The panacea that is drug reimportation is finally getting its due. I’ve been wondering what the big hoopla is regarding “cheap” drugs from Canada and other foriegn nations. Sure, the Canadians and other countries use their monopolistic buying power to negotiate cheap prices from drug manufacturers, and some American consumers may be able to save significant dollars (barring a more significant decline of the US$) by piggybacking on those nations’ smart buying.
But on the whole, buying drugs from Canada is NOT an answer to the US drug cost inflation problem.
A just-published HHS study on the reimportation of drugs demonstrates that this “strategy” provides negligible savings.
Leaving aside the question of how a country that consumes 2% of the world’s pharmaceuticals can supply a nation that consumes over 50%, the real implication is clear – reimporting drugs is no solution. While it may be politically expedient, it is merely allowing US consumers to use the leverage of the Canadian government to buy drugs at a marginally lower cost.
Interestingly, the same US politicians that bought into the (at the time politically attractive) Medicare Drug bill also included provisions prohibiting the US government from negotiating with drug manufacturers. Thus, the politicians refused to allow the US government to employ the same “price lowering” tactics used by the Canadians, tactics that were delivering prices so attractive to voters that these politicians were in favor of allowing drug reimportation.
Have your cake, eat it too, and don’t get fat. Or in this case, please the big pharmas, protect the little guy, and thus preserve both campaign donations and votes. What a great country.
An excellent summary of the issues surrounding drug reimportation is provided by California HealthLine.
A recent post on the HealthBeat blog concerns a 2002 survey of employees of the US FDA. The survey indicates many FDA scientists are concerned about drug safety after approved drugs were on the market.
The study found that fully 2/3 of FDA scientists “lack confidence in the agency’s process for ensuring drug safety…(and) Nearly one in five said they had been pressured to approve or recommend approval for a drug despite safety and quality reservations.”
Other findings addressed drug labeling concerns:
“Only 12% of scientists were completely confident that FDA “labeling decisions adequately address key safety concerns” while 30% were not at all or only somewhat confident”
and perhaps most troubling, internal political pressure to approve new medications:
“Nearly one in five scientists (18%) said that they “have been pressured to approve or recommend approval” for a drug “despite reservations about the safety, efficacy or quality of the drug.”
The full study, conducted by the Office of the Inspector General of DHHS, reports on potentially dangerous gaps in the approval and marketing of prescription drugs.
As pressure grows on the FDA in the wake of the Cox-2 fiasco (Vioxx and Celebrex to the layperson), it is likely this survey will get increased attention.
Of note, the present head of CMS (Center for Medicare and Medicaid Services, Dr. Mark McClellan, was formerly the Commissioner of the FDA.
McClellan was Commissioner from 11/2002 to 3/2004, so his tenure post-dated the survey.
The HealthLawProf blog has an interesting post about the need for the FDA to set up an independent testing arm. The post opines positively about this idea and makes a solid case.
The blog cites a NYT article, and provides a good synopsis (brief and to the point).
The Agency for Healthcare Reseach and Quality (AHRQ), recently published a study examining hospital admission patterns. The study indicates that a significant percentage of admits could have been eliminated if the patient had received appropriate care earlier.
It will be no surprise to faithful readers that there is significant variation across geography, with rates highest in the west. AHRQ theorizes that this is due at least in part to the greater distances people in rural areas have to travel to seek care; thus preventing them from receiving care earlier in the disease process.
Poverty, rural locations, and diagnosis are also key variables influencing the “avoidable admit” rate. There was much more variation for chronic than for acute conditions:
“Among the 10 chronic conditions, differences in admission rates between the lowest and highest income communities range from 76 to 278 percent.”
The report notes significant cost implications –
“Potentially preventable hospitalizations are a significant issue with regard to both quality and cost. During the year 2000, nearly 5 million admissions to U.S. hospitals involved treatment for 1 or more of these conditions; the resulting cost was more than $26.5 billion.1 While some hospitalizations were likely inevitable, many might have been prevented if individuals had received high quality primary and preventive care. Identifying and reducing such avoidable hospitalizations could help alleviate the economic burden placed on the U.S. health care system. Assuming an average cost of $5,300 per admission, even a 5 percent decrease in the rate of potentially avoidable hospitalizations could result in a cost savings of more than $1.3 billion.”
Medpundit, a blog published by a practicing MD has an excellent and brief summary of the recent Celebrex news. The net is celebrex increases the risk of cardiovascular events significantly; and the higher the dose, the greater the risk increase.
While we can blame the FDA, the big pharmas, consumers, physicians, and the big bad wolf, our time will be much better spent learning from this fiasco.
Early lesson – stick with the proven meds, which in this case are Tylenol et al, and ibuprofen et al. They have the benefit of much lower cost, very similar outcomes, and a much longer track record.
The Global Medical Forum held their 2004 US Summit in Washington DC last week, focusing on the different systems’ approaches to health technology. Building on the 2003 Summit’s focus on Pharmaceuticals, the presentations provided compelling insights into the ways technology is reviewed, adopted, and reimbursed in the EU.
Some of the more intriguing points included:
—the evaluation process tends to be much longer in the EU than in the US, and involves stakeholders from the patient, provider, hospital, and governmental communities
—in Germany, this process includes consideration of appropriate reimbursement amounts (contrast this w the US “we approve, you pay” methodology)
—cost-effectiveness is absolutely a consideration when reviewing new technology for possible reimbursement
—in Germany, only 20% of new health care technology applications are accepted..
I left with several other impressions and “take-aways”. First, the EU relies, to a surprising degree, on US health care data when evaluating their own situation or projecting into the future. Second, the evaluation of the cost-effectiveness of a specific technology makes a lot of sense, and is done rather well by the Germans. Third, in Great Britain’s much-maligned National Health System, there is surprising (at least to me) willingness to consider new technology, and to pay for expensive evaluations of same.
We can learn quite a bit from our colleagues in the EU. Health care systems in the EU tend to deliver excellent care for a lot less money than we do here in the US.
Paradoxically, I heard from several European experts that they see real value in some of the components and attributes of our system. For example, we are much better at collecting, analyzing, and using data.
Health care cost increases, which appeared to be moderating last year, appear to be stepping on the accelerator again. The Center for Studying Health System Change’s recent analysis indicates that health care costs continue to grow much faster than either overall inflation rates, or, more importantly, worker incomes.
CSHC’s analysis indicates that hospital price increases are one of the key factors driving health cost inflation, with prescription drug costs continuing to accelerate as well.
CSHC’s analysis and review of the numbers forecasts the impact of continued inflation, noting :
“Health care costs likely will continue to grow faster than workers’ income for the foreseeable future, leading to greater numbers of uninsured Americans and raising the stakes for policy makers to initiate effective cost-containment policies or accept the current trend of rapidly growing health care costs and gradually shrinking health coverage.”
With the number of uninsured exceeding 45 million by most counts, 18% of the non-Medicare population is now uninsured. This compares to an uninsured rate of 0.1% in Germany, a country with health care costs as a percentage of GDP some 50% less than ours.
The Piper Report, a well-respected weblog focused on all issues healthcare, published a great piece about techniques for encouraging enrollment in high-quality health plans.
Briefly, the piece documents the success some states see when they use “performance based auto-assignment”. This is engineer-ese for enrolling people in health plans based on the performance of the plan. States practicing “PBAA” (my acronym, not their’s) assign Medicaid recipients to health plans based on a comprehensive analysis of plans’ performance – quality, cost, access, patient satisfaction may be used in this analysis. This assignment only occurs if the recipient has not picked their own plan within the required time frame.
“PBAA” is being extended to Medicare prescription drug beneficiaris, in January of 2006. The first of that year, over 7 million Medicare recipients will find themselves participating in prescription drug “auto-assignment”.
There will be clear winners and losers, but among the winners will be taxpayers and beneficiaries. No topic has generated more heat and less light than the issue of “pay for performance” – here is the best example to date of why performance matters.
Perhaps employers should consider employing the same method in selecting health plans for those workers who can’t seem to enroll on time…
The latest information on the Coventry acquisition of First Health may provide a sense for the future of the merged entity.
Profits at First Health are down, ostensibly due to “merger related charges” and steep declines in revenues from FH’s MailHandler’s employee benefit program.
The MailHandler’s program is a federal employee health benefit plan, formerly administered by CNA Insurance. Several years ago FH won the contract, taking it from CNA (who happened to be a FH customer at the time). It accounts for a significant portion of FH’s topline (revenue).
Coventry EVP Tom McDonough has been named to oversee the integration of FH and Coventry. McDonough joined Coventry from UnitedHealthGroup, where he was responsible for their large, multi-state employer groups. Clearly, this experience is highly relevant to FH’s present market mix.
Several years ago, UnitedHealthCare divested itself of its’ Workers’ Comp entities, specifically Focus Healthcare and MetraComp, after the MetraHealth acquisition. McDonough was at United at the time, as were other current Coventry executives (e.g. Harve DeMovick, now CIO).
Coventry and FH stock prices have not fared well since the acquisition announcement. The Motley Fool, long a critical observer of FH management, had this to say just after the announcement:
“No sooner had the buyout news gone out than 11% of Coventry’s market capitalization vanished, and McGraw-Hill’s (NYSE: MHP) Standard & Poor’s placed Coventry on its watchlist for a possible debt-rating downgrade. The reason: Coventry may be overpaying for this underperforming business. Coventry plans to pay for its purchase roughly half in stock (at a 0.1791:1 exchange rate) and half in cash ($9.375 per share of First Health). At Coventry’s Wednesday closing price, that would value First Health at $18.75 per share, imputing a valuation of $1.7 billion to First Health. Factoring in Coventry’s own share price decline in response to the deal’s announcement, however, brings the agreed value of First Health shares down closer to yesterday’s close — about $17.70.”
Currently, Coventry’s stock price remains significantly below the pre-acquisition level (from $53.50 to $44.01 today). I doubt either Coventry or FH management are terribly pleased with this…
One of the criticisms advanced by analysts is the potential for Coventry management (which is highly respected) to become distracted by the merger and the non-core FH business – PPO, Workers’ Comp, etc.
Net is this – if the Coventry stock price continues to languish, expect to see a “return to the core” – perhaps spinoff of some of the non-core assets.
I live in Madison, Conn., a town of some 18,000 located between New Haven and Old Saybrook on the Connecticut shoreline. Madison is a pretty well-off place; schools are excellent, services good, and government responsive.
To fulfill my civic responsibility, I have been working on a couple of projects with the Superintedent of Schools, a very professional, and very capable, woman. Of late, the topic of interest has been health care. Madison has some 550 employees, including teachers, administrators, police, and town office staff. Most of these employees are covered under one of another union-negotiated health plan, and all get great (read “expensive”) health benefits.
The Town is now in negotiations with the unions on new contracts, which will include health insurance coverage. The contracts will run for three years, and benefits are fixed for that period.
Here’s the issue. Costs are around $7000 per employee per year, and increasing over 12% per year.
Think about that. Costs will be $14,000 per employee in 5 years, and $28,000 in 10. That is not a long way off.
These increases are simply unsustainable. Like many others, I have been predicting we would finally reach a point where we could not afford health insurance. Clearly, for the taxpayers of Madison, that point will be reached in the next ten years.