No better drug bargain

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There is a great disconnect between what consumers want and what the liberalestablishment thinks is good for them. Despite the best efforts to scare people away from enrolling, millions of seniors ignored the fearmongering and enrolled in the Medicare drug benefit.

By yesterday's deadline, nearly 90 percent of all seniors without drug coverage had enrolled. Most will pay $25 or less each month, save $1,500 a year on drugs and know that a catastrophic drug bill will not wipe them out financially.

Yet, one of the key proposals of Families USA and the Democrats is to kill the new Medicare drug benefit and replace it with a one-size-fits-all program run by the government.

Democrats and Families USA argue that the government can drive a better price by buying in bulk and that drug companies are ripping off Medicare. They want to use the approach taken by the Department of Veterans Affairs drug plan to save money in the Medicare drug program. They claim that the VA doesn't have price controls and that it only negotiates drug prices. But federal law requires companies (both profitable drug firms and money-losing biotech concerns) to give the VA -- now only 2 percent of the drug bill in this country -- a 40-percent discount below the price it gives to wholesalers. If companies don't, their drugs are banned from Medicaid and Medicare. Prices can only increase at the inflation rate thereafter. Then the VA uses closed formularies. That means it will only use drugs on a list. To get on that list you have to chop the price below the mandated 40 percent.

Lower prices through government regulation will come at the expense of the health of seniors and actually make health care more expensive, not less. And by the same token such price controls, which have discouraged innovation in Europe, will do the same thing here.

Whether it's the UK and Canada denying women with breast cancer the latest cures or the Department of Veterans Affairs refusing to let people who can't have heart surgery have access to new medicines that prevent heart failure, efforts to control drug costs by limiting use of newer medicines will come at the expense of people's well-being and increase total health-care spending.

For instance, a 1996 study of 13,000 patients from six HMOs found that the more restrictive the formulary, the more patients used other, more expensive services such as emergency rooms, hospitals and doctor visits. Seniors were twice as likely to be hospitalized or go to the ER when faced with such restrictions compared to younger patients. Studies of people suffering from stroke, asthma and Alzheimer's show the same dire result. HMOs have learned from this research and realize that rigidly limiting access to new medicines is penny-wise and pound-foolish.

By contrast, VA formularies cover only 65 percent of the drugs offered by the private Medicare plans. Supporters of turning Medicare into a VA clone claim that people can still get a drug not on the formulary. But to do so, patients often have to "fail" to get better with older drugs and it takes a week or more to get an answer from the VA bureaucracy before getting the drug you want.

Only 38 percent of the drugs approved in the 1990s, and 19 percent of the drugs approved by the Food and Drug Administration since 2000, are on the VA National Formulary. By comparision, the Medicare drug plans on average cover nearly 90 percent of all medicines approved by the FDA since that time and 100 percent of all priority medicines. That includes such miracle cancer drugs such as Gleevec and Tarceva.

As a result, people not only get sicker under the VA program, they die sooner as well.

The use of older drugs in the VA system reduced life expectancy by over two months. Veteran's life expectancy increased substantially before the national formulary was introduced (between 1991 and 1997) but did not increase, and may have declined, after the formulary was introduced (between 1997-2002); yet, the life expectancy of all U.S. males increased both before and after 1997.

On the heels of the drug plan's success in helping seniors save on their drug bills, Medicare's leadership wants seniors to be able to save money by choosing private drug or Medicare health coverage that prevents disease and improves health. Ultimately, plans should compete on providing the best health possible. That's the right way to save Medicare -- and seniors -- money. The wrong way -- fulfilling a campaign promise of cheaper drugs by restricting access to new ones -- will force seniors to pay for lower prices with shorter and sicker lives.

Robert Goldberg is vice president for strategic initiatives for the Center for Medicine in the Public Interest.