by Del Meyer
Keep The Government Out Of The Medicine Cabinet
Chris Ward, an independent consultant to the pharmaceutical industry, spoke at the annual meeting of the Association of American Physicians and Surgeons (AAPS) this past month on the topic of prescription drugs. His specialty is Market Access & Health Policy Issues. He was formerly in charge of Canada’s pharmaceutical research and development program. He also was the Minister of Education in 1987 and the House Leader in 1990. He described himself as a recovering politician.
Until 1985, he believed that medical care was a right – that there was a free ride. With no background in medicine, healthcare or medical policy, he is now surprised as to how much he thought he knew about these issues. He finally came to his senses and realized these issues are too complicated to plan for the masses. He is now on a crusade in keeping government out of the medicine cabinet.
Why Are Drugs So Expensive?
Ward feels that drugs are actually the best bargain in healthcare. Because of diseases treated with pharmaceuticals, the death rate in the US has dropped from 19,000 to less than 9,000. Hospitalization rates have decreased by 31% in the decade of the 1980s. Because peptic ulcers can now be more effectively treated, hospitalizations from 1980 to 1998 have decreased from three million days to one million days per year, saving huge health resources. The value of a new drug is found in the benefits it provides in meeting the needs of patients. Medical research and innovations are leading to new therapies replacing more costly and invasive medical procedures.
As the average age of the population increases, so does the consumption of medicines necessary for the treatment of many diseases and conditions. However, price increases contribute only a fraction of the annual growth in drug expenditures. Drug development is a long and costly process. Only one in 5,000 molecules that are tested makes it to market as a new therapeutic drug. In the last decade, 1000 new medical entities were approved, but only 100 made it to market. Only three of 10 that make it to a market develop sales exceeding cost of development. The process is highly competitive, assuring us of the lowest possible costs. The estimated cost of bringing a new drug to market from1976 to1996 increased from $54 million to $500 million. Forty-five per cent of pharmaceutical research in the world is done in the US. Industry-funded research has increased from one-third to one-half, and government-funded research has decreased from one-half to one-third.
Why Are Pharmaceuticals Cheaper In Other Countries?
Pharmaceuticals have a higher value in the US in terms of costs of other health services that they replace. If we compare drug expenditures among developed countries with their total expenditures, the US has the lowest ratio. Drug costs in Italy is19.4% of their total healthcare expenditures, France 17.2%, UK 16.7%, Canada 13.8%, and the US 10%. Thus drugs in our country have the lowest proportion of total healthcare costs of anywhere, although there was a 40% increase in cost of pharmaceuticals.
Health Care Spending Growth
Healthcare spending growth in 2000 has not shown any preference for increased drug costs. In fact, physician costs have increased 1.8%, drug costs have increased 1.9%, and hospital costs have increased 3.4%. Per person health expenditure in the US & Canada have not shown any disproportionate costs. The average cost per person for hospitalization is $1700 in the US vs $760 in Canada, cost of physician fees is $761 vs $300, and cost of pharmaceuticals is $320 vs $264.
Choices For Managing The Impact Of Pharmaceutical Innovation
One can restrict the supply of medications by restricting formularies as they do in Canada and thus restrict patient access to new medicines. Canada cannot advertise the drug and the disease in the same ad. However, 80% of the magazines in Canada are from the US. One can also restrict access to pharmaceuticals by using prior authorization and thus putting more drag in the system. One can impose price controls which usually have been counter productive. Witness the recent news release that some generic medications are more expensive than proprietary medications because of governmental involvement in a selective discount and pricing web.
So, when one says very glibly that he can get the same medicine in Canada or some country with universal coverage, just remember that real costs are still better in this country.