Lipitor Brand

Generic Lipitor

Like most first world countries, the United States uses the patent system to encourage research and development. If a pharmaceutical company can develop a new drug, they can maintain a government approved monopoly on the sale of that drug for up to 17 years. Monopolies drive higher prices, which helps the inventor, Pfizer in this case, recoup their research costs, and return a handsome income to their shareholders. Once the patent runs out, other manufacturers can apply to produce the drug. This increased competition then quickly drives down prices. So far, this is a classic example of market forces at work.

Pfizer has been planning for this day for a number of years, and with annual sales figures like those in 2010, this is vital to the company’s fortunes. The company has triggered a number of legal and regulatory efforts to delay the arrival of generic equivalents. For a compilation of news articles on Lipitor, see this page in The New York Times.

Two particular strategies twist prescription drug coverage in favor of the brand name. Many prescription drug plans have incentives to encourage patients and their physicians to use generic drugs. Often this is done with a lower co-payment on the part of the patient. The lower co-payment provides an incentive for the patient to accept a generic equivalent, and the insurance plan saves money by paying the lower, generic price. Pfizer (and other drug companies facing similar out-of-patent challenges) is trying to subvert this incentive. Here’s a hypothetical example.

These figures are illustrative – made up – but make the point.

Typical Brand vs. Generic Comparison for a Drug Plan

Brand:  Patient Copay: $30 – Total Cost of Drug: $200 – Insurance Pays: $170

Generic: Patient Copay: $10 – Total Cost of Drug: $50 – Insurance Pays: $40

Now Pharmaceutical Company Offers a Copay Discount
(Pfizer discounts its price of the brand drug to cover reduced copay)

Discount Brand: Patient Copay: $8 – Total Cost of Drug: $178 – Insurance Pays $170

With this discount arrangement the patient is happy, the drug store doesn’t lose any money, but the insurance company still pays the larger cost. This puts upward pressure on insurance premiums.

Another strategy – Pfizer offers a significant discount on the price of brand name Lipitor to pharmacy chains as long as they agree to not provide generic equivalents. The chains save money, and can pass some of that on to patients, but the insurance plans that pay for the drugs don’t enjoy any savings.

Is this legal?  The second, discounting strategy with pharmacies, smells a lot like restraint of trade/anti-trust concerns to me. The earlier example, offering a discount on copays, seems legal. Are either of these good social policies? Not a chance.

These creative approaches illustrate one of the problems that insurance introduces into a market. In healthcare, patients have enough discretion that they can alter their buying behavior, based on prices they face. Yet the patients don’t see or feel the full price of their purchase decision. In a regular market the patient balances the benefit of the purchase against the price, and makes a good decision on allocating resources. That good decision helps society. With insurance the patient sees only a small fraction of the total price, and may make a decision that is not socially optimal. This breakdown in market forces is one of the challenges our healthcare reform goals face. Ideally we would like patients to be full partners in the decisions made about their care. Insurance blunts that participation.

Consultants saw patients quickly, and generally called me to discuss their findings and advice. And very often there would also be a letter in the mail: “Thank you for referring this delightful patient to me.”

How things have changed! Now a doctor gets the phone menu, just as the patients do, and it often ends in voice mail. It might be a few days before a staff member calls back—usually with the news that “we are not accepting any new Medicare patients.” At best, my patient might be offered an appointment in several months.

One very fine gentleman, who had recently moved to a rural area, found it easier to fly to Tucson to see me than to get in to see a local internist. That was in 2009. Recently, he has become unable to travel, so I needed to find him a local doctor.

I tried to expedite matters by ordering him an immediate diagnostic test: an abdominal CT scan. I don’t think anyone could argue that it wasn’t indicated under the circumstances. One little problem: I am not enrolled in Medicare and don’t have the proper government-issued number to enter into the computer. A license to practice medicine is not enough. This National Provider Identifier (NPI) is supposed to protect the system against being defrauded. Without that number, the imaging facility could not get paid by Medicare.

“Why not use the radiologist’s number?” I asked. After all, he was the one who would get paid. Nope, a referral was required. How about a self-referral from the patient? Nope, we can’t allow patients to decide what tests they need. “The patient is willing to pay for his own test,” I said. Nope, if he’s on Medicare, they aren’t allowed to take his money.

They gave the patient 24 hours to find a properly enumerated doctor to countersign my order. Fortunately, he found a specialist willing to do so, and assume potential criminal liability for committing “waste, fraud, and abuse” by ordering a “medically unnecessary” study. (Fortunately for the patient, he turned out not to have cancer, but that could be bad news for the doctor.)

So this is the status of retired Americans. They can’t just walk into a facility and request a medical test, and pay for it with their very own money.

A man may be qualified to pilot a 747 across the Pacific, but once he’s on Medicare, he is unfit to make an unsupervised decision about his own medical care.

I did find my patient a doctor. None of the internists within a 150-mile radius who “take Medicare” are willing to take on a new Medicare patient. But through the website of the Association of American Physicians and Surgeons (www.aapsonline.org), I found a link to the Medicare carrier’s list of opted out physicians. They don’t “take Medicare,” but many are pleased to see older patients, for a reasonable fee. There was one internist on the list, 150 miles from my patient. She has a courteous and helpful assistant who actually answers the phone, and told me the charge for a new patient visit: $300.
Things could be worse—and already are much worse in Canada. The “soul-destroying search for a family doctor” is described in the Globe and Mail on Aug 21. The Ontario government’s program called Health Care Connect manages to link only 60 percent of patients with a doctor—although you might find a concierge doctor for $3,000 a year.

That’s the cost of medicine when it’s “free”—if you can find it at all. If ObamaCare is implemented, all Americans will be in the same boat. And guess who will get thrown overboard first.

We are no longer free. Now, we are much less free than Washington, Jefferson, Madison, and Franklin, and all the other colonists were before the American Revolution.

Need to see a physician because of illness or injury? Now it is between you, your physician, and the government. The government will decide whether you are worth treating. “You lucky dog!” has taken on new meaning, because for your lucky dog, it is still between you and the veterinarian how to take care of your sick or injured pet. You have been made as dependent on the government as
your pet is on you, but I bet you love your pet. Your government does not love you.

Want to start a business? You’ll need to go through wearying red tape, “comply” with a noose of regulations, buy a bunch of  Occupational Safety and Health Administration posters, and worry about whether there is something you’’ve overlooked, whether it makes sense or not, that could land you “in violation.” Also, for occupations from physician to simply braiding hair, or decorating a house, you may need a license, and be forced to take a couple of years worth of courses before you can compete with someone in deciding what kind of sofa pillow to recommend.

Want to move into your own house? You may need permission from the local government to occupy it, and they may insist that you alter the banister on the basement steps so nobody could possibly fall through between the banister and steps. Rain stain on the wallpaper? It must be fixed, and then be “re-inspected” to make sure it has been done to some government functionary’s satisfaction. And so on and on and on. Think you own the house? Think again. In some locales, you use it only at their sufferance.

Think you are ever going to retire? The government has forcibly taken the fruits of your labor from you, and claimed they are in some “trust fund” and will be paid back to you in due course. For people in the early part of their Ponzi scheme, it worked in spades; they got much more back than they ever paid into the scheme. For those of us reduced to serfdom to pay the way of others, we are likely never to get back what was taken from us. The government, especially since World War Two, has become more daring and brazen in stealing from us and bullying us. There is no legal enforcement at any citizen’s disposal to compel government to give us what was taken. It is said to be a “compact between generations,” but I never signed on to it. The same goes for Medicare and Medicaid.

People who die before getting “Social Security,” many of whom are poor, cannot leave it to their children, so are doubly robbed.

Stalin is said to have taken a bird and slowly plucked off its feathers, and then disgustingly boasted that not only was the bird now totally at his mercy, but was also grateful for the slight bodily warmth of his hand.  We are similarly at the mercy of an irresponsible, bullying government, which has partially plucked us and has as its goal to reduce us to subjects under a despotism much more absolute than that of King George the Third.

As we enter the third bleak year of an unconstitutional and alien regime, there is no cause for celebration this July the Fourth. When we have restored Constitutional government, limited only to its delegated powers, and are teaching our children how to be ever vigilant in preserving it, that will be the time to celebrate.

To these people, I say: just *try* to be a consumer. Presume that somebody actually could act as a consumer, and go buy their health care. An honest seeker after the truth will quickly realize that so few people pay for their own health care that prices aren’t available. Go into a doctor’s office and say “I’d like a 20 minute visit with the doc — how much will that cost?” and the staff will be flabbergasted. Chances are very good that they won’t know what to tell you. This could make the point that people who consume health care aren’t consumers (although it’s hard to state that relationship without using the “C” word). I think, instead, that it makes the point that people are consumers, but they’re not purchasers.

With broadband Internet, in contrast, India has not got such breakthroughs.

The September 2009 issue of Finance & Development has a story on the impact of mobile phones for development. In India, there is a lot of merit in using new technologies and players to break with the comfortable stagnation that’s enveloped finance.

The Economist has a beautiful section on mobile phones and development: on Chinese progress on network hardware, broadband, on the impact on development, a retrospective, looking forward, and an enthralling piece on the cost reductions by firms in developing countries. Now all we need is for Indian finance to go the way of Indian telecom (and airlines).

Anand Giridharadas, writing in New York Times, describes new developments in distance education. India is the place in the world which would be the biggest beneficiary from distance education, given the combination of lots of young people and a dismal education system. This does require broadband to go the way mobile phones have. I often joke that the task of an economics undergraduate education in India should be to get a person to the point where he or she can read my blog (and cynics respond saying that most of the teachers of economics in India can’t parse my blog).

Anne Eisenberg has an article in New York Times about researchers at UCLA trying to use cell phones to do medical diagnosis. Given the ubiquity of cell phones in India, these could be useful lines of attack for us.

Patients Lose More than Their Health

The cost of this disease to its victims can be unrelenting. According to a study by the National Brian Tumor Foundation, of patients with brain cancer, 59% said their medical expenses were a financial hardship. Many families felt financially drained and had to borrow money (42%), increase their credit card debt (47%), accept a second or third mortgage (15%) or went completely bankrupt (7%). The cost of prescriptions, deductibles, increased insurance premiums and delayed disability funding exacerbated their medical costs and made expenses more difficult to pay. In fact, 15% of the patients assessed paid more than $1,000 each month for treatment. Making things more difficult, while 91% of patients were able to work before their diagnosis, only 33% were able to work afterwards. Furthermore, the disability insurance which was intended to help patients only makes things worse due to long, complicated forms that usually assure an initial denial. Even after acceptance, patients were required to wait two years before any benefits would take effect. During this interlude, patients were left to scrape by as best they could. Of the patients interviewed, 62% lacked disability insurance. The medical debt never failed to grow however, as it was found that a significant correlation existed between the time since diagnosis and the patient’s credit card debt.

Hope for Help in the Near Future

Brain cancer is notoriously difficult to diagnose and treat due to its location in the body. Usually, patients are forced to undergo invasive biopsy procedures for doctors to assess which type of cancer the patient has. This increases medical costs by increasing the time spent in the hospital during the operation and recovery, the drugs used for sedation and pain afterwards, and of course, the number of doctors required for such a procedure. However, it may soon be possible to find the same answers through a simple blood test.

Cancer cells, like other cells, “talk” to each other. Often a cell will accomplish this by secreting a protein that is recognized and acted upon by another cell. Cancer cells, for example, can send signals in this way to cause blood vessels to alter their normal route and instead, grow near the cancer cell. This redirection of blood vessels is what feeds the cell and allows it to grow. In cancer cells, these signaling factors are called microvesicles.

After the discovery of these signals as imperative for breast cancer cell growth, Dr. Johan Skog of Harvard Medical School began studying the microvesicles secreted by brain tumor cells. What turned this into a potential diagnostic method were the small bits of RNA found in the microvesicles. Previously, neither DNA nor RNA had been observed which made any diagnosis based on these signaling secretions impossible. However, when RNA was found, it opened the door to a blood-based genetic test. Skog and Dr. Xandra Breakefied, a neurologist also at Harvard Medical School, hypothesized that if the brain tumors were releasing signaling factors with RNA, they might be found in the blood where sensitive tests could detect them and distinguish between the types of brain cancers.

To test their idea, Skog and Breakefield collected the secretions from 30 tumors that had been frozen for long-term storage. They also examined blood samples from the same patients the tumors had been extracted from. In 28% of the blood samples, RNA from the microvesicles was found. In the tumors, RNA was found in almost 50%. Although this may seem to leave a lot of room for misdiagnosis, it is significant since RNA is very fragile and unstable and can degrade very quickly. The fact that RNA was found at all is rather amazing. It is believed that if these same tests were run on fresh samples, rather than those that had been frozen, a much higher number would test positive for the tumor-specific RNA. The RNA released from these tumors could even help doctors determine the genetic abnormalities of the cancer, allowing for a more tumor-specific therapy.

Although doctors do not expect this new method to completely replace the need for other diagnostic procedures, it could lend a way to extract valuable information in a relatively non-painful and inexpensive way.