Analysis: Drug prices part of bigger issue

By ELLEN BECK, United Press International

WASHINGTON, May 26 (UPI) -- The senior citizen organization known as AARP released a study Wednesday that points out rising prescription drug prices and, while it feeds a seemingly endless outrage over U.S. healthcare costs, it fails to get us any closer to answering a key question: So...?

So, what are American consumers to do about rising prescription drug prices? So what is America, via its healthcare policy, to do as a country?


An even larger question: Are we, as a nation, saying the $1.6 trillion we're spending each year on healthcare is too much? If so, what changes should we make in our system or what other system do we want to replace it?

These all are basic questions Americans need to answer and studies that singularly point out hot trouble spots that generate a media frenzy do not answer. It is not just drug prices, but insurance premiums, hospitalization costs, long-term care costs -- the list goes on and on.


The AARP study said, in a nutshell, pharmaceutical companies charged more each year from 2000 to 2003 to wholesalers and the rate of that yearly increase went from 4.1 percent in 2000 to 6.9 percent in 2003. That means in 2003, the rate of the increase was three times the rate of general inflation. The study was based on the top selling brand-name medications

AARP's John Rother told a news briefing the organization "is going to keep the focus on pricing behavior by the industry. So I hope this will have the effect of keeping pressure on the industry to keep prices affordable.

So what can be done to get pharmaceutical companies to lower their prices?

Some people think price controls are the answer. Taking policy and politics together, there is no serious likelihood of price controls -- in effect in most other countries -- levied on U.S. drugs any time soon.

There also are many experts who think such a policy would not control prices, but merely reduce the availability of the high-tech miracle drugs on which America prides itself. It is an integral part of the common saying: America has the best healthcare in the world.


Jeff Truewhitt, spokesman for the the Pharmaceutical and Research Manufacturers of America, told United Press International government and other estimates place the loss of innovation due to price controls at from 10 percent to 30 percent.

Regardless of arguments that America is shouldering the largest burden for drug research and development to compensate for controls overseas, price controls probably are not the answer.

That said, so what can consumers do in their own micro-economies to reduce their prescription drug costs?

"Clearly generic medication is the first thing that comes to mind, and that can make savings of 60, 70 percent depending on the product we're talking about," Duane Kirking, a professor at the University of Michigan College of Pharmacy in Ann Arbor, told United Press International.

Consumers also can be more aware of drug prices by talking to their physician and pharmacist about therapeutic equivalents -- different medications that are available for the same diagnosis that might be less expensive.

A step beyond the consumer and the local physician, the United States could allow consumers to import or reimport drugs from Canada and elsewhere -- which Kirking said "has to be done very carefully."

Generics in Canada, for example, might well be more expensive than in the United States. Canadian price controls, Kirking said, are for brand-name drugs -- so pharmaceutical companies make up some of the difference by charging more for generics.


He added another idea is to have health plans cover selective over-the-counter drugs. When drugs go OTC, their costs go down but consumers actually often pay more because they are not covered by insurance. Instead of the $5 or $10 co-pay for Claritin, they pay the full retail price.

Health policy experts think we need to be more clear what we want in terms of healthcare policy. Do we want a government-paid, nationalized system, like England? Aside from the political battle such talk brings, the tradeoff for many Americans in such a system could be long waits for services -- including surgery -- and less innovation.

England spends 8 percent of its gross domestic product on healthcare, compared to almost twice that much in the United States.

"The British have 58 million people and a 1.4-million-person waiting list for hospitalization," Robert Moffit, director of domestic and economic policy for the conservative Heritage Foundation, told UPI. "If that's what you want we can have that."

There also are policy proposals floating around Washington that combine private-sector insurance with a mandatory system of healthcare subsidized by the government. There are some that expand the Federal Employee Health Benefits Program more broadly. And some expand Medicare to become a government entitlement for all citizens.


Though Democrats tend to favor more government involvement, Republicans favor more private sector responsibility and there is plenty of policy for everyone to dig into.

"Let's assume we do spend too much on healthcare," Moffit said. "What is the logical response. If we spend too much is there somebody at HHS (Health and Human Services) or in Congress or at the White House who knows how much we should be spending on healthcare?"

Don't want to go there? OK, Moffit suggested looking at the question differently: Are we getting value for our money spent on healthcare?

He said in terms of delivery of care we are getting far more for our money than 10 years ago. Advanced diagnostic technology finds diseases faster, allowing for quicker, less costly cures. Doctors are changing the way they do surgery -- it is less invasive, meaning less time in the hospital and a faster return to work. The pharmaceutical industry pumps out blockbuster drugs that have significantly improved the quality of life in America.

So, is this a good investment of our healthcare dollars?

Aside from the clinical delivery of care there is the administrative healthcare industry. Is health insurance good value or should we have some other way of paying for healthcare? We're having the very beginnings of that discussion with health savings accounts -- which begin to turn the responsibility from the employer to the patient.


Moffit said the insurance system as we have it is not a good value, but Truewhitt said it provides one avenue to lower drug prices.

He said the 60 percent to 75 percent of people in health plans in the United States have relatively few complaints and that making sure the insured get the medications they need can help to reduce healthcare expenditures overall through fewer and shorter hospitalizations and less use of costly, invasive surgeries and interventions.

"We need to get more people into health plans to benefit from discounts (negotiated between drugmakers and plans)," he said and defended pharmaceuticals pricing as in line with medical inflation.

In response to the AARP study, Truewhitt said the average pharmaceutical price increase was 4.5 percent per year since 2001, compared to the overall medical inflation rate of 4.6 percent. He noted medicines are 10 percent of each healthcare dollar spent.

Truewhitt also agreed America needs to open up its healthcare discussion to more basic questions and look at a broad range of policy and delivery options.

"Let's hear the critics, let's hear the complaints," he said.

Bottom line: Healthcare often is very personal. Some folks might say America does not spend enough on healthcare -- especially if they are lacking it. Some might say if their employer spends more on healthcare it is good, but if they have to it is bad.


Health insurance over the decades has taken much of the decision making process out of the hands of consumers -- and that is just beginning to change as America moves toward what the buzz calls consumer-driven healthcare. For consumers to be in the driver's seat, however, they are going to have to learn a lot more about their healthcare system and the options for change if they don't like the road they are on.

Drug prices then, become just one more pothole.


Ellen Beck is UPI's Health Policy Editor. E-mail [email protected]

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