Tag: "drugs"

Health Goods Prices Rise; Other Prices Fall

Last Friday’s release of the Producer Price Index  for February confirms that prices for health goods and services are rising at a much higher rate than other producer prices, most of which are declining significantly.

As shown in Table 1, prices of goods for final demand actually dropped 4.2 percent over the last twelve months. However, prices of pharmaceutical preparations increased by 7.1 percent; and prices of medical, surgical, and personal-aid devices also crept up.

20150313 PPI

Prices for intermediate goods tell a similar story, with prices for medicinal, botanical, and biological chemicals experiencing higher price growth than other processed chemicals.

Prices for services sends a much less clear signal, being distributed around an increase of 1.2 percent for all demand services. (Health insurance is categorized as both a final and intermediate services, as it is sold both retail and wholesale.)

Prices of services are more important than prices of goods in determining overall health price inflation. Nevertheless, there is no evidence that Obamacare is holding down prices of health services.

(The Altarum Institute has also released its updates of health spending and prices, which show strong growth in health spending of 5 percent in 2014 and high relative price inflation.)

One Family’s Obamacare Nightmare

One of this blog’s consistent themes is that Obamacare incentivizes insurers to attract the healthy and shun the sick. Pattie Curran is a North Carolina mother of two children born with a rare bone-marrow dysfunction. She reported her experience in the Washington Times:

The co-pay for a medication that protects my youngest son’s kidneys from damage had been $131 for a three-month supply for five to six years before the law passed. In 2011, the medication suddenly more than doubled. We watched in horror as it skyrocketed to $532 by the middle of 2013, while at the same time trying to get a medical-necessity exception. Obamacare not only made everything less affordable, it created more work for families and providers. We have witnessed a corresponding decrease in quality of care because of the extra administrative demands placed on physicians and their staff.

During the past month, some of our sons’ most important medications have been discontinued from coverage altogether.

This is a tragic, but not surprising outcome of a system that gives politicians the power to allocate medical resources. They will allocate them such that the majority of healthy people get “free” “preventive” care, while the truly sick pay the price.

FDA Approves First Biosimilar Drug; Still No Guidance on Names

The Food and Drug Administration has approved the first biosimilar therapy in the U.S.:electronic-medical-record

Many newer biotech drugs cost more than $100,000 per year, and together they account for nearly 30 percent of all U.S. drug spending. Five of the top 10 U.S. drugs by revenue are biotech medicines, according to IMS Health. Since their introduction in the 1980s, biotech drugs haven’t faced generic competition because the FDA did not have a system to approve copies.

In 2012, the FDA laid out a regulatory pathway to approve so-called “biosimilars.” That’s the industry term for generic biotech drugs, indicating they’re not exact copies. For years the biotech industry staved off competition by arguing their drugs were too complex to be reproduced by competitors. (Matthew Perrone and Linda A. Johnson, Associated Press via Denver Post)

A Grand Bargain for Intellectual Property in International Trade Deals?

vaccine-shotBloomberg View columnist Caroline Freund has proposed a thoughtful grand bargain for brand-name pharmaceutical firms’ data exclusivity in international trade deals.

Unfortunately, the column confuses two related but different issues: Patent protection and data exclusivity. The former is available to anyone who invents a better mousetrap. It is an important type of intellectual property (IP), and the U.S. leads the world in protecting inventors’ IP.

To Reduce Drug Prices, Solve R&D Crisis

A new NCPA study concludes that Congress must act to reduce the regulatory burden on pharmaceutical research and development.

Reducing the prices of specialty drugs requires improving the productivity of research and development (R&D). On that front, the news is sobering. Last December, Deloitte and Thomson Reuters examined newly introduced drugs from the 12 pharmaceutical companies with the largest R&D budgets.5 They found it cost $1.3 billion to bring one of these new compounds to market. However, the peak sales forecast for each of these drugs declined by 43 percent, dropping from an average of $816 million in 2010 to $466 million in 2013.

The high nominal prices of new drugs do not compensate for the smaller patient populations they target. Deloitte and Thompson Reuters estimate the internal rate of return (IRR) of R&D spending has dropped in half since 2010, from 10.5 percent to 4.8 percent. Sales of new drugs are not overcoming the loss of patents, weak pricing power for older drugs, or the reduced productivity of R&D.

Why are Health Insurers Persecuting Innovative Drug-Makers, Instead of Bloated Hospitals?

One constant refrain heard in national health policy circles is the need for “integrated” or “coordinated” care. To be sure, I have never heard anyone speak favorably of “disintegrated” or “un-coordinated” care. While there are many good-faith practitioners who do want to integrate and coordinate care for patients, these terms are often used to camouflage a more straightforward way to raise prices. Here’s an example from Bloomberg BusinessWeek:

money-burdenFor the past four years, Pennsylvania insurance company Highmark has watched its bills for cancer care skyrocket. The increase wasn’t because of new drugs being prescribed or a spike in diagnoses. Instead, the culprit was a change that had nothing to do with care: Previously independent oncology clinics and private practices have been acquired by big hospital systems that charge higher rates, sometimes three times as much, for chemotherapy drugs. “The site of care and the type of service provided does not change at all,” says Tom Fitzpatrick, Highmark’s vice president of contracting. “The only significant difference that we primarily see is the [patient] gets a wristband placed on them.”

Hits and Misses

States Spent $7.7 Billion on Prisoners’ Heath Care in 2011

GOV065A new report from the Pew Charitable Trusts reports that 41 states experienced growth in their correctional health care spending from fiscal 2007-2011, with a median increase of 13%. Further:

…state spending on prisoner health care increased from fiscal 2007 to 2011, but began trending downward from its peak in 2009. Nationwide, prison health care spending totaled $7.7 billion in fiscal 2011, down from a peak of $8.2 billion in fiscal 2009. In a majority of states, correctional health care spending and per-inmate health care spending peaked before fiscal 2011. But a steadily aging prison population is a primary challenge that threatens to drive costs back up. The share of older inmates rose in all but two of the 42 states that submitted prisoner age data. States where older inmates represented a relatively large share of the total prisoner population tended to incur higher per-inmate health care spending.

OxyContin Abuse: Stopping the Dealers Helps; Suing the Drugmaker Does Not

One of the biggest challenges with the regulation of prescription drugs is how to prevent the abuse of addictive ones. OxyContin, a powerful painkiller is probably the best known example. There are two ways to reduce the abuse of OxyContin: Punish the inventor and manufacturer of this valuable medicine; or go after those to take advantage of addicts who need help.

HSAAlthough OxyContin is widely prescribed by physicians and valued by patients who need powerful pain relief, trial lawyers decided that the medicine, not the addiction, was the problem. Years ago, the decided they could make some money by suing the manufacturer, Purdue Pharma. Back in 2008, Heartland Institute’s Lawsuit Abuse Fortnightly reported on the cost of this effort:

If anyone doubts tort claims are a burden on American drugmakers, consider the fees for Purdue Pharma L.P.’s defense of 1,400 lawsuits in 32 states, alleging that OxyContin, its prescription painkiller, is addictive.

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