Eileen K. Carpenter, MD
More than ever, physicians have the power to maintain their patients in good health using medications being developed by the pharmaceutical industry. But the expense of these drugs is high. Many patients have no access to these medications at all, and others are dependent on having physicians willing to spend the time to go through tedious managed care insurer pre-authorization processes or manufacturer indigent patient programs to obtain them.
Prescription drug costs are a major factor pushing up the cost of health insurance, and it is no longer a reasonable option to have insurance that does not cover prescriptions -- drugs generally cost far more than the doctor visit itself. Hospitals, which are often paid flat per diem rates by insurers, must swallow the expense of drugs that cost more than the payment a hospital receives for the entire inpatient day. Uninsured patients who pay cash to see the doctor become undesirable patients due to the extra time required from the doctor try to care for them without the benefit of their full prescribing armamentarium.
Part of the expense is undoubtedly justified: Quality drug research costs money. But we also see the results of massive amounts of money being spent on marketing:
-- Multiple sales representatives promote a single company’s products, competing for doctors’ limited free time.
-- Inappropriately lavish gifts and trips are offered to physicians.
-- Free lunches are offered to entire office staffs (putting physicians in the position of being the ones to refuse a free lunch for their overworked and underpaid employees).
-- Doctors who need to supply their uninsured patients with free samples must meet with a drug representative to sign for them, providing access to the doctors’ attention to market other drugs.
-- Educational conferences are sponsored with “unrestricted” funds -- but only for topics involving diseases that can be treated with expensive new medications.
-- Television and print media are glutted with direct-to-patient advertising for drugs and conditions supposedly so complex that prescribing the drugs is limited to those with medical degrees.
-- Television news is full of “medical reports” that are clearly based on corporate press packages.
-- Doctors find themselves in the position of having to argue with patients who want the overpriced drug they heard about on TV instead of a more appropriate and less expensive older drug.
-- Some of the most reliable independent medical journals have found, after the fact, that they have published research papers tainted by authors’ ties to pharmaceutical companies.
-- Several new drugs have been pulled off the market for safety reasons
after massive
numbers of patients received them due to aggressive marketing.
Despite multiple warnings, drugs were prescribed in combinations far
more
dangerous than the individual drugs or to patients who were especially susceptible
to harm.
Doctors were getting the message from marketers about the drugs’ usefulness,
but
not about the need for caution.
Other new drugs were known to be dangerous, but could have provided
a great benefit to a select few patients for whom other available drugs were
not sufficient. Instead, they were promoted for every conceivable patient
from the moment they
received FDA approval. Had they been marketed more cautiously, their risk
might be
considered reasonable in those few patients. Now they are not available to
anyone.
-- Foreign pharmacies can purchase the same drugs are far less cost than American ones can.
-- Cash patients pay far more for drugs than insurers do, despite the added expense to pharmacists for billing the insurer.
-- Despite multiple “me-too” drugs within the same class, all are priced at the same stratospheric level.
-- Insurers are offered “rebates” – cash back for money they spend on a particular drug – in exchange for making those drugs available on their formularies (the lists of drugs their enrollees can get covered on their plans). These are secret, proprietary agreements between drug companies and the “pharmaceutical benefit companies” that are subcontracted by health insureres to pay their prescription claims. That means the cheapest drug to one insurer may be the most expensive to another. Doctors can’t keep track of which company covers what, and have to spend inordinate amounts of time changing prescriptions to get their patients medications at affordable prices.
Health policy discussions often claim that pharmaceutical companies’ indigent patient programs ensure that every patient who needs medications can get them. This is a farce. These programs may be very useful, but as one of the doctors who takes advantage of them, I can attest that they benefit very few of the patients who need them.
-- There is a separate program for every manufacturer’s products (and sometimes, for different products of the same manufacturer) requiring ill patients who require several medications to file multiple applications.
-- Part of each application must be completed by the patient’s doctor.
-- Most programs require the drugs to be shipped to the doctor’s office, then dispensed to the patient by office staff.
-- The entire process usually has to begin all over again every three months for each medication.
-- This might work if a doctor had only a couple patients who couldn’t afford medications, but uninsured patients are usually concentrated in the practices of a small number of physicians who don’t have time to do this for all of their patients in need -- especially since they are often charging low fees to all their patients and writing off charges to especially hard-up patients.
-- Although some programs rely only on the physician’s judgement of who is unable to afford medications, others have applications as complex as a college financial aid form (as if patients sophisticated enough to fill them out are likely to be eligible!). The income limits often are unreasonably low given the price of the medications and the fact that the patient may well be on more than one expensive medication.
What’s going on? What happened to supply and demand? In fact, those principles don’t work here because of the disconnect between who selects, who consumes, and who pays for a product. There are no fixed prices for drugs, so physicians can’t learn which drugs are most cost effective. The wholesale price is set very high, but then pharmaceutical companies offer rebates to insurers and discounts to institutions like hospitals to induce them to put the drug on their formularies. The higher the make-believe wholesale price, the sweeter the rebates/discounts look.
But the independent pharmacist who dispenses the drugs must pay the full wholesale price – he/she doesn’t see any of that rebate, and is paid a paltry profit to stock and dispense all these medicines. And cash patients have to pay enough to cover the pharmacist’s actual costs – so they pay the highest price, even though they pay up front, saving the pharmacist considerable cost.
Patients who do have prescription coverage, on the other hand, usually pay a fixed co-payment. It may be higher for brand name or non-formulary drugs, but it has no actual relationship to the cost of the drug to the pharmacist or a cash patient. So if a company wanted to sell its new drug at a dramatically affordable price, most patients would still pay the higher “brand name” co-pay, and the drug might even be excluded from formularies if competitors offered rebates that overcame the cost differential to the insurer. Not surprisingly, even drugs that advertise they are lower-priced are only a few dollars cheaper for comparable potency.
Since the wholesale price has little effect on physician prescribing, drug companies feel the need to pump huge sums into marketing. Doctors like to think of themselves as skeptical and not susceptible to marketing -- so it takes even more money to drum in the message.
How can physicians be sucked into this? Medical education is being squeezed by pressures on medical schools and physician practices to be more cost effective, to have their doctors generating more income seeing patients or doing corporate-sponsored research. (Ironically, some of that pressure comes from health insurers -- who can’t control the price of patent-protected drugs as easily as they can the cost of hospital and physician reimbursement.) Some medical schools have actually set standards for such income generated by their faculty. The time that used to be available for informal teaching of students and residents is gone. The result is that physicians hear again and again about the new products from marketing efforts. But they hear very little about the older drugs, with lower prices and established safety profiles, which the senior physicians are familiar with.
We hear people demand a prescription drug benefit for low-income Medicare recipients. In Pennsylvania, we have such a program for all residents over age 65, and believe me, it is a godsend. But the income limits (which are the same as those proposed for the Medicare program) are unreasonably low, especially for couples, punishing those with the poor judgement to get married and work hard all their lives. They make no allowance for those with unusually high prescription costs due to serious illness. And there is no coverage for early retirees and those disabled persons under age 65 whose social security income is above welfare’s limits. Medicare+Choice HMO’s were once an option, but now they are being forced to limit or eliminate prescription coverage due to the rising cost. If the Medicare budget were to simply take on this expense, it would merely encourage even more drug price inflation.
Beyond the needs of the elderly, there is the simple fact that many of these drugs offer tremendous benefit to young, healthy people. Treating hypertension in a 30 year old goes a lot farther to reduce long term costs for heart surgery and medication, dialysis, stroke rehabilitation, and nursing home care than starting when someone turns 65. High cholesterol and diabetes are also conditions best treated early. We have wonderful medications available to prevent death and disability, but a large portion of our population can’t afford them. Everyone benefits from paying lower prices for the goods and services provided by young people in low-paid jobs, and we need to take some responsibility for those workers’ long term health needs. But again, you can’t pledge to pay the bill if you can’t control the cost -- the cost will predicatably go higher because of the guarantee of payment.
I propose an interim measure to try to get market forces back on our side to regulate these prices: uniform wholesale drug pricing. If a company sells a product to Rite Aid or CVS or Tenet Hospitals for $X/unit, it must sell to small pharmacies for the same price for the same unit. (Shipping and handling costs of course, could vary for large vs. small orders, but would have to be within a fixed percentage of the actual shipping costs). No rebates – the price is the price. Publish the price on the internet so everyone knows what it is and whether it changes. Pharmacies would compete on the basis of the dispensing fee they tack on, not the overall price of the drug, and the dispensing fee at a particular pharmacy would have to be uniform -- either a flat fee or a fixed percentage of the wholesale cost -- for all the drugs they sell. No jacking up the price on generic antibiotics to allow lower prices for advertised maintenance drugs. If a manufacturer wants to get the business of the big payors by competing on price, the price must also be the lowest to the cash patient.
In addition, all prescription plans would reimburse a percentage of the wholesale cost of a product, not a fixed dollar amount. 80–95% of the wholesale price would be an appropriate level of coverage. If a brand name drug costs less than a generic competitor, the patient cost is also less, not perversely greater. An insurer could set a deductible, but not a maximum benefit – such maximums discriminate mostly against those taking multiple pills because they really have no choice, and force the sickest patients out of HMO’s -- raising the costs to Medicare and other indemnity insurers. (A maximum patient out-of-pocket cost, on the other hand, would be permitted and encouraged).
The lower cost of foreign drugs is to some extent unavoidable given the lower tort costs in other countries. But perhaps some type of tort reform would be available to companies who sold a product in all countries at the same price and observed certain marketing restrictions. There might also be some type of prescription drug tax for Americans who wanted a “full-tort” option.
These controls would be set by federal law, since these pricing practices cross state lines. I predict that if such measures were instituted, the market would quickly control drug prices, as price wars between me-too drugs ensued. Patients would keep track of prescription drug costs better than any pharmacy committee at an insurance company could, eliminating a lot of overhead for insurers. (Believe me, patients will pay more attention to whether a prescription costs them $10 or $11 than whether it costs their insurer $10 or $100.)
If price were a consideration when doctors wrote prescriptions, marketing abuses would control themselves to some extent – they would effectively communicate to doctors and patients that the drug was overpriced. Even so, restrictions on doctors accepting gifts would be appropriate. Requiring pharmaceutical firms to issue doctors a 1099 form at the end of the year enumerating the taxable value of those gifts would begin to stop the flow pretty quickly, I would bet.
Who loses under this plan? Who is going to scream and try to convince people it is a threat to their health?
-- Pharmaceutical benefit managers will also fear change, since their business includes negotiating these secret rebate deals for insurers. These are the managed care companies subcontracted by health insurers to fill their prescription claims. But since many of them are paid a flat capitation rate for paying prescription claims for a plans’ enrollees, something that controls overall prescription costs is in their long term best interests, too. It’s no accident that these firms are becoming less profitable as drug costs are rising.
-- Entertainment industry firms who provide meals and facilities for pharmaceutical company marketing activities will lose business. I know this is a bad time for them, but it’s a bad time for everyone else, too. Sorry.
-- Media outlets will be running fewer prescription drug ads. The market won’t dry up completely, however, as ads to promote drugs that are lower priced will fill some of the void.
-- There are too many pharmaceutical sales representatives, though there is quite a bit of turnover among reps. A program to retrain them for more productive roles (such as research jobs) would benefit everyone.
-- Medical training programs have come to depend on pharmaceutical companies to pay guest lecturers. If we want our doctors looking out for the best interests of patients, we’d better find a different way of paying for this, anyway.
-- Doctors and their staffs have been receiving food and trinkets. We’ll get over it. And we’ll be gaining income seeing the patients who currently don’t come to the doctor because they can’t afford the medications.
Once the market is brought under some type of control, then certainly a prescription drug benefit for Medicare (and everyone else) is essential. Prescription drugs are being developed at a rapid pace and offer the possibility of aging without significant disability to a large percentage of the population. Our federal Medicare and Medicaid costs would benefit from having a large proportion of our elderly requiring no hospital or nursing home care and dying peacefully in their sleep of old age. And our society would gain immeasurable value from having our elders remain healthy to contribute their wisdom and time to their families. But it is not fiscally responsible to do so without first addressing the factors leading to the cost spiral.
©2003 Eileen K. Carpenter, MD