How Not to Solve Healthcare Cost Challenge

How Not to Solve Healthcare Cost Challenge

11.03.11 | By

Over at the New York Times opinion page, Dr. Ezekiel Emanuel has an interesting on-line commentary on healthcare spending and proposals to control it. Dr. Emanuel looks at where policy proponents on both sides of the political aisle would go to make cuts and has some interesting observations about the weaknesses of various proposals.
While the whole piece is worth reading, I want to point in particular to two arguments for reducing costs often raised against the biopharmaceutical research industry that Dr. Emanuel dispatches as effectively as I've seen. He writes:
"One proposal to limit drug company profits is to encourage the use of generic rather than brand name drugs. But that has already happened. Between 2004 and 2009, generic drug use rose from 57 to nearly 75 percent of all prescriptions. Paradoxically, over those same years, the total amount Americans spent on drugs actually increased by 31 percent - the same rate as overall health care expenditures. Even the best estimates suggest that savings from expanding generics' use even further are, according to the Department of Health and Human Services, "likely to be small relative to total spending on drugs." And substituting generics is not always possible; many important drugs are still patented and have no generic equivalent yet."
"Importing brand name drugs from other countries, particularly Canada, is another favorite liberal cost control proposal. Many have criticized President Obama for not having fought harder to include it in the Affordable Care Act. It is true that brand name drugs cost substantially more in the United States than they do in Europe, Australia and Canada. A 2005 study in Annals of Internal Medicine found that Americans could save an average of 24 percent on brand name drugs if they were allowed to buy them from Canada. But overall this doesn't add up to much. According to an evaluation by the Congressional Budget Office, the "reduction in drug spending from importation would be small." How small? Pharmaceutical costs account for roughly 10 percent of total health care spending, some $260 billion in 2010. Importing brand name drugs from abroad would cut about 2 percent from that - $5 billion per year. Another cost control disappointment."
Certainly, these proposals get a lot of attention, but as pointed out, their effectiveness in limiting healthcare costs would, at best be marginal.

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