Tag: "drugs"

Consumer Price Index: Amid Disinflation, Medical Prices Increasing

BLSYesterday’s Consumer Price Index (CPI) release confirmed prices of medical goods and services continue to rise at a steady pace, despite the general deflationary environment. The CPI declined 0.1 percent from July to August (seasonally adjusted), and increased just 0.2 percent in the last twelve months.

Much of the disinflation is caused by dropping energy prices. Excluding food and energy, the CPI increased 0.1 percent last month and 1.8 percent over the last twelve months. Medical care, although flat last month, increased 2.5 percent over the last twelve months (see Table I). This is moderate by historical standards, but still excessive relative to current CPI.

PPI: Gap in Hospital Inpatient & Outpatient Prices

BLSAugust’s Producer Price Index was flat, month on month, and dropped 0.8 percent, year on year, continuing the trend we saw last month. Producer prices for health goods and services are rising faster than other producer prices (see Table I).

20150911 TI

Health-Related Producer Prices Tame in July

BLSThe Producer Price Index (PPI) for July increased more than expected, but was still benign. Health-related producer prices were tame last month.

Prices for pharmaceutical preparations, which have increased faster than other producer goods in the long term (rising 9.4 percent since July 2014), finally turned around and actually dropped 0.4 percent last month (See Table I). This was a bigger decline than prices for all final demand goods (-0.1 percent) or for all final demand (0.2 percent).

Producer Price Index: Pharma, Biologics Jump

The Producer Price Index (PPI) for June increased more than expected, as the effect of the drop in oil prices abated. As shown in Table I, producer price growth for health goods and services was in line with tame growth in overall PPI, which grew 0.4 percent on the month and dropped 0.7 percent on the year to June.

The exceptions were pharmaceutical preparations, which increased 2.5 percent on the month and are up 10.3 percent on the year; and biologic products (including diagnostics), which increased 3.1 percent month on month and 3.2 percent year on year.

Producer Prices: Health Goods & Services Lag

Last Friday’s Producer Price Index showed a jump from April to May of 0.5 percent (seasonally adjusted). When I last looked at the PPI, it looked like prices of health goods and services were outpacing other producer prices.

The latest data show them lagging (see Table 1). Although, looking at year-on-year data, pharmaceutical products, hospitals, and nursing homes have had relatively high price increases. Price inflation for health insurance has been moderate, according to the PPI.

Drug Shortages Getting Worse

Robin Miller, a 62-year-old oncologist in Atlanta with bladder cancer, was scheduled to receive a potentially lifesaving drug in December. But her doctor’s office called shortly before the appointment to say: “Sorry, we don’t have any. We can’t give it to you,” according to Dr. Miller.

The disruption was due to a global shortage of the drug, BCG, which arose after manufacturing problems at two of the few global suppliers. Without the drug, Dr. Miller feared her cancer would come back and she would have to have her bladder removed, a step she called “barbaric.”

The crisis illustrates the potentially grave consequences of a persistent problem in health care: drug shortages. The number of drugs in short supply in the U.S. has risen 74% from five years ago, to about 265, according to the University of Utah’s Drug Information Service, which tracks supplies. They range from antibiotics and cancer treatments to commodity items such as saline. (Peter Loftus, “U.S. drug shortages frustrate doctors, patients,” Wall Street Journal, May 31, 2015)

The U.S. government’s measures to mitigate this problem have failed because it has ignored NCPA’s conclusion that shortages result from too much, not too little control over the market for these drugs.

The government keeps tightening the screws on manufacturers, and the shortages keep growing.

See Devon Herrick’s testimony to the U.S. Senate in 2011 and my own study published in 2012.

IS FDA Reporting Drug Shortages Adequately?

For a number of years, there have been critical shortages of certain generic drugs for injection. These are often important cancer drugs. In 2012, I wrote a report that concluded over regulation by the Food and Drug Administration (FDA) was the primary cause of the shortages.

The President and Congress acted, but their actions did not result in improvement for over a year.

Today, the FDA claims to have improved the situation. However, an article in Health Affairs points out that the number of drug shortages reported by the FDA and the number reported by the University of Utah Drug Information Service (UUDIS), the leading private source of this data is diverging dramatically:

Medicaid Managed Care Pharmacy Costs 15 Percent Less Than Fee-For-Service

vbnAmerica’s Health Insurance Plans (AHIP), the main trade association for health plans, has released research comparing pharmacy costs in states where Medicaid pharmacy benefits are “carved in” versus “carved out.”

“Carved in” means that a managed care organization manages the benefit. “Carved out” means the Medicaid bureaucracy manages it directly. The latter costs a lot more:

  • Across 28 states using the carve-in model, the net cost per prescription was 14.6%lower than the average net cost per prescription in states not carving in pharmacy.
  • This 14.6% differential created a $2.06 billion net savings in state and federal expenditures in FFY2014 for states deploying the carve-in model.
  • The seven carve-out states had a 20% increase in net costs per prescription from FFY2011-FFY2014 — in stark contrast to the 1% increase in net costs per prescription experienced by the 6 states that recently switched from a carve-out to a carve-in model.
  • The seven carve-out states “missed” a total of $307 million in savings in FFY2014 which would have occurred had they used a carve-in model.

Patent Policy Cost India $10 Billion Investment

Variety of Medicine in Pill BottlesLegal support for intellectual-property rights is essential to innovation. In health care, patents protect intellectual property in pharmaceutical innovation. Not all countries respect pharma IP equally, according the Global IP Index.

India has long been a problem because of its successful generic drug industry. Generic drug makers make copies of brand-name drugs once their patents have expired. This means that they have an incentive to lobby for weaker patents. If the political economy of a country’s pharmaceutical industry is dominated by generic competitors, it is difficult for innovative companies to gain a foothold.

One Indian innovative drug maker is speaking out:

Hyderabad-based Hetero Pharma that the country has lost nearly $10 billion worth of investment by not respecting IP norms. “The Compulsory Licence (CL) that we issued did more harm to our image than actually helped patients,” Srinivas Reddy, director, Hetero Pharma, told ET. (Economic Times)

A compulsory license is one which the government orders a patent-holder to issue to a generic competitor at low-market fees. Let’s hope more Indian entrepreneurs speak out like Mr. Reddy has.

Obamacare Beneficiaries 2.5 Times More Likely to Have HIV/AIDS Than Commercially Insured

One of our themes is that Obamacare causes health plans to attract the healthy and shun the sick. However, they do not succeed, according to a report by Prime Therapeutics, a pharmacy-benefit manager:

During tVariety of Medicine in Pill Bottleshe first year public health exchanges existed, Prime Therapeutics’ (Prime) members who enrolled in plans on these exchanges filled an average of 11.7 prescriptions, exceeding fills by commercial members by 13.6 percent. Public exchange members were also 2.5 times more likely to have hepatitis C or HIV, driving an almost 200 percent higher spend on related medicines.

More specifically, nearly $1 out of every $5 spent on drugs for public exchange members was spent to treat                                               hepatitis C or HIV.

The report also states that exchange beneficiaries are significantly older than commercially insured persons: 42.6 years versus 34.7 years old, on average. 28 percent of Obamacare beneficiaries were between 55 and 64 years old, versus only 16 percent of commercially insured persons.

Why does this matter? While Obamacare beneficiaries are older and sicker than people with employer-based benefits, they have less access to health services. Obamacare is not the right way to take care of these peoples’ needs.