WASHINGTON — Public-spirited rhetoric usually masks intense interest-group combat in Washington, D.C., like that over pharmaceutical patents. Health insurers, which barely survived the Clinton administration’s assault, are targeting drug-research firms.
The issue is complex: what is the right balance between generating new products and cutting the price of old ones? What to do with 30-month stays in patent infringement actions?
Current law reflects a political compromise running back to 1984. In July, however, the U.S. Senate passed the McCain-Schumer bill, weakening patent protection. The House has refused to go along, so generic-drug interests are attempting to force their bill out of committee through a discharge petition, which requires signatures from a majority of members.
The issue will carry over into any lame-duck session, but some business supporters are now backing away. For instance, the so-called Business for Affordable Medicine never lived up to its name, with as many gubernatorial and labor union members as business members. Moreover, BAM has been losing firms. For instance, Georgia- Pacific recently abandoned its leadership role in the organization.
Also active is the Coalition for a Competitive Pharmaceutical Market. Yet CCPM opposes the discharge petition out of fear that it will inhibit creation of a bipartisan coalition. Like BAM, CCPM includes a number of employers. But CCPM also involves generics drug producers and, more importantly, insurers.
For instance, Aetna, several Blue Cross/Blue Shield entities, and some health insurance associations sit on the organization’s board. Representing the links among them is Leonard Schaeffer, who heads Wellpoint Health Networks, a national HMO that began as Blue Cross of California, and has played a leading role in several industry groups.
Generics lower the cost of existing medicines. But generics firms do very little research. Thus, speeding generics to market will reduce prices only by simultaneously cutting the return on research and development for new products.
Another aspect of the insurers’ campaign against the research industry is their effort to move drugs to over-the-counter status. Doing so increases patients’ freedom to choose their own medicine, but that’s not why companies like Aetna and Wellpoint prefer that products like Allegra and Claritin be granted OTC status.
Shifting to OTC means that insurers no longer have to pay for prescriptions. Although the cost of OTC drugs tends to fall, the remaining expense is no longer covered by insurance. Wellpoint’s savings on Allegra and Claritin run around $90 million annually.
Wellpoint and Aetna now want to push entire classes of drugs, such as nonsedating antihistamines, to OTC status. This strategy is particularly attractive as health-care costs rise. The Center for Studying Health System Change figures that 2 to 3 percent of the expected 15 percent rise in medical spending in 2002 will be pushed from employers to employees.
There’s nothing nefarious about adjusting benefits in light of changing economic circumstances, when negotiated with patients. However, moving pharmaceuticals OTC and dropping them from the official formulary allows insurers and employers to cut benefits sub rosa.
Ironically, scrimping on new pharmaceuticals may not be a good way to save money. For some people, brand-name products are more effective and ultimately minimize other health-care costs.
Moreover, a recent analysis in Health Affairs magazine reported that “Hospital spending was the key driver of overall cost growth” in health care in 2001. In contrast, “prescription drug spending growth declined for the second straight year and was overtaken by spending on outpatient hospital services.”
Insurers might be best advised to try to shrink hospital outlays. In any case, the real problem is insurers’ lack of accountability to patients, resulting from U.S. government medical and tax policies that encourage third-party payments.
If employees, not employers, purchased their health insurance, they could choose among a range of low through high drug coverage options. Unfortunately, most insurers are beholden to employers, who naturally prefer to spend less. Thus, the insurance industry’s emphasis on lowering short-term costs even to the long-term disadvantage of patients.
Moreover, some of the generic activists have broader, more dubious agendas. CCPM board members include aggressively leftwing groups like the Gray Panthers and the National Committee to Preserve Social Security and Medicare. Of equal concern, lobbyist Chris Jennings, who handles some BAM and CCPM members, like General Motors, worked for Ira Magaziner, the architect of President Bill Clinton’s ill-fated federal takeover plan.
America’s health-care system needs reform. But if Congress only focuses on cutting costs, it will inevitably degrade patient care.
Balance is especially important in designing patent law. Washington should change it if doing so strikes a better balance between expensive innovation and cheap status quo.
But Washington shouldn’t change patent laws to advantage insurers and employers to the detriment of patients. It certainly shouldn’t do so to allow politicians to secure a few cheap votes in the upcoming election.
By subscribing, you can help us get the story right.