Time: Bitter Pill: Why Medical Bills Are Killing Us

[gbear]

What scares me most in the article is the lack of knowledge the consumers have by design. First there are the doctors and hospitals with incentives to promote treatments whether because of kick backs or to pay for the new equipment. How should a patient know what is in fact needed/best for their condition and their pocketbook? Then we add on the crazy billing for services and treatments, often with double or triple billing. I spent a long time going through my hospital bill to get it correct when I was hospitalized for my MS. I've spent dozens of hours in just the past year fighting billing errors and even stopping going to an infusion site over their insistence I get additional blood work every month. I fought the extra needle because I saw and felt it, but the cost was hidden in their bills to my insurance.

As I look at our healthcare market, I see a broken attempt to allow consumers to navigate. We haven't the information, and often when we take the time to try and get the information, we haven't the understanding. The irony with MS is those with MS often have cognitive issues making navigation of the system even harder. The thing is, it's not just MS. Most of us aren't going to the doctor because we are healthy and in the best mental place to make complicated choices. I find the expectation that we the patients should be able to make these decisions in a rational manner to be unreasonable.

When consumers can no longer be expected to make rational decisions to advance their best interest, how can one expect a free market to work? Why do we keep trying to force the square through the circle hole?

[Wrong Direction]

What scares me most in the article is the lack of knowledge the consumers have by design.

...

As I look at our healthcare market, I see a broken attempt to allow consumers to navigate.

...

When consumers can no longer be expected to make rational decisions to advance their best interest, how can one expect a free market to work? Why do we keep trying to force the square through the circle hole?

I think what should scare you most from that article is the fact that healthcare lobbying dwarfs all other lobbies in Washington. They say you can't cut defense because the industry has placed itself in so many congressional districts. Well, healthcare interests are in every single congressional district and in every district of every state and county politician, and every district of every school board.

This isn't about the failure of consumers to operate in a free marketplace. It's about lobbies getting politicians to deliberately fixing the marketplace so it's not free.

This is where politics need to be separated from reality. Truly free markets are based on transparency. If government wanted to drive more competitive pricing, they'd require all providers to post and explain costs and options prior to delivering any non-emergent care. They'd also re-define emergeny care and provide no relief for non-emergent uncompensated care.

Look at spine devices as one example. The feds don't require a unique device identifier despite the fact that requiring such an identifier would clearly allow better safety monitoring. However, it would also allow more transparency in the marketplace respecting pricing.

The notion that markets don't work just rings hollow to me. The Medicare Modernization Act (2003) established 1) Part D and 2) Competitive Bidding for a lot of DME. In each case, savings are larger than expected (or costs are lower than expected). In Part D, it's a direct result of transparent pricing. Part D is filled with protections for seniors and costs are still lower than projections. For competitive bidding, CMS just released savings estimates saying Medicare will save 45% on the cost for DME. That's remarkable, and it's because of competition.

Now ask why CMS hasn't competitively bid labs, therapy, devices in the hospital setting, maintenance nursing, home health...all things with enough supply to allow competition to lower prices. Why are the exchanges forced to cover things like chiropractors? Why are hospitals the focal point of so many "reforms" like payment demonstrations and ACOs? Why do so many states have so few insurance options? Why do so many municipalities basically provide a monopoly to certain insurance companies and disallow open competition. The answer in every case is the big lobbies.

There's no doubt in my mind that the cost of health care is in a massive crony-capitalist-government-created bubble right now. It's the worst of all Republican and Democrat voter nightmares, except for the Republicans and Democrats representing us are bought and paid for. This isn't different than what went on in the housing bubble, or what's going on with college tuition costs today. All of our healthcare could be provided at massive discounts from what we're paying today, but our political system is broken and won't allow it.

[PeterMP]

The notion that markets don't work just rings hollow to me. The Medicare Modernization Act (2003) established 1) Part D and 2) Competitive Bidding for a lot of DME. In each case, savings are larger than expected (or costs are lower than expected). In Part D, it's a direct result of transparent pricing. Part D is filled with protections for seniors and costs are still lower than projections. For competitive bidding, CMS just released savings estimates saying Medicare will save 45% on the cost for DME. That's remarkable, and it's because of competition.

There's no real evidence that Part D came in under budget because of competitive pricing. The two best and only really documtented reasons it has come in under budget are because fewer people signed up for it than expected and because drug costs increased less than expected (which is related to the "patent cliff" and important and common drugs being switched to generics and not many knew patented drugs coming onto the market).

The only people pushing that Part D came in under budget because of design are people that are tied to passing it.

http://www.politifact.com/truth-o-meter/statements/2011/jun/15/rick-santorum/did-medicare-part-d-come-40-percent-under-budget-b/

That healthcare isn't a free market can be demonstrated with some real simple questions.

Is your doctor "good"?

What data do you have to support that (do you have any data on the health of their patients vs. the costs to the patients)?

The idea that a free market requires that people can make good decisions to operate is basic economics and decisions based only on immediate pricing aren't good decisions.

(IF this works with drugs, it is because of the actions of the FDA (that tries to assure at least some level of quality), which is very non-free market. The FDA takes decisions out of the hands of the drug manufactures in a way that people throw a fit and start talking about "death panels" if they did to individual doctors/hospitials.)

[Wrong Direction]

There's no real evidence that Part D came in under budget because of competitive pricing. The two best and only really documtented reasons it has come in under budget are because fewer people signed up for it than expected and because drug costs increased less than expected (which is related to the "patent cliff" and important and common drugs being switched to generics and not many knew patented drugs coming onto the market).

Politifact is a joke, but that's off topic.

I'll address the substance of your post, but we should be clear that the goal posts on this conversation are nowhere near where they are on any other entitlement spending.. We're actually discussing the reasons that a government program came in either 28% or 40% below budget. Politifact doesn't project how much under budget Part D would have been with other enrollment assumptions, but in any case we're discussing a program that would be, at worst, on budget if the flawed assumptions were correct. That would be a success all by itself.

Democrat versions of alternative legislation/amendments wanted to guarantee a $35/month premium in the first year, and that would escalate annually based on a growth factor. Seven years after implementation, there are still many plans available for cheaper than that.

Why is enrollment lower? Two reasons:

1) the tax free retiree drug subsidy (RDS) has proven to be effective. This is not free to the government, but in fairness it's also not a 1:1 offset of what costs would be if those beneficiaries chose to enroll directly in a Part D Plan. So, people subsidized by the retiree drug subsidy are getting ~60% of the subsidy amount from the government that they would have if they enrolled (going by memory, and after considering the 28% subsidy is tax free).

2) many plans would drop medical coverage for spouses if their member chose Part D only, so people basically got stuck in their employer plan. Most of those folks have employers who are also getting the RDS, so the savings resulting in lower Part D enrollment are mitigated.

After you look at all the data, something like 91% of Medicare beneficiaries have "creditable coverage." That figure is incredibly close to original estimates.

Generic pricing and overall pricing is a chicken and the egg type of argument. People who were against the plan (from both parties) like to say that generics took off and lack of block busters had an effect. However, the evidence on their side is slim to none. First of all, Part D outperformed Medicaid programs with respect to generic utilization, and that includes states that mandated use of a generic. I know this for a fact because I cobbled together that data myself as part of my job at the time. The transparency with respect to patient options, required patient cost sharing and the donut hole all drove this. Only a nincompoop would deny those economics.

With respect to new blockbusters, there aren't a ton of blockbuster surprise drugs out there. Development is slow and predictable. I know price estimates came out higher than what eventually happened, but that's not primarily because new blockbusters didn't hit the market; it's because 1) pricing competition between brands, 2) from generics, 3) between pharma companies and plans as it related to formulary placement and patient cost sharing and 4) pharmacy network competition happened throughout Part D. Those plan/pharma and plan/pharmacy negotiations drive lower plan costs and thus lower premiums, and lower premiums have driven enrollment.

And these various pricing competitions had a downstream (non-Medicare) effect because the size of the Medicare market drove down the various index pricing standards (AWP, AMP, WAC).

I don't blame politifact for not understanding this stuff. I blame them for speaking with authority about something they don't understand. The least they could have done is try to quantify the cost difference by having less people purely part of Part D, but I frankly even question the details he presented around that "fact" simply because overall coverage ended up very close to the number he cited.

Really, the truth about beneficiary choices is in the enrollment data. Beneficiaries, in large numbers, chose cheaper plans, they got the coverage they wanted and they responded with incredibly high satisfaction rates. The market delivered them the price and coverage they need.

[chipwhich]

The real bitter pill can be seen in real life. Go to a CVS, and walk back to their pharmacy, look at all the prescription drugs waiting to be picked up. Then literally walk across the street to Walgreens and do the same. Then literally walk to the other corner to Rite Aid and do the same.

This doesn't even address mail order.

Over prescribed and unhealthy America. The new American way.

No other country could support 3 drug stores on the same street/corner.

[Wrong Direction]

We definitely have an issue with using too many prescription drugs. It's easier to lament when it's not your or your family member faced with those decisions.

[chipwhich]

We definitely have an issue with using too many prescription drugs. It's easier to lament when it's not your or your family member faced with those decisions.

Or, when your family has faced those decisions it's not easy to lament the fact that we are in this position.

My family hasn't been avoid of this lifestyle, I assume yours hasn't either.

[PeterMP]

1) the tax free retiree drug subsidy (RDS) has proven to be effective. This is not free to the government, but in fairness it's also not a 1:1 offset of what costs would be if those beneficiaries chose to enroll directly in a Part D Plan. So, people subsidized by the retiree drug subsidy are getting ~60% of the subsidy amount from the government that they would have if they enrolled (going by memory, and after considering the 28% subsidy is tax free).

2) many plans would drop medical coverage for spouses if their member chose Part D only, so people basically got stuck in their employer plan. Most of those folks have employers who are also getting the RDS, so the savings resulting in lower Part D enrollment are mitigated.

The end result is that spending on Part D is lower partly because of decreased enrollment.

Generic pricing and overall pricing is a chicken and the egg type of argument. People who were against the plan (from both parties) like to say that generics took off and lack of block busters had an effect. However, the evidence on their side is slim to none.

First of all, Part D outperformed Medicaid programs with respect to generic utilization, and that includes states that mandated use of a generic. I know this for a fact because I cobbled together that data myself as part of my job at the time. The transparency with respect to patient options, required patient cost sharing and the donut hole all drove this. Only a nincompoop would deny those economics.

With respect to new blockbusters, there aren't a ton of blockbuster surprise drugs out there. Development is slow and predictable.

First, new drug applicants to the FDA (NDAs) are down and the exculsivity period of the NDAs granted by the FDA have been declining. This wasn't predicted and isn't the result of a proces that is slow, but steady.

http://www.nature.com/nbt/journal/v29/n10/full/nbt.1993.html

Second, spending on drugs in the general population has not increased as much as expected, while non-generic prices have gone up because of increased use of generics tied to drugs that were not generic before becoming generic.

"The price of brand-name prescription medicines is rising far faster than the inflation rate, while the price of generic drugs has plummeted, creating the largest gap so far between the two, according to a report published Wednesday by the pharmacy benefits manager Express Scripts."

"Spending on traditional medicines — which treat common ailments like high cholesterol and blood pressure — actually declined by 0.6 percent during the period, the report found. That decline was mainly because of the patent expiration of several blockbuster drugs, like Lipitor and Plavix, which opened the market for generic competitors. But even as the entry of generic alternatives pushed down spending, drug companies continued to raise prices on their branded products, in part to squeeze as much revenue as possible out of an ever-shrinking portfolio, Dr. Miller said."

If you were taking Lipitor, you now can take a generic and save money and things like Lipitor "blockbuster" drugs are among the most common drugs taken.

And not surprisingly the generic market share has increased:

http://www.manhattan-institute.org/html/mpr_11.htm

This has nothing to do with Part D and just due to the patent cycle/the FDA approval process (the exclusivity periods granted by the FDA).

"Lower-Than-Expected Medicare Drug Costs Mostly Reflect Lower Enrollment and Slowing of Overall Drug Spending, Not Reliance on Private Plans"

http://www.cbpp.org/cms/index.cfm?fa=view&id=3775

"Actual net Part D costs per beneficiary in 2010 were 22 percent lower than the Medicare trustees originally projected and 16 percent lower than CBO had estimated. But overall prescription drug spending per capita in 2010, as measured in the National Health Expenditures estimates, was 35 percent lower than the actuaries at the Centers for Medicare & Medicaid Services (CMS) projected when Congress enacted the drug benefit."

Accross the board the US population spent less money than projected for prescription drugs. The costs of drugs is not increasing as fast as expected.

"Indeed, overall drug spending per capita grew an average of only 2.8 percent a year between 2006 and 2010. Overall retail drug spending per capita in 2010 was 35.3 percent lower than had been projected in 2004."[/url]

I guess those people don't know what they are talking about either.

Oh and here's more for you:

"For example, in 2009, on a per-unit basis, Medicaid drug rebates were three times larger than the median rebates negotiated by private insurance plans for the top 100 drugs used by Medicare Part D beneficiaries, according to the Department of Health and Human Services' (HHS) Office of the Inspector General. As a result, Medicaid drug rebates reduced total Medicaid spending for these drugs by 45 percent, while the discounts negotiated by private plans reduced Part D costs for the same drugs by only 19 percent. Ensuring that Medicare gets the same rebates for drugs dispensed to low-income Medicare beneficiaries that Medicaid obtains for those drugs would reduce Part D costs by $137 billion (or nearly 12 percent) over the next ten years, according to CBO — striking evidence of the extent to which Part D overpays for prescription drugs."

Simply by going to government run Medicare prescription drug and mandating the same reduction that Medicaid got, we'd save money.

(The idea that ONLY private industry can negotiate with the Pharma industry and get rebates is laughable. The US military does it, Medicaid does it, Canada does it.)

"For example, one report argued that private Part D plans have been especially successful at encouraging the use of generic drugs.[19] Yet, the use of generic drugs among Part D plans appears to have been no different than the rates of generic utilization in state Medicaid programs during the early years of the drug benefit.[20] "

I know price estimates came out higher than what eventually happened, but that's not primarily because new blockbusters didn't hit the market; it's because 1) pricing competition between brands, 2) from generics, 3) between pharma companies and plans as it related to formulary placement and patient cost sharing and 4) pharmacy network competition happened throughout Part D. Those plan/pharma and plan/pharmacy negotiations drive lower plan costs and thus lower premiums, and lower premiums have driven enrollment.

1. I can demonstrate that the number of NDA approved by the FDA have decreased over the last 10+ years and that there are fewer years of exclusitivity being granted.

2. I can demonstrate that the percentage of generic drugs being sold in the US (not just through Medicare) has gone up.

3. I can demonstrate that the rate at which prescription drugs costs are increasing has slowed even though the price at which non-generics has not and that the prices of generics has actually declined.

None of this has anything to do with Part D. For anybody that you predicted prescription drug costs for over the last decade assuming a similar rate of NDA and usage and exclusitivity length of time over the last ten years, the net effect is that you would have had a pretty large over-estimate.

Only a nincompoop would claim that things that can be rigorously documented and demonstrated didn't happen or weren't having an effect.

What can you document?

(Oh and again, this only works because generics actually work, which only happens because the FDA works to help ensure their quality (though they are held to much lower standards than non-generics (e.g. the variation in the amount of active ingredient can be much higher in non-generics)).

[NoCalMike]

From what I hear from people, going to the doctor, whether or insured or not usually consists of a 2 minute session where the patient describes their symptoms, followed by the Doctor authorizing a prescription. In & out in 5 minutes, barely any conversation or examination let alone advice on how to possibly makes lifestyle changes to get rid of whatever is ailing them. (As far as patients living unhealthy lives go)

Pharmaceutical companies don't want a healthy population, they want folks to be ailing, just not terminal. They want a situation where taking pills makes you temporarily feel better.

This I understand is just one tiny aspect of how the healthcare system is messed up, but it is very real.

[chipwhich]

This I understand is just one tiny aspect of how the healthcare system is messed up, but it is very real.

Well according to PeterMP it's a check box on a voting form.

Meanwhile back at the ranch.....

[Special K]

The real bitter pill can be seen in real life. Go to a CVS, and walk back to their pharmacy, look at all the prescription drugs waiting to be picked up. Then literally walk across the street to Walgreens and do the same. Then literally walk to the other corner to Rite Aid and do the same.

This doesn't even address mail order.

Over prescribed and unhealthy America. The new American way.

No other country could support 3 drug stores on the same street/corner.

Just curious, who and/or what do you attribute this problem to?

[gbear]

"Pharmaceutical companies don't want a healthy population, they want folks to be ailing, just not terminal. They want a situation where taking pills makes you temporarily feel better."

I see this sentiment often, especially on message boards for MS and other chronic medical conditions. When I worked for a consulting firm looking at the market for new medical technologies, the concern with holding anything back was progress with existing compounds and treatments is inevitable. It made no sense to go through a fairly expensive approval process if somebody would release something better than you had in a month. There was a push to define the ideal target niche where your drug works best. I just can't see the situation where it would make sense to sit on a cure.

The problem as I see it comes when the cure has been around forever, but it was a cure for something else. The incentive to go through trials to test the efficacy of a drug which has been out for 30 years treating another condition just don't seem to exist. Without the trials, the drug won't be used or covered.

[Wrong Direction]

The end result is that spending on Part D is lower partly because of decreased enrollment.

A little bit, but the degree of that difference is not reported, and the politifact article preditably plays that angle up while somewhat discounting the other side.

First, new drug applicants to the FDA (NDAs) are down and the exculsivity period of the NDAs granted by the FDA have been declining. This wasn't predicted and isn't the result of a proces that is slow, but steady.

This takes 7 years of program context into account, but ignores that costs in year 1 were lower than projected. There wasn't a massive withdrawal of pharmaceutical trials from the FDA or a massive unplanned ending of exclusivity periods coinciding with the start of Part D. The truth is that most of the exclusivity periods and new labels were on the radar forever. I generally think the difference between Part D and B funding has driven manufacturers more toward biologic injectibles (BLA) and less toward traditional oral agents, but that too is driven by the economics of Parts B and D.

Second, spending on drugs in the general population has not increased as much as expected, while non-generic prices have gone up because of increased use of generics tied to drugs that were not generic before becoming generic.

1) I've explained the economics of drug pricing within and beyond Part D. Spending hasn't increased as much as expected precisely because of that transparency. (caveat...since the economic downturn, spending across healthcare has diminished relative to expectations. However, this was already true in the drug world prior to the downturn). Second, it's certainly possible that brand manufacturers are trying to squeeze more profit out of their exclusivity periods since their profit after loss of exclusivity has diminished. I'm not sure what the point there is, and I'm certainly not sure that's a bad thing when considering the context of savings attributable to generics now that the marketplace is more driven in that direction.

"The price of brand-name prescription medicines is rising far faster than the inflation rate, while the price of generic drugs has plummeted, creating the largest gap so far between the two"

Brand drugs have been rising faster than inflation for a very long time. Part D's drive to generics, coupled with similar benefit tiering now promulgating throughout health plans, has driven generic use up. That has resulted in more generic companies competing for more customers, and that has driven the price of generic drugs down. Interesting note...generic price negotiations occur between the generic company and the pharmacy in many cases. The growth of chain pharmacies has contributed to lower generic prices as well, as evidenced first by Wal Mart's $4 generic list.

If you were taking Lipitor, you now can take a generic and save money and things like Lipitor "blockbuster" drugs are among the most common drugs taken.

Lipitor is the biggest blockbuster drug ever. It's exclusivity period has been known forever. CBO can account for this stuff. If anything, Pfizer going the authorized generic route extended high prices for Lipitor longer than was previously predicted.

This has nothing to do with Part D and just due to the patent cycle/the FDA approval process (the exclusivity periods granted by the FDA).

This is just false; willfully ignoring the scope of Part D. Yes, the cycle has plenty to do with this, but that cycle has been known. The FDA approval process, if anything, has gotten faster, not slower over these years. I'm not sure why it's so hard for people to admit that real marketplace dynamics among the population that uses the most drugs has also contributed to pricing. It's crazy to think it hasn't.

"Actual net Part D costs per beneficiary in 2010 were 22 percent lower than the Medicare trustees originally projected and 16 percent lower than CBO had estimated. But overall prescription drug spending per capita in 2010, as measured in the National Health Expenditures estimates, was 35 percent lower than the actuaries at the Centers for Medicare & Medicaid Services (CMS) projected when Congress enacted the drug benefit."

Accross the board the US population spent less money than projected for prescription drugs. The costs of drugs is not increasing as fast as expected.

"Indeed, overall drug spending per capita grew an average of only 2.8 percent a year between 2006 and 2010. Overall retail drug spending per capita in 2010 was 35.3 percent lower than had been projected in 2004."[/url]

Come on Peter, from wikipedia..."While the CBPP claims to be non-partisan, journalists have characterized it as liberal or left of center." Note that there are 8 citations for that quote.

To hear detractors, they'd argue that this growth is purely a coincidence of timing that just happens to exactly coincide with a drug benefit that has tons of competitive mechanisms for a huge part of the highest drug users in the country. The least you can do is admit that people who are against the politics of the benefit have at least as much incentive to diminish Part D's achievements as its original supporters have to attribute all of its achievements to their ingenius benefit design. Politics goes both ways.

"For example, in 2009, on a per-unit basis, Medicaid drug rebates were three times larger than the median rebates negotiated by private insurance plans for the top 100 drugs used by Medicare Part D beneficiaries, according to the Department of Health and Human Services' (HHS) Office of the Inspector General. As a result, Medicaid drug rebates reduced total Medicaid spending for these drugs by 45 percent, while the discounts negotiated by private plans reduced Part D costs for the same drugs by only 19 percent. Ensuring that Medicare gets the same rebates for drugs dispensed to low-income Medicare beneficiaries that Medicaid obtains for those drugs would reduce Part D costs by $137 billion (or nearly 12 percent) over the next ten years, according to CBO — striking evidence of the extent to which Part D overpays for prescription drugs."

Squeeze the balloon. Medicaid can charge all the rebates it wants and all that does is raise WAC, which causes non-Medicaid drug programs to basically subsidize Medicaid. That's sort of good for Medicaid's bottom line, but not for drug costs in general. Force the same thing in Medicare and you'll just compound that effect. The difference between Medicaid rebates and Medicare rebates is pharmaceutical manufacturers are paying those rebates in Medicare because they need to pay them to get formulary access. If Medicaid wanted to have a positive global (in the US) effect on drug pricing they'd negotiate lower WAC/AMP pricing rather than bigger rebates. Manufacturer costs of rebating through Medicaid can be passed on to others. Causing actually lower AMP or WAC list prices would accrue to the benefit of other payers and against manufacturers, and it would still leave the competitive private rebating negotiations in place since they serve a totally different purpose. The more I think about Medicaid drug pricing, the more I remember how worked up I used to get about it. Their pricing schemes are purely designed to make Medicaid costs appear better than others. They actually hurt the marketplace in a bad way, particularly the details (like requiring best price be offered to Medicaid, which just removes the incentive for manufacturers to negotiate better prices with other payers).

(The idea that ONLY private industry can negotiate with the Pharma industry and get rebates is laughable. The US military does it, Medicaid does it, Canada does it.)

But you're not talking about negotiations with Part D. You're talking about price fixing (mandating equal rebates to Medicaid, even though they're only similar by name but not by function). Sure, if you price fix, you can achieve savings. Negotiations happen between two parties and are only actual negotiations if one party can walk away from the table. If you truly want to give Part D the ability to negotiate better rebates, you'd reduce the very high bar CMS has set in its formulary requirements. Correct me if I'm wrong, but I believe coverage requirements are broader in Part D than DoD, VA, Medicaid or Canada. That would increase competition to be on a formulary. That's what VA does...provide formulary access to much fewer drugs. People in the VA can eventually get the drugs they want, but they first have to overcome the processes designed to give them access only to their negotiated drug and then have to win an appeal. The hurdle is substantial.

"For example, one report argued that private Part D plans have been especially successful at encouraging the use of generic drugs.[19] Yet, the use of generic drugs among Part D plans appears to have been no different than the rates of generic utilization in state Medicaid programs during the early years of the drug benefit.[20] "

I literally created a table about this in 2007. Part D was ahead of Medicaid programs and outpaced projections for generic dispensing rates by just over 4%. I can't find it in my files...it was literally 6 years ago and I have changed jobs. In any case, if you wanted, you'd look for OIG reports about GDRs in Medicaid in 2005/2006 and compare to Part D and you'll find that Part D is ahead.

1. I can demonstrate that the number of NDA approved by the FDA have decreased over the last 10+ years and that there are fewer years of exclusitivity being granted.

Great, but exclusivity changes are relatively recent and much of this happened after Part D was already showing savings. Plus, are you accounting for BLAs? Genuinely asking on that latter point. ASP + 6 creates terrible pricing incentives.

2. I can demonstrate that the percentage of generic drugs being sold in the US (not just through Medicare) has gone up.

Just not as much as Medicare. Here's one old press release I did find. It doesn't mention Medicaid, but does show that Part D is outpacing private industry alone in this regard:

http://www.cms.gov/apps/media/press/release.asp?Counter=2081&intNumPerPage=1000&checkDate=&checkKey=&srchType=1&numDays=0&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=1&pYear=1&year=2007&desc=false&cboOrder=date

3. I can demonstrate that the rate at which prescription drugs costs are increasing has slowed even though the price at which non-generics has not and that the prices of generics has actually declined.

And I explained how Part D marketplace dynamics contribute, and once again that the Part D savings were immediate and not dependent on datapoints from 2008-present.

None of this has anything to do with Part D. For anybody that you predicted prescription drug costs for over the last decade assuming a similar rate of NDA and usage and exclusitivity length of time over the last ten years, the net effect is that you would have had a pretty large over-estimate.

Only a nincompoop would claim that things that can be rigorously documented and demonstrated didn't happen or weren't having an effect.

Luckily I'm claiming no such thing. I'm able to point out that Part D was the leader in this regard and I've contextualized the difference in enrollment projections. Bottom line: Part D has been cheaper than predicted since day 1. It drove generic utilization in advance of the rest of the market. Formulary tiering, pharmacy networks and transparent premiums have contributed greatly to that.

I'm not discounting that out year projections (years 5-10) generally become less accurate. That's always true. It's a fact of scoring and assumptions. I'm happy to concede that point because it's not one I'm arguing. It doesn't change the fact that pricing and generic use were better in Part D immediately after implementation of the program, and that those lower costs have held ever since.

[SkinsHokieFan]

Just curious, who and/or what do you attribute this problem to?

Fat, unhealthy Americans?

TV, cars, lack of exercise, too much drinking, not walking enough, big macs, farm/ethanol subsidies and just a general laziness of our population

shall I go on?

[Wrong Direction]

Fat, unhealthy Americans?

TV, cars, lack of exercise, too much drinking, not walking enough, big macs, farm/ethanol subsidies and just a general laziness of our population

shall I go on?

Not enough attention drawn to the negative effects of prescription drugs, particularly their interactions.

[SkinsHokieFan]

Not enough attention drawn to the negative effects of prescription drugs, particularly their interactions.

I agree. They are a disaster in my opinion.

The last few years of my dad's life were a ****tail of prescription drugs, blood pressure drugs, blood thinner drugs, etc, etc.

Really had he changed his eating habits 10-15 years ago, he probably would have been fine

[Corcaigh]

There seems to be a pervasive view in the medical profession that most of their patients are lazy (probably correct ) and will not fix problems that could be addressed through diet and exercise, so the patient gets a ****tail of crap with nasty side effects to take for the rest of their lives.

The common reaction that runners get in a check up when the doc measures a resting pulse in the 50s, and fantastic numbers for cholesterol and blood pressure, is that the patient is some kind of freak and curiosity of what motivates people to be healthy like that. Was there a trauma experienced earlier in life?

Anyway, I don't think prescription drugs are what's causing out of control healthcare, but it contributes. And patients typically don't seem to be presented with the idea that taking all these drugs is really bad for them. It's better than doing nothing. But those aren't the only choices and often they are presented as such because the healthcare system rewards transactions, not patient health.

Before you get in your car to visit the drive-though for your super sized Big Mac and large fries, remember to take your cholesterol and blood pressure medication.

[PeterMP]

This takes 7 years of program context into account, but ignores that costs in year 1 were lower than projected. There wasn't a massive withdrawal of pharmaceutical trials from the FDA or a massive unplanned ending of exclusivity periods coinciding with the start of Part D. The truth is that most of the exclusivity periods and new labels were on the radar forever.

The law was passed in 2003. It didn't go into affect until 2006.

Things changed in those years.

The fact of the matter is that the CBO did understand that the drugs on the marker would see their exclusitivity expire, but they assumed as part of their calculation that new drugs would also be developed and the same costs would be associated with them.

They assumed that the net effect would be that as a percentage of the market the generic use would stay about the same. That this historical trends would hold.

They actually weren't already holding when Part D was passed, they weren't holding when the CBO did their estimate, and they've continued to not hold.

Brand drugs have been rising faster than inflation for a very long time. Part D's drive to generics, coupled with similar benefit tiering now promulgating throughout health plans, has driven generic use up.

Generic use is up amongst the total population. There's no need to envoke a role of Part D in driving up generic use.

Lipitor is the biggest blockbuster drug ever. It's exclusivity period has been known forever. CBO can account for this stuff. If anything, Pfizer going the authorized generic route extended high prices for Lipitor longer than was previously predicted.

This is just false; willfully ignoring the scope of Part D. Yes, the cycle has plenty to do with this, but that cycle has been known. The FDA approval process, if anything, has gotten faster, not slower over these years. I'm not sure why it's so hard for people to admit that real marketplace dynamics among the population that uses the most drugs has also contributed to pricing. It's crazy to think it hasn't.

This just shows a lack of knowledge of the situation the Pharma industry is in and the how the estimates of the costs for Part D were done.

The CBO and others assumed that drugs going off of exclusitivity would be "replaced" by others that were not.

Everybody knew that Lipitor was going to go to generic, but the assumption was that the Pharma would create new drugs that other people would use at the same rate.

The assumption was that the percentage of the prescription drug market that was generics would resemble the historical norm and that the exclusitivity of the drugs being used would be essentially flat.

Neither of those two things have happened.

People discount because there is no evidence for it and there's no real reason it would happen, and we have plenty of data that pre-dates Part D that said it happened before Part D.

Before Part D, drugs came off their patent and generics were made that were cheaper. I don't need to invoke Part D for the same behavior that was happening before Part D to continue to happen.

Come on Peter, from wikipedia..."While the CBPP claims to be non-partisan, journalists have characterized it as liberal or left of center." Note that there are 8 citations for that quote.

Right, attack the souce not the actual information in it.

To hear detractors, they'd argue that this growth is purely a coincidence of timing that just happens to exactly coincide with a drug benefit that has tons of competitive mechanisms for a huge part of the highest drug users in the country. The least you can do is admit that people who are against the politics of the benefit have at least as much incentive to diminish Part D's achievements as its original supporters have to attribute all of its achievements to their ingenius benefit design. Politics goes both ways.

The difference between the two sides is that I see one side putting out real data from pretty reliabel source (e.g. the CBO and Health and Human Services), and I see the other side waving their hands around and saying don't look at this look a this other mumbo-jumbo

And again, generics coming onto the drug market that are cheaper than the non-generic after the exclusitivity period pre-dates Part D.

I don't need to invoke a Part-D related mechanism to explain that.

Squeeze the balloon. Medicaid can charge all the rebates it wants and all that does is raise WAC, which causes non-Medicaid drug programs to basically subsidize Medicaid. That's sort of good for Medicaid's bottom line, but not for drug costs in general. Force the same thing in Medicare and you'll just compound that effect. The difference between Medicaid rebates and Medicare rebates is pharmaceutical manufacturers are paying those rebates in Medicare because they need to pay them to get formulary access. If Medicaid wanted to have a positive global (in the US) effect on drug pricing they'd negotiate lower WAC/AMP pricing rather than bigger rebates. Manufacturer costs of rebating through Medicaid can be passed on to others.

Costs are related to supply and demand and not production costs. There is no "passing" on costs.

There is no current viable economic theory that includes the ability to pass on costs.

(I'll point out that I used to make a similar argument here w/ respect to our Pharma costs and countries like Canada, but as I've gained a better understanding of economic (mostly by reading this board), I've come to appreciate that argument is badly flawed.)

I literally created a table about this in 2007. Part D was ahead of Medicaid programs and outpaced projections for generic dispensing rates by just over 4%. I can't find it in my files...it was literally 6 years ago and I have changed jobs. In any case, if you wanted, you'd look for OIG reports about GDRs in Medicaid in 2005/2006 and compare to Part D and you'll find that Part D is ahead.

You know what I did. I looked at the link that I posted above (you know the one that you criticized for being biased) and then I found the reference in it.

https://oig.hhs.gov/oei/reports/oei-05-07-00130.pdf

"Department of Health and Human Services

OFFICE OF INSPECTOR GENERAL

GENERIC DRUG UTILIZATION IN THE MEDICARE PART D PROGRAM"

"For Part D, the overall generic drug substitution rate of 88 percent is similar to the median generic drug substitution rate of 89 percent for State Medicaid programs during 2004."

That is if people CAN use a generic they do so at an 88% for Part D. If they can in State Medicaid programs in 2004, they were at 89%.

(Please, note how they aren't just comparing the percentage of generics, but the subsititution rate. Comparing ONLY the percentage of generics is BADLY flawed because different populations will take different medicines that have differences in the availibility of generics (which is what the link you posted did).)

And:

"Overall, Part D achieved a high level of generic drug use during the first two quarters of calendar year 2006 that was similar to the level of generic drug use achieved by State Medicaid programs in 2004."

I think that should pretty much kill your argument.

The shift to generics when things go off patent pre-dates Part D. Over the life time and even pre-dating the creation of Part D, the people that did the estimates predicted things based on historical norms. Those historical norms were wrong right off the bat and have been for the life time of the program, but they weren't just wrong for Part D, they've been wrong for the whole US population and can be tied to decreases in exclustivity being granted by the FDA, which has been tied to decreased drug development by Pharma

That tied to lower than expected enrollment in Part D are the best and clearest explanations of the reduced costs of Part D.

We don't have to go to unsupported things like maybe Part D caused there to be more generics or lowered the prices of the generics.

There were lower priced generics before Part D. Companies made generics and people used them.

---------- Post added February-28th-2013 at 11:52 AM ----------

Well according to PeterMP it's a check box on a voting form.

Meanwhile back at the ranch.....

Yeah, that's what I've said.

---------- Post added February-28th-2013 at 12:23 PM ----------

The problem as I see it comes when the cure has been around forever, but it was a cure for something else. The incentive to go through trials to test the efficacy of a drug which has been out for 30 years treating another condition just don't seem to exist. Without the trials, the drug won't be used or covered.

I think we can do something about this in many cases by shifting the focus of the NIH. Right now, much of the focus of the NIH is about understanding diseases in a manner that allows for development of new drugs and even finding things that could be new drugs.

That is the NIH is funding the basic reserach that then underlies the Pharma industry.

We should shift much of the focus of the NIH to finding affects of things we already know or basic life style things.

We should be doing more large scale and long term studies on diet and even the use of prescription drugs.

If we can figure out how to treat Alzheimer's by life style or existing moleulces, does it really matter if we understand Alzheimer's disease in detail?

(though I think we need to continue to do pretty active drug development research on infectious diseases and the risks of new technology because those things change, but I don't think we do enough of that now anyway.)

[Special K]

Fat, unhealthy Americans?

TV, cars, lack of exercise, too much drinking, not walking enough, big macs, farm/ethanol subsidies and just a general laziness of our population

shall I go on?

Those are obvious problems, not really what I was getting at though.

More, does the problem primarily rest with pharmaceutical companies marketing directly to the American public? Lazy doctors? Lazy patients? All of the above? One more than the other? Etc.

Furthermore, how does one propose solving what they see is the problem?

Don't just tell me fat and lazy Americans. That's a very easy solution and more than obvious. How is that problem solved?

Just interested in people's thoughts on that.

[PeterMP]

Those are obvious problems, not really what I was getting at though.

More, does the problem primarily rest with pharmaceutical companies marketing directly to the American public? Lazy doctors? Lazy patients? All of the above? One more than the other? Etc.

Furthermore, how does one propose solving what they see is the problem?

Don't just tell me fat and lazy Americans. That's a very easy solution and more than obvious. How is that problem solved?

Just interested in people's thoughts on that.

More consistent and relevant information on what is good for you, including information that takes into account variation and variables (e.g. do the studies so that we understand at some real level how "over weigth" and at what age is really bad for most people and get out there consistently in a relevant manner.) than "positive" "information" for what is bad for you.

And this includes advertisements/commercials.

This is what worked for smoking (lack of ability of cigerette companies to advertise (e.g. no tv commercials) and anti-smoking advertising) and what hasn't worked in terms of obesity (e.g. people know that being overly obese, especially when you are young is bad, but numbers for childhood obesity keep going up because of the difference in advertisement of that information vs. the advertisements to eat (especially eat things that can contribute easily to being obese)).

[Larry]

This is what worked for smoking (lack of ability of cigerette companies to advertise (e.g. no tv commercials) and anti-smoking advertising) and what hasn't worked in terms of obesity (e.g. people know that being overly obese, especially when you are young is bad, but numbers for childhood obesity keep going up because of the difference in advertisement of that information vs. the advertisements to eat (especially eat things that can contribute easily to being obese)).

Think we should be running PSAs that are designed to make obese people look ugly, stupid, and evil?

(Yes, it's a sarcastic question.)

[Special K]

More consistent and relevant information on what is good for you, including information that takes into account variation and variables (e.g. do the studies so that we understand at some real level how "over weigth" and at what age is really bad for most people and get out there consistently in a relevant manner.) than "positive" "information" for what is bad for you.

And this includes advertisements/commercials.

This is what worked for smoking (lack of ability of cigerette companies to advertise (e.g. no tv commercials) and anti-smoking advertising) and what hasn't worked in terms of obesity (e.g. people know that being overly obese, especially when you are young is bad, but numbers for childhood obesity keep going up because of the difference in advertisement of that information vs. the advertisements to eat (especially eat things that can contribute easily to being obese)).

I would agree with this. I think there are a variety of tactics that need to be employed in the fight against America's epidemic of chronic disease and over-reliance on Rx's. Obviously, Rx's do a lot of good overall, but I agree that they are over-prescribed for a variety of reasons.

I think that restrictions need to be placed on pharmaceutical marketing, in magazines, newspapers, tv commercials and a million other media venues. The same restrictions placed on tobacco products should be placed on pharmaceutical drugs, IMO. Observations made during my time interfacing with patients in the medical setting absolutely makes me think restrictions on pharmaceutical advertising would go a long ways in helping reduce patient "need" for Rx's. I can't count how many times patients entered the clinical setting where I worked asking directly for Rx's they had read about online or seen on TV. The infiltration of these advertisements into our everyday lives is out of control and this type of marketing needs to be addressed by our legislators.

I would also agree with positive PSA commercials regarding healthy living, facts about obesity and chronic disease, etc. would be helpful.

I'm also in support of taxing "junk food" items similar to the way we tax tobacco products. I'm not sure what exact type of metric should be used to determine what constitutes "junk food" and falls under the tax umbrella, but I'm sure health experts could come up with an appropriate definition.

Finally, I think incentives for healthy behavior (weight loss, healthy eating choices, preventive care checkups, etc.) should be more widespread among the insurance, employer, public and private sectors. When I lived in Colorado, a health incentive program called LiveWell Colorado experienced success with its' incentive program for registrants engaging in healthy behavior activities.

Anyway, I'm sure there are many more ways to approach this probem, I'm just sick of hearing people say "we rely too much on prescriptions" and "we're fat and unhealthy" without really outwardly verbalizing their thoughts regarding the causes of these health issues and potential solutions for them. Clearly these diseases place an immense burden on our health care system and I agree with others who say expanding efforts in the preventive realm can very likely help some of the problems we are experiencing with our health care system.

[Corcaigh]

I would also agree with positive PSA commercials regarding healthy living, facts about obesity and chronic disease, etc. would be helpful.

Shown during cartoons. Encourage kids to pressure their parents about healthy lifestyle, unless they want to be destitute orphans. :evilg:

[Wrong Direction]

Peter,

On my phone, so I'll try to be brief.

1. On GDR vs GSR, I remember the issue but can't recall the details. I will try to look it up tomorrow, mostly because I think the distinction doesn't actually favor Medicaid.

2. The law was passed in December 2003. Plans had to hire staff, negotiate pharmacy networks, negotiate rebates and formulary design. Write and submit bids to CMS in June of 2005. That's like 20 months, max, and plan bids all came in under projections. The pipeline didn't dry up in 20 months. Prices were lower because of competition.

[Larry]

I don't think I'd have a problem with even an outright ban on advertising prescription medication.

Maybe I wouldn't have a problem with something along the lines of "if you have <condition>, theres a new drug out that might help. See your doctor to see if its right for you". Not so much advertising, as letting the public know that there's a new option on the table.

But my reasoning is that, supposedly, the reason why a drug requires a prescription, is because its been determined that nobody but a doctor can decide if this drug is right for you.

And yeah, I remember when mom went through a phase where she'd call me into her room every time an ad for a drug came on tv, and tell me that she wanted it. (And she watched shows like Matlock. Where ALL of the commercials were for drugs, scooters you could get if you had Medicare, and lawyers wanting to sue drug companies).