Tuesday, April 15, 2008

How the Drug Czars Are Squishing the Poor People

While other bay area bloggers are busy screwing up this country's future, something that actually matters is passing unnoticed by all but the very unfortunate.

You may or may not have seen the recent NY Times article about changes health insurers are making to prescription copay policies. Private insurers, taking a cue from Medicaid, are switching from flat-rate copay schemes to percentage based schemes. Essentially, the more a drug costs, the bigger the copay. According to the Times:

No one knows how many patients are affected, but hundreds of drugs are priced this new way. They are used to treat diseases that may be fairly common, including multiple sclerosis, rheumatoid arthritis, hemophilia, hepatitis C and some cancers. There are no cheaper equivalents for these drugs, so patients are forced to pay the price or do without.

Sophistry, bullshit and befuddlement!

First, Aetna knows exactly how many patients will be affected. Trust me, this is not a shot in the dark. Second, the thread that runs though all of these conditions isn't that they are "fairly common" among Americans. It's that these patients (1) cost more than they pay into insurance, and (2) tend to consume more medical services across the board. The truth is this country spends FAR more money on hypertension, allergies, or high cholesterol, all of which are sometimes treated with expensive drugs. But the new pricing scheme doesn't touch them. Why? Because taken as a whole, cholesterol treatment is profitable (it usually doesn't exceed the cost of a premium) and common (the few patients who consume expensive cholesterol drugs are healthy and vocal enough to scream bloody murder if their copays change).

The treatment of MS, hemophilia and hep C, on the other hand, is not profitable. And those paints aren't vocal. They're sick.

Does anyone really think it is a coincidence that patients with conditions like MS, Hemophilia and Hepatitis C also tend to be the patients who *gasp* require more medical services in general? The new pricing scheme is not a way to "curb rising drug costs." It is a way to discriminate against people with chronic disease, who are not fortunate enough to be in a position to self-advocate.

The immediate effect of the change will be that patients with unprofitable disease will either go bankrupt trying to pay, or stop taking the medication. The ultimate effect will be that patients with chronic AND unprofitable disease leave the health system (a euphemism for dying) more quickly, and cease to be a profit-suck.

There. I said it.

4 Comments:

Blogger McWho said...

I'm just going to point out that insurance companies do not have an obligation to subsidize certain medications, even if they lose money on them (or have a lower profit margin than other products).

I understand why you have ethical problems with it, and I make no comment on whether the government should try to fix this (and many other) problems with health care---but this is akin to being mad at car companies for making hybrid cars cost more.

4/15/2008 11:11 AM  
Blogger Patrick said...

You are absolutely right, except for the car example. To be clear, my ethical problem stems from the observation that consumers are stuck between a rock and a hard place -- if no one subsidizes medications for these people, then what will happen to them?

One option, as you suggested, is to turn to the government for a bailout. But who, exactly, would the government be bailing out? The poor/uninsured? Or the rathe cozy relationship between an insurance/pharmaceutical market that feels no pressure to reduce their respective profit margins or lower the cost of their products?

Another way to ask the question is this: why aren't the nation's largest health insurers putting pressure on pharmaceutical providers? The answer is that (1) pharmaceutical companies are tough and expensive negotiators, and (2) there are other incentives for insurers to drive patients with certain types of illness out from under their coverage. Namely, these patients tend to get sick a lot.

4/15/2008 11:21 AM  
Anonymous Anonymous said...

The pharmaceutical drug problem is too complex to dismiss based only on insurer and drug company greed. There are two significant problems:

(1) Developing new drugs is insanely expensive and risky. Drug companies don't know why some drugs work or why some drugs kill people. It is not that uncommon to pour hundreds of millions of dollars into development, only to find out in Phase III trials that it has a low probability of causing a fatal side effect that will preclude FDA approval or, at the very least, widespread enough use to spread out the costs. Huge downside risk requires huge upside reward potential or no one will make the investment

(2) Prescription drugs often have an inelastic demand. Drug companies can exploit this to raise prices even further.

These two combine to cause very high prices. But you can't really blame one but not the other. If we capped drug prices, existing drugs would be cheaper, but at a certain price ceiling, no new drugs would be developed. A person with an expensive disease like MS might like this because they get the best of the available medicines at an affordable price. Or they might not like it because it might guarantee that there is never a cure for MS. Or AIDS. Or Cancer. Or Alzheimer's. Or Diabetes.

As for insurance... The whole theory behind insurance is that you take the entire cost of health care paid by the insurance company, divide it among a big group of people, and then everyone pays the average cost in exchange for whatever treatment they need. An obvious way to decrease the cost of insurance is to decrease the insurance company's payments. Everyone shares in the cost reduction, except the person who isn't covered anymore, who gets screwed.

But as with anything else, if you lower the cost of insurance, more people can afford it. Therefore, for every high-cost patient you can exclude, additional health people will be able to buy insurance. I don't have a problem with insurance companies trying to exclude high-cost treatment. A simple hypothetical illustrates why: suppose a scientist invented a way to cure cancer tomorrow, but it cost $20,000,000 per person to administer. If we enforced an absolute right to the best cancer treatment in existence, we would bankrupt every health insurance company. No company could afford that. No one would get health insurance anymore unless the prices went up enormously, or insurance companies were allowed to exclude that treatment option. This is an extreme example (although I think it is becoming closer to the truth with every scientific advancement) but it illustrates the problem with insurance well.

Now, I think what the insurance companies are doing according to the article at issue is totally shady for a simple reason: they are changing the rules in the middle of the game. It isn't fair to tell people during their healthy years not to worry because they will have a fixed co-pay if they ever need drugs, but then to change the rules down the line if they actually do need drugs. On the other hand, if the insurance policy says up front that there is a proportional co-pay, and people sign up for it, I think it's fair. They benefited during their healthy years from the lower premiums. Presumably, some insurance companies will offer fixed co-pay plans that have higher premiums and we can all make our choice.

4/15/2008 3:52 PM  
Blogger Patrick said...

Good points, all. And I fully confess to oversimplification.

Still. There is a freakish theme among the tier four medications. It's not just that they are very expensive. They also tend to be used to treat diseases that appear in people who, for lack of a better phrase, are generally sickly.

4/15/2008 7:08 PM  

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