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Critical Condition

NRO’s health-care blog.

What Should Rick Perry Say About Gardasil?



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The Republican presidential primaries have been temporarily hijacked by a single incident in Rick Perry’s decade-plus tenure as governor of Texas. Despite Michele Bachmann’s ludicrous claim that Gardasil causes mental retardation, let’s recall that not one single schoolgirl was vaccinated by the offensive executive order: The legislature overturned it long before the school year began.

Furthermore, the executive order did not comprise a mandate. Like today’s Governor Perry, I agree that the vaccination should have required parental opting in, not parental opting out to avoid it. Obamacare, on the other hand, has a mandate to buy government-dictated health insurance: If it withstands legal challenges, you will not be able to turn it down by getting a note from your parents!

So what else can Governor Perry say about Gardasil?

First, he need not retreat from his position that Gardasil is good medicine. As Henry I. Miller writes, it has an outstanding reward/risk ratio.  However, conservatives know that the greater threat in a democracy comes from politicians who intend to do good things to us, rather than those who intend to do bad things to us.

So, he needs to recant the executive order in toto, not just the opting-out provision. HPV may be described as an “epidemic” but it is not communicable in normal social situations. There was no emergency — hurricane, flood, or swine flu — that demanded immediate action. If Governor Perry really thought that the vaccinations would have been good policy, he should have found a sponsor in the legislature and had it debated and voted on there. He should tell us that the blow-back has reminded him of the importance of separation of powers in our democracy.

Finally, he should remind us (once again) of the Tenth Amendment. While Texas might have the power to implement such a policy, he should declare that he sees no such power delegated to any branch of the federal government. Thus, it is not a relevant topic for his presidential campaign.
 

Fourth Circuit Doesn’t Rule on Obamacare’s Constitutionality



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The Fourth Circuit Court of Appeals said today that Virginia has no standing to challenge Obamacare’s individual mandate. In a second ruling issued at the same time, the Richmond court also said that Liberty University can’t challenge the law before the mandate goes into effect in 2014.

The latest rulings focused only on judicial procedure and not on the merits of the law, leaving a split decision between the Sixth and Eleventh circuits on the actual constitutionality of the individual mandate. (The Sixth Circuit in Michigan said the individual mandate can stand because it is important to the overall working of the law. The Eleventh Circuit — in which 26 states are challenging the law – disagreed and said the individual mandate is not only unconstitutional but “is breathtaking in its expansive scope.”)

In today’s ruling, the Fourth Circuit appeals court did not address the question of the constitutionality of the individual mandate: “Because we hold that Virginia lacks standing, we cannot reach the question of whether the Constitution authorizes Congress to enact the individual mandate,” the judges wrote. There was no dissenting opinion.

This is not a victory for the Obama administration. But neither does it help those opposed to the law.

In the barrage of cases against the unpopular health-overhaul law, the Eleventh Circuit decision in mid-August on the 26-state challenge from Florida was the most significant court ruling to date, with the panel saying the mandate is unconstitutional — a defeat for the Obama administration. The White House is weighing whether to request an en banc decision by all of the Eleventh Circuit judges in an effort to delay a U.S. Supreme Court hearing in the coming term.

Rather than basing their challenge on a state statute, as Virginia did, the 26 states base their argument on the individual mandate’s unconstitutionality as an unprecedented expansion of the federal government’s authority under the Commerce Clause.

In today’s ruling, the Fourth Circuit judges threw out the elegantly decided ruling in the Virginia case delivered last year by U.S. District Court Judge Henry E. Hudson, who decided that Congress exceeded its constitutional authority to regulate interstate commerce by compelling people “to involuntarily engage in a private commercial transaction.” Judge Hudson did not strike down the whole law but determined that the individual mandate and associated provisions could be declared unconstitutional – severing the “problematic portions while leaving the remainder intact.”

The Fourth Circuit did not address the merits, writing: “Article III of the Constitution confers on federal courts the power to resolve only ‘cases’ and ‘controversies.’ Specifically, a plaintiff must demonstrate that: (1) it has ‘suffered an injury in fact’; (2) there exists a ‘causal connection between the injury and the conduct complained of’; and (3) a favorable judicial ruling will ‘likely’ redress that injury.”

The court wrote: “Only if Virginia meets the burden of establishing standing does the Constitution permit a federal court to address the merits of the arguments presented. . . . Standing here turns on whether Virginia has suffered the necessary ‘injury in fact.’”

The court found that it did not, concluding “the individual mandate does not directly burden Virginia” and that it “does not threaten Virginia’s sovereign territory.”

Virginia attorney general Ken Cuccinelli had argued that his state has standing solely because the federal health law conflicts with a state law protecting its citizens from Obamacare’s individual mandate, litigating on behalf of the rights of its citizens. The court disagreed: “When a state brings a suit seeking to protect individuals from a federal statute, it usurps this sovereign prerogative of the federal government and threatens the ‘general supremacy of federal law.’”

It continued: “Given this fact, the [Virginia statue] merely declares, without legal effect, that the federal government cannot apply insurance mandates to Virginia’s citizens. This non-binding declaration does not create any genuine conflict with the individual mandate, and thus creates no sovereign interest capable of producing injury-in-fact. . . . Given this fact, Virginia lacks the ‘personal stake’ in this case essential to ‘assure that concrete adverseness which sharpens the presentation of issues.’”

The battles now move one step closer to the U.S. Supreme Court.

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‘Breathakingly Expansive’



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The Eleventh Circuit decision this month was the most significant court ruling to date in the constitutional challenges to Obamacare, and it virtually assures a U.S. Supreme Court hearing, most likely in the coming term. The Eleventh Circuit court was very blunt in saying that the individual mandate is not only unconstitutional but “is breathtaking in its expansive scope.”

This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives.

Earlier, a Sixth Circuit Appeals court ruled in a separate challenge that the mandate is constitutional. Several more cases are pending, but the split in the two appeals court decisions tees it up for resolution by the Supreme Court.

The overriding question is whether Congress can continue to expand its economic and regulatory power under the Commerce Clause of the Constitution or whether it’s finally time for someone to say, “Stop!” The Eleventh Circuit chose the latter:

There is no reason why Congress could not similarly compel Americans to insure against any number of unforeseeable but serious risks.

. . . Individuals subjected to this economic mandate have not made a voluntary choice to enter the stream of commerce, but instead are having that choice imposed upon them by the federal government…we are unable to conceive of any product whose purchase Congress could not mandate under this line of argument.

. . . What Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.

If the individual mandate is upheld, the next step surely will be requiring that we all purchase Obamacare’s long-term care insurance, especially since HHS secretary Kathleen Sebelius has acknowledged that program is “totally unsustainable” now.

The court said it could find no precedent for a mandate on individuals to purchase government-approved health insurance:

Few powers, if any, could be more attractive to Congress than compelling the purchase of certain products…[But even] in the face of a Great Depression, a World War, a Cold War, recessions, oil shocks, inflation, and unemployment, Congress never sought to require the purchase of wheat or war bonds, force a higher savings rate or greater consumption of American goods, or require every American to purchase a more fuel efficient vehicle. . . .

The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life. This theory affords no limiting principles in which to confine Congress’s enumerated power.

And the court didn’t buy the government’s argument that the mandate is constitutional because Congress needs it for other provisions in the law to work.

It simply will not suffice to say that, because Congress has regulated broadly in a field, it may regulate in any fashion it pleases.

The court took several shots at the legislation itself, including the weak penalties for not buying insurance:

Congress has hamstrung its own efforts to ensure compliance with the mandate by opting for toothless enforcement mechanisms.

And the court made it very clear that it finds the law enormously complex.

To know whether a legislative act is constitutional … our task is to figure out what this sweeping and comprehensive Act actually says and does.

The 304-page decision devotes a total of 35 pages to describing what Obamacare does — no small feat.

The administration disagrees, of course, with the Eleventh Circuit’s finding that the individual mandate is unconstitutional, but the court’s extraordinarily detailed and thorough decision, drawing on dozens of prior Supreme Court cases, raises a very high bar. If the individual mandate ultimately is ruled unconstitutional, the center pole in the tent of the monstrous law collapses, setting up a challenge for Congress and the voters to repeal and replace it with more sensible reform.

Former Obama Adviser Warns of the Perils of Price Controls



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Former Obama White House adviser Dr. Ezekiel Emanuel wrote a surprising op-ed last week in the Sunday New York Times on the growing shortage of generic cancer drugs — 14 of 34 generic cancer drugs, he points out, are in short supply. The surprise came when Dr. Emanuel, an advocate for drug-price controls, actually suggested that Medicare should pay higher prices for generic drugs. He argues that the higher rates would increase profits and attract more generic producers.

Unfortunately, Emanuel also sets up a false dichotomy between cheap generic drugs that cure a range of cancers and newer, branded drugs that may cost tens of thousands of dollars per patient, but “just extend life for a few months.” Emanuel takes a cheap shot against branded drugs, since he neglects to mention that every generic drug was once an expensive branded medicine. And while many pediatric cancers (and some adult cancers, like testicular cancer) can respond very well to older medicines, companies are now targeting much harder-to-treat cancers, including metastatic colon, lung, and prostate cancer.

Some newer cancer drugs may, on average, only extend life for a few months at high cost, but this is a function of the scientific complexity of cancer treatment and the costs involved in developing cancer drugs for FDA approval. Even so, more cancer drugs are coming to market that are tailored to attack specific genetic abnormalities of cancer cells, allowing physicians to tailor drug treatments to the patients most likely to benefit — and producing much higher response rates.

And, like their older cousins, today’s expensive cancer drugs will eventually lose patent protection and become cheap generics.

Emanuel also oversimplifies the problem, suggesting that pricing is the only issue driving the current shortage of generic cancer drugs. But, for instance, pediatric cancer drugs aren’t covered by Medicare, and thus aren’t subject to Medicare’s cap on drug price increases for Medicare Part B. Many other types of drugs, including anesthetics, are also in short supply.

For current producers, technical and regulatory issues are more likely to affect supply than price alone. This is borne out by the data, since many drug shortages involve generics called sterile injectables, which are complex and expensive to manufacture. If one or more manufacturers have their manufacturing line temporarily shut down by the FDA due to regulatory violations, or if there’s a spike in demand, it can be very difficult and time-consuming for other companies to quickly compensate by ramping up production.

And, as companies chase the lowest-cost suppliers of active pharmaceutical ingredients (API), they’re increasingly relying on Chinese firms, which can have their own serious quality control problems (e.g., contaminated heparin). 

Keep reading this post . . .

The Mandate Today



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The Eleventh Circuit upheld the district court’s ruling that the individual mandate is void. The most immediate impact of this ruling may therefore be that it prevents the 26 plaintiff states from implementing, and the federal government from implementing with regard to those states, any aspect of the individual mandate — “essential benefits” regulation, mandate penalties, regs regarding reporting health insurance status to the IRS, etc. 

States that are implementing Obamacare should stop implementing all parts of the law, but it is now unlawful for those 26 plaintiff states to implement portions of the law dedicated to defining or enforcing the mandate. 

Tyrannis delenda est.

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Don’t Forget About the FDA



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After Obamacare and entitlement reform, FDA reform should be the #2 priority for market-oriented health-care reformers. Like it or not, it’s the gatekeeper for every new drug and device marketed in the U.S., and it’s a big reason why it takes over a decade and hundreds of millions of dollars to bring a single new drug to market. Getting innovative new products through the FDA’s development and approval process faster and less expensively would improve public health and help lower health-care costs.  

For the next year, FDA reform will be up for grabs. Every five years, Congress reauthorizes a critical piece of FDA legislation: the reauthorization of the Prescription Drug User Fee Act (PDUFA), a “must-pass” piece of legislation that offers a real opportunity to rethink how the agency does business. The next reauthorization is due in 2012.

One FDA reform that should be at the top of Congress’s list is the agency’s inability to fill its advisory committees with the most qualified experts due to overly stringent conflict-of-interest regulations. Today, nearly one in four advisory committee seats (23 percent) are vacant, over double the FDA’s target rate of 10 percent.  At the FDA’s Center for Biologics Evaluation and Research (CBER), the vacancy rate is a stunning 38 percent.  

The problem has gotten to the point where the agency’s senior leadership is talking about it in public. At a recent conference, Dr. Janet Woodcock said that “there is no doubt it is difficult finding highly experienced people who do not have conflicts” to serve on the agency’s advisory committees.

In the wake of the Vioxx scandal, Congress set a cap on the number of conflict-of-interest waivers the FDA could grant for its committees, under the assumption that researchers who worked with industry were inherently biased and couldn’t be trusted to review new products objectively. 

The only trouble with this argument is that there’s no real evidence to support it. 

A 2006 study by Public Citizen in JAMA reviewed four years of voting patterns from 200 meetings of 16 FDA advisory committees. While finding that nearly 30 percent of voting members had “conflicts,” the study also found that if all the votes by all the conflicted members were removed, not a single committee recommendation would have changed.

The FDA re-analyzed the same data and found if the definition of a “conflict” was expanded to include a committee members’ purported financial interest in a competitor’s product, voting patterns actually tended to go against the panelists’ interests. 

The late Jack Calfee, from the American Enterprise Institute, offered a simple but powerful explanation for why elite researchers wouldn’t be beholden to companies they consulted for:

. . . in the researchers’ world the dominant coinage is reputation among peers, from which all else flows.  Committee members’ must know that if they vote more consistently with their short term financial interests than with their take on the science, their famously prickly colleagues will catch on.  That would mean impaired professional relationships and eventually a distressing erosion in awards, prestige, and even income. 

There is no doubt that the most qualified scientific experts often consult with industry. A study the FDA commissioned in 2007 found that members of the standing committees who were granted waivers had higher “overall measures of expertise” than committee members who weren’t granted waivers.  It also found that the median value of financial interests who were granted waivers was relatively modest, $14,500. 

The study concluded that while it may be possible to find experts with “few or no conflicts of interest,” the search would be difficult, and many candidates would still require waivers. Perhaps this explains why so many committee seats are still vacant, and why recusals from FDA advisory committee meetings have led to meeting cancellations and even delays in application approvals. 

Transparency is important, and members serving on FDA’s advisory committees should disclose their industry sponsored research or consulting. But if the FDA ensures that its committees are balanced and represent the most highly qualified experts in their respective fields, there’s no reason why industry consultants shouldn’t offer the agency advice — which, after all, the agency can ignore.   

Otherwise, the agency’s current conflict-of-interest policy will keep the FDA from getting the best scientific advice — and keep patients waiting longer for innovative new therapies.

How Does Rick Perry Stack Up to Mitt Romney on Health Care?



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Rick Perry, upon entering the presidential race, immediately becomes a top challenger to front-runner Mitt Romney. Romney is well known in these parts for his track record on health care as governor of Massachusetts. But what about Perry? How does Perry’s nearly eleven years in the Texas Governor’s Mansion stack up on health-care matters?

Motivated by this question, I compiled a Texas vs. Massachusetts almanac of health statistics over at my Forbes blog, chock full of charts and graphs. And the figures are interesting:

If you’re the type who likes to read the end of a book first, you might ask, “Okay, Avik, what’s the bottom line?” The answer will, in part, depend on what you think is important in health care policy. If you’re most concerned about runaway government spending, Perry is the clear winner. If the rising cost of health insurance is your primary worry, Perry wins there too. On the other hand, if universal coverage is your bailiwick, Romney comes out far ahead.

Texas spends just 5.1 percent of its budget on Medicaid, compared to 28.9 percent for Massachusetts. (The national average is 15.7 percent.) And that doesn’t count what the Bay State spends on Romneycare’s health exchange subsidies.

Most impressively, from 2003 to 2009, the average health-insurance premium grew in Texas by 4.0 percent for an individual plan per year and 4.6 percent for a family plan, below the national average of 5.0 percent and 5.9 percent, respectively, and far below Massachusetts’ 7.1 percent and 6.9 percent.

This different in premium growth is at least partially driven by the two governors’ different approaches to health reform. Romney’s plan subsidized the demand for additional health spending, without expanding the supply of doctors and hospitals, driving prices up. Perry’s signature achievement — convincing Texas voters to pass a referendum capping non-economic medical malpractice damages — has helped the Lone Star State buck national cost trends, and attracted hordes of doctors to the state.

Romney fans, on the other hand, can point to the state’s very low proportion of residents lacking health insurance: 4.4 percent in 2009, compared to 26.1 percent for Texas; the national average in that year was 16.7 percent.

However, contrary to Romney’s argument (repeated at last night’s debate) that his plan would solve overuse of emergency rooms by “free riders,” ER usage in Massachusetts is above the national average, at 473 visits per 1,000 residents in 2009, compared to the national average of 415, and Texas at 381.

What these two governors did or didn’t do at the state level is just one aspect of things, of course. What matters even more is how they plan to tackle our health-care entitlements at the federal level. We’ll have to see if past is prologue.

— Avik Roy is an equity research analyst at Monness, Crespi, Hardt & Co., and blogs on health-care policy at The Apothecary. You can follow him on Twitter at @aviksaroy.

Required Reading.



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Health care and education aren’t exactly the darling issues of conservatism.  Taxes, defense, and crime are probably the “Big Three”.  This isn’t to say that conservative policy wonks aren’t doing great work on education and health care, but that aspiring young conservatives are much more likely to immerse themselves in the nuances of defense spending than Medicare Part A.

Arnold Kling and Nich Schulz argue persuasively in the current issue of National Affairs that this has to change, and that conservatives need to immerse themselves in the details of health care and education spending if they want to have any hope of controlling the future growth of government.

They start with a simple observation: if you want to know what the “commanding heights” of the U.S. economy are today, take a look at what consumers are actually spending their money on.  By this measure, education and health care are “our foremost growth sectors – the ones most central to employment and consumption”.  They are also the two sectors that are most subject to government intervention and planning - both on the demand side (through enormous tax expenditures that encourage consumption) and supply side (through extensive state and federal regulation). 

We’ve known for a long time that the U.S. has shifted from a manufacturing economy to a service sector economy.  What isn’t as well recognized is how much of this shift is dominated by health care and education.  Kling and Schulz cite research showing that health care alone was responsible for nearly 1 out of every 4 new jobs during the last two decades.  Government was second, with 15% of new jobs, with nearly three quarters of this represention education.

Over the last 10 years, government, education, and health care spending increased by 16%, with employment outside these sectors decreasing.  Michael Mandel, an economist at the Progressive Policy Institute, writes that “health and education (public and private) account for an amazing 75% of real wage and salary gains” over that period.

This isn’t necessarily a bad thing, in and of itself.  There isn’t anything wrong with consumers deciding that trading more income for better health, or investing in additional years of education. 

The problem is that it is extraordinarily difficult to mesure productivity in health care and education, and both sectors have been highly resistant to technology driven efficiency gains that have transformed almost every other sector of the econmoy.

In a podcast interview with Arnold Kling recently, he put it this way: the U.S. manufacturing sector is almost unrecognizable compared to what it was a century ago.  But if a teacher from 1900 walked into a modern classroom today, if would seem extraordinarily familiar and very little has changed. This is because education and health care involve more individual judgment and decision making that “are not as easily handed over to machines or outsourced to low-skilled workers abroad.”

Government exacerbates this fundmental problem by increasing demand for services through subsidies and through regulations that shielf workers in these sectors from competition.  How inefficient are they?  Studies from RAND and Dartmouth suggest that much of U.S. medical spending does not result in improved patient health.  The same goes for education: despite spending 40% more per student than other OECD countries,  U.S. students rank far below the average in reading, science and math skills.

In short, government policy both encourages spending in less efficient industries, and shields providers in those industry from competition through licensing requirements (for teachers and health care providers) that reduce competition from lower-cost or higher quality providers (charter schools, retail clinics, etc.). 

Kling and Schulz go beyond the basic observation that entitlement spending is on course to wreck the U.S. budget.  More importantly, government control of these sectors creates massive inefficiencies that shift spending from potentially more productive sectors of the economy into health care and education.  And the stakeholders – hospitals, nursing homes, teachers’ unions – in these sectors are critically dependent on additional government spending are powerfully motivated to defend their position on the “commanding heights” and fight off market-oriented reforms. 

What to do about it?  Kling and Schulz don’t spend much time talking about reforms, other than to advocate for more market-based options and paring back licensing requirements that would encourage “on job learning” in lieu of expensive diplomas.  They also note that conservatives have been late to realize importance of health care and entitlement spending.  Whether they are too late is another question.

 

 

 

 

 

    

 

 

 

 

    

  

The Goldilocks problem: How to get generic drug prices “just right”?



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Former Obama White House advisor Dr. Ezekiel Emanuel had an interesting op-ed in the Sunday New York Times - interesting because Dr. Emanuel, an advocate for drug price controls, actually suggests Medicare should pay higher prices to remedy a growing shortage of generic cancer drugs.

Emanuel addresses a real, and growing problem of generic drug shortages, particularly for cancer patients, with 14 of 34 generic cancer drugs on the market today in short supply.

Unfortunately, Emanuel also sets up a false dichotomy between cheap generic drugs, which “cure cancer” and newer, branded drugs that may cost tens of thousands of dollars per patient, but “just extend life for a few months.  He bemoans the fact that ”only the older but curative drugs – drugs that can cost as little as $3 per dose – have become unavailable.”

Emanuel’s slap against branded drugs is a cheap shot.  He neglects to mention that every cheap generic drug was once an expensive branded medicine. And while many pediatric cancers (and some adult cancers, like testicular cancer) can respond very well to older medicines, companies are now targeting the remaining and much harder to treat cancers, including metastatic colon, lung, and prostate cancer. 

And while some newer cancer drugs may – on average – only extend life for a few months at high cost, this is more function of the scientific complexity and high cost involved in developing cancer drugs for FDA approval.  Even so, more cancer drugs are coming to market that are tailored to attack specific genetic abnormalites of cancer cells, allowing physicians to tailor drug treatments to the patients most likely to benefit – producing much higher response rates.  Finally, like their older cousins, today’s expensive cancer drugs will eventually lose patent protection and become cheap generics (as Gleevec will in 2015). 

Emanuel also seems to suggest that pricing is the only issue driving current generic drug shortages:   

If the laws of supply and demand were working properly, a drug shortage would cause a price rise that would induce other manufacturers to fill the gap.  But such laws do not realy apply to cancer drugs….[because] cancer patients do not buy chemotherapy drugs from their local pharmacies the way they buy asthma inhalers or insulin.  Instead, it is their oncologists who buy the drugs, administer them and then bill Medicare and insurance companies for the costs.

Medicare certainly suffers from a “Goldilocks” problem common to all price control schemes – after paying too much for oncology drugs administered by physicians under Part B, Medicare switched to a different formula, which prevented manufacturers from quickly increasing a drug’s price in the event of a drug shortage. 

But generic drug shortages are also most likely to affect drugs called sterile injectibles, which are complex and expensive to manufacture.  After a drug goes generic, competition is likely to winnow the field to the lowest cost manufacturers, which a boon for payers (like Medicare).  But is also means that if one or more manufacturers experiences supply problems, or there’s a spike in demand or a quality problems with raw ingredients, it can be very difficult and time consuming for companies to ompensate by ramping up production. 

Finally, as companies chase the lowest cost suppliers, they’re increasingly relying on Chinese firms, which have their own serious quality control problems. The FDA needs more money and manpower to ramp up inspections of foreign producers, but they can’t do it all alone. Chinese regulators will have to pick of the slack if they want to continue to supply products for the global market. 

Increasing generic drug prices will help with some of these problems – including keeping more reputable and predictable companies in generic drug markets.  But there are not fast, easy fixes.

One “radical” suggestion that Emanuel makes isn’t a radical solution at all, which is to transfer generic cancer drugs out of Part B and into Part D, for payment by private insurers.  “That way,” Emanuel concludes, “prices can better reflect the market, and market incentives can work to prevent shortages.” 

This isn’t a radical solution at all, and it has worked well for Part D since 2006 – while producing affordable drug coverage for seniors at about 40% less than original government estimates.  What is radical is having Dr. Emanuel endorse the Part D model at all.

Ballot Initiative Would Repeal RomneyCare’s Individual Mandate



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This week, a grassroots organization in Massachusetts announced plans to launch a ballot initiative to repeal the state’s individual mandate to purchase health insurance. Massachusetts Citizens for Life is primarily concerned about how the growing cost of health care in the state will lead to rationing and denial of care. But it sees repeal of the individual mandate as the key ingredient for an eventual dismantling of the state’s landmark 2006 health-care law.

The law’s defenders point to its role in increasing insurance coverage in the state to record levels (though it is still not universal). But the other side of the balance sheet reveals that an overwhelming number of these newly insured are heavily subsidized through an expanded Medicaid program and a highly regulated “Connector” to coverage for individuals in households earning up to three times the federal poverty level. Meanwhile, other private insurance premiums (particularly for small businesses) continue to rise, in part due to the new law, and Massachusetts remains the “leader” among states in its high overall health-care costs. Unsubsidized Connector coverage for small businesses and other middle-income individuals has found few takers.  

Political promises that the new law would reduce use of overcrowded hospital emergency rooms were overstated. Emergency room visits actually increased over 7 percent from 2006 to 2009. Timely access to primary care remains difficult as a subsidized surge in demand outstrips supply.

Although the higher costs have put some pressure on the state’s own budget, most of them are hidden because they were shifted to federal taxpayers as part of a Medicaid waiver, according to a recent study by the Beacon Hill Institute.

All of the above reflects the calculated political strategy behind the 2006 law: to rapidly increase coverage first and only worry about higher costs years later. Some belated efforts to impose top-down price controls on insurers and providers in the state have mostly floundered thus far.

Apart from touting the initial coverage gains under the new law and recycling anecdotes of how it provided life-saving access to care, the program’s advocates insist that it remains highly popular. Indeed, a Harvard School of Public Health poll earlier this spring reported 63 percent support for the 2006 law (up 10 percent over the last two years). However, support for the individual mandate remains more shaky, with 44 percent opposed (up from 35 percent in a similar2008 poll). And 47 percent of state residents say that the Massachusetts health law should not have been used as a national model (versus 43 percent who like telling the rest of the country what to do).

Will the new effort to roll back the state’s landmark law succeed? Massachusetts voters admittedly have a greater taste for high taxes, more government spending, and overregulated health-care markets than voters in other states (see McGovern 1972; Dukakis 1988; and Kerry 2004). But the proposed ballot initiative would be the people’s first chance to vote on what their politicians and closely linked interest groups delivered five years ago. By targeting the more vulnerable individual mandate, it could unravel the larger ball of yarn.

There is recent precedent for the threat of ballot initiatives to drive political change in Massachusetts. Strong grassroots efforts led to tentative approval of a different one in 2004 to add a right to “comprehensive, affordable, and equitably financed health insurance coverage” to the state constitution, and the possibility that a similar measure to impose a payroll tax on employers in 2006 might succeed added to the political pressure to finally enact the current Massachusetts health law instead.

The actual wording of the proposed ballot initiative first must be certified by state attorney general Martha Coakley before Massachusetts Citizens for Life can begin to gather the almost-60,000 signatures needed to get it on the 2012 ballot. Funny that it should be Martha Coakley — she has some first-hand experience with unexpected grassroots opposition to a new health-care law upending the plans of the state’s political establishment.

— Tom Miller is a coauthor of Why Obamacare Is Wrong for America (HarperCollins 2011). 

Three Ideas for Winning the Next Battle Over Entitlement Reform



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The debt reduction deal, such as it is, is now in place, with the harder work of entitlement reform kicked a bit further down the road — really, into the 2012 election season. With that in mind, here are three ideas conservatives and moderates should consider for linking health-care reform, entitlement reform, and economic growth — because reforms that lower the cost of health care will make entitlement reform easier, and medical innovation will improve patient health and drive job creation. 

1. Find ways to pay Medicare recipients to use more cost-effective providers and services. The principle works relatively well in Medicare Part D and (until recently) the FEHBP. If seniors can share in the financial gain of choosing less expensive prescription-drug plans and health-insurance plans, Medicare should be able to find a way to similarly share the savings when seniors use more efficient providers and services. Peter Suderman talks about the perils and pitfalls of this approach in a recent article for Reason magazine, but Safeway and Whole Foods represent other good models to build on. Combined with House Budget chairman Paul Ryan’s premium-support model, this approach would not only reduce Medicare spending but force providers to compete by becoming more efficient. 

2. Incentivize innovations that lower costs, as well as create jobs in the biotech and medical-device sectors. America is a global leader in medical innovation, but regulators are throwing up more roadblocks to bringing new drugs and devices to market, while Obamacare’s Independent Payment Advisory Board threatens to slash reimbursements for innovative new therapies for diseases like Alzheimer’s and Parkinson’s. There’s bipartisan support for killing IPAB, but we should also focus on reforms that reduce the time and cost required to bring new products to market through the FDA, as well as rewarding companies that develop “disruptive medical innovations” — like giving patent or data exclusivity extensions to drug makers who bring new medicines to market with diagnostic tools that identify patients who are most likely to benefit. This will energize a productive U.S. industry, and pay dividends by making the health-care system more efficient. 

3. Deregulate, deregulate, deregulate. Health-care competition is strangled by a mass of regulations that create barriers to lower-cost innovative providers competing with expensive entrenched incumbents. Hospitals have blocked competition from physician-owned hospitals, while certificate of need regulations and other provider certification rules prevent other low cost providers (like nurse practitioners) or retail clinics from offering a wider range of low cost services to consumers. Some enterprising governor should work with providers and insurers to create a “health-care entrepreneurs zone” that would suspend as many of these regulations as possible in return for allowing innovative health-care business models and entrepreneurs to come online and succeed or fail on their own merits.  In return, they’d promise to provide transparency on prices and outcomes, creating a true laboratory for rapid experimentation and innovation in a system that is currently hamstrung with red tape. 

These are three ideas that seize the moral high ground in our national health-care debates by promoting patient-centered health-care reforms; accelerating the creation of life-saving medical innovations (and high-paying jobs); and encouraging competition that drives real delivery system reforms from the bottom up. 

A Health Spending Crisis



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House Republicans will be blamed if a deal isn’t reached on the debt ceiling, and they will be held responsible for the fallout. The White House is looking for every opportunity to blame someone else for the miserable economy — including today’s economic numbers showing we are dangerously close to another recession.

Speaker Boehner recognizes this risk more than anyone, and he is doing everything he can to put together a bill that will get to 218 votes.

The debt crisis is a health spending crisis, plain and simple, and real change will take much longer. Government spending on health-care entitlements will bankrupt this nation unless we reform these programs. And Obamacare’s new entitlement programs will make the problems much, much worse.

We must take the long view and know that the American people want to have confidence that their leaders can govern. Passing the debt ceiling bill in the House will provide that confidence so that conservatives can continue the real work of scaling back government and providing the climate for a prosperous economic future.

Jobs Gone to Obamacare



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The conclusion is inescapable that Obamacare is killing job creation and smothering the recovery, and now the Heritage Foundation’s James Sherk has produced a study that clearly shows the correlation.

He compared job growth before and after the health overhaul law passed in March of 2010 and finds that it basically flatlined after the law was signed.

Before Obamacare passed, the number of new jobs was soaring. Private-sector job creation had improved by an average of nearly 68,000 a month in the 15 months before April 2010. But in the 15 months since then, it has slowed to an average of 6,500 a month, a ten-fold drop.

Sherk points out in his paper that “correlation cannot prove causation.” But he says the evidence “does lend strong weight to the voices of business who say that the law is preventing hiring.”

He quotes Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, as saying that “the lack of clarity about the cost implications of the recent health care legislation” is a prominent factor in the sluggish recovery.

“We’ve frequently heard strong comments to the effect of ‘my company won’t hire a single additional worker until we know what health insurance costs are going to be,’” the Fed president said.

When Speaker Boehner asks, “Where are the jobs?” the answer is increasingly clear.

And the week brought more news about Obamacare’s problems. The Hill carried an important report about a new “glitch” that has been uncovered in the health law — one that could mean a trillion-dollar underestimate of the law’s true cost.

Under the law, employees can obtain subsidized health insurance if their employer plan is “unaffordable,” meaning that it costs more than 9.5 percent of their income.

Let’s take a worker who has been getting a family health plan through her job. Apparently when congressional scorekeepers analyzed the bill before it passed last year, they decided that if the health insurance plan the employer was offering for an individual was affordable to the worker, the worker wouldn’t be eligible for subsidies in the exchange. But what if the family plan the employer offered cost 20 percent of the worker’s salary? Too bad. The scorekeepers assumed she wouldn’t be eligible for subsidies but would still stay with the employer plan.

The decision clearly was crucial to keeping the price tag of the total bill under the president’s $1 trillion limit, but liberal advocates now are worried about the impact. One admitted, “We’re going to have middle-class families extremely unhappy with health reform in 2014, because they’ll basically be facing financial penalties for not buying coverage when they don’t have access to any affordable options.”

The “glitch” explains the previously puzzling CBO estimate that only 9 to 10 million people who currently get health insurance at work would be switched to government-subsidized insurance in the exchanges. The (fictional) cost of Obamacare could be kept under $1 trillion as long as they didn’t count all the people who would really go into the exchanges.

But if employers drop coverage completely, pay the federal fine, and send their employees to the exchanges, then their employees will be eligible for subsidized coverage. In a study last year, former CBO director Douglas Holtz-Eakin, now president of the American Action Forum, says that as many as 35 million more people will flood into the exchanges, driving up the cost of Obamacare by $1 trillion or more.

So we have a trillion-dollar “glitch” in Obamacare’s cost. The law piles trillions more debt obligations on top of the mountain of debt we already have. It is absolutely imperative that the law be repealed if we are to have even a remote hope of getting government spending under control.

Sebelius in the Hot Seat over IPAB



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Tempers are flaring in Washington’s sweltering July heat over the looming government default. The debate is also heating up over one of the scariest parts of Obamacare: the powerful, unelected, 15-member Medicare payment board.

Health Secretary Kathleen Sebelius testified before two hearings in one week about the controversial Independent Payment Advisory Board (IPAB). She did everything she could to downplay its powers, insisting it is only a “stopgap” and won’t be needed if Congress does its job in cutting Medicare payments to meet strict targets.

See Exhibit A, the current budget battles in Washington, as a predictor of whether or not Congress could get that done.

Opposition to IPAB runs deep. Rep. Frank Pallone (D., N.J.), the top Democrat on the Energy and Commerce Health Subcommittee, said he has no interest in defending the board. “I’ve never supported it, and I would certainly be in favor of abolishing it,” he said.

Few Democrats are willing to defend IPAB, and some are working hard to repeal it, including Rep. Allyson Schwartz of Pennsylvania who has co-sponsored repeal legislation with Rep. Phil Roe (R., Tenn.).

IPAB symbolizes everything that is wrong with Obamacare — taking power away from doctors and patients and putting it in the hands of elite experts who have virtually no accountability to voters.

Under current law, Medicare is on track to pay doctors less than a third of what private health insurers pay. IPAB could make even deeper cuts to keep spending within Obamacare’s fixed budget, and President Obama has called for the board to cut Medicare further to help with deficit reduction. 

During the House Budget Committee hearing, Chairman Paul Ryan challenged Secretary Sebelius to explain how doctors and hospitals will be able to provide services if Medicare payments are cut so deeply that they don’t even cover doctors’ costs.

Secretary Sebelius — who was literally in the hot seat as she testified in the hearing room that reached 90 degrees — avoided the question and, instead, offered utopian promises about the incredible cost savings and efficiency gains that will come from government-directed and regulated programs. 

And she worked hard to deflect attention from IPAB with inaccurate charges about the Ryan Medicare plan. Not a good idea with Ryan sitting right there. The congressman was well able to explain the need for competition, choice, and modernization of Medicare’s financing, which his premium support plan would create.

The Energy and Commerce Health Subcommittee, chaired by Rep. Joe Pitts (R., Pa.), also invited Secretary Sebelius to the witnesschair.

She continued to downplay IPAB and insist that the health-care law will do what never has been done before: Regulate the health sector into efficiency. And she continued to deflect the focus from IPAB by criticizing and mischaracterizing the Ryan plan.

It is astonishing that she has the gall to do that when she is presiding over Obamacare, which takes $575 billion out of Medicare to create two shockingly expensive new entitlement programs, and creates the all-powerful IPAB, which will quickly dry up access to care for seniors.

At another Budget Committeehearing on the topic, Rep. Tom Price (R., Ga.), a physician, asked chief Medicare actuary Rick Foster what the impact would be of deeper cuts in payments for Medicare services.

“We’d like not to find out,” Foster replied, stressing that “the potential access problems could be very serious.”

The health-overhaul law calls for cuts in payments to Medicare providers that will mean they fall below current payment rates for Medicaid. “We see with the Medicaid program, of course, in some states the payment rates — particularly for physicians — are quite low and the access to care is quite low,” Foster said.

Under current law, Foster predicts many Medicare providers will go bankrupt. He says more than 40 percent of them eventually would end up “shifting to negative profit margins” – i.e., losing money — and will either go out of business or stop seeing Medicare patients altogether.

And IPAB will be charged with cutting payments even more than Obamacare does in order to reach ever-declining statutory targets. Unless Congress can muster super-majority votes to come up with its own cuts to reach the same targets, the dictates of these unelected technocrats will carry the force of law.

I testified before the Budget Committee’s IPAB hearing and warned that this unelected board will ultimately determine policies for spending hundreds of billions of dollars, impacting care for tens of millions of seniors, with no judicial, administrative, or – realistically — congressional intervention. This challenges the very principles of representative democracy and consent of the governed.

Doug Holtz-Eakin, former CBO director and current president of the American Action Forum, also testified that, “IPAB is fatally flawed, structured to punish innovative health-care providers and threaten seniors’ access to care. . . . It continues Washington’s obsession with price-fixing in Medicare’s separate silos rather than changing the incentives that have led to rampant overspending, fraud, and uneven care quality.”

Georgetown University professor Judith Feder was the third witness, cheering the health-care law and IPAB, and calling for Congress to expand its powers to direct all health-care payments. Feder stood alone in her enthusiastic defense of IPAB and later indicated that she hopes to serve on the board.

IPAB is ripe for repeal. “Many Democrats agree with Republicans that IPAB should be repealed,” said Rep. Pitts. “I hope that we can come together across the aisle and stop this unaccountable and possibly unconstitutional board from taking power away from the people’s representatives.”

Amen.

Tomorrow’s Crop of Medical Innovations Is in Jeopardy



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Seed corn is the best of the corn you keep in reserve to grow next year’s crop. Obviously, if you sell or eat everything you’ve got this year, you’ll have nothing to grow next year.

This is exactly the direction that we’re headed in with regards to medical innovation. Obamacare is the leading culprit at the moment, with massive new taxes on medical devices and pharmaceuticals. Medicare’s new Independent Payment Advisory Board (IPAB) is also slated to focus its cuts on just a fraction of Medicare spending — including payment rates for Medicare Part D and Medicare Advantage plans. The cuts will be extraordinarily difficult to overturn, and (because they have to be met year by year) will have to be very deep to meet spending targets. 

Any innovative (and thus expensive) new drug or device that comes to market for cancer or Alzheimer’s will, as former CBO director Douglas Holtz-Eakin and I discuss in a recent op-ed, come with an IPAB bullseye on its back, crippling incentives for companies to bring life-saving new medicines to market. The focus on reimbursement cuts continues Medicare’s perverse fee-for-service payment structure, and ignores the potential for bundling services – or using more innovative and effective treatments – to result in cost savings and improved health for seniors. (For another great overview of IPAB’s unintended consequences and options for reform, see Grace Marie-Turner’s analysis here.)

Current debt-reduction discussions appear to be going in the same kill-the-golden-goose direction, including implementing price controls for the Medicare Part D, or forcing Medicaid rebates on drugs used by dual eligibles (seniors who qualify for both Medicare and Medicaid coverage). Slashing the prices for today’s medicines will only ensure that we have fewer innovative treatments available tomorrow. 

It’s also ironic that while President Obama calls for a renewed focus on American innovation and competitiveness, he supports measures that will hamstring one of the few industries where the U.S. is the unquestioned global leader, and that provides hundreds of thousands of high-paying U.S. jobs

Health-care spending, particularly through entitlements like Medicare and Medicaid, needs to be brought under control. But it has to be done in a way that incentivizes both higher quality care and innovations that keep Americans healthier, longer. Slashing prices for medicines today won’t do anything to change the tsunami of health-care costs on the horizon from Alzheimer’s, cancer, and diabetes due to a rapidly aging population that is also, in many ways, unhealthy (e.g., overweight or obese). 

Debate about medical innovation was almost completely absent from the debate over Obamacare, and is nearly non-existent today. This is not only short sighted from a fiscal standpoint, but risks abdicating U.S. leadership of a vital global industry. Someone needs to think about ensuring biomedical innovation today - or it might be gone tomorrow

Obamacare a Factor in Bleak Jobs Report



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Creation of new jobs has hit a wall as employers created just 18,000 jobs last month, sending the unemployment rate to 9.2 percent. The numbers would have been even worse had so many Americans not simply given up looking for work.

I talked about this on Fox News this morning in the context of health care.

It is clear that the mandates in the health-care law are an important factor in depressing job creation. Small business is the engine for job growth in America, but a recent survey found that 70 percent of them have no plans to increase hiring in the next year.

There are many reasons they aren’t hiring: They don’t have enough customers to justify expansion, they can’t get credit from the banks, and they are uncertain about the future tax, regulatory, and economic climate. But the Obamacare mandates are a big factor:

— Some businesses are worried that hiring more workers would put them over the 50-employee limit and expose them to the expensive employer mandate.

— Small businesses that already have more than 50 workers worry about the cost of providing new government-mandated coverage for their workers or the fines they would have to pay if they don’t comply.

— Larger companies are doing everything they can to pare back on hiring and automate entry-level jobs to avoid the added cost of mandatory health insurance. McDonald’s is putting in electronic ordering kiosks, and CVS drug stores are putting in electronic checkout systems to replace live people, for example. Is it any wonder that youth unemployment is at an all-time high as these entry-level jobs vanish?

Unemployment is a tragedy. It weakens our country when people who are willing and want to work simply can’t find jobs. It weakens families because of the terrible pressures of financial stress. And it weakens our future, as young people can’t get the jobs to get their foot on the economic ladder and learn the skills they need to move up.

It’s not just the fear of Obamacare, of course. Tax policy must be reformed and modernized. Regulations must be lifted so businesses can focus on customers, not federal agents. And federal spending must be controlled to avoid the tsunami of red ink that threatens to destroy any chance of future prosperity.

We can do this. The American spirit is alive, and people want to work.

When I get discouraged, I go back to a conversation I had with my good friend, economic guru Art Laffer, when I spoke at one of his company’s seminars recently.

“This economy is ready to soar,” he said. But for that to happen, he said, we must lift the burdens of outdated and oppressive tax, regulatory, and trade policies.

Art is right. We believe in America. But politicians must undo the damage of decades of burdensome public policies so the people can turn this ship aright.

High-Priced Cancer Drugs: Are They Worth It?



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The New York Times ran an editorial Wednesday implicitly arguing that Medicare should consider withdrawing coverage for high-priced cancer drugs that have “modest” benefits, such as Avastin for metastatic breast cancer and Provenge for metastatic colon cancer. The Times makes the best possible case for rationing access to pricey cancer drugs, but the case ultimately falls short. Here’s their argument:

Many patients with advanced cancer must feel great relief after last week’s decisions by Medicare to pay for two drugs that provide limited medical benefits. For these patients, even a few more months of life is beyond price.

The unaddressed issue, however, is whether public and private insurance should continue to pay the staggeringly high cost — reaching $88,000 and $93,000 in some cases — for drugs that offer modest help to the typical patient. A prime driver of our escalating health care costs is the advance of medical technology and the understandable desire of patients and doctors to adopt the latest treatment. Sooner or later, as the nation struggles to contain health care spending, we may need to devise measures to determine whether very high-priced drugs provide enough medical benefit to warrant paying the bill.

Where to begin? High price tags make an easy target, but drug costs aren’t bankrupting the U.S. health-care system. They’re only about 11–12 percent of total health-care costs; total direct costs for oncology care were about $125 billion in 2011 (that’s all cancer costs, including drug costs). That’s a lot of money, but it’s not the lion’s share of the nation’s $2 trillion health-care tab.

Innovations in cancer treatment are also very valuable, because cancer is a disease that is rapidly fatal if it’s left untreated. A 2010 NBER paper found that from 1988 to 2000, life expectancy for all cancers increased by about four years, adding nearly $2 trillion in social value. Five-year survival rates for all cancers are now 66 percent, compared with 50 percent in the 1970s. Researchers have estimated that a reduction in cancer mortality of 1 percent would have a value of $500 billion; they estimated a complete cure would be worth a mind-boggling $50 trillion.

Pointing the finger at Provenge and Avastin ignores the tremendous strides that the U.S.’s commitment to market-driven cancer innovation has made possible. Early stage breast cancer now has more than a 90 percent five-year survival rate, in part thanks to new drugs like Herceptin. Testicular cancer, once a death sentence, is now eminently treatable (think Lance Armstrong). Gleevec has largely transformed CML (a type of leukemia) into a serious but manageable chronic illness, with even better drugs available to patients who can’t tolerate Gleevec. 

Provenge is an extraordinary new type of treatment that harnesses a patients own immune system to help fight metastatic prostate cancer that has stopped responding to hormone treatment. It is one of the very few treatments available for patients in this condition, and it actually extends survival, with minimal side effects. A four month survival benefit is only “modest” if you ignore the fact that almost nothing else works.

Avastin is a groundbreaking drug for several types of cancer. The problem is that it only appears to help a small fraction of patients with metastatic breast cancer, and no one knows — yet — how to identify those patients. But that is also largely true for many cancer drugs, which are used “off label” as doctors and patients desperately search for treatments that work.

Should we stop using these tools because they don’t work as well as we’d like? Or learn better how to use them? Given the choice, I think most Americans would prefer the latter option.

Markets are usually much better at incorporating new information than central government bureaucrats. Avastin’s use in metastatic breast cancer was already declining before the FDA’s advisory board last week voted to remove its indication for metastatic breast cancer. Doctors — sophisticated consumers — were already adapting their practices to the best medical evidence available before FDA firestorm began. Collecting and disseminating more information on “what works” is preferable to blanket policies that prevent experimentation and learning.

Cancer treatment is also shifting rapidly, and targeted treatments are the wave of the future. Companies know this and are rushing treatments to market that are matched to tumor variations present in individual patients. Hopefully, breast cancer patients who respond to Avastin may someday be identified using similar diagnostic tools. 

But what about the high cost of new cancer drugs? As a society, we often spend more on higher need populations — like AIDS or cancer patients — out of a recognition that their disease is extraordinarily deadly and disabling. High prices also drive rapid innovation in the field. Provenge and Avastin are good, but the “second generation” drugs developed using similar principles — harnessing the immune system, choking off tumors’ ability to use the body’s vascular system for nutrients — are likely to be more powerful because researchers will learn from earlier experience. 

Much of the high price of new cancer drugs is also attributable to the lengthy, risky, and expensive process for testing these drugs and submitting them for FDA approval. The FDA and Congress should be doing everything possible to streamline and accelerate cancer drug development to help bring those costs down. Cheaper and faster development will lead to more competition and likely lower prices.

Last but not least, many of today’s high priced cancer drugs — like Gleevec — will become cheap generics when they lose patent protection (as Gleevec will in 2015). In the interim, high prices fund new cancer research. 

These are all better options than endorsing blanket coverage decisions — which won’t produce what we all want, which is better treatments for cancer.

Obamacare Supporters Are Over-Interpreting Oregon Medicaid Study



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Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment. In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.

Fisman’s interpretation of the results is different from mine in mainly two respects.  First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”

A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money. Fisman writes:

Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?

That’s not what cost-effectiveness means. For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.

The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year). It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program. Nor does it tell us anything about the costs and benefits of alternative policies.

Just as some opponents of Obamacare over-interpreted previous Medicaid studies, Fisman and other Obamacare supporters are over-interpreting the OHIE.

Warnings That Don’t Work



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Diseased lungs. Corpses. Rotting teeth. A man smoking from a tracheotomy hole. These are some of the shocking images featured in the Food and Drug Administration’s recently unveiled series of cigarette package warnings. The FDA asserts that these graphic warnings will serve public health by terrifying smokers into quitting. Commissioner Margaret Hamburg boasts that “the FDA [is taking] a crucial step toward reducing the tremendous toll of illness and death caused by tobacco.” But will these labels work? Will the lurid imagery scare smokers into quitting?

Probably not.

First, the shock value of such warnings is likely to cause smokers to reject, not absorb, the message that smoking causes disease and premature death. Instead, they will tune out the message and do their best to ignore the images. Those in favor of the new labels insist that, now, tuning out such warnings will be difficult because the color images take up more than half the cigarette pack. However, when similar ads were introduced in Canada, smokers found them so disturbing that they purchased covers for their cigarette packs to block out the images — and then kept right on smoking.

Second, for habitual smokers, the decision to light up is not a rational, well-considered one: The nicotine in cigarettes is highly addictive, and smokers simply need that physical “hit.” In truth, the urge to have a smoke involves many behavioral and situational cues not at all addressed by the graphic warnings. These warnings will not address the power of that addiction; at best, they may prove a minor annoyance to the smoker.

Third, while shock value can, in some circumstances, help modify behavior, its impact is very short-lived. “The point of putting these pictures on is shock value — and [that] wears off very quickly,” notes Dr. Timothy Edgar, associate director of health communication at Emerson College.

If the federal government is going to be effective in discouraging cigarette smoking, it should focus on interventions that work, not those with no proven efficacy. For instance, instead of spending time on graphic warnings, the feds could help prevent tens of thousands of premature deaths by informing smokers that there are less harmful ways to use tobacco — ways that can be a valid step toward cessation. Specifically, smokeless tobacco products like snus, because they are not lit and inhaled, do not generate the products of combustion that greatly increase the risk of disease and death to cigarette smokers.

Yet the federal government continues to ignore such possibilities. Not only does the government not have a program to urge smokers to switch to smokeless products, they forbid the smokeless manufacturers to advertise the unambiguous truth: using smokeless products is far less hazardous than smoking cigarettes.

Cigarette smoking remains the leading cause of preventable death in America. We should be doing everything we can to help smokers to quit — and to prevent people from starting in the first place. But the efforts of our federal agencies to pursue such a goal are pathetically ineffective. The new series of gross-out warning labels is just another example.

— Dr. Elizabeth Whelan is the president of the New York–based American Council on Science and Health.

How Obamacare Reduces People to the ‘Average Patient’



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No one wants to be “average,” but when it comes to medicine, being treated as an individual takes on a whole different meaning. Every patient’s treatment should be informed by the best evidence and the best science we have, but at the end of the day the best outcomes depend on a doctor using his or her best medical judgment to help the patient sitting in their office — not an abstract ”average” patient as defined by large studies that are more designed to cut costs than optimize outcomes.

Unfortunately, hundreds of millions of dollars coming from the federal government for something called ”comparative effectiveness research” may be used to slash health-care budgets rather than improve individual patient health. Such a strategy will not only be harmful to patients, it is likely to turn out to be penny wise but pound foolish. 

In 2009, President Obama summed up much of the Beltway’s conventional wisdom on health-care reform — that there’s lots of expensive but wasteful spending that should be easy to cut out. “If there’s a blue pill and a red pill,” the president asked, “and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that’s going to make you well?”

Why indeed? But when it comes to drug treatment, choices are not always so clear cut. First, most (about 75 percent) of the prescription drugs used in the U.S. today are already cheap generics. And total drug costs make up just 10–12 percent of U.S. health-care spending. Focusing on the cost of the “red pill” may be good politics (since drug companies are the villains du jour), but it’s not likely to result in any substantial savings. 

And even when there are good generics available, they won’t be the best option for every patient. Patients vary in how they respond to different treatments (one statin might work for you, but not for me), what side effects they develop, and in their tolerance for side effects. Finding the right blue pill or red pill requires more than just comparing average effects and price tags.

This isn’t to say that we can’t do a much better job of using smart research to improve patient care. Doctors can (and should) use well-designed, evidence-based clinical guidelines to help inform how they treat patients. Large studies that follow many patients over time, like the Framingham Heart Study and the Women’s Health Initiative, have revolutionized the treatment and prevention of heart disease, and sharply reduced the use of hormone-replacement therapy by post-menopausal women.  

But using CER studies to pick drug “winners” and drive reimbursement decisions based on the average response of the largest number of patients is likely to leave many individual patients without effective options. This was exactly what health-care researchers Tomas Philipson and Eric Sun found in a new report for the Manhattan Institute:

The potential short-term savings [from comparative effectiveness research] is significant. For example, antipsychotic drugs represent one of the largest and fastest-growing expenses for Medicaid. In 2005, a CER analysis of antipsychotic drugs found little difference between the effectiveness of older, cheaper antipsychotics and that of more expensive “second-generation” drugs. We determined that if reimbursement policies had been changed in response and Medicaid had stopped paying for the more costly drugs, it would have saved $1.2 billion out of the $5.5 billion that it spent on these medications in 2005. However, the consequences of this policy shift would have been worse mental health for many thousands of people, resulting in higher costs to society that would equal or outweigh any savings in Medicaid costs.

This result seems counterintuitive: How can it be that, when a CER study shows no difference between two drugs, limiting coverage for the more expensive drug could actually increase costs? The answer is that in most CER studies, it is the drug or treatment with the larger average effect on an entire population that “wins.” In the president’s hypothetical, the blue pills are “just as effective” as the red ones because, on average, they do as much good for patients. But the average patient is not the same as any particular individual patient. Declaring a treatment most effective based on an average is a medical and an economic error…

Philipson and Sun suggest a different approach. Rather than throw the baby out with the bath water and give up on CER research, they suggest designing CER trials that take into account patient variation (based on age, sex, race, and other demographic information) and collect information on how failure with one therapy can predict success with another therapy. 

They also encourage CER researchers to use more observational studies, because they are based on patients’ real-world insurance records and other data that can capture information about patients tolerance for side effects and other factors that can influence whether a drug is effective in the “real world.” This data may be more helpful to physicians than the pristine but artificial information gleaned from traditional randomized clinical trials. 

Their approach would replace one-size-fits-all guidelines with nuanced information that can actually help physicians get to the right treatment faster. It’s also likely to get more “buy-in” from doctors; help patients stay on critical medications longer; and keep patients with chronic ailments out of much more expensive hospital or emergency rooms. 

Better designed CER research will be more convincing and effective — which is what we should  be trying to achieve anyway.

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