Imagine for a moment that you are an oncologist caring for a 53-year-old man with metastatic cancer, a person whose tumor has spread to lung and liver.
With standard chemotherapy, this man can expect to live around 12 months. That standard treatment isn’t all that expensive in today’s terms, only $25,000 and his insurance company will pick up the entire tab since he is already maxed out on his yearly deductible and co-pays.
But wait! Before prescribing the standard treatment, you find out there is a new chemotherapy on the market, one that costs $75,000 (in other words, fifty thousand dollars more than usual care) and has no more side effects than that standard treatment.
How much longer would patients like this have to live, on average, for you to feel that this new chemotherapy is warranted?
That’s not an easy question to answer. But it’s not an impossible one either. Clearly if the treatment would provide only, say, 1 day of additional survival on average, that would not amount to $50,000 well spent. Just as clearly, if this man could expect 10 years of additional life, no one would deny him this new treatment.
So when, between 1 day and 10 years, does it become a tough call whether to prescribe this new treatment?
In a recent study published in Health Affairs, my colleagues and I presented Canadian and U.S. oncologists with a scenario very like the one I described above. The median respondent to our survey indicated that the $75,000 drug would need to extend life expectancy by an average of 6 months to be worth prescribing, an answer that suggests that oncologists think that it is worth spending about $100,000 to extend patients’ lives for a year. Of course, oncologists’ opinions were scattered widely. Some said that a week or a month would be enough time to justify this drug. Others thought that, with medical care being so expensive, we need to demand more out of expensive drugs—a year of survival, maybe even two.
An interesting result then: No consensus among oncologists about the price of life, but a pretty strong sense that anything more than $100,000 for a year of life is starting to get a bit expensive.
But I’ve only told you about half of our study. Because you see, when we mailed this survey to oncologists, we conducted an experiment. In a second group of physicians, we said that the new chemotherapy costs $150,000. This treatment, in other words, wasn’t a mere $50,000 more expensive than standard treatment; it was $125,000 more expensive. With this much more money at stake, oncologists should demand even more out of this drug, right?
As it turns out, the median respondent to our survey once again indicated that they would prescribe the drug if it extended patients’ lives by an average of 6 months. For these oncologists, in other words, it was worth spending about $250,000 for a year of life.
What’s going on here?
The oncologists responding to our survey were essentially insensitive to the price of treatments when telling us how they would think about new chemotherapies.
I spoke about this experiment with a pharmaceutical executive once, a man who ran the oncology division of a major pharmaceutical company. He told me: “Oh yes, we know that oncologists are not very price sensitive.” That’s one reason why his company is able to charge so much for its new treatments.
How much? Six figure treatments are becoming common in oncology. Some studies tout new drugs that cost more than $100,000 for a course of treatment, and which extend people’s lives by maybe 2 months on average. That amounts to $600,000 per year of life.
I don’t pretend to know the price of life, or have unique insight into how we ought to decide whether expensive new treatments are worth their costs. But I do know that at some point, we need to demand more from these ultra-expensive medicines or we are going to spend our way into fiscal oblivion.
Peter Ubel is a physician, behavioral scientist and author of Pricing Life: Why It’s Time for Health Care Rationing and Free Market Madness. He teaches business and public policy at Duke University. Peter’s new book, Critical Decisions will be available in the fall of 2012. You can follow him on his personal blog.
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Its a tough issue to understand, making it a really complex problem to solve. It’s going to take everyone’s involvement to make these absurd prices reasonable.
How can we even have this conversation without considering the pricing practices of the pharma company?
How much of the $75K actually reflects the real cost of manufacturing the drug versus profit goals for the pharma company?
And how much would the drug actually cost if the drug were open to other manufacturers so the pharma company doesn’t have exclusive right to charge whatever they feel like knowing competition won’t drive down the costs?
And we’re willing to tell someone they can’t live that extra 6 months because the pharma execs need their bonuses?
We can’t transform healthcare until we’re willing to consider all of the factors that make it expensive.
Rationing of care or drugs can’t be considered until we tackle tort reform, pharma costs, etc.
at least your upfront that your practicing blatant class warfare. Just wish people like you would stop including me in your class. Only 20% or so of people agree with you, hardly a fight of or for the 99%.
“Should people that work and do contribute to society be able to get that extra month if they so choose,”
If when they are healthy they buy insurance that covers the extra month of life and pay the premium for that right then yes they should receive everything they paid for.
People should not be allowed to forgo insurance, not pay into the system, then demand that those that did the right thing buy them an extra month of life. Those on public healthplans should not get the extra month of life.
“It’s hard-working Americans against the greedy and selfish few at the top,”
Is everyone successful greedy and selfish?
Is anyone in the 99% greedy and selfish?
I have never seen you say anything that would imply no to the first and yes to the second.
“First, the effect would be to shift the tax burden even more away from the wealthy and onto the middle class and lower middle class.”
Depends how you tax consumption and what consumption you tax. I would exempt healthy food for example from all taxes. I would also tax cigs and alcohol at a much higher rate then everything else. Yachts would also be at a higher rate then cars. The things the poor should be buying would have a very low tax rate, the things they should not much higher. The key for me is everyone pays the same rate for the same item.
29% tax assumes we keep spending as much as we do. I have hundreds of billions of in spending reductions to go along with it. Most spending would go back to the states where it belongs. How ever the states decide to tax is up to them.
I rather see State ID cards that live up to a minimal national standard. Don’t trust national politicians.
The NPI in theory should be the same as a national ID for providers billing we just treat it laxly and don’t care if they rob public healthplans. Banks are required to check ID, including SSN, when they open an account. All this fraudulent money is being deposited into some bank account, its not like they mail envelopes full of cash, so why can’t they go back and check the bank records and arrest these people? They just don’t care.
Nate, as much as you would prefer to talk about redistribution of wealth as it pertains to health care services, this is not the question raised here. This is not about entitlements. It’s about 99% of Americans and it is about private payers as much as it is about public ones.
Should people that work and do contribute to society be able to get that extra month if they so choose, or should “society” make that decision for them, if all their hard work and contribution did not translate into enough wealth to purchase the extra month on their own?
These are folks with insurance, but you think its “crazy” to assume that insurance will pay for an extra month, which means that only the very wealthy amongst those who work hard all their lives will have a choice in the matter.
I think this is blatantly wrong and also completely unnecessary at this point.
My class warfare is not the welfare-poor against hard working Americans. It’s hard-working Americans against the greedy and selfish few at the top, and the government that now serves them.
Nate –
I suspect that we will ultimately wind up with both a consumption tax and an income tax at the federal level. I’m not a fan of consumption taxes alone for a couple of reasons. First, the effect would be to shift the tax burden even more away from the wealthy and onto the middle class and lower middle class. Second, the size of the tax needed to replace the income tax and FICA taxes would be huge. The FAIR tax was billed as a 23% tax on most purchases but it’s actually 29.9% if calculated the way state sales taxes are. That is, if a $1.00 purchase includes $0.23 of tax, the FAIR tax proponents call that a 23% rate. However, if the pretax cost of the item is $0.77, the $0.23 of tax equals 29.9% of the pretax purchase price. As proposed it would apply to over 80% of GDP while the broadest based value added taxes in Europe apply to a bit over 40% of GDP at most. Then you still have state sales taxes on top of that. It wouldn’t work.
I know a number of people who support consumption taxes as well. They generally grew up in middle class families, went to college, worked hard and became successful. They were lucky enough to have been born in America instead of, say, Bolivia. They were lucky to be born with brain wiring that gave them a skill set that pays off handsomely in our economy and society. Some were in the right place at the right time from a career standpoint. Their kids are healthy and don’t need any special help. The two main determinants of a life outcome are luck and effort. Effort includes not just hard work but also healthy behaviors and sensible choices.
Plenty of people max out on effort but are unlucky in various ways and need some help. I don’t mind providing it paid for with progressive taxation within reason. At the same time, I think there is a lot more that we can do to fight fraud and system gaming across a host of government programs. That’s why I would also like to see everyone have a national ID card with a name, picture, and unique numeric and biometric identifiers. If you’re going to apply for government benefits, at least be prepared to prove that you are who you say you are and only apply under one name. If you’re billing Medicare and/or Medicaid, medical providers should have such ID cards as well.
“who are not “providing” anything at all, except complexity and heartburn”
At least your not arguing hyperbolically. What is the job of payors? They accept claims from providers, verify eligibility, benefits, and legitimacy of claim then make payment. Your saying they don’t do that? You can’t even make logical arguments your grasping so desperately to support your failed dogma.
“are happy to cover one month of life regardless of costs for all currently paying customers?”
No I am not, not sure where you even get such a crazy idea. I’ll say it again clearly;
Your demand to eliminate profits will not fund more then one month of the spending you demand we do on behalf of the 99%.
The problem with our healthcare system starts and ends with people taking more out of the system then they contribute, our problem is Medicare/Medicaid not private insurance.
People that do not work and contribute to society do not deserve the same healthcare as those that do, period. The exception being the truly disabled and kids, in the case of kids their parents are responsible.
“administrative costs are also a fraction of what they are here. That’s how money is saved.”
Studies have shown self funded plans have admin cost on par with any of the other OECD programs. Admin cost is not the difference in spending. You have to have a complete ignorance of Math to ignore that 80%+ of our spending goes to providers. If we spend twice as much as everyone else if you clicked your heels and eliminated ALL admin cost you would still be 50%+ over everyone else.
Do the basic math. Admin is not and never has been the driving cause of our spending problem with the exception of public insurance fraud.
“I get rid of the administrative nightmare created (purposefully) by private payers”
What administrative nightmare do I purposefully make? Name even one?
The entire premise of this post is that we should not pay an arm and a leg for a month of life.
Are you suggesting that your payer buddies, who are not “providing” anything at all, except complexity and heartburn, are happy to cover one month of life regardless of costs for all currently paying customers?
If so, we indeed need to have a different conversation.
“You keep referring to folks on welfare in most of your replies and since you have a low opinion of them it is easy to engage in hyperbole regarding free loading bums.”
And you refer to rich people and payers as greedy in most of yours. What your asking is for me to stop demonizing free loaders so you can attack people that work for a living.
The overwhelming majority of Americans don’t need to worry about paying for cancer treatment out of pocket because the greedy profitiers you despise provide them insurance. Private health insurance and those who work are not the problem. It is the public health insurance plans that are BK and dragging down the entire system.
Welfare is the problem, just because you don’t want to deal with the problem doesn’t mean we should stop talking about it.
I notice you still refuse to answere the simple question that will put it all in perspective;
How much profit do all these people you hate make?
How many months of your spending would that pay for?
Answer those two questions and you will clealy see Welfare and Entitlements are the problem.
Why would you keep a deduction for people choosing to have kids? They already get the advantage of free public education and all sorts of other support. If you choose to have kids you should pay for it, someone that chooses not to have kids shouldn’t be taxed more for not consuming more public resources.
I think we need to ask what is your contribution and what is your burden.
Ideally I would prefer we not tax work at all, much rather we tax consumption.
Nate, out of order because the comments are running on top of each other up there, I would like to request one thing.
You keep referring to folks on welfare in most of your replies and since you have a low opinion of them it is easy to engage in hyperbole regarding free loading bums.
I am not talking strictly about people on welfare. I am talking about the overwhelming majority of Americans who cannot possibly afford to pay out of pocket for cancer treatment when their time comes. Most of us are “poor” when you look at it this way, and these rationing schemes are intended for all, but the very few who coincidentally make the rules.
So leave the welfare folks out of this one for a change.
Nate –
For the record, I would be willing to do away with the major tax deductions and preferences in exchange for lower marginal income tax rates on ordinary income. This includes: (1) the mortgage interest deduction, (2) the tax preference for employer provided health insurance, (3) the deduction for state and local taxes, (4) charitable contributions, (5) the personal exemption for the taxpayer and his or her spouse (but not the children) and (6) tax capital gains and qualified dividends at the same marginal rate as ordinary income or 28%, whichever is less. While I no longer benefit from #2 since I retired at the end of last year, I supported getting rid of it for years while I was still working. I also haven’t paid any mortgage interest since 1978 but I do currently benefit from the other four. Unlike most people, I’m willing to support changes in the law that could adversely affect my family because I think we need to get our debt and deficit under control.
I would challenge every interest group to step up and answer the following simple question: What’s your contribution? That goes for both the federal debt and deficit imbalance and unsustainable healthcare cost growth.
Let me know if this misrepsents your point, want to be fair.
We need to stop honest hard working people from making a profit so these people who can’t “afford” the ransom don’t suffer?
“The Grandma calls the Department of Child & Family Services, and states that the unemployed daughter is not capable of caring for all of her kids. DCFS agrees, and tells her the children will need to go into foster care. The Grandma then volunteers to be the foster parent, and receives a check for $1500 per child each month in Illinois.
Total yearly income: $144,000 tax-free and nobody has to go to work! In fact, they get more if there is no husband/father/man in the home! Not to mention free healthcare (Medicaid), plus a monthly card entitling them to free groceries and a voucher for 250 free Obamaphone minutes each month. This does not include WIC and other welfare benefits…that they are “entitled” to.”
How much profit do you think there is in the 2 trillion of spending that you can chop?
Next question to ask is how much of your desired spending would that choped profit pay for?
If eliminating all profit will fund 1 month of your spending it’s not the place to start. It’s an excuse to not make the hard decisions.
like this;
Sen. Hillary Rodham Clinton and former president Bill Clinton have operated a family charity since 2001, but she failed to list it on annual Senate financial disclosure reports on five occasions.
The Ethics in Government Act requires members of Congress to disclose positions they hold with any outside entity, including nonprofit foundations. Hillary Clinton has served her family foundation as treasurer and secretary since it was established in December 2001, but none of her ethics reports since then have disclosed that fact.
The foundation has enabled the Clintons to write off more than $5 million from their taxable personal income since 2001, while dispensing $1.25 million in charitable contributions over that period.
A lot of these will hire kids or family members that do nothing but get bloated salaries from the charity for their “work”
Clean up the tax code and do away with all charitable write offs
they shouldn’t be tax deductible. To many sham charities meant to only enrich those that run them. If someone wants to be charitable do it post tax.
Jonathan, perhaps you should have a conversation with a Marine regarding the notion of leaving people behind.
Regardless of that, the issue with your logic is that it is not realistic. We don’t have a problem in health care because of the so called “million dollar babies”. We have problems because of millions of small wasteful things and because we pay twice what we should pay to HC corporations.
My suggestion is to put waste and corporate profit on the chopping block first instead of volunteering to sacrifice the lives of those who cannot afford the ransom. We can discuss rationing of lives, if necessary, after we deal with waste and price failure.
All arguments to the contrary are based on calculations that assume the status quo, and frankly, are immoral.
Nate –
While I’m no fan of President Obama’s policies, especially toward business, the main reason for his relatively low federal income tax rate is that he contributed $172K or over 20% of his adjusted gross income to charity. For what it’s worth, Governor Romney contributed close to that percentage of his $21 million of AGI to charity as well.
I view charitable contributions as a voluntary tax that allows the donor to select the beneficiaries of his or her generosity.
Americans will spend an average of 29% of their income on federal, state and local taxes in 2012, the Tax Foundation announced Monday. That’s more than the average family spends on food, clothing and housing combined, the organization said.
And it means that the average American is going to be working 107 days into the year just to earn enough money to pay their taxes.
Obviously we need to work some amount of our year to pay taxes but when 3-4 months are taken that is getting to long. Especially when I see millions of people not working at all or working very little and taking vacations or spending all day with their family not having to make the same sacrafices.
This is the problem with progressive tax schemes, they are by definition discrimitory. They guarantee some people a better more enjoyable life not based on effort or contribution but popularity.
I have read that the first person to live to 150 has been born, I haven’t seen what that does to our enetilement programs but imagine it can’t be pretty.
Did he release that or is it supulation that is where the gifts went? After spending far more time reading someone else’s taxes then I care for I couldn’t find it. In analysis by forbes, cnn, and others they say that might be what it was used for but nothing defnitive. Maybe I missed the itemizations but I didn’t see the write offs detailed either. i.e. 49K on his foreign income.
I agree, fid72. The reasoning Margalit seems to be displaying here reminds me of a trope that drives me nuts in movies and TV. It’s especially common in Star Trek: the captain puts the lives of the entire crew or landing party in extreme jeopardy to try to save the life of one crew member. You know the plots: the captain hangs around an extra few minutes as the enemy closes in, or refuses to jump to warp as the bomb ticks out its final few seconds, so that if the rescue maneuver fails everyone dies.
The reasoning is: a life is too valuable to waste; we cannot simply “let” someone die. And yet, apparently the many lives of the crew are not too valuable to waste if the extremely perilous mission goes wrong.
We should be willing to take some risks and make some sacrifices for others, but there are always trade-offs and we shouldn’t pretend otherwise. Lives are harmed by spending limitless amounts on healthcare. It isn’t just that education and transportation infrastructure suffer. Those extra dollars for care translate into lives’ worth of work. If the average lifetime earnings of a person is one million dollars, then spending one million dollars to lengthen a gravely ill person’s life by one year means that the entire lifelong monetary product of an average person’s work is going to pay for one person’s additional year of life. Of course, with insurance this cost is distributed and doesn’t fall on a single individual, but multiply the costs for many very sick people and the incremental amounts can quickly add up. And it is not just the money that gets taken to pay for health care, but the time it took to earn that money because it was taken out of the person’s paycheck and could not go to other living expenses (or saving), so effectively longer hours had to be worked for the same standard of living. By taking away people’s time, you are effectively taking away a piece of their life (that they could have spent doing something more enjoyable, like being with their children, or retiring earlier). I am oversimplifying, but I hope all can recognize that this dynamic exists.
Well said, Paolo.
Yes, Barry, I am referring to Israel. Just because it’s small, it doesn’t mean that the principle cannot scale. We are now implementing changes in the US based on models that were tested in much smaller environments. If we can learn from Mayo and Kaiser, we should be able to learn from small countries too.
As to Maryland and price negotiations in general, they keep disappointing because we do everything half way (trying to be polite here). Exempt payers from antitrust and exempt providers from antitrust and pharma and devices too. Get them all in one room, including the government, and let them negotiate, and make the proceedings public. How is that for transparency?
Or just go to single payer and get this sorry game over with.
To follow up on the MD all payer system, when it first went into effect in 1977, Medicare and Medicaid agreed to pay more than they did previously so private insurers could pay less. However, cost shifting to private payers was either still in its infancy back then so the gap wasn’t nearly as high as it is now. For Medicare and Medicaid to pay more today so private insurers could pay less would be a non-starter in the current federal and state fiscal environment.
Drug manufacturing costs are relatively low at only 17% of sales, but research and development investments are a higher percentage of sales than in virtually any other industry, including the electronics, aerospace, and automobile industries.[7]
It is estimated that only one out of nearly 10,000 chemically synthesized molecules investigated as drug candidates actually becomes an approved drug.� During the 1990s, the average length of time required for drug development and government approval reached 15 years in the U.S.[10]� As the length time to bring a drug to market has increased, so have the costs, economic risks and uncertainties.� One study estimates the pre-tax cost of developing a drug introduced in 1990 to be $500 million
That prize would need to be around 1 billion to make sense
Regarding Maryland’s all payer system, I don’t think MD has done much better controlling healthcare costs than other states in recent years though their system has been in place since the late 1970’s. As you probably know, it only applies to hospital charges, not physician fees, drugs or other healthcare costs. I’ve heard Maryland doctors note that there is a crazy system now that allows hospitals to build facilities like imaging centers on an existing hospital campus but have it designated as “unregulated space.” Then we see the ridiculous site of a hospital inpatient being loaded into an ambulance, transported 100 yards to the imaging center on the same campus, getting the MRI and being transported back to the hospital, all so the image and probably the ambulance ride can be billed outside the scope of the all payer system.
It cost hundreds of millions if not more to get a drug through trials and into the market.
It cost pennies to make it. You can’t ignore R&D. Not only R&D for that drug but you also need to factor in the failed drugs.
For an accurate analysis take Pharma profit minus marketing and some excess salary and a portion of that is what could be cut out of the market.
“Google and Microsoft spend billions on research, yet charge relatively little for their products.”
Office cost over $300 and is full of bugs. Server and SQL cost in the 1000s. Compare MS and Google profit to the entire Pharma industry. Not a great comparison if your using them for the poster of reasonable profit.
Margalit –
Are you referring to Israel? It’s roughly the size of New Jersey in square miles and has 7.6 million people vs. 8.8 million for NJ. I don’t think it’s an apt comparison for the U.S. nor are the Scandinavian countries. Germany would be more appropriate from a healthcare system standpoint.
If we want payers to negotiate more forcefully with providers, especially hospitals, then give them an anti-trust exemption for the purpose so they can negotiate as a group like the Swiss insurers do. If we want to see hospitals compete, let’s have disclosure of contract reimbursement rates and user friendly price and quality transparency tools available to both patients and referring doctors. Also, more people with tiered insurance networks would nudge them toward the most cost-effective high quality providers.
If we want to get serious about fighting fraud, let’s require every provider with the authority to bill Medicare or Medicaid have a robust ID card with a picture, an address and both a numeric and biometric identifier.
I think doctors will always expect to earn more money in the U.S. than their counterparts in other countries because the opportunity cost of higher earnings potential in other fields like finance and law among others are greater in the U.S.
I don’t think it’s reasonable to cap by fiat what drug companies can charge for a specific drug. There are lots of costly research failures that never make it through clinical trials. Breakthrough drugs are especially expensive to develop as opposed to marginal improvements on existing therapies. Negotiate hard. Be prepared to say no, we won’t include it on our formulary. Without necessarily being precise about it, payers and drug companies need to develop a general consensus around a cost per QALY level that’s within the zone of reasonableness.
I find it interesting that the parts of our economy that have the most government involvement as either payers or providing loans – healthcare and college costs are already super expensive and increasing faster than other parts of the economy. In both sectors, a focus on cost control and management is not a priority within those organizations and not a path to a rewarding and successful career.
Barry, having lived most of my life in one of those “socialist” countries, I can tell you with certainty that no one is “more accepting of death” and no one is concerned with burdening their fellow citizens when staring death in the face. It is a myth.
I can also tell you with 100% certainty that what providers receive as compensation in those countries is only a fraction of what they receive here, (hospitals in particular), and that price variations are minimal and that administrative costs are also a fraction of what they are here. That’s how money is saved.
Bob,
I use the term “negotiate” because I do believe manufacturers deserve a chance to be heard and explain their costs. I also used the term “an offer they cannot refuse”.
I agree with you that prices should be set at a national level, and not just for drugs, but I think there should be sellers at the table were decisions are made, so we don’t make disastrous decisions.
This model exists today in Maryland for hospitals and in other countries for most everything.
I do believe pharma is different than Google and Microsoft because R&D is much more expensive and because Google makes most of its money from secondary uses of their consumer products. Secondary use of Google is very expensive (advertising).
I am not interested in deterring research or putting pharma out of business, but there is plenty of room to cut prices before we reach a danger point.
A $10 million prize may not be enough to pay for research on newer drugs. Besides, a fixed prize per drug would only encourage pharmaceuticals to simply generate as many new drugs as possible of questionable value with minimal research.
A more useful prize system would set the prize amount based on the actual expected VALUE of the drug. If a new drug is expected to help N people add Y years to their lifespan, the prize value should by N x Y x V, where V is the implicit value of one year of life.
But that is equivalent to just negotiating with the company and saying that the most that you are willing to pay for the drug per person is Y x V.
Any way you cut it, there is an explicit or implicit value you attach to a person’s life.
We need not dabble in hypothetical situations of 1 billion dollar pills. If you look at the graph in the JAMA article I linked to above, you can see that fraud, pricing failure and administrative complexity are the major offenders. Addressing those should be more than enough, and it does not require overcoming any moral dilemmas. We don’t need to debate these things forever, we just need to do it.
BTW, once QALYs are considered, you may not have formal tribunals, but you’ll be awfully close. We should not go there just because we’re too lazy to fix the paperwork.
Good ideas above, but why do even left-wingers in America tend to use words like “negotiate” when they discuss drug prices?
It is possible to find out the cost to manufacture a drug. (I consider research a sunk cost, just the way that Microsoft and the rest of American industry books it.)
If the cost of production is $10 for a monthly supply and the drug company is charging $100, well, that is not unknown in American industry, and if competitors can come in for less then good for them.
But if the drug company is charging $1,000 on a $10 drug and the patient has no choice, that is pure price gouging and should be illegal.
I am not calling for the FDA or a similar board to set every actual price. But they can and should punish anyone who exceeds a maximum price for a patient who has no choice.
As one of the Supreme Court justices once said in regard to pornography,
“I cannot define it but I know it when I see it.” Same for price gouging.
Negotiation is way too timid.
I can hear the argument now, ‘who will do research’? One answer is to give the inventor of a new drug $10 million as a federal prize, then control the retail price after that.
Another answer is that Google and Microsoft spend billions on research, yet charge relatively little for their products. Consumers not price gouged to pay for research.
If pharma is that different from the rest of American industry, I am open to hear it.
Bob Hertz, The Health Care Crusade
Margalit –
Many of the big blockbuster drugs have either already gone off patent or will do so over the next several years including Lipitor and Plavix, the two largest sellers, by mid-2012. Lipitor is already off though still in its six month exclusivity period. The issue driving drug spending higher these days is the ultra high cost specialty drugs. I’ve heard drug companies claim that the price of these drugs is roughly the same in other developed countries as it is in the U.S. We already have an oligopoly of three drug wholesalers negotiating with the drug companies. If Medicare negotiated drug prices just on behalf of Medicare beneficiaries, they would be buying for fewer people that any one of the drug wholesalers. Moreover, there would then presumably be just one formulary for all beneficiaries whereas we now have hundreds of Part D plans for people to choose from. Each of those can establish their own formulary and drug tiers within it We like choice in this country even if it costs a bit more.
One criticism I’ve heard foreign healthcare experts level at U.S. doctors and hospitals is that we don’t know when to stop. I said before that people in other countries are more accepting of death, in part, because they don’t want to burden their fellow citizens with unreasonable costs when the prognosis is dire to hopeless. I suspect that this is especially the case among those who have already lived a normal lifespan and then some. I don’t think it’s doing patients and families any favors when doctors hold out false hope rather than just gently say that there’s nothing more that we can do for you aside from keep you comfortable. In the case of cancer, doctors often know that the outlook is grim and the patient is dying well before they actually communicate that to the family. My earlier reference to practice pattern changes includes more honesty with respect to not only the prognosis but the quality of life implications of available options so the patient and family know exactly what they are signing up for if they opt for aggressive treatment.
Finally, doctors and the big cancer centers are often anxious to enroll patients in clinical trials for the research value of what they might learn. While the drug undergoing trials is free to the patient because drug companies are not allowed to make a profit on drugs in trial, there are still substantial hospital and doctor charges that need to be paid, largely by insurers. I’m not looking for people to die quick cheap deaths; I’m looking for a complete and honest prognosis from providers and more realism on the part of patients and families.
I don’t think anybody is suggesting setting up a health care tribunal that makes life or death decisions on a case by case basis. We are talking about having a reference value of life to be able to perform cost-benefit analysis on health care policy: how much money can we pay for a drug that extends life by X months? What funding do we give to NHS researchers working on disease Y? etc.
Having a more efficient delivery system is great (and we can debate how to do that forever), but even if you still had the most efficient delivery system you still have to perform cost-benefit analysis.
If you simply value life at infinity, then what prevents you from having a pharma company spend $1 billion on a custom drug that helps just 1 person and then expect to get paid for it?
Even if you nationalized the entire health care industry and put everyone on a fixed salary (and completely removed all profits), you still need to perform cost benefit analysis to determine how to best improve people’s health using a fixed budget.
And btw, if engineers had to value life at infinity, they wouldn’t be able to build bridges, airplanes, and automobiles.
“Obama pushing the buffet rule while he pays lower tax rate then his secratary due to sheltering $48,000 in income to his daughters.”
This is completely untrue and worth refuting. Contributing a total of $48k to two 529 college plans does not lower your federal income tax. 529 plans allow you to make a contribution of up to $12k that is GIFT-TAX free. They don’t affect your INCOME TAX payments. Every responsible parent who can afford it should open a 529 plan for their kids.
The reason Obama pays a slightly lower income tax than his secretary is that he gave 22% of his 2011 AGI to charity.
Barry,
I seriously doubt that magnanimity has anything to do with the VA drug pricing, and it has nothing to do with the prices negotiated by European countries for their citizens. It’s all about power in numbers. When you negotiate on behalf of 311 million people, you can make offers that cannot be refused by the other side.
I do agree though that expensive drugs may turn out to be a net saving to the system overall, and I am not trying to vilify pharma. They do what a business needs to do, and we should do what we need to do.
Besides, drugs as everybody mentioned above, are not a major component of expenditure, which calls into question the need to limit access to drugs based on all sorts of “value” schemes.
what do you think your doing when you take money and resources from one person and give them to another?
Liberals played god with public housing and that was a disaster.
Liberals played god with welfare and that was a disaster.
Your right when humans play god it usually leads to terrible things….so why do you keep doing it?
“So your health care reform is based on not wanting to be an adult and having to make grown up decisions?”
No,it is based on my reluctance to play God, and a long history of catastrophic tragedies when people tried to do just that.
“I am uncomfortable with telling people who want to be alive a bit longer that their lives are not worth my money”
So your health care reform is based on not wanting to be an adult and having to make grown up decisions? It’s just like the mother that spoils the child. Why do you think we have spending like we do, because people like you don’t want to have to make the hard decision to say when is enough. Of course you never do it with your own money, it’s always someone else that should be giving more which makes it all the more terrible. That guy should give up all of his money so you don’t feel bad.
Obama pushing the buffet rule while he pays lower tax rate then his secratary due to sheltering $48,000 in income to his daughters.
Elizabeth Warren saying the rich need to pay more while she doesn’t take advantage of the MA option for voluntary higher tax rate.
Liberals are all the same, we need to spend more and do more just not with my money.
How about this Margalit, when you give up all your creature comforts and live the life of a nun after donating all your money, then you start demanding others give up more of theirs.
Besides demanding that others pay what have you really done for the poor person you can’t bear to tell their life isn’t worth your money, cause you do it every day when you spend your money on everything but them.