U.S. is on fast track to health care train wreck
By RICHARD D. LAMM and VINCE MARKOVCHICK
With the impending repeal of Obamacare, America is headed toward a public policy train wreck.
Three seemingly unstoppable trends in America are on collision course: 1) the inventiveness of the promoters of medical technology; 2) health care insurers and providers’ excessive costs; and (3) the health care expectations of the American public.
America is sleeping as this collision draws nearer. As Winston Churchill warned us 70 years ago, democracies always seem to wake up 20 years too late. We believe that even if America awoke tomorrow, it would be too late to avoid many aspects of the coming collision.
But what an opportunity! If we spent what other developed nations spend on health care, we could balance the budget and fund a myriad of other important public needs.
In 2015 we spent $3.2 trillion on health care, which was $10,000 per person in the U.S., ($25,000 for a typical American family). This is 17.5 percentof the U.S. Gross Domestic Product (GDP). To put this in perspective, this is more than twice what most other developed nations spend on health care while insuring all of their residents. This year we are on track to exceed that amount with it being 18 percent of GDP.
Even with the implementation of the Affordable Care Act, we still have 28 million people with no health insurance, and many more are under-insured due to rising co-pays and deductibles. Most families are unaware of the magnitude of spending since their employer pays most of their $17,000 family annual health insurance premiums. Because most do not need to be hospitalized, they are unaware of the extremely high cost of medical care.
Of the $3.2 trillion health spending, 70 percent goes directly to fund the cost of our healthcare. The remaining 30 percent is spent on administration and profit, which is more than twice that of any other nation. In 2014, studies published by the Institute of Medicine, Rand Corporation, and the Center for Medicare/Medicaid Services estimated that out of total health care spending, as much as $900 billion, or about one third of our total spending, can be attributed to waste, fraud and abuse.
Over the past 25 years, health care inflation has been three to four times the rate of overall inflation. This has forced employers to pay more and more for health insurance, which is one of the major causes of wage stagnation during this period. During this same period employees have had to pay a higher share of their health insurance premiums as well as higher co-pays and deductibles.
This current system is unsustainable, but who will tell the American public? We suggest that the solutions to the real problems of health care are hardly being talked or written about.
The ideal health insurance system is one that: provides free choice of hospitals and doctors; provides insurance coverage to all at all times (i.e., not tied to an employer); is affordable and will remove all risk of medical bankruptcy. This system should have an administrative cost of less than 5 percent and have everyone in the risk pool, thus making premiums affordable. We have such a system now: Medicare covers all persons over 65, those on total disability, and all renal dialysis patients.
Currently 20 percent of the population accounts for 80 percent of our total health care spending, most of this coming from Medicare and Medicaid. Medicare should be improved by allowing the government to negotiate for prescription drug prices, and to pay directly for prescription drugs, thus eliminating the private health insurance prescription drug coverage. This improved Medicare will eliminate the need for costly Medicare supplemental insurance and the large subsides to Medicare Advantage private insurers. It will also dramatically reduce waste, fraud and abuse. It would be funded by an increase in the Medicare tax and by cost savings.
Medicare, with all the fraud and other issues, still operates with about 3 percent to 4 percent overhead. That is much less than the profit and overhead added by U.S. health insurers, which is instead 15 percent to 20 percent. In addition, Obamacare, Veterans Affairs and Medicaid each add another entire layer of expensive bureaucracies. All these, along with the government being unable to bid for drugs purchased under Medicare, add up to unnecessary cost and waste in our system.
These costs would be dramatically reduced if the VA and Medicaid coverage could be put under Medicare instead, and if drugs could be bid for on a competitive basis. Similarly, there would be tremendous cost savings if under Medicare as a single payer, it is authorized to negotiate for hospital care on a more cost-efficient and more comparable basis across the nation.
This is where we need to go to avoid the looming disaster that we face in the future.
Vince Markovchick is president of the Healthcare for All Colorado Foundation. Richard D. Lamm is former governor of Colorado.
Want to Get Rid of Obamacare? Be Careful What You Wish For
by Robert H. Frank - NYT
With Donald J. Trump’s choice of Tom Price to head the Department of Health and Human Services, it’s clear that Republicans have a good chance of fulfilling their pledge to repeal Obamacare. In January, Republican majorities passed a measure similar to the one now proposed, which President Obama promptly vetoed. But with control of the presidency, they can prevail.
The prospect portends one of the biggest political backlashes in recent history. On Monday, a search of The New York Times archives since 1981 turned up 344 articles containing the phrase “Be careful what you wish for.” As the repeal effort gathers steam, expect that number to grow sharply.
Opponents of the Affordable Care Act have denounced it bitterly for more than six years, so it is not surprising that, despite the program’s successes, public opinion about it would be divided. Even so, a repeal would unleash the awesome power of loss aversion, among the more deeply rooted human tendencies known to behavioral scientists. Their consistent finding: The amount of effort people will expend to resist being stripped of something they already possess is significantly larger than the effort they will devote to acquiring something they don’t already have.
When the possession in question is an insignificant material object, such as a coffee mug, people must be offered roughly twice as much to part with it as they would have been willing to pay to acquire it initially. If the possession relates to health or safety, that ratio becomes drastically larger.
In one experiment, subjects who were asked to imagine having been exposed to a rare fatal disease — there was a 1 in 1,000 chance they had caught it — were willing to pay only $2,000 for the only available dose of the antidote. The same subjects said that, under the same conditions, they would pay roughly 250 times as much to avoid any exposure to the disease if there was no available antidote.
The asymmetry is striking, since in both cases, people would be buying a one-in-a-thousand chance at reducing their likelihood of death. The findings suggest that people would fight hundreds of times harder to retain the health benefits they currently possess than they would to acquire those same benefits if they lacked them.
The scale of the losses at stake for Obamacare is staggering. A study by the Urban Institute estimates that a repeal would result in almost 30 million Americans losing their health coverage. Research on loss aversion thus suggests that the repeal would precipitate a political firestorm of epic proportions.
Republicans have promised to replace Obamacare with something better. Everyone, Mr. Trump included, insists that any plan must require insurers to offer affordable coverage to people with pre-existing health conditions. But that’s not possible financially unless the insured pool includes predominantly healthy people. And because many healthy people won’t buy insurance unless they are required to do so, no developed country relegates its health coverage entirely to unregulated private insurance markets.
The same logic explains why private/government hybrid programs — like Obamacare, and its predecessor in Massachusetts, Romneycare — include an individual mandate. Opponents of the mandate argue that it limits individual freedom, which of course it does. But traffic lights and homicide laws also limit individual freedom; everyone celebrates liberty, but sometimes we must choose among competing freedoms. Failure to include a mandate would eliminate the freedom of citizens to purchase affordable health insurance. In such cases, we must decide which of the competing freedoms is more important.
The third feature of Obamacare (and Romneycare) is that both provide subsidies for low-income people. You simply cannot require people to buy something they cannot afford.
In short, it’s logically impossible to cobble together a private-insurer-based replacement for Obamacare that offers affordable coverage to people with pre-existing conditions without also including an individual mandate and subsidies. That’s why, despite scores of House votes to repeal it, no one has come forward with a coherent proposal to replace it. Hence the dilemma currently facing Republicans.
Some hope they can sidestep it by enacting a “repeal and delay” bill — one that repeals the Affordable Care Act immediately while promising to replace it with an unspecified alternative several years hence. That won’t solve the problem. As numerous health economists have explained, repeal without immediate replacement would result in a speedy collapse of the Obamacare insurance exchanges.
Bad times are looming for health insurance. If Mr. Trump wants to avoid a political buzz saw, what might he do? Unlike Republican congressional leaders, he seems to have no ideological commitment to a largely unregulated, and hence untenable, private health insurance system. And he has already demonstrated that Republican base voters will side with him rather than their congressional leaders.
The upshot is that, unlike President Obama, he may actually have the political power to enact the most sensible system for providing basic universal health coverage: the single-payer approach taken by most other developed countries. Older Americans have been covered under a single-payer system since the 1965 enactment of Medicare, which delivers basic health coverage more cost effectively than private insurance plans can, and which they are of course free to supplement with private insurance.
But having just announced plans to phase out Medicare, Republicans are extremely unlikely to voluntarily embrace a single-payer insurance option for all Americans, and Mr. Trump’s true intentions are, to say the least, unclear.
So buckle up. Whatever happens, there’s a rough ride ahead.
Go to the Wrong Hospital and You’re 3 Times More Likely to Die
by Reed Abelson - NYT
Not all hospitals are created equal, and the differences in quality can be a matter of life or death.
In the first comprehensive study comparing how well individual hospitals treated a variety of medical conditions, researchers found that patients at the worst American hospitals were three times more likely to die and 13 times more likely to have medical complications than if they visited one of the best hospitals.
The study, published Wednesday in the academic journal PLOS One, shows “there is considerable variation in outcomes that really matter to patients, from hospital to hospital, as well as region to region,” said Dr. Thomas H. Lee, a longtime health care executive who was not involved in the research.
The study’s authors looked at 22 million hospital admissions, including information from both the federal Medicare program and private insurance companies, and analyzed them using two dozen measures of medical outcomes. Adjusting the results for how sick the patients were and other factors, like age and income, the researchers discovered widespread differences among hospitals. Even a hospital that had excellent outcomes for heart care might have poor outcomes in treating diabetes.
The study did not disclose which hospitals had which results. Under the terms of the agreement to receive the data, the researchers agreed to keep the identities of the hospitals confidential.
“Fundamentally, there is sort of an implicit assumption that every hospital is the same,” said Dr. Barry Rosenberg, the study’s lead author and a partner at the Boston Consulting Group in Chicago. But if someone has a heart attack, the closest hospital could have a death rate of 16 percent, compared with one a little farther away, where the rate was 4 percent, he said.
Earlier research examined the geographic variation in health care spending and how often patients received a medical procedure in a given market or hospital and found that there was wide variation. This study looked specifically at medical outcomes.
While factors like the health and income of a hospital’s patients contribute to its performance, Dr. Rosenberg emphasized that a large part is played by factors like the skill of the physicians and nurses, the culture at the hospital and how they chose to treat a given illness. “There is this other half of the story,” he said.
Hospitals that treated a high volume of cases were generally more successful than those that treated a low volume, but there were exceptions, Dr. Rosenberg said.
While the study underscored important differences among hospitals, the researchers also acknowledged that patients have little information about those differences. While consumers can use tools like Medicare’s Hospital Compare, which offers general quality information about individual hospitals, the data are very limited, Dr. Rosenberg said.
Many quality measures rely on reporting about whether the hospital gives patients an antibiotic, not whether they develop an infection, and they do not distinguish among different diseases. A hospital that is a top performer in heart surgery, for example, may be a poor place to choose to get a knee replacement.
The authors say patients need such information. “This paper raises the question of why don’t we have broader outcomes measurement and transparency around performance,” said Dr. Justin B. Dimick, one of the authors and a surgeon and researcher at the University of Michigan.
The researchers argue that this kind of information is necessary to judge the quality of the narrow network of hospitals increasingly offered by insurance companies. “The key thing about narrow networks is that they are created based on costs, negotiated prices and things like that,” Dr. Dimick said. “You need to pay attention to both cost and quality.”
Hospitals that excel in heart surgery or knee replacements should be rewarded by having more patients come and potentially being paid more for their care, Dr. Rosenberg said. “It’s an opportunity to improve health that has been underleveraged and underappreciated,” he said.
But researchers say obtaining information about outcomes is becoming increasingly difficult. Federal and state databases release less information than they used to.
If the incoming Trump administration wants to make health care function more like a market where people are encouraged to shop for medical care on their own, the researchers say, people will need that information.
“We’re going to need more access for people to find out these results about their hospitals and their care,” said Dr. Atul Gawande, one of the study’s authors and the executive director at Ariadne Labs in Boston, who has written frequently about the wide variation in medical practice in The New Yorker.
He points to two areas where information is publicly available: heart surgery by the Society of Thoracic Surgeons and cystic fibrosis. In those two areas, patients have the ability to make better-informed decisions and hospitals can use the data to improve their care.
“They are actually naming the outcomes by hospital,” he said. “The world did not end.”
He Won’t Actually Take Away My Insurance, Will He?
by David Leonhardt - NYT
“I kept hearing informed voters, who had watched the election closely, say they did hear the promise of repeal but simply felt Trump couldn’t repeal a law that had done so much good for them.”
Linger on that last phrase: simply felt Trump couldn’t repeal a law that had done so much good for them.
It comes from Sarah Kliff of Vox, who went to Corbin, Ky., to interview people who had received health insurance from Obamacare — and then voted from Donald Trump.
To some extent, they understood what they were doing, that their insurance was a result of Obamacare, and that Trump vowed to repeal it. They voted for him anyway, because they liked other things about him and because they figured he wouldn’t really get rid of their insurance. If anything, they hoped he would fix the parts they didn’t like, just as he promised.
But there is no magical fix for Obamacare. Our health care system is a messy hybrid of the public and private sectors. Obamacare eschewed radical change — which would have been even less popular, given the disruptions — for progress within the current framework. And the law has done far more good than bad, by expanding insurance coverage and helping slow the growth of medical costs.
The Republican Party has essentially tied itself to a magical solution: getting rid of the law while keeping its benefits. The party does seem committed to repealing major parts of the law early in 2017, as Nicholas Bagley of the University of Michigan laid out in a smart tweetstorm yesterday. Yet Republicans could cause a lot of anger and frustration if they stick to their plan.
How do they solve their dilemma — a dilemma with real-life consequences for many people? It’s one of the biggest mysteries of 2017. I’ll continue to hope that those Kentucky voters have their optimism rewarded, but it’s a deeply wishful form of optimism.
The GOP strategy to ‘repeal and replace’ Obamacare is a joke
by Greg Sargent - Washington Post
Politico’s lead headline today blares: “Democrats open to replacing Obamacare.”
The story accompanying that headline is more nuanced than that. But it does raise the prospect that some Senate Democrats might be going wobbly about the coming battle over repeal and replace. And it points out that Dems might find themselves under pressure to acquiesce to Republicans in ways that would produce a terrible outcome.
But the story is at least as revealing in another way: It demonstrates key weaknesses that Republicans face in the coming battle, ones that Democrats can exploit — if they handle this correctly. Here’s the crux of it:
Senate Democrats will never vote to repeal Obamacare. But once the deed is done, a surprising number of them say they’re open to helping Republicans replace it. “If it makes sense, I think there’ll be a lot of Democrats who would be for it,” said Sen. Claire McCaskill (D-Mo.).As Republicans aim to make good on their years-long vow to quash Obamacare and replace it with their own health care vision, they’ll have to do something Democrats were never able to: Bring members of the opposing party on board. Enacting any substantive alternative will take at least eight Democratic votes in the Senate.Yet the GOP will have powerful leverage that Democrats lacked in 2009 – namely, a huge number of members facing reelection in hostile territory. Twenty-five Democrats are on the ballot in 2018, including 10 in states that Donald Trump just won. The GOP is betting that many or most in the latter group will be under irresistible pressure to back an Obamacare replacement, if the alternative is leaving millions of people in the lurch without insurance.
The GOP game plan is to repeal much of the law via a simple majority “reconciliation” process, killing the Medicaid expansion and the subsidies that have expanded coverage to many millions. Republicans would implement a delay in repeal kicking in, so they can develop a replacement that — because it would be much more in keeping with GOP health reform ideas — would end up covering far fewer people.
Donald Trump has campaigned to repeal and replace the Affordable Care Act, otherwise known as Obamacare, once he gets into office. Now that he's won the presidency with a majority Republican House and Senate, that feat might not prove to be too easy. Wonkblog's Max Ehrenfreund explains. (Daron Taylor/The Washington Post)
At this point, goes the theory, Democrats facing reelection in 2018 would be under pressure to join Republicans in backing this replacement, because it would at least cover some people. Result: Obamacare is repealed; GOP replace goes into effect; far fewer people are covered, but Republicans can say they did reform the health system and helped people. The story quotes a few Democrats saying they might be open to backing some kind of replacement in this scenario.
But there are problems with this plan. Some Republicans want to delay repeal to push the fallout (millions losing health insurance) until after the 2018 midterm elections, while using the specter of that fallout as a leverage point in the run-up to those elections to force Dems into cooperating to bail all those people out with a GOP replacement. But to do this, Republicans would have to be offering a plan that actually bails all those people out with a GOP replacement. Only then could they blast Democrats for failing to join them in helping bail out all those people.
Most experts expect Republicans to offer a replacement plan that would cover far fewer people. If so, at that point, Republicans would still be in the position of rolling back the health coverage of millions — those who benefited from Obamacare, but won’t regain coverage under the GOP replacement — even if the GOP replacement were to pass. With that looming, that’s the point at which Democrats can position themselves as the ones who are arguing for actually bailing out those people, by saying that they will only support a more generous replacement plan that covers a lot more people than the GOP replacement would.
Speaking to The Washington Post Tuesday, House Majority Leader Kevin McCarthy said that it will be a lot easier to repeal Obamacare than replace it, due to Senate procedure. “Repealing it easier and faster because that could be a 51 vote," McCarthy said. "Replacing is going to be 60 votes." Asked when Congress would begin the process of repealing or replacing the law, McCarthy said he doesn’t want to put a time limit to get it done by a certain date. “I want to make sure it gets done right,” he said. “You need to make sure you replace it properly.” (Washington Post Live)
At this point, the Republican argument would devolve into absurdity. Are Republicans really going to blast Democrats for refusing to cooperate in covering people, after they have already voted to repeal coverage for all of Obamacare’s beneficiaries, and even as they are insisting on a replacement that covers far fewerpeople than the Democrats want to cover? No question, Republicans are highly skilled at covering up their policy gibberish with all manner of obfuscation, but good luck messaging that one.
What’s more, if Republicans do repeal much of the ACA through reconciliation — and they are almost certain to succeed at that — the fallout from this vote may well begin immediately. As others have already pointed out, insurers might exit the exchanges rather than stick around and wait for a replacement that might never materialize. And, if Republicans keep the ban on discrimination against preexisting conditions while repealing the mandate, that could wreak havoc on the insurance markets. The ensuing mess could shift the political calculus in the near term, putting more pressure on Republicans to do something to replace the ACA, which in turn (since a number of congressional conservatives won’t support any replacement) would require Democratic cooperation. Dems could theoretically leverage that for a much better replacement.
To be sure, for Democrats to play this right, they need to hold to a hard, unified line against any sub-standard GOP replace plan. Chuck Schumer has vowed to me that Democrats will do that. But we don’t know for sure if they will. Right now, Democrats probably should be laying down a marker, making it clear that the only replacement they’ll accept is one that does not substantially roll back the coverage expansion achieved by Obamacare.
To be sure, one very possible outcome is that the ACA is mostly repealed and falls apart, and no replacement ever passes, either because Republicans cannot reach consensus on any replace plan, or because Democrats end up refusing to support the one they do create. Many Republicans would be quietly fine with this outcome, and surely some conservatives would celebrate it. But it wouldn’t be “repeal and replace.” It would just be “repeal.” More than 20 million would lose coverage, a huge mess would ensue, and we’d battle all this out again heading into the 2020 elections.
Medicaid expansion group says it has enough signatures for 2017 referendum
by Christopher Cousins - Bangor Daily News
AUGUSTA, Maine — Proponents of a referendum that would seek to force Maine to expand eligibility for its Medicaid program say they collected enough signatures on Election Day to force the question onto a ballot in 2017.
Maine Equal Justice Partners, which orchestrated a statewide signature-gathering push on Election Day, announced Thursday that the effort gathered more than 65,000 signatures from all 16 counties. Those signatures are subject to verification by municipal clerks and the secretary of state’s office, but the threshold for citizen-initiated ballot access is 61,123.
“The success of this signature-gathering effort demonstrates the strong passion of Mainers when it comes to health care,” said Robyn Merrill, executive director of Maine Equal Justice Partners, which is an organization that advocates for low-income Mainers. “People of all walks of life, concerned about the high cost of health care, were eager to sign the petition, making this one of the fasted signature gathering efforts in recent memory.”
Despite multiple legislative attempts, Maine has not expanded its Medicaid program under the provisions of the federal Affordable Care Act, which promises to cover the cost of expansion for the first three years and then cover 90 percent of the cost into the future. Legislative efforts, mostly spearheaded by Democrats, have failed six times because of opposition by Gov. Paul LePage and most legislative Republicans, who argue it would be fiscally ruinous to the state budget.
LePage and most Republican legislators remain steadfastly opposed to expanding Medicaid eligibility.
The most recent effort, in April of this year, was sponsored by Republican Sen. Tom Saviello of Wilton, but it failed to garner enough support to override a veto. The bill passed in both chambers but was ultimately tabled.
Proponents of the citizen initiative gave the Legislature until Jan. 26, 2017, to enact Medicaid expansion and avoid a November 2017 referendum, but with split majorities in the Legislature there is little reason to believe the debate will produce a different result than it has in the past.
One major moving part is the fate of the Affordable Care Act following the election of Republican Donald Trump as president. Trump campaigned on a promise to repeal and replace the ACA, which would presumably take Medicaid expansion incentives off the table.
http://bangordailynews.com/2016/12/15/health/medicaid-expansion-group-says-it-has-enough-signatures-for-2017-referendum/HOW DOCTORS COULD THWART HEALTH-CARE REFORM
Over the years, doctors have behaved like a classic political interest group, and they’ve been very successful at it.
by James Surowiecki - The New Yorker
On the campaign trail, Donald Trump made many promises he doubtless won’t keep and a few he apparently doesn’t remember. But his nomination of Representative Tom Price, a hard-core conservative from Georgia, to be Secretary of Health and Human Services is a sign that repealing Obamacare is one promise he’d like to carry out. In every Congress since the Affordable Care Act was passed, Price has sponsored a bill to replace it. And there’s something else that should worry supporters of Obamacare: he’s a doctor.
To be fair, that makes Price more qualified than most of Trump’s Cabinet picks. But doctors have a history of opposing health-care reform of all kinds. The most famous instance is the American Medical Association’s campaign against the creation of Medicare. (In 1961, it hired an actor named Ronald Reagan to warn of the dangers of socialized medicine.) But the pattern emerged much earlier. In 1917, during the First World War, Californians voted on whether to institute universal health insurance. As Paul Starr recounts in “The Social Transformation of American Medicine,” a doctors’ group called the League for the Conservation of Public Health denounced the idea as a “dangerous device” imported from Germany and helped defeat the initiative. New Dealers pushed for Social Security to include health insurance, but public attacks by the A.M.A. convinced Franklin Roosevelt to steer clear, in order to save the rest of the bill. When Harry Truman proposed a universal-insurance plan, after the 1948 election, the A.M.A. put an end to it with the most expensive lobbying campaign that America had seen. And it helped derail Bill Clinton’s health-care plan, too.
It’s not only government reforms that doctors have resisted; it’s almost any plan that has threatened to reduce their income or autonomy. In the thirties, there were experiments with “pre-paid medical groups,” in which customers paid a flat fee to a set of doctors in exchange for care. The A.M.A. did its best to drive these groups out of business—it was fined for antitrust violations—and state medical societies ostracized doctors who joined up. The A.M.A. did tentatively endorse Obamacare, in a break with tradition, but only after helping nix the so-called public option. Since then, doctors have been among the program’s loudest critics.
Doctors have typically framed their opposition to reform in terms of the need to protect the doctor-patient relationship from outside interference. That’s understandable and legitimate. But many doctors have also fought reform because it runs counter to their financial interests. As an A.M.A report once said, doctors “display a consistent preoccupation with their economic insecurity”; more bluntly, “They think about money a lot.”
There’s plenty of evidence that financial considerations affect medical decisions: for instance, studies show that doctors who have a financial stake in imaging equipment like MRI machines order many more unnecessary MRIs. So it’s no surprise that the medical establishment’s criticism of reforms often hinges on money. The 1917 California insurance plan was attacked for offering treatment “at bargain counter prices.” The pre-paid medical groups were competition for traditional fee-for-service doctors. Doctors opposed universal health insurance in part because they feared that government involvement would drive down fees, and they tried to stop Medicare for the same reason. (They needn’t have worried: doctors’ incomes rose steadily in the years after Medicare was enacted, because they added more patients without having to cut their fees.)
Doctors, then, have behaved like a classic political interest group, and they’ve been very successful. They are now more likely to be in the top one per cent of earners than members of any other industry. They don’t have things all their own way—there are more administrative burdens, and insurance companies and the government are more intrusive than before—but the profession has been the single biggest beneficiary of the boom in medical spending in the past four decades, and doctors’ incomes have remained relatively untouched by attempts to rein in health-care costs.
There’s nothing inherently wrong with this; it’s how interest-group politics work. But what’s fascinating is that doctors are a powerful lobby in part because voters think of them as above the fray. Doctor regularly ranks as one of the three most trusted professions. People love their doctors and respect their expertise and work ethic. So it’s easier for politicians to go after reliable villains like insurance companies and drug companies. Suggesting that doctors might not always be disinterested policy advocates is a losing tactic.
We can expect to hear Tom Price invoke his medical background as he tries to roll back Obamacare. (He’s an orthopedic surgeon—according to one study, the most politically conservative field in medicine.) But let’s hope that doctors’ groups think twice before going along with him. Those groups have said that they support expanding access to medical care and giving people with preëxisting conditions affordable options, and doctors’ valid complaints about aspects of Obamacare are a reason to reform the program, not abandon it. After decades of using their political leverage to kill reform, it might be time for doctors to use that power to keep it alive. ♦
Congress Just Quietly Handed Drug Companies a Dangerous Victory
The 21st Century Cures Act has been lauded as a bipartisan success. It's actually the result of a long war on drug regulation.
20 States Accuse Generic Drug Companies of Price Fixing
by Katie Thomas - NYT
A wide-ranging investigation into generic drug prices took its most significant turn yet on Thursday, as state attorneys general accused two industry leaders, Teva Pharmaceuticals and Mylan, and four smaller companies of engaging in brazen price-fixing schemes — and promised that more charges were coming.
A civil complaint filed by 20 states accuses the companies of conspiring to artificially inflate prices on an antibiotic and a diabetes drug, with executives coordinating through informal industry gatherings and personal calls and text messages. Officials said the case was a small example of broader problems in the drug business.
“We believe that this is just the tip of the iceberg,” George C. Jepsen, Connecticut’s attorney general, whose office started the inquiry that led to the charges, said in an interview on Thursday. “I stress that our investigation is continuing, and it goes way beyond the two drugs in this lawsuit, and it involves many more companies than are in this lawsuit.”
The accusations, as well as continuing investigations at the state and federal levels, have left a cloud of uncertainty over the industry. While several other big generic drug companies have received subpoenas, it is unclear where the inquiries will eventually lead. The generic drug business is already on the defensive and struggling to recover from a barrage of public criticism in the past year over high prices.
The complaint on Thursday describes a cozy industry culture defined by regular dinners and social outings, and argues that those events often cross the line to violate antitrust rules. Generic drug makers hoping to begin selling a new drug first seek out rivals, the suit says, in hopes of reaching an agreement on how to maintain market share and avoid competing on price.
“These agreements had the effect of artificially maintaining high prices for a large number of generic drugs and creating an appearance of competition when in fact none existed,” the lawsuit says.
Teva, an Israeli drug maker, is the world’s largest manufacturer of generic medicines. Mylan faced intense criticism this year after it sharply raised prices on EpiPen, a severe allergy treatment. The charges filed on Thursday are not related to EpiPen, a branded product that has little competition.
Both Teva and Mylan, the suit says, engaged in anticompetitive behavior, but not with each other — coordinating instead with smaller companies.
A Teva spokeswoman said, “We have not found evidence that would give rise to any civil or criminal liability.” A spokeswoman for Mylan offered a similar statement, saying the company knew of “no evidence that Mylan participated in price-fixing.”
The suit’s focus is two drugs, a delayed-release form of the antibiotic treatment doxycycline hyclate, and glyburide, a commonly used diabetes drug. The price of doxycycline has surged in recent years, and it was singled out by members of Congress and others as a prime example of unexplained price increases for generic drugs.
One form of doxycycline, for example, went from an average market price of $20 for a bottle of 500 pills in October 2013 to an average market price of $1,849 in April 2014, according to a congressional report.
The suit filed by the attorneys general says the investigation began in Connecticut in July 2014 and “uncovered evidence of a broad, well-coordinated and long-running series of schemes to fix the prices and allocate markets for a number of generic pharmaceuticals in the United States.”
On Wednesday, federal prosecutors made similar claims against two former executives at Heritage Pharmaceuticals, a small company, accusing them of engaging in a price-fixing scheme for the same two drugs. Heritage was also one of the companies named in the complaint on Thursday.
That complaint, in Federal District Court in Connecticut, identifies Heritage as the “principal architect and ringleader” of the activities involving the two drugs, and said that employees of the company, including the two former executives, Jeffrey Glazer and Jason Malek, contacted competing companies and sought to make illegal deals over pricing before entering the market for the two drugs.
Heritage fired Mr. Glazer, the former chief executive, and Mr. Malek, a former president, in August and is suing the two men, claiming that they “looted” tens of millions of dollars from the company. Heritage, which has said it is cooperating with the authorities, declined to comment on the lawsuit filed Thursday.
Other companies named in the suit, including Aurobindo Pharma, Citron Pharma and Mayne Pharma, did not reply to requests for comment.
The court actions this week could have wide implications, particularly if, as officials suggest, they are just the beginning. More than 80 percent of all prescriptions dispensed in the United States are for generic drugs, which have been credited with saving consumers and taxpayers billions of dollars by introducing competing products to a drug losing patent protection.
“It blows that entire assumption out of the water when you hear that generic companies are getting together to increase prices,” Michael A. Carrier, an antitrust professor at Rutgers Law School, said.
The lawsuit, filed by Democratic and Republican attorneys general, portrays a close-knit circle of generic drug executives and sales representatives who regularly socialize at conferences and gatherings like golf outings, cocktail parties and “girls’ night out” events in the New Jersey area, where many of the companies are based.
But the collegial relationships, while common in many industries, veered into more overt anticompetitive tactics, Mr. Jepsen, Connecticut’s attorney general, said.
“It’s very damning,” he said. “It reveals a culture of cronyism where, whether it’s over a game of golf or a dinner or drinks, there’s just systematic cooperation.”
He described the behavior as deliberate. “There’s nothing hidden about it,” he said.
In the case of doxycycline, the complaint says that in 2013 Heritage contacted Mylan, the only other maker of a delayed-release version of the product at the time, and told executives there that Heritage planned to release its own version. According to the complaint, Mylan agreed to “walk away” from at least one major wholesaler and one large pharmacy chain to allow Heritage to gain a foothold in the market. The complaint quotes from emails that are redacted in the publicly available version and that the suit says show how Mylan and Heritage executives hammered out the details.
When a third competitor, Mayne, planned to enter the doxycycline market in 2014, it contacted Heritage and Mylan to negotiate details of how prices would be set and customers would be allocated, the suit says.
A spokesman for the Generic Pharmaceutical Association, the industry’s lobbying group, declined to comment on the investigation. But he said that the group supports laws that promote competition, and “believes competition is the key to providing affordable and accessible medicines to patients, while also constraining costs.”
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