Thursday, December 24, 2009

Treatise on Health Care Reform: Part 3 of 3

My final thoughts on the health care debate are focused on one specific type of "cost." Most of the things you buy when you purchase health care items are not things at all, but are services. MRI scans, doctor visits, surgeries, and the like are things that you have done for you, not things that you take home. There are certain goods, however, that fall under the category "health care costs." These things fall under two basic categories, the first being equipment (known in the medical world as "durable medical equipment" or DME) such as wheelchairs, walkers, elbow braces, CPAP machines, etc. The second category is medication.

Because these items are "goods" rather than "services" it is easier to focus on them and compare them to similar items in other sectors; it is much easier to place intuitive value on an actual thing than on a service.

Take pills, for example. Never has a society paid so much for so little. To understand this, consider the cost of most generic medications these days, which can be purchased for $4 for a month's supply at WalMart. This price includes the wholesale cost, plus markup, plus a standard "filling fee" that goes to the pharmacy. Many people don't realize it, but the actual production cost of that same medication is probably less than $1. The manufacturer, and the pharmacy, are probably each taking a 100% or so markup, still a killing.

Now, consider the cost of your average, new, branded drug. Most of these now cost in the neighborhood of $100-120 for a month's supply. Some are less, some are much more. The actual production costs of these drugs isn't any higher, usually, than drugs that are available generically. The pharmacy typically makes the same on the sale whether the drug is generic or not. So, all that money in the margin is going straight to the manufacturer.

How can this possibly be justified? Drug reps will tell you that the answer is simple: R&D. It costs so much to bring these drugs to market that they need to charge that much to recoup. There is always the risk that, once the manufacturer has expended all those research dollars on a drug, it doesn't make it through the FDA approval process, so they need to charge that much to recoup the costs of the "duds" they test but can't bring to market because they flunk out somewhere in the testing and approval process.

Well, I see somewhat of how much money these corporations throw away on stupid, frivolous things, and so I don't fully buy that explanation. Plus, the system as it is does not encourage companies to develop drugs that I need, it encourages them to develop drugs that will make the most money. What kind of drug will make money? Let's see, a "golden goose" drug will be intended to treat (not cure) a lifelong, chronic illness. No wonder my sample closet is chock full of hypertension and diabetic drugs! No wonder we haven't had a significant new antibiotic in 15 years: those are too good at curing the conditions they treat!

As I have outlined previously, I believe strongly that allowing free market principles to take hold in health care would go a long way toward "fixing" the system. I'm not sure this axiom fully applies to pharmaceuticals; all the competition in the world isn't going to encourage companies to develop drugs that we need. These people went to college, and it doesn't take a rocket scientist to figure out which types of drugs, for which types of conditions, will sell.

So, if the government is so intent on socializing something, why not the pharmaceutical industry? It irks me that probably 90% of the biochemical research done to develop a drug is done in the academic realm, mostly funded by the NIH and other government organizations, from my tax dollars. A pharmaceutical company then takes that knowledge base, built on the backs of the taxpayers, tweaks a chemical a little bit, patents it, and laughs all the way to the bank. They, literally, get us coming and going.

Why not make it illegal to patent a chemical intended for human consumption (a drug)? Pharmaceutical companies could still battle it out to produce better drugs than each other, they just couldn't own exclusivity.

True, this would stop private-sector R&D in its tracks and remove most of their incentive to develop new drugs. That's okay, in my view, since the new drugs they're researching aren't necessarily the ones we need anyway. As a physician, I don't need one more hypertension drug, I need the ones that I already have to be affordable. I need to not spend half my day figuring out how my patients are going to afford the treatment they need.

Let a governmental organization decide where research dollars are directed, based on public health needs. Let them assume the costs associated with FDA approval, and then pass those costs on to the consumers. Drugs would start out generic! Insurance premiums would plummet.

While I am, by nature, loathe to voluntarily trust the government to run stuff if it doesn't need to, I really do wonder if this would be one area more suited to that. What private entity can decide where to best direct drug research? If there is one that can do it fairly and rationally, let them do it. I would not completely socialize pharmaceuticals; I would hope that pharmaceutical companies would still produce, market, and distribute drugs; they would simply do so in a much smaller market, in terms of dollars. Americans don't need, or want, to see drug commercials during the Super Bowl.

Keep watching for the fourth (and final) installment in this series; this will be my own "healthcare bill," the one I would put into law if I were King, guaranteed to be considerably less than 2,400 pages long.

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