Thanks, again, for several more fantastic posts. The irony of this mindset among legislators is that the pharmaceutical marketplace is almost the polar opposite of a functional, free market. Much of the business model is premised on capturing profits during the period of government-sponsored monopoly (i.e. patents) and discouraging competitors from bringing their products to market. The ACA actually
increased the monopoly power of innovators in the expensive biologic drug market, which still boggles my mind.
We need Congress to act on this - or are they continuing to support this monopoly?
One of the big fights in the pharmaceutical industry over the past several years has been for control of the generics market. To oversimplify: as patents expire and generics become possible, would-be generic manufacturers still have to pass FDA approval before bringing their drug to market. Historically, rather than take their generic through the lengthy clinical trial process, they've taken advantage of an alternative route: if a generic manufacturer can show that its drug is (substantively) chemically identical to an approved drug, it can use its data to pass FDA muster, making the process far quicker, simpler, and cheaper.
I'm all for cutting red tape, but not at the expense of consumer safety. Generics save hundreds of millions of dollars yearly. But plans switch generic manufacturers and, for whatever reason, generics from India may not work as well on an individual as one from Canada, for example, for that person. FDA says multiple clinical trials show 3.5% of a difference in generic and trade when they looked at cardiovascular drugs.
Well, ACA gave major manufacturers a huge carrot in this process in terms of biologics (a particular, new class of complex pharmaceuticals manufactured using biological rather than chemical processes) -- data exclusivity for 14 years following approval of a biologic. In other words, even if a biologic's patent expires earlier, a generic (in this case, called "biosimilar") drug manufacturer cannot bring its product to market unless it a) conducts its own clinical trials or b) waits 14 years following approval of the original.
Is this FDA colluding with Big Pharma, or following Congress's guidance? What is the usual expiration period for non-biologics?
On top of that, biosimilarity has become a pretty huge issue with the FDA, with Phrma and a few non-Phrma pharmaceutical companies pushing hard for a narrow classification, which would cut off many drugs from using past data at all (effectively making bringing them to market cost-prohibitive even after the patent and data exclusivity terms lapse on the original biologic).
How is the subsequent huge price increases managed in other countries like the E.U. ones? Does "socialized medicine" in the U.K. or Canada or Germany, for instance, have the same problem with costs? Or do they have different regulatory mechanisms that are more effective?
That's a narrow example, but it's a very expensive one. These are the kinds of drugs you hear about alongside the new Hep C drugs in terms of crazy pricing. With the Medicaid drug rebate program rules (which
require state Medicaid programs to cover drugs manufactured by participating manufacturers, regardless of price), these are driving crazy cost spikes in the market. I remember a few years back when Sovaldi came to market with a sticker price north of $80,000 for a round of treatment and very limited prior authorizations out there. The cost ran into the tens of millions for several states before they could crack down and it still runs into the millions every year for pretty much every state. That's for a drug that is only necessary and appropriate for a few hundred covered people.
And then the cost of cancer medicines...The High Cost of Cancer Drugs and What We Can Do About It (Offers some solutions) Is the solution regulatory?
Projecting Income and assets:
What might the future hold for the next generation of medicare
beneficiaries?
Conclusion
While a small share of the Medicare population lives on relatively high incomes, most are of modest means, with half of people on Medicare living on less than $21,000 in 2010. The typical beneficiary has some savings and home equity, but asset values are highly skewed and are significantly higher for white beneficiaries than for black or Hispanic beneficiaries. The income and assets of Medicare beneficiaries overall are projected to be somewhat greater in 2030 than in 2010; yet, only a minority of the next generation of beneficiaries will have significantly higher incomes and assets than the current generation, with much of the growth projected to be concentrated among those with relatively high incomes. Racial disparities in both income and assets are projected to persist for the next decades. As policymakers consider options for decreasing federal Medicare spending and addressing the federal debt and deficit, this analysis raises questions about the extent to which the next generation of Medicare beneficiaries will be able to bear a larger share of costs.
Recent stats - Health care costs are the source of 38% of all debt collected from consumers. And, Medical Bills Are the Biggest Cause of US Bankruptcies: Study
I think that article mistakes rate increases moving in tandem with rate increases driven by costs in other states. I'm actually not sure if it's the article (which really doesn't go there) so much as the headline writer (which does, implicitly). Hikes in TX/OK/NM/MT may be
predictive of hikes in IL, but they generally cannot be
causative of those hikes. Late in the article, one of the experts they interviewed actually references the set of laws I was referring to in my original reply when he says that insurers aren't permitted to make up losses from previous years in rate increases. There are fairly tight controls on what elements can be used to generate an insurance rate -- historical trends, known changes to risk mix, utilization projections, sometimes market-specific inflation -- but an insurer is generally prohibited from baking losses or external costs into their rates. Commissioners' level of control is going to vary by state, but that's a standard from NAIC, so it should be at least fairly ubiquitous.
I did not intend to imply that at all. Insurers aren't allowed to get rate hikes to cover losses in other plans or in other state plans. Thank you for your clarifications. That doesn't mean that the parent company, e.g. BCBS of Illinois, does not coordinate operations, policies and procedures, of course. Rate requests in subsidiaries could be reflective of the insurers' effectiveness of managing costs throughout their subsidiaries, for instance.
There's a formula many state regulatory commissions use which includes the amount of money on hand for unseen losses - a "rainy day fund". Of course, all BCBSs exceed those amounts by a long shot. So, if rate increases were granted using those criteria, BCBS might be getting single digit annual increases?
So, there's an issue I have with all of these kinds of studies (well, not with the studies per se, but more with their use for present purposes) -- obesity costs are certainly rising and they have an annual cost relative to the costs of a healthy person, but determining that they represent a cost to the system requires more than an annual cost, it requires a lifetime cost. What I mean by that is really opaque, so I'm going to try to clarify through very (absurdly) extreme examples. Imagine that the annual chronic care cost of an obese individual is $1, the annual chronic care cost of a healthy individual is $0, and the annual chronic care cost of an aged individual is $10. Imagine further that an obese individual lives 50 years and a healthy individual lives 70, the last 20 of which fall into the "aged" category. So, an obese person will cost $50 over the course of his life, while a healthy person will cost $200, simply by virtue of the fact that the obese person dies before they can pass into the truly expensive "aged" category. Now, even if the costs of obesity triple (roughly in line with the Emory study), obesity will still be a
net savings to the health care system simply because the typical obese person died before he could become truly expensive. The Harvard study also falls into this gap -- it compares the cost of care of an obese person to the cost of care of a healthy person, which is perfect for figuring annual cost (e.g. for determining insurance risk) but is incomplete for determining whether obesity costs the country money.
Obesity is a huge cost to taxpayers and insurance companies - $300 billion a year. Hope this explains how the studies reach this conclusion. Certainly, if someone dies at 70 vs an obese individual dies at 50 with the same amount of health care and productivity, the costs might be similar. But there are so many direct, indirect and life-prolonging therapies for the complications from obesity. (see CDC link in O.P. and tell us what you think.)
Budget Busting U.S. Obesity Costs Climb Past $300 Billion a Year
I want to be clear that I'm not saying obesity is a savings. Just that it's extremely difficult to determine the cost of chronic disease on the overall cost of care. It's the same problem we run into when trying to find savings through improved population health -- it's an incredibly complicated and murky issue. One more thought and I'll leave it: an individual is virtually free to insure for most of his life. It's expensive to be born and then it's almost free to live from 1 to about 55. After that, your costs skyrocket to the point that we'll spend roughly as much in your last year of life as we did on your first 50. Extending life is a wonderful thing, but it's also had the effect of extending the amount of time our population spends in this incredibly expensive span of life. I don't have a good answer for how we bring that in line -- healthy living isn't it -- but it's one of the hard questions of health care funding.
(Response Above)
I actually think that's a bit of a positive outcome of the change. Health insurance is an inherently unhealthy mechanism for financing the purchasing of health care services. To the extent that the change creates the use of prices as
actual signals, I think that's a positive change. Of course, it's an unstable, painful change, as well.
In the end, individuals have to bear the primary responsibility for their health. Those of us who pursue healthy lifestyles are low risk, but are combined with high-risk people to manage risk. It reminds me of how mortgages are bundled except that those with low risk mortgages are not impacted (except for Wall St excesses) with rate increases due to high risk mortgages.
And here's the inverse -- an extremely negative change. Unless you're a fan of single payer, I suppose.
(On five health care insurances dominating the market - my insert)
With 83% of the health insurance marketplace dominated by five companies in the industry, the pricing power, if left unchecked, would be intimidating. Will Congress correct the factors that severely impacting the consumer? But it's free market capitalism - like the drug industry.
How would a single payer system benefit the consumer? Or does this just worsen?
