthly cost is approximately $480 or $5,760 annually. · Keytruda: is a monoclonal antibody that is used to treat certain types of cancer. The dosage varies, but it is common for 200 mg to be administered intravenously once every 3 weeks, at $2,250 per injection. Annual cost: $29,250. · Viagra: is a drug to treat erectile dysfunction. The cost for one, 100 mg pill is $59. · Cialis: is also a drug to treat erectile dysfunction. One, 10 mg pill costs $41. There are only two countries in the world that allow direct-to-consumer prescription drug advertising: The United States and New Zeeland. In the United States, drug companies spend over $5 billion annually in direct-to-consumer advertising. I may be old fashioned, but I believe that you should go to a doctor, get a diagnosis, and then take your physicians advise. He or she may very well prescribe a more appropriate medication or cheaper generic equivalent than the product you see on television. Advertising is fine if it helps you make the decision between a Ford or a Chevy, but not when it comes to your health. Listening to your doctor’s perspective after reading a news report or article may help put your mind at ease, but the happy images, coupled with “voice over” side effects, contained in a drug advertisement add nothing to the conversation and is a waste of yours’ and your doctor’s valuable time.
(This is the Second Segment In A Four Part Series) The healthcare system that Obama and other liberals preferred was a single payer expansion of Medicare that covered everyone. However, Obama learned a valuable lesson from previous democratic presidents who had attempted to take-on the various healthcare interests, and failed. Being a pragmatist, he realized that any change in healthcare would require the buy-in of all major players: the pharmaceutical, hospital and health insurance industries; and of course, the powerful American Medical Association. If Obama could have garnered the support of all democrats, even without a single republican vote, he could have passed any bill he desired. But, the democrats from red and purple states were representing voters that were less liberal and therefore more skeptical of a system run by the government, so the compromise plan that he settled on was a nationalized version of Mitt Romney’s Massachusetts program, including sweeteners that lobbyists believed would increase their revenues and profits. The Affordable Care Act was never a shoe-in. Even with the support of lobbyists and moderates, the bill was never very popular with the public and barely squeaked through congress. Obama’s main goal was to decrease the huge number of uninsured Americans, not to fix the costly and fragmented systems and organizations that controlled healthcare. To accomplish this mission, he reinvigorated individual health insurance by setting up a state to state network of health insurance exchanges and then mandated that everyone in the country be covered under some form of government approved health plan. This was a necessary ingredient, because to induce insurance companies to include preexisting conditions there needed to be a huge pool of participants. Children could continue under their parent’s policy up to age 26. Anyone choosing not to participate were to pay a special mandated penalty (or as the Supreme Court ruled, a tax). Low income participants qualified for graduated federal subsidies; paid for through a series of new or increased taxes to help pay the cost of insurance premiums. There was also an expansion of Medicaid payments to the states. The result has been mixed. Many of the provisions are very popular and about 17 million more Americans are now covered by health insurance than before Obamacare. And the rate of increase in healthcare costs has been slightly lower in recent years, however, the fundamental flaws that existed before, have not gone away. While healthcare expenditures are increasing at about 5.5%, healthcare premiums for individual plans are increasing at a rate of about 25%! Although, taxpayers may groan, almost 85% of plans purchased through the various marketplaces receive federal subsidies. This is to help participants pay for otherwise unaffordable health insurance premiums. Of course, to qualify their incomes must be below federally determined thresholds, the lower your income, the greater the subsidy. I admire Obama’s goal of providing everyone with health insurance, however, all he accomplished was to load more and more people onto an incredibly expensive and inefficient system. The poor may benefit, but at a huge and growing cost to the federal government, which is already stretched to the breaking point. And many who don’t qualify for subsidies won’t participate. And finally, if insurers can’t cover expenses, then one by one they will drop out of the various individual marketplaces. If we compare the health outcomes with other developed countries, we still have a long way to go: Costs There are many reasons for the big increases in individual healthcare plans. First, Obamacare did very little to halt healthcare inflation, and in fact contributed to the huge rise in pharmaceutical prices. This is because, under the law, Medicare is banned from purchasing generic drugs, only name brand products; and second, Medicare is also banned from negotiating drug prices, which has allowed the pharmaceutical industry to raise retail prices to obscene levels — for Medicare and the uninsured — while offering attractive discounts to big group insurers. Second, many young and healthy Americans have found it cheaper to incur the penalty, rather than pay the high cost of individual health insurance plans. And this trend will likely increase as premiums purchased through exchanges continue to soar. Thus, with fewer participants in the pool, premiums will rise even further. Third, Obamacare created a new and untested model for insurance company actuaries and executives. They simply overestimated the actual number of participants and underestimated the loss ratio and the costs of participating in the various exchanges. The result has been huge losses for smaller insurance companies that primarily focused on individual plans; and huge profits for the big insurance companies that focused on group plans. Many big companies were smart enough to see the “writing on the wall” and have dropped out of the exchanges, refusing to participate in the unprofitable individual healthcare markets. And fourth, by adding 17 million newly insured consumers there was logically more demand for hospital services, clinic visits and prescription drugs. In 2015 we spent $3.2 trillion on healthcare, almost $10,000 per person in the United States, representing 17.8% of our Gross Domestic Product. The fact that healthcare as a percent of GDP keeps rising means that, as a nation, a greater percentage of our national resources are diverted from other sectors of the economy. Healthcare in America is collapsing under its own weight. The administrative costs (including services that are ultimately written off as bad debts) are enormously inefficient, cumbersome and must serve a myriad of requirements by federal and state governments; as well as numerous insurance plans; including the coding and pricing of countless medical services and prescriptions. Nothing is easy or uniform. The price of every service and product is based on thousands of separate negotiations. And of course, if you are not included in a plan (or covered by Medicaid) then you pay the retail, listed price for everything. To give you some comparisons: French hospitals have about 67% fewer administrative personnel than the U.S.; Our health insurance industry spends 20 cents on every dollar for non-medical costs, France spends a nickel. In America, we spend about $3.2 trillion dollars on healthcare. 20% of that figure comes to $640 billion dollars. If we could bring down our non-medical costs to 5% that would be an annual savings of $512 billion or over the next ten years: $5.1 trillion! Aside from administration, other drivers of increasing costs are the American Medical Association (AMA) and drug prices. First of all, as a nation, we need a huge increase in the number of qualified doctors and other medical professionals. On the other hand, the AMA wants to greatly limit the number of doctors to keep their member’s salaries high. General practitioners have felt the squeeze between higher operating costs, including high medical malpractice insurance and the ability to raise prices. Many have found it in their best interests to form group practices, own their own labs,hire their own technicians and replace MD’s or DO’s with Physicians Assistants; doctors, therefore become more managers than practitioners, resulting in poorer care for patients. There is also a logical tendency to over-refer their patients for testing and lab-work. Many of these tests may be justifiable and reimbursable, but not medically necessary or even desirable. Every time there is a new study that questions the value of some test or procedure, the AMA immediately refutes the study. Unfortunately, then, every visit to your doctor becomes a game to see how much money can be extracted from the insurance company. Still the general practice doctors are not making a fortune and many are struggling. The specialists, however, are making a fortune and their prices continue to rise well above the rate of inflation. It is not surprising then, that in England about 60% of medical doctors are general practitioners, but in the United States about 65% are specialists. My experience with a Urologist provides a good example. When I was about 60, my primary care physician discovered that I had a slightly enlarged prostate and my Prostate-specific Antigen or PSA was high enough to cause concern (In England PSA tests are rarely given, as they are not considered a reliable test for prostate cancer screening). Therefore, I was referred to a Urologist, who started asking questions about erectile dysfunction and how many trips I made to the bathroom at night. He then scheduled an ultrasound for my prostate, which apparently wasn’t conclusive, so he then scheduled a biopsy, which showed no cancer. In the meantime, he also scheduled an ultrasound of my bladder to determine how much fluid remained after urination and then scheduled a separate test to determine the strength of my urine flow. These tests resulted in the prescription for a drug, the side effects of which were worse than the minor annoyance of a couple of trips to the bathroom at night. Two years later I was diagnosed with colon cancer. As part of the surgery, a Urologist was needed to insert stents. A pre-op consultation was required in the doctor’s office (the same office that I had visited a couple of years earlier), at which time the Urologist asked about my PSA, my nighttime bathroom habits and if I experienced erectile dysfunction. After finishing with his initiated Q and A, he got up to leave. I had to stop him, sit him back down and ask: “What are stents and why are they important to my procedure?”