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Media Coverage
Tips to Help Choose and Understand Prescription Drug
Benefits for Open Enrollment
Monday, November 15, 2004
Published by Health News Digest
When choosing a health plan, it is as important to make sure the medicines
you take regularly are covered as it is to know that your doctor is in
the network. Most health plans cover prescription medicines, but the rules
may be different than those for other medical services. In addition, pharmacy
benefits may not be administered by the same company as the physician
and hospital benefits, but rather by a separate company, called a pharmaceutical
benefits manager or "PBM." Before you decide on a health plan,
get the facts you need about the benefit. To read the full story, Tips
to Help Choose and Understand Prescription Drug Benefits for Open Enrollment,
click here.
Medicines Overall Keep
Costs Down
Thursday, September 6 12:02 AM ET
By ANJETTA McQUEEN, Associated Press Writer
WASHINGTON (AP) - Americans should look beyond the cost of expensive
medicines to consider the savings they produce, including fewer and shorter
hospital stays, health and economic scholars say.
There's little dispute over whether the research and development of stronger
medicines or safer surgeries is driving the decades-long cost increase
for prescription drugs, insurance premiums and even visits to the doctor.
But in several essays and reports, health care economists, presidential
advisers and other experts take on the issue of expensive medicines and
suggest many are paying for themselves: People are staying healthier,
living longer and avoiding lengthy and costly hospital stays.
“High-price new drugs may be the cheapest weapon we have in our struggle
against rising overall medical expenses,'' J.D. Kleinke, a health care
economist based in Denver, Colo., says in one report being published Thursday
in the journal Health Affairs.
Kleinke, for instance, points to the anticoagulants used to treat strokes.
A lifetime of care for a severe stroke victim averages $100,000, while
therapeutic medicines cost just $1,095 a year, he says. He adds that although
prescription drug costs are grabbing a bigger share of all health spending,
the share spent on hospital stays is declining.
Yet, the persistent squeeze on personal pocketbooks and government budgets
has launched bitter debates across the country. Congress returned this
week from a summer break to tackle key health care issues such as Medicare
drug benefits, HMO members' rights to sue, and less stringent patent laws
that would allow generic drug makers to bring low-priced versions of popular
medicines to market more quickly.
Consumer advocates have criticized the escalating health costs, charging
that the high prices are driven by demand for greater profits and expensive
marketing budgets.
Experts caution that policy-makers should consider the value behind the
price tags.
Frank Lichtenberg, an economist at Columbia University, says in another
journal study that the continued replacement of older medicine formulas
with newer ones has reduced illness, death and overall medical spending.
For example, a better drug could cost $18, but knock at least $44 off
an average hospital stay - maybe even more, Lichtenberg said.
The figures are based on a national survey of patients and the treatments
and medicines they received in 1996, the latest year that such information
was available.
“Drug costs, and changes in drug costs, are visible to the naked
eye,'' Lichtenberg says. “People making drug policy decisions need
to consider the full range of effects, not just the costs, of newer drugs.''
A pair of presidential health advisers studied the direct benefit of technology
and recent breakthroughs on a handful of specific diseases.
Heart disease patients are healthier and more productive, thanks to better
medicines and safer surgeries to unclog or repair key arteries, says a
report by David Cutler, who advised President Clinton, and Dr. Mark McClellan,
a current adviser to President Bush.
The advances saved the government the expense of hospitalizing older Americans
on Medicare, the report says, so $7 was gained for every $1 spent on improving
treatment of heart attack victims.
Cutler and McClellan also point to another added benefit: “Doctors
diagnose disease more frequently when treatments are safer and easier
to take, and patients pay more attention to their condition when therapy
is more effective.''
Another group of scholars say that new drugs in the pipeline, however
beneficial, could add an estimated $19 billion to prescription medicine
spending by 2004.
But drugs, however costly, are cutting down on the expense of surgeries
and other remedies that would be needed without the effective new medicines,
Kleinke says. He adds that some insurers are raising consumers' premiums
based on the drug costs without passing along the savings on other treatments.
© Associated Press, 2001.
Study
claims higher-priced new drugs reduce costs more than older drugs
Last Updated: 2001-09-06 15:47:22 EDT (Reuters Health)
NEW YORK (Reuters Health) - Despite carrying a higher price tag, newer
brand-name medications save more money in overall health spending than
older, lower-priced drugs, according to a study released Thursday.
Frank Lichtenberg, a business professor at New York's Columbia University,
examined federal data encompassing a random sample of the US population
and determined that people taking more recently approved medications had
a longer lifespan and lower health costs, largely because they had fewer
hospital stays.
"People who are taking newer drugs are significantly less likely
to be hospitalized than those taking older drugs," Lichtenberg told
Reuters Health. Lichtenberg's study appears in the September/October issue
of Health Affairs.
"On average, newer drugs are better than older drugs, and are worth
the money," he concluded. Overall, taking new therapies resulted
in a reduction in non-drug spending of $71.09, which far outweighs the
average $18 increase in money spent on those new drugs, said Lichtenberg.
The absolute benefit was better for people over age 65, but overall spending
is also higher for that age group, he noted.
Lichtenberg cautioned against using his study to support conclusions about
specific drugs, noting that the numbers of patients he studied with any
particular condition was relatively small.
He used the Agency for Health Care Research and Quality's Medical Expenditure
Panel Survey for 1996 to make his calculations. That database holds specific
prescription, physician office visit, hospitalization and home healthcare
information on 23,230 people who took slightly more than 170,000 medications
for multiple different conditions.
In the study, "new" drugs were defined as those approved by
the US Food and Drug Administration in the years just prior to 1996. Only
about 17% of the drugs taken by the MEPS patients were approved in the
1990s, while more than half were approved before 1980, and one-fourth
were approved before 1950.
Lichtenberg used the MEPS data to investigate whether newer, more expensive
drugs extended lives, reduced overall medical care costs or the number
of days lost at work.
With the new drugs, the likelihood of being hospitalized went down by
0.5%. Given that hospital stays average $8,000, expected hospital costs
would decrease by $40 to $50, said Lichtenberg.
There was not as significant a decrease in lost work days, said Lichtenberg,
but he thinks the lack of impact was due to the imprecision of the MEPS
database. He is working with new information and expects to release a
draft of his latest conclusions on work-loss within a few weeks.
The study did have limitations, said Lichtenberg. The only measure of
drug quality was how recently it had been approved by the FDA. Also, the
database could not account for whether a drug taken for one condition
might affect the outcomes or spending for another.
But, he concluded, "If there was little therapeutic benefit from
new drugs, you would not see any benefit, and we're seeing that the average
benefit is quite high."
Lichtenberg's study was funded by the National Pharmaceutical Council,
a non-profit group that is supported by pharmaceutical companies.
Copyright © 2001 Reuters Limited. All rights reserved. Republication or
redistribution of Reuters content, including by framing or similar means,
is expressly prohibited without the prior written consent of Reuters.
Reuters shall not be liable for any errors or delays in the content, or
for any actions taken in reliance thereon. Reuters and the Reuters sphere
logo are registered trademarks and trademarks of the Reuters group of
companies around the world
Drug
industry R&D spending closely tracks profit margins
Last Updated: 2001-09-07 17:17:51 EDT (Reuters Health)
By Alicia Ault
WASHINGTON (Reuters Health) - After setting out to either debunk or
give support to what seemed to be a drug industry truism, an economist
said on Friday that he had shown that for major pharmaceutical companies,
profits are indeed the engine that drive research and development (R&D)
spending.
Michael Scherer, a professor of public policy emeritus at Harvard University's
Kennedy School of Government, said that the industry has always stated
that R&D spending is determined by profits, but that there has never
been good, clean data to prove or disprove this.
Speaking at a briefing here, Scherer said that he had determined, via
a simple analysis, that the more profits go up in a given year, larger
amounts are funneled into R&D. Scherer was hoping to get a clear picture
of investment in pharmaceutical R&D only. Many drug companies also
have non-drug businesses like herbicides, dental products, and supplements.
So, rather than look at each company's R&D outlays, Scherer used aggregate
data for the industry, which was provided by the Pharmaceutical Research
and Manufacturers of America, the industry's top trade group. The PhRMA
data was supplemented with sales and products surveys by the US Bureau
of the Census.
The findings of Scherer's research are published in the September/October
issue of the journal Health Affairs.
In looking over trends from the late 1960s to the mid-1990s, Scherer found
that as gross margins went up, R&D spending increased, by more or
less the same percentage. As gross margins declined, so did R&D spending,
again, closely tracking the percentage decrease in profits.
He also said that overall, the growth rate of gross margins was about
4.23% a year, which is much lower than the annualized growth rate of R&D
spending, about 7.51%. Extrapolating current trend data over time, Scherer
said that R&D expenditures are likely to exceed margins by 2025.
His study should serve as a caution to the industry, which seems to recklessly
dive into the pool of profits to fund R&D, Scherer said.
"As profit opportunities expand, firms compete to exploit them by
increasing R&D investments, and perhaps also promotional costs, until
the increases in costs dissipate most, if not all supranormal profit returns,"
he wrote in the conclusion of his article.
Copyright © 2001 Reuters Limited. All rights reserved. Republication or
redistribution of Reuters content, including by framing or similar means,
is expressly prohibited without the prior written consent of Reuters.
Reuters shall not be liable for any errors or delays in the content, or
for any actions taken in reliance thereon. Reuters and the Reuters sphere
logo are registered trademarks and trademarks of the Reuters group of
companies around the world.
Americans
love new medical technologies, but it's worth it, say economists
Last Updated: 2001-09-07 17:59:18 EDT (Reuters Health)
By Alicia Ault
WASHINGTON (Reuters Health) - Americans have an abiding love for technology,
equating the latest innovations with the best medicine, but that affair
has given the nation longer lives and lower overall health costs, economists
said at a briefing here on Friday.
"By all measures, we're more interested in medical discoveries here
in the US than in Europe," said Robert Blendon, a professor of health
policy at the Harvard School of Public Health, who spoke at a briefing
on medical innovations held by the journal Health Affairs.
Using existing data and their own new survey, Blendon and colleagues determined
that 66% of Americans said that they were very interested in new medical
technologies, compared with 44% of Europeans.
Americans over age 65 are also much more attuned to new discoveries, with
many saying that they regularly read medical journals, Blendon said. And,
Americans have higher expectations for medical technology, stating that
new innovations can do more to extend life than older treatments, and
that having those new breakthroughs was equivalent to the best possible
therapy.
Being able to get the most advanced tests, drugs and medical procedures
and equipment is viewed as "absolutely essential" by 35% of
Americans, compared with 21% of Germans, according to a 1994 Harvard/Harris
Robert Wood Johnson Foundation poll.
All the signs point to increased pressure on policymakers to fund new
medical technology research and for insurers to pay for those breakthroughs,
Blendon said. Already, the US spends a much larger percentage of its federal
research dollars on health-related projects than all other European countries
and Japan, he noted.
Canadians exhibited a similar enduring interest in health technology as
Americans, but, interestingly, Canada does not spend as much on medical
research or pay for as many breakthroughs, said Blendon.
Other economists said that even though America has been spending more
on technology, the cost has been outweighed by improvements in health
and longevity.
A person born in 1950 would be expected to spend $8,000 for medical care
in his or her lifetime, while someone born in 1990 would likely spend
$45,000. But that person would have seven years' more life and less lifetime
disability, said Mark McClellan, a former Stanford University professor
who recently joined the White House Council of Economic Advisers.
He said that advancements in heart disease treatment and neonatal care
alone had produced valuable societal benefits that outweighed overall
rising health costs. While the cost of treating a heart attack increased
by about $10,000 from 1984-1998, it produced a one-year increase in life
expectancy, with a $70,000 value. That's a net benefit of $10,000, McClellan
said. Special treatments for low birthweight babies added $40,000 to the
cost of care, but resulted in a 12-year increase in life expectancy for
a net benefit of $200,000 per infant, he said.
High tech therapies for breast cancer have also increased life expectancy,
but have not contributed as large an economic benefit, said McClellan.
"On the whole, we are clearly much better off than before,"
he said.
Blendon's and McClellan's research are published in two separate articles
in the September/October issue of Health Affairs.
Copyright © 2001 Reuters Limited. All rights reserved. Republication or
redistribution of Reuters content, including by framing or similar means,
is expressly prohibited without the prior written consent of Reuters.
Reuters shall not be liable for any errors or delays in the content, or
for any actions taken in reliance thereon. Reuters and the Reuters sphere
logo are registered trademarks and trademarks of the Reuters group of
companies around the world.
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