10/2003 Galen Report

Published October 1, 2003

California liberals are working feverishly to enact an employer mandate requiring businesses to provide health insurance to workers or pay a big tax to fund a new state-run health coverage program. The last thing deficit-plagued California needs right now is a new job-killing tax to fund another multi-billion-dollar government program.

The leader of the state senate, Democrat John Burton, is trying to get his bill enacted and signed by Governor Gray Davis before Davis faces a recall vote.

Locking health insurance even more tightly to employers in a state whose workforce is as highly mobile and technologically savvy as California’s is absolutely the wrong way to go, and passage of Burton’s measure could set a very dangerous precedent. Empowering health care consumers through tax reform is the better option.

On Medicare

Staffers on the Medicare conference committee worked over the August recess to get as much work as possible done before their bosses returned. It was evident how tricky those negotiations will be as rural health care again became a stumbling block: Senator Chuck Grassley pulled his staff from the talks because he didn’t feel his issues were getting sufficient attention.

The conferees also will be forced once again to face drug reimportation. Furor over the issue did die down during the August recess, and Representative Gil Gutknecht (R-Minnesota) and his allies, fresh from a series of townhall meetings, will push to include in the final Medicare bill his plan to legalize drug reimports from 26 countries.

The Food and Drug Administration (FDA) weighed in on drug reimportation with a stern warning to states and municipalities that have been cooking up their own plans to reimport cheaper drugs from Canada and elsewhere.

I believe the tipping point leading to House passage of drug reimportation legislation in July was the growing awareness other rich countries–France, Germany, and Canada among them–pay little toward research and development costs, pushing the bulk of the burden onto U.S. consumers.

Americans are growing angry, especially since those who usually wind up paying the highest prices are seniors without drug coverage or someone to negotiate discounts on their behalf.

As much as anything, legislators wanted to send a wake-up call to the pharmaceutical companies to fix this problem. But the companies are over a barrel: Most countries have “compulsory licensing” laws that allow them to violate patent protection and copy the drugs if the companies don’t agree to the price-controlled rates the governments offer.

The pharmaceutical companies have a strong incentive to go along with these deals, since protecting their intellectual property rights is the lifeblood of their industry. The solutions will involve complex issues of international trade to empower a tough new bargaining stance by the companies.

— Grace-Marie Turner


Plan Seeks to Give Employees Control over Health Coverage
Peter Neurath
Puget Sound Business Journal
August 11, 2003

Retired admiral and physician Steve Barchet and health-promotion expert Larry Chapman have developed a model health plan called HP4Life, which combines financial incentives for consumers to conserve on health care with 20 programs aimed at promoting health, according to an article in the Puget Sound Business Journal.

Barchet and Chapman encourage employers to merge consumer-driven health plans with “health management interventions,” including coaching and disease management for employees with multiple health risks, toll-free advice lines, and full employer financing of household health accounts for employees who receive all preventive screening, immunizations, and tests recommended by their doctors. The principal reason for HP4Life, Barchet said, “is to stabilize inevitable increases in health spending and improve the health of the population covered by the plan.”

Full text: http://www.seattle.bizjournals.com/seattle/stories/2003/08/11/newscolumn1.html

A New Medicaid Program
Lynn Etheredge and Judith Moore
Health Affairs
August 27, 2003

Lynn Etheredge and Judith Moore suggest forming a new federal-state partnership to create an updated Medicaid program because “huge gaps and inequities result from the outdated Medicaid statute, an absence of national standards, and unplanned spending growth.”

Etheredge and Moore detail their plan for a new Medicaid that would offer health insurance based on “needs-based” standards and assist working Americans through “Medicaid plus tax credits.” The authors also recommend improving the long-term care system for people with disabilities and improving accountability for quality of care.

Full text: http://www.healthaffairs.org/WebExclusives/Etheredge_Web_Excl_082703.htm

Socializing Drug Development Costs after FDA Approval Is Not Feasible
Jeff Lemieux
August 23, 2003

Jeff Lemieux of Centrists.org challenges economist Burton Weisbrod’s recent op-ed in The Washington Post proposing to socialize pharmaceutical research and development by paying “awards” to drug development firms after FDA approval. Weisbrod suggested taxpayers would pay R&D costs to drug companies, and then the government would take possession of the patents and freely offer them to generic firms willing to produce the drugs.

Lemieux writes that Weisbrod’s proposal is not feasible for several reasons: It would be very difficult for the government to decide on the amounts of the awards; if actual costs were used, companies would not be able to recoup costs for drugs that did not succeed clinically; investors would not bet on the possibility of large profits from uncertain government reimbursements; and the government would have to socialize all R&D to keep the drug discovery process alive.

Full text: http://www.centrists.org/pages/2003/08/22_lemieux_health.html

Weisbrod’s op-ed: http://www.washingtonpost.com/wp-dyn/articles/A29306-2003Aug21.html

The FDA Warns Cities, States about Buying Canadian Drugs
Anna Wilde Matthews
The Wall Street Journal
August 27, 2003

The FDA took action against California and Massachusetts in an effort to prevent some state and city governments from purchasing Canadian prescription drugs for their employees, writes Anna Wilde Matthews in The Wall Street Journal.

In a “strongly worded letter” to California officials, the FDA advised that prescription drugs imported from Canada “will nearly always be in violation of federal law.” The city of Springfield, Massachusetts is encouraging its employees to enroll in CanaRx, a program that offers Canadian pharmaceuticals to U.S. customers, which prompted an investigation by the FDA.

Full text (requires subscription): http://online.wsj.com/article_print/0,,SB106193424282979700,00.html

Material for this report is provided by The Galen Institute, P.O. Box 19080, Alexandria, VA 22320, http://www.galen.org. Grace-Marie Turner is president. The report was produced by Elizabeth Lamirand, who can be reached at 703/299-9550, and edited by Conrad F. Meier, managing editor of Health Care News.