Tag: "drugs"

Do Transparency Tools Work in Health Care?

Laptop and Stethoscope --- Image by © Royalty-Free/Corbis

Laptop and Stethoscope — Image by © Royalty-Free/Corbis

A new report by economist Jon Gabel and his colleagues at NORC, a research center affiliated with the University of Chicago, looked at the use of transparency tools in an employer health plan. The analysis found the use of price transparency tools to be spotty. For instance, 75 percent of households either did not log into the transparency tool or did so only one time in the 18-month period of study. Fifteen percent did so twice; but only 1 percent logged in 6 times or more. The study concluded:

It could very well be that we are asking too much of a single tool, no matter how well-designed. Consumer information for other goods and services on price and quality are seldom dependent upon information gained mainly, if not solely, through a digital tool. Rather, information on relative value is spread far and wide through advertising and other kinds of promotion using conventional, digital, and social media communication channels.

EpiPen: A Case Study in what’s the Matter with Health Care

Americans throw away unused epinephrine auto-injectors worth more than $1 billion annually. Or maybe it would be more accurate to say that Americans waste more than $1 billion annually on $50 million worth of epinephrine auto-injectors that are discarded unused. The devices should only cost $20 a pair. So, why do they cost $608 instead? More on that below.

EpiPen: A Case Study of Government Harm

EpipenMuch has been written about the dramatic price hikes for EpiPens, which inject a drug that counters severe allergic reactions (anaphylactic shock). According to Aaron E. Carroll, writing in the New York Times, the real (inflation-adjusted) price of EpiPens has risen 4.5 times since 2004.

Both Carroll and the Wall Street Journal have described how government has allowed EpiPen’’s manufacturer to hike prices so much. EpiPen is complicated, being both a drug and a device. The drug is very inexpensive, and not patented. The device is protected by patents issued in 2005, which expire in 2025.

First, the government made a couple of interventions in the market that allowed the manufacturer to raise prices above the free-market level. The federal government changed its guidelines such that the EpiPens have to be sold in packages of two (while customers might prefer just one, or at least an odd number). Also, the federal government gave public-emergency grants to states on condition they stockpile EpiPens.

CPI: Medical Prices Continue Upward March

BLSThe Consumer Price Index for July was flat. Medical prices, however, continued their upward march, increasing by one half of one percentage point. If prices for medical care had been flat, the CPI would have declined by 0.1 percent. Prescription drugs, physicians’ and other medical professionals’ services, and health insurance stand out even within medical care.

Over the last twelve months, prices for medical care have increased almost seven times faster than prices for non-medical items in the CPI. Price increases for medical care have contributed 40 percent of the overall CPI increase.

Many observers of medical prices decline to differentiate between nominal and real inflation. Because CPI is flat, even relatively moderate nominal price hikes for medical care are actually substantial real price hikes. Consumers are seeing no relief from high medical prices.

PPI: Health Price Inflation Low, But Not Low Enough

BLSThis morning’s Producer Price Index came in unexpectedly low, decreasing 0.4 percent versus an expected slight increase of 0.1 percent. Except for nursing home care, which increased 0.9 percent, producer prices for medical goods and services decreased or increased very modestly. Of 15 medical goods and services measured in the PPI, four actually experienced price decreases over the month. This number includes pharmaceutical preparations. However, because overall PPI actually deflated significantly, all medical prices increased at a faster rate than the overall PPI.

Over the last twelve months, prices for all but one medical category (medical lab and diagnostic imaging services) have increased faster than overall PPI. At 6.3 percent (versus just 0.3 percent for final demand), producer prices for pharmaceutical preparations stand out. However, the monthly PPI suggests this trend might be breaking down. Nursing homes, for which producer prices increased 2.5 percent might replace drug makers as a target of politicians’ campaigns against health costs, but they have a long way to go.

(See Table I below the fold.)

What was Hillary Thinking When She Hatched Her Plan to Lower Drug Costs?

Newsflash! Hillary Clinton is concerned about your drug costs. Unfortunately, her plan could actually raise drug prices and force you to pay more, albeit indirectly. She proposes to accomplish both feats simultaneously by capping your prescription drug co-pays at no more than $250 per month. This reckless proposal is central planning of the ilk you would find in Cuba or Venezuela. But I’m getting ahead of myself.

Medical Marijuana Saves Taxpayers Money

ReeferIn a fascinating article in Health Affairs, Ashley Bradford and David Bradford of the University of Georgia have estimated that medical marijuana has benefited taxpayers:

Using data on all prescriptions filled by Medicare Part D enrollees from 2010 to 2013, we found that the use of prescription drugs for which marijuana could serve as a clinical alternative fell significantly, once a medical marijuana law was implemented. National overall reductions in Medicare program and enrollee spending when states implemented medical marijuana laws were estimated to be $165.2 million per year in 2013. The availability of medical marijuana has a significant effect on prescribing patterns and spending in Medicare Part D.

(Ashley C. Bradford and W. David Bradford, “Medical Marijuana Laws Reduce Prescription Medication Use in Medicare Part D,” Health Affairs, 35 (7) July 2016, pp. 1230-1236.)

Let’s not get carried away, here. The Medicare Part D prescription drug program spent $69 billion on benefits in 2013, of which $59 was funded by taxpayers (not premiums). So, medical marijuana is making an insignificant dent in the burden of this entitlement.

Government Price Controls & Drug Addiction

Variety of Medicine in Pill BottlesIn a recent print issue of National Review, David French has a sobering article describing how the Veterans Health Administration is overdosing veterans on prescription drugs. A veteran himself, French has plenty of anecdotes about his buddies:

They couldn’t sleep, so they had to take Ambien. They were depressed, so they were taking Lexapro. They had chronic neck and back pain after hanging 90 pounds of gear on their frame day after day, month after month, so they took Lortab. They were anxious, so they took Xanax.

It was as if a VA doctor had simply listened to a list of symptoms, located a pill to address each complaint, loaded up the patient with prescriptions, and called it “treating” a soldier with PTSD.

In 2014, an inspector-general report found that the VA was systematically over-medicating its patients – even to the point of death.

Wisconsin’s Senate race is being roiled by a report on the VA facility at Tomah, a place so notorious for freely writing narcotics prescriptions that it gained the nickname “Candyland.”

(David French, “Casualties of the VA,” National Review, Vol. LXVIII, No. 12, July 11, 2016, pp. 20-21.)

Chemotherapy Payment Reform: Medicare Is Missing the Elephant in the Room

cigarettes-2Last May I wrote about the uproar over Medicare’s proposed changes to how it will pay doctors who inject drugs in their offices. This largely concerns chemotherapy. Currently, physicians buy the drugs and Medicare reimburses them the Average Sales Price (ASP) plus 6 percent. The proposed reform would cut the mark-up to 2.5 percent and add a flat fee of $16.80 per injection.

I did not think the reform would have a positive impact, but I also thought criticism was overblown. Well, Medicare has managed to irritate all the affected interest groups to such a degree that it is likely to toss the proposal and go back to the drawing board.

CPI: Medical Prices Resume Upward March

BLSDue to vacation, I did not discuss June’s release of the Consumer Price Index for May, in which medical care prices were very moderate. This continued that which was observed in May (for the April CPI).

Unfortunately, prices for medical care resumed their upward march in the June CPI, released today. At 0.4 percent, prices for medical care increased twice as fast as the CPI for all items. Price changes for medical care contributed 16 percent of the price change for all items. Prescription drug prices, especially, resumed their increase. Prices for medical care services, on the other hand, were in line with the CPI for all items.

Over the last twelve months, prices for medical care have increased over four times faster than prices for all items other than medical care. Medical care price increases have contributed almost one third (29 percent) to the price increase of one percent for all items. Claims that consumers have experienced relief from medical prices are simply not grounded in data.

(See Table I below the fold.)