It has become fashionable at the White House and on Capitol Hill to try to cut costs at the expense of the research-intensive (as opposed to generic) pharmaceutical industry, although this sector has been one of the nation's most innovative and productive. The proposals are moving us inexorably toward drug rationing, although politicians avoid that term like the plague.
Drugs often improve the span and quality of life in a remarkably cost-effective way, a fact of crucial significance not only to the individual patient but to society as a whole. Innovative new medicines, for example, have helped many patients avoid costly hospitalization. Between 1980 and 2000, the number of hospital days fell by 56% and, as a result, Americans avoided 206 million days of hospital care in 2000 alone, according to Medtap International, which provides health economics and outcomes research services. And a study in 2000 sponsored by the Agency for Health Care Policy and Research concluded that increased use of a blood-thinning drug would prevent 40,000 strokes a year, saving $600 million annually. A 1997 study by the National Bureau of Economic Research found the costs of treatment per episode of major depression fell by 25% from 1991 to 1995.
Another sign of progress is that, in general, new drugs confer an advantage over older ones in reducing mortality. A 2004 National Bureau of Economic Research study of patients who took drugs between January and June 2000 found that a higher percentage of those who took newer medications were still alive in 2002. The estimated mortality rates were directly related to the time that had elapsed since each drug was approved.
However, the climate for drug development is deteriorating. Research and development investments per new drug introduction approximately doubled between the early 1980s and early 1990s, and only about three in 10 drugs approved by the Food and Drug Administration for marketing recoup their development costs.
President Obama has made it clear that he intends to eke out huge cost savings at drug companies' expense: "You've heard that as a consequence of our efforts at reform, the pharmaceutical industry has already said they're willing to put $80 billion on the table," and he added: "We might be able to get $100 billion out or more."
The president has promised that consumers will not be deprived of choices or high-quality care, so where will these cost savings come from? One approach is to adopt the pretense that the government can determine when one medicine is better than another, and then can predicate reimbursement based on those determinations. As the president oversimplified it: "If there's a blue pill and a red pill, 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?"
The stimulus bill has already set aside $1.1 billion to figure out how to distinguish the blue pills from the red ones, and reform legislation is expected to pour more money into these attempts to measure "comparative effectiveness."
But this approach ignores the futility of such one-size-fits-all prescribing of medicines. For many classes of drugs -- among them statins, anti-hypertensives, pain-relievers and antipsychotic medicines -- the selection of the appropriate drug among many possibilities requires a delicate balancing of effectiveness and acceptable side effects in each patient. Under Obama-care, you don't want to be one of those people who might really need the more expensive red pill.
Once the cheap blue pill has been anointed as the one eligible for federal reimbursement, there will be little incentive for companies to pour millions of dollars into developing a new generation of drugs that might in fact prove to be better -- but perhaps only for a small subset of patients. Quite justifiably, the drug industry's trade association, the Pharmaceutical Research and Manufacturers of America, fears "that the federal government will wind up rationing healthcare and dictating what medicines doctors can prescribe to their patients. This may well prevent patients from gaining access to the critically important medicines they need to fight diseases such as cancer, diabetes and heart disease."
Politicians seem determined to squeeze the drug industry, but it is patients ultimately who will feel the pinch.