Full Version: Medicare Part D
There was a lot of debate over the prescription drug plan for seniors which is known as Medicare Part D.
The real costs would be higher than advertised. The government could not negotiate drug prices. We don't need more entitlements.
It's now being reported that the benefit came in $13 billion under budget this year.
Nancy Pelosi has announced that one of her first goals is to get the feds the power to negotiate with drug companies directly in order to lower costs. But as we can see from the example of the Department of Veterans Affairs, this comes with a cost.
Questions for Debate:
Has Medicare Part D been successful?
Will Pelosi's plan help or hurt it in the long run?
The real costs would be higher than advertised. The government could not negotiate drug prices. We don't need more entitlements.
It's now being reported that the benefit came in $13 billion under budget this year.
Nancy Pelosi has announced that one of her first goals is to get the feds the power to negotiate with drug companies directly in order to lower costs. But as we can see from the example of the Department of Veterans Affairs, this comes with a cost.
QUOTE
The development of fewer new medicines would be the collateral damage inflicted by government negotiations that would lower industry returns and reduce R&D spending. My own estimate, based on existing government data, would be that almost 200 new drugs would go undiscovered over the next two decades as an indirect result of federal price negotiations.
To understand why this is true, it is instructive to review the actual experience of the drug purchasing program administered by the Department of Veterans Affairs, cited by many as a "negotiating" model for Medicare Part D. In order to reduce budget costs, the VA excludes newer and more expensive medicines. The VA "formulary", a list of covered medicines, includes about 1400 drugs; virtually all of the existing Part D formularies, currently negotiated by private purchasers, have about 4300 drugs.
What is more striking is that drugs covered by the VA formulary are significantly older than those covered by Medicare Part D or by private health insurance plans. The VA formulary includes only 38 percent of the drugs approved by the FDA during the 1990s, only 19 percent of the drugs approved since 2000, and only 22 percent of the drugs given priority review approval since 1997. VA prescriptions systematically are for drugs older than those specified in non-VA prescriptions, and new drugs as a matter of VA policy are not considered for the VA formulary for three years, regardless of improved effectiveness or reduced side effects. A third of VA seniors prefers to switch to Part D, but cannot because they would lose other VA benefits.
To understand why this is true, it is instructive to review the actual experience of the drug purchasing program administered by the Department of Veterans Affairs, cited by many as a "negotiating" model for Medicare Part D. In order to reduce budget costs, the VA excludes newer and more expensive medicines. The VA "formulary", a list of covered medicines, includes about 1400 drugs; virtually all of the existing Part D formularies, currently negotiated by private purchasers, have about 4300 drugs.
What is more striking is that drugs covered by the VA formulary are significantly older than those covered by Medicare Part D or by private health insurance plans. The VA formulary includes only 38 percent of the drugs approved by the FDA during the 1990s, only 19 percent of the drugs approved since 2000, and only 22 percent of the drugs given priority review approval since 1997. VA prescriptions systematically are for drugs older than those specified in non-VA prescriptions, and new drugs as a matter of VA policy are not considered for the VA formulary for three years, regardless of improved effectiveness or reduced side effects. A third of VA seniors prefers to switch to Part D, but cannot because they would lose other VA benefits.
Questions for Debate:
Has Medicare Part D been successful?
Will Pelosi's plan help or hurt it in the long run?
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Questions for Debate:
Has Medicare Part D been successful?
Has Medicare Part D been successful?
To some extent yes in that it has given seniors some drug coverage. If the program goes the way of the VA model this will not be the case as cost cutting will limit choices to older drugs exclusively. This is typical “government coverage” and the reason we never, ever want to go to a “single payer” system where the government will decide for ALL of us which medications are to be cover based on price.
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Will Pelosi's plan help or hurt it in the long run?
Hurt in the long run as described below from the article. Certainly some negotiation would not hurt badly since this is already happening. Large HMOs, hospitals, and pharmacy chaines negotiate prices now. So to say that this is not happening is just untrue. Pelosi and the crew on the left will IMO push for regulated very low prices as has been done in Canada. This will have the effect as described below.
Based on a review of existing government purchasing programs, new research from the Manhattan Institute provides specific estimates of these effects: Prices would be driven down by over 35 percent by 2025. The cumulative decline in drug R&D for 2007-2025 would be about $196 billion in year 2005 dollars, or $10.3 billion per year. Because R&D costs for new medicines are about $1 billion, the loss would be about 196 new drugs. Other published research reports findings that each pharmaceutical R&D investment of roughly $2000 yields an expected gain of one life-year. Accordingly, an annual R&D decline of $10 billion would result in an expected loss of 5 million life-years each year. If we assume, again conservatively, the value of a life-year at $100,000, the economic cost of this effect would be about $500 billion per year, far in excess of total U.S. spending on pharmaceuticals.
QUOTE(Ted @ Jan 8 2007, 09:22 AM) 
Based on a review of existing government purchasing programs, new research from the Manhattan Institute provides specific estimates of these effects: Prices would be driven down by over 35 percent by 2025. The cumulative decline in drug R&D for 2007-2025 would be about $196 billion in year 2005 dollars, or $10.3 billion per year. Because R&D costs for new medicines are about $1 billion, the loss would be about 196 new drugs. Other published research reports findings that each pharmaceutical R&D investment of roughly $2000 yields an expected gain of one life-year. Accordingly, an annual R&D decline of $10 billion would result in an expected loss of 5 million life-years each year. If we assume, again conservatively, the value of a life-year at $100,000, the economic cost of this effect would be about $500 billion per year, far in excess of total U.S. spending on pharmaceuticals.
If I may, your mathematical formula above assumes that all money produced by pharmaceutical companies is equalled by costs, thus a reduction in income automatically requires a reduction in costs.
This is, of course not true at all. It ignores the fact that for the last several years the Pharmaceutical companies of the US have yearly been turning over record profits, with annual profit increases as high a +25% annually, each year. In fact the profit of the top 10 pharmaceutical companies was more than that of every other member of the Fortune 500 combined.
So even if your assumed damage to the profit margin of these companies were accurate, the lost money would be taken from the massive excess profit long before it dug into costs. In fact the additional costs you describe - 10.3 billion per year - are paltry when compared to the industry's profit margin. In 2002 the industry made as total profit, after all costs, over 130 billion dollars. That is in one year, though sadly I do not have more recent figures at hand. Reduction of their profits by 10.3 billion per year would in no way affect their costs or R&D, would still leave them as the most profitable industry in the United States today, and would allow millions more people access to critical and even lifesaving drugs.
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This is, of course not true at all. It ignores the fact that for the last several years the Pharmaceutical companies of the US have yearly been turning over record profits, with annual profit increases as high a +25% annually, each year. In fact the profit of the top 10 pharmaceutical companies was more than that of every other member of the Fortune 500 combined.
I agree with you to some extent. The math was not mine but from the posted link. Lets remember that not all drugs are developed at the top 10 companies and some smaller companies literally go under if a drug failshttp://sanfrancisco.bizjournals.com/sanfra.../31/daily6.html
So while the big guys may, at some times, when profits are good, be able to sell at 35% below std. price others would not make it or simply decide that the returns did not equal the expense and “risk” involved in developing a drug. Big profitable companies can manage more risk and continue to fund new drug development. When profits drop the first to go will be niche drugs aimed at conditions that effect fewer people.
I would favor negotiating with companies and allowing them high profits (through higher prices) if they were willing to also fund research into diseases like Malaria which kills millions worldwide.
QUOTE(Ted @ Jan 8 2007, 11:42 AM)
I agree with you to some extent. The math was not mine but from the posted link. Lets remember that not all drugs are developed at the top 10 companies and some smaller companies literally go under if a drug fails
As is the norm in any industry planetwide in a capitalist system. If your primary product fails, the company in question tends to suffer an enormous loss.
That does not alter the fact that at the moment the most profitable industry in the United States is the pharmaceutical industry. I am a capitalist at heart, and am wary of the intervention of government in private business. But I am also nauseated when the richest and most profitable industry in the country, reporting year after year profit increases over 25%, pleads poverty when it comes to a measure that would help millions, and yet still leave them as the most profitable industry in the United States.
Developing a drug is expensive. So if developing a car, or an aircraft, or a candy or a soft drink or for that matter a toy. Prices should be such that in industries where the risk is greater, the income is also greater to offset the cost. But the word offset is critical here. Pharmaceuticals are not simply offsetting the cost, they are making money hand over fist. If profits are that high, then clearly a slight reduction is not going to affect costs and R&D.
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Developing a drug is expensive. So if developing a car, or an aircraft, or a candy or a soft drink or for that matter a toy. Prices should be such that in industries where the risk is greater, the income is also greater to offset the cost. But the word offset is critical here. Pharmaceuticals are not simply offsetting the cost, they are making money hand over fist. If profits are that high, then clearly a slight reduction is not going to affect costs and R&D.
Again I have no real problem with the government ‘negotiating” to get a better price for drugs. In fact I am shocked these folks have not done so years ago. What I fear is “regulation” which arbitrarily sets the price of a drug. This IMO will be bad for the industry and the consumer.
And again small companies should not be allowed to be ruined by the government. I agree that big companies will not be seriously damaged by price negotiations.
And as always part of the problem is the very strong lobby the drug industry has in Congress.
I believe the current state of our entire medical field has become the ultimate greed machine with virtually no emphasis on caring at the top brass only profit margins. Even in a normal capitalist environment can large volume price negotiations occur but for the reason that these pharmaceutical companies will lose money on R&D the government won't negotiate better prices. Since they will lose all of this R&D money less treatments will come out meaning our well being is in danger.
Gone are the days that affordable health care is available to the average joe and the cost of care is slowly becoming an elitist only club. Inflation for drugs is four times the amount of normal inflation.
Giving these companies a green pass to swim in their green field of dollars at the cost of cheaper health care because of the promise that a cure "wont" be found is in my opinion absolutely ridiculous. Many of these companies spend tons of money on advertising with green fields and beautiful people, they don't care about health, they care about profits. When was the last big breakthrough that came through to increase our well being... even if what they say is true, which I have a hard time believing, the only drugs we might miss out on if we negotiate prices is another "lose weight fast" or "have energy all day" pill.
http://www.nybooks.com/articles/17244
You seem to have the wrong idea about single payer systems. The government doesn't choose what drugs are covered because as long as it's an approved drug (deemed to be safe and effective) it would be covered.
Gone are the days that affordable health care is available to the average joe and the cost of care is slowly becoming an elitist only club. Inflation for drugs is four times the amount of normal inflation.
Giving these companies a green pass to swim in their green field of dollars at the cost of cheaper health care because of the promise that a cure "wont" be found is in my opinion absolutely ridiculous. Many of these companies spend tons of money on advertising with green fields and beautiful people, they don't care about health, they care about profits. When was the last big breakthrough that came through to increase our well being... even if what they say is true, which I have a hard time believing, the only drugs we might miss out on if we negotiate prices is another "lose weight fast" or "have energy all day" pill.
QUOTE
But while the rhetoric is stirring, it has very little to do with reality. First, research and development (R&D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind "mining, crude oil production," and "commercial banks.") The prices drug companies charge have little relationship to the costs of making the drugs and could be cut dramatically without coming anywhere close to threatening R&D.
...
Second, the pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH). The great majority of "new" drugs are not new at all but merely variations of older drugs already on the market. These are called "me-too" drugs. The idea is to grab a share of an established, lucrative market by producing something very similar to a top-selling drug. For instance, we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol, and the newest, Crestor) on the market to lower cholesterol
...
Second, the pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH). The great majority of "new" drugs are not new at all but merely variations of older drugs already on the market. These are called "me-too" drugs. The idea is to grab a share of an established, lucrative market by producing something very similar to a top-selling drug. For instance, we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol, and the newest, Crestor) on the market to lower cholesterol
http://www.nybooks.com/articles/17244
QUOTE
To some extent yes in that it has given seniors some drug coverage. If the program goes the way of the VA model this will not be the case as cost cutting will limit choices to older drugs exclusively. This is typical “government coverage” and the reason we never, ever want to go to a “single payer” system where the government will decide for ALL of us which medications are to be cover based on price.
You seem to have the wrong idea about single payer systems. The government doesn't choose what drugs are covered because as long as it's an approved drug (deemed to be safe and effective) it would be covered.
QUOTE
You seem to have the wrong idea about single payer systems. The government doesn't choose what drugs are covered because as long as it's an approved drug (deemed to be safe and effective) it would be covered.
[b]You could not be more wrong. Single payer systems are budgeted. The single “payer” will thus use the “approved drugs and treatments’ rout to limit costs. Medicare does it now and single payer systems in Japan and elsewhere do it as well. Save and “effective” is a relative term.
Single-payer health-care systems promise universal coverage, says Linda Gorman of the Independence Institute, but they do not guarantee access to treatment. For instance, in 1997, an estimated 20 percent to 30 percent of all patients on Canadian waiting lists were expected to die before getting care.
Because the government funds health care, access is limited by budget constraints. And since only 4 percent of adults are likely to need treatment in any year, politicians are likely to spend less on health care than individuals would themselves. Thus Americans spend about twice as much on health care as people in other countries.
The poor performance of single-payer systems can be seen in higher mortality rates for treatable diseases, compared to the United States. Take cancer, for instance:
• For breast cancer in the United States, the cancer-mortality ratio, or death rate divided by the incidence of disease, is 25 percent.
• In Canada and Australia, it is 28 percent; in Germany, 31 percent; in France, 35 percent; and in New Zealand and the United Kingdom, 46 percent.
• For prostate cancer, the U.S. mortality ratio is 19 percent; in Canada, 25 percent; in New Zealand, 30 percent; in Australia, 35 percent; in Germany, 44 percent; in France, 49 percent; and in the United Kingdom it is 57 percent.
Single-payer systems are also extraordinarily costly to run because they do not reward those who reduce costs by increasing their profits. With all costs included, the overhead of the Canadian system is about 45 percent of claims -- compared to 7.6 percent of claims for private insurers in the United States -- according to Patricia Danzon of the Wharton School of Business.
http://www.ncpa.org/iss/hea/2003/pd011503g.html
http://www.heritage.org/Research/HealthCare/bg1973.cfm
So lets agree that drug companies (sometimes) make too much money and that we need to negotiate better. But lets stay away from single payer.
So in other words they don't use overly expensive rip off drugs but use generics that do the same thing instead. Sounds good to me.
You are incorrect in your assesment that single payer systems are somehow inferior to our system. In the newest assement of US healthcare we are virtually at the bottom of the industrialzed nations.
http://www.netscape.com/viewstory/2006/09/...&frame=true
Let's take this for example. First of all 43.6 million Americans don't have health insurance. So around 15% of the US population does not have health insurance. Secondly 115 out of 100,000 U.S. deaths could have been avoided with timely and appropriate medical attention which ranks 15th out of 19 industrialized nations. If anyone doesn't guarantee access to treatment it's the US. We don't even guarantee coverage much less access. Heck we don't guarantee anything short of if you get your leg cut off and are sent to the emergency room.
What we do guarantee is alot of profits... if you can afford health care.
This is the most critical part of the report.
What does this tell you? That our medical services have there own ghetto's because in certian area's people can't afford to pay their hospital bills. In other words our health care is slowly drifting toward an elitist society that only the well off have access to the best health care while those who need it most are left out to dry in the name of profits.
You are incorrect in your assesment that single payer systems are somehow inferior to our system. In the newest assement of US healthcare we are virtually at the bottom of the industrialzed nations.
http://www.netscape.com/viewstory/2006/09/...&frame=true
QUOTE
The U.S. health-care system is doing poorly by virtually every measure. That's the conclusion of a national report card on the U.S. health-care system, released Sept. 20. Although there are pockets of excellence, the report, commissioned by the non-profit and non-partisan Commonwealth Fund, gave the U.S. system low grades on outcomes, quality of care, access to care, and efficiency, compared to other industrialized nations or generally accepted standards of care. Bottom line: U.S. health care barely passes with an overall grade of 66 out of 100.
...
Yet the U.S. ranks 15th out of 19 countries in terms of the number of deaths that could have been prevented. The study estimates that each year 115 out of 100,000 U.S. deaths could have been avoided with timely and appropriate medical attention. Only Ireland, Britain, and Portugal scored worse in this category, while France scored the best, with 75 preventable deaths per 100,000.
BELOW POTENTIAL. The U.S. ranks at the bottom among industrialized countries for life expectancy both at birth and at age 60. It is also last on infant mortality, with 7 deaths per 1,000 live births, compared with 2.7 in the top three countries. There are dramatic gaps within the U.S. as well, according to the study. The average disability rate for all Americans is 25% worse than the rate for the best five states alone, as is the rate of children missing 11 or more days of school.
...
Yet the U.S. ranks 15th out of 19 countries in terms of the number of deaths that could have been prevented. The study estimates that each year 115 out of 100,000 U.S. deaths could have been avoided with timely and appropriate medical attention. Only Ireland, Britain, and Portugal scored worse in this category, while France scored the best, with 75 preventable deaths per 100,000.
BELOW POTENTIAL. The U.S. ranks at the bottom among industrialized countries for life expectancy both at birth and at age 60. It is also last on infant mortality, with 7 deaths per 1,000 live births, compared with 2.7 in the top three countries. There are dramatic gaps within the U.S. as well, according to the study. The average disability rate for all Americans is 25% worse than the rate for the best five states alone, as is the rate of children missing 11 or more days of school.
QUOTE(Ted)
Single-payer health-care systems promise universal coverage, says Linda Gorman of the Independence Institute, but they do not guarantee access to treatment. For instance, in 1997, an estimated 20 percent to 30 percent of all patients on Canadian waiting lists were expected to die before getting care.
Let's take this for example. First of all 43.6 million Americans don't have health insurance. So around 15% of the US population does not have health insurance. Secondly 115 out of 100,000 U.S. deaths could have been avoided with timely and appropriate medical attention which ranks 15th out of 19 industrialized nations. If anyone doesn't guarantee access to treatment it's the US. We don't even guarantee coverage much less access. Heck we don't guarantee anything short of if you get your leg cut off and are sent to the emergency room.
What we do guarantee is alot of profits... if you can afford health care.
This is the most critical part of the report.
QUOTE
The report found that quality of care and access to care varied widely across the country, and it noted substantial gaps between national averages and pockets of excellence.
What does this tell you? That our medical services have there own ghetto's because in certian area's people can't afford to pay their hospital bills. In other words our health care is slowly drifting toward an elitist society that only the well off have access to the best health care while those who need it most are left out to dry in the name of profits.
Hey I am for universal health car as long as its not “single payer”. Our system is not good because we lose 100,000 people a year (yes a year) to medical mistakes, mostly in hospitals. But lets face it hospitals are regulated by the state and should be under closer scrutiny. The answer is NOT to take a bad system and make it worse with single payer.
And let’s also remember our system has the burden of 20 million uninsured and ILLEGAL aliens and their kids. Canadian and other do not allow this. In fact if you get hurt in Canada and it is not life threatening, they will not treat you. You must go HOME. Far cry from the US where people cross our borders illegally and get care the same day if they need it.
Our worst problem is hospital acquired infections and theses could be stopped, as some countries have, with better rules on checking new patients for resistant infections.
http://www.rense.com/general74/hosp.htm
http://www.americansmadandangry.org/know-h...al_acquired.php
http://www.mercola.com/1999/archive/medical_mistakes.htm
And let’s also remember our system has the burden of 20 million uninsured and ILLEGAL aliens and their kids. Canadian and other do not allow this. In fact if you get hurt in Canada and it is not life threatening, they will not treat you. You must go HOME. Far cry from the US where people cross our borders illegally and get care the same day if they need it.
Our worst problem is hospital acquired infections and theses could be stopped, as some countries have, with better rules on checking new patients for resistant infections.
http://www.rense.com/general74/hosp.htm
http://www.americansmadandangry.org/know-h...al_acquired.php
http://www.mercola.com/1999/archive/medical_mistakes.htm
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