Pharma industry: hands off our prices Medicare!
Pharma industry to Uncle Sam: hands off our prices Medicare!" Got this story off the Schwitzer health news blog always an excellent source. Evidently the pharmaceutical lobbying organization PhRMA is making noise again about Medicare's (lack of) regulation over drug prices. Not to turn this piece into a rant but of all the players in healthcare the drug manufacturers have maintained the most market power over the years. The doctors gave up their ability to regulate their own prices a long time ago and shame on the AMA for allowing that to happen. Hospitals also lost the power to set their own prices and Medicare and insurance companies regulate how much they can charge for a hospitalization based on the length of stay and the complexity of the diagnosis. The rules on how doctors and hospitals get paid are getting more complex with each passing year. There's a whole movement to tie our fees to how well we do our jobs--the word for this is "quality " where there are rewards and penalties for meeting defined goals of clinical care. Now let us evaluate the situation with the drug companies. They retain the ability to set their own prices and they have protections from the federal government to prevent reimportation (which might also destabilize high prices in the US). The only regulation of drug costs I can see occurs in my office where the really expensive drugs the ones that cost over $1 000 a month come with reams of paperwork to fill out. The prior authorizations. Now I have to have extra staff to help move all that paper through the system and that costs money. But once the drug is authorized the insurance company pays every dollar demanded by the drug company. In fact the pool of dollars to purchase these overpriced drugs expanded recently with the creation of Medicare Part D. Now I think it's great that older Americans get a federal program to help them buy drugs but why doesn't that program regulate the costs of those drugs as it regulates the cost of every other component of medical care down to hospice costs? So the pharmaceutical industry essentially argues that they need their full market prices or else they will have little incentive to innovate and come up with new drugs. This argument fails for several reasons. The pace of innovation has slowed considerably over the past few years and the rate of new drug approvals is down across the board. Also if you look at total costs of drug development you have to account for the fact that a lot of new drugs are "me-too" drugs not actually innovative but just designed to cash in on a currently successful drug's popularity by making small changes to the formula. Perhaps more important is the issue that much of the real innovation is subsidized by the federal government already in the form of NIH research grants to university researchers. When the university innovations reach the point of feasibility as a new drug the intellectual property can then be purchased by the drug companies who then turn it into a drug. In this way drug companies are more like banks or hedge funds and less like the innovation factories they claim to be. Large drug companies can also purchase smaller more innovative drug companies after the riskiest phase of drug development has taken place in the smaller company. Again this makes the innovation argument moot since the companies yelling the loudest about Medicare price regulation are not the ones actually creating the most drug innovation. Imagine if there was a "quality" directive in place for the drug companies. Lack of efficacy or perhaps serious side effects in a given patient could be punished by withholding of payment for a drug. Right now the drug companies have to pay for serious side effects in class-action lawsuits but this only occurs way after the fact and not as part and parcel of the reimbursement system.