Category Archives: Uncategorized

Ambien (zolpidem) Sanafi-Aventis’s blockbuster sedative was due to come off patent last October.  The FDA for whatever reason extended the patent 6 months to allow for further study of it’s use in children. 

This drug earns about a billion dollars a year for it’s manufacturer.  The company realizing it will be losing this revenue stream to generics recently received FDA approval for a controlled release version of Ambien (Ambien CR) which will be protected by patent for another two decades.  Releasing long acting versions of old drugs is almost standard practice in the pharmaceutical industry.  Long acting versions of old drugs extend the revenue stream with minimal investment.  In the case of Ambien CR there have been  no studies comparing it with either the original drug or other sedatives (it was approved after comparisons with placebos) so it is questionable that this new expensive medication offers any advantages.

To assure that patients will move from the original to the newly released drug Sanofi-Aventis raised prices.  According to AARP Ambien’s price increase during the first six-months of 2006 was the highest among the top drugs sold in the U.S.  It sounds counterintuitive but here’s how this works.  Ambien 5 mg went up 13.3% and Ambien 10 mg 9.9%. A  $100,000,000  increase in revenue from a one billion dollar seller.  The price of Ambien now exceeds that of the new medication, Ambien CR.  So, of course, it’s logical to switch your patients to the new medication, it’s cheaper–and also offers Sanofi a secured revenue stream.  Meanwhile, of course,  there are generic sedatives that work just as well for a small percentage of the  $3.00-4/pill Ambien.  Temazepam (generic Resteril), for example, sells for about $5.00/month.

Ambien’s development costs have long ago been amortized.   Despite this, prices for Ambien have been increased at rates that far exceed inflation.  As a matter of fact Ambien when originally released 100 pills cost about $150.  Now that $150 approximates the cost of 30 pills.  So over the course of the patent (since 1993) it’s price has more than tripled.  Overseas the cost of the drug is about 1/3 to 1/2 that which we pay here.

America is the monopolist’s dream.  A place where profits and patents trump the public good, where price manipulation is the norm and where negotiation (Medicare Part D) is a dirty word.

The Times has this sobering assessment of the distortion in priorities caused by the war in Iraq. 

It is routine for pharmaceutical companies to claim a huge amount, as much as $400,000,000, as the opportunity cost of investing in a new drug’s development and simply add that to the real cost.  While I question the validity of such an assumption when documenting the actual cost of a commercial product, should we, as a society, do the same with this war.  It’s 1.2 trillion dollar cost, does affect our other priorities and of course, adds to the national debt.  Is the real cost 2.4 trillion?

Interesting coalition for changes in health care.  It is essential that somehow we sift out the special interests of the Health Care Industrial Complex and arrive at a solution in which the patient is the  beneficiary.

But how do we deal with such insightful thoughtful observations as this from John McCain–"I want to keep health-care costs down until I get sick, and then I don’t give a goddamn." 

This story about companies offering clinics for employees reminds me of my Uncle Abe’s story about the man and the new suit.

(Told originally with yiddish interspersed) This man goes his tailor and after much bargaining has a suit made.  When he goes to pick it up he finds one arm too long, the other too short, one leg too short and the suit too long.  He asks the tailor to fix it but the tailor suggests that he do the following.  He should simply extend one arm, pull in the other, bend the knee of the leg that is too short and pull up the suit a bit by lifting his shoulder (this was much better with Abe demonstrating the fitting with a smelly dead cigar in his mouth). ” There” said the tailor, as he showed the man the door,”it fits perfectly!!”

Our health care system is being distorted in various ways and politicians keep telling us how well it fits (“best system in the world, etc”).  However, there are significant objections to employer organized clinics: 

1.  The clinic would have fatal conflicts of interest.  Who is the health care provider working for?  Will saving money for the employer trump the best possible care for the employee.  The appearance of a conflict undermines confidence in the provider and clinic. 

2.  Confidentiality is essential and also impossible in such a setting. 

3.  Should an employee become sick and need to stop working who provides care? 

4.  We talk about choice as being desirable, where is it? 

5.  There is no continuity of care–although this is becoming a fleeting goal of our non system–a little like a suit we’re told this will fit perfectly.

There must be a better way.  Our country spends more, by 50-100%, than other industrialized countries for health care yet our health care statistics are mediocre and 45 million of our citizens have no access.  Are we educable?  Can we learn from others or must we stumble through a wilderness of ill fitting expensive solutions for another 40 years?

What are we fighting for?  Retirement after 20 years, free health care and/or free health insurance for life, free dental care or dental insurance, a health care system developed for the employees and his/her family’s special needs, free or almost free housing, paid utilities,  food allowances, educational subsidies, limited access  food markets and superstores,  sponsored or subsidized recreational facilities, subsidized child development centers and reasonably competitive salaries*.  Our conservative friends will say that such a society is blasphemous, socialistic, and counterproductive.

Yet those are the benefits our military savor and indeed fight for.  It is a fact that the  military exists in an almost seamless government subsidized "socialized" system.

Don’t misunderstand me, I don’t have problems with the benefit structure, by their service our soldiers deserve all we can provide.  I do simply wonder whether some similar benefits should be available for those who pay the bills–and will pay today’s bills forever in the future?

* Competitive salaries  "Military pay is not really all that bad. Now, the bad news: It also ain’t all that great, either. What I mean by that is that for a brand new high school recruit, with little or not work experience, it would be hard to find a better starting wage. However, for an enlisted member with years of experience, trained in a critical technical specialty, it’s not all that great when compared to wages for a similar civilian job."

Leavitt’s self serving piece on Medicare doesn’t deal with the 200 million people who have no access to the Medicare benefit and are at the mercy of the Health Care Industrial Complex’s monopolistic practices.  In addition, the prices of medications in the plans are discounted not because of great negotiated prices by the insurer but because  the government is providing subsidies to the program.  As noted below negotiating prices will result in lower costs to the program.

This from Representative Stark’s website:    "REALITY: Prices under the private drug plans in Part D are 75 percent higher than those negotiated by the Veterans Administration. Prices are also 60 percent higher than in Canada, 5 percent higher than at Drugstore.com, and 2 percent higher than at Costco [New Medicare Drug Plans Fail to Provide Meaningful Drug Price Discounts in the San Francisco Bay Area, Committee on Government Reform, Minority Staff, 03/06/06]. They are even higher than the prices in the preceding drug discount card program [Medicare Drug Plan Prices Are Higher Than Medicare Drug Card Prices, Committee on Government Reform, Minority Staff, 02/21/06]. The Medicare Modernization Act prohibited the government from using the clout of more than 40 million beneficiaries to negotiate for lower prices. The MMA also divided the population into smaller groups, also undermining the ability of the private sector to negotiate. To the extent beneficiaries are saving money, they are doing so thanks to government subsidies, not good discounts."

Medicynic’s modest proposal is to negotiate and make prices public, hopefully shaming PHARMA into providing similar savings to everyone. 

Never was the point of the title of Gore’s film more clearly demonstrated than in this dispute in Federal Way Washington. The Flat Earth society is back!

Paul Krugman’s New Year’s article pointed out the need for a system of health care in our country. It’s good reading.

Similarly, I came across a syndicated financial column by Malcolm Berko. It points out the outrageous billing practices encountered in the current non-system of health care. His point is that there is no incentive for either the providers or the insurers to be more efficient. Prices and insurance rates go up in lock-step. The concept of value in health care doesn’t exist.

Berko notes:

“I’d like to know why you don’t “gritch” about a $30,444 hospital bill plus $3,882 in medical supplies for an appendectomy patient who had a five-day stay. And how fair is a $7,809 emergency room charge to X-ray and cast a fractured fibula? But I’d really like to know why Aetna and Blue Cross paid those outlandish charges without a peep (but nickel and dime every doctor) using our premium dollars.”

“Last year the Big Eight (ed note: health insurers) reported net profits of $19 billion plus free cash flow of $22 billion. Holy moly! That’s $41 billion – easily enough to pay the health care costs for all of those 41 million uninsured. The top five officers at each of the Big Eight health insurance companies received $237 million in compensation last year. That’s a shameful use of our premium dollars. Those Big Eight health insurers employ more than 300,000 people, each of whom is paid a salary with benefits averaging $40,000. Well, that number computes to $12 billion and not a penny of that is used for health care. Certainly a shameful use of our premium dollars.”

Consider also that these insurers have overheads estimated at over 20% compared with the published 2% of Medicare–critics say that this is understated and that the real overhead of Medicare is 5%, still not bad in comparison with the private providers.

Add that to the obvious culture of waste in the private insurers. In a cost plus system there is no particular incentive to hold the line on costs.

It is a fact that the salaries and option packages that health insurance executives enjoy are generated from your health insurance premiums. It’s also sadly obvious that health care is a business first and that the customers/patients have become cash cows that provide a revenue stream.  How else to explain the runaway costs at every level of service provided.  The major beneficiaries are the the corporations, their executives and stock holders. What’s wrong with that picture?

Highest compensation package, exclusive of unexercised stock options
NAME              TITLE         COMPANY           COMPENSATION
William W. McGuire  CEO    UnitedHealth Group     $54,129,501
Wilson H. Taylor Rtd, chair         Cigna                 $24,741,578
Ronald Williams Exec VP         WellPoint                $13,205,631
W, Donaldson Chair       Aetna/U.S. Healthcare    $12,650,393
Leonard Schaeffer Chair/CEO  WellPoint               $11,127,465
H. Edward Hanway Chair/CEO    Cigna                   $9,478,634
D. Mark Weinberg Exec VP      WellPoint                $8,957,410
Richard Huber Ex-chairCEO Aetna/US Hlthcare       $6,988,987
William Pastore President          Cigna                   $6,779,028
T. Jones Pres Retir/invest          Cigna                  $6,055,314
Source: http://www.managedcaremag.com/archives/0109/0109.compmon.html

Executives with the largest value of unexercised stock options
NAME                 TITLE       COMPANY           COMPENSATION
William W. McGuire   CEO      UnitedHealth Group    $357,865,646
Stephen J. Hemsley  Pres/CEO  UnitedHealth Group $144,928,886
Norman C. Payson  Chair/ CEO  Oxford                  $115,375,414
Wilson H. TaylorRetired chair     Cigna                    $66,141,372
Leonard Schaeffer Chair/CEO   WellPoint                 $64,610,759
H. Edward Hanway  Chair/CEO   Cigna                    $43,385,939
James G. Stewart Exec VP/CEO Cigna                    $41,049,922
Jeannine M. RivetExec VP/CEO, UnitedHealth           $39,450,395
R. Channing Wheeler   CEO     Uniprise United Hlth  $32,506,870
John W. Rowe  President & CEO Aetna                   $25,026,549
SOURCE: HEALTH PAY FOR HEALTH PLAN EXECUTIVES, JUNE 2001, FAMILIES USA, WASHINGTON

I know this will come as a shock. But there are conflicts of interests at every level of the medical establishment.

In our market driven culture we think transparency is essential, that is price and product information must be available to consumers in order to determine utility and value. But what if the system is set up to obfuscate and subtly deceive? In health care price is obscured; patients are often in crisis and unable objectively evaluate information; and information available about the medical product, procedure and outcome is biased. This article in the NY Times points out some of the problems with industry sponsored research.

This is from the Patented Medicine Review Board in Canada. It shows the current pricing of Avastin, a drug that prevents new blood vessel development in tumors. You will note that the tax for being a U.S. citizen and having a cancer diagnosis requiring Avastin is a price premium of 50%.

A course of treatment of Avastin, with other medication, for colon cancer lasts on average 10 months and may prolong the life of the patient 4-5 months (no cures). The cost for Avastin alone is $44,000 –it essentially doubles the cost of treating the disease.

The dosage of Avastin in breast and lung cancer is double that of colon cancer. For these patients, a course of treatment will approach $100,000 for the Avastin with another $30-$50,000 for other medicines and procedures. Such treatment offers no chance of cure and only a limited extension of life– 2 months for lung cancer, 6 months progression free survival improvement in breast cancer.

To paraphrase Everett Dirksen, $100,000 here $100,000 there, pretty soon we’ll be talking real money. It’s wonderful that there has been progress but can we afford it? Is it reasonable to pay $100,000, an amount that is more than double the median and average incomes in country for 2-6 month improvement in survival?

Genentech the manufacturer of Avastin has magnamiously offered to place a $55,000 ceiling on an individual’s expenditures for this drug if they have an income of less than $75,000/year. No one would accuse the pharmaceutical industry of generosity with such an offer.

In reality we could all save the 50% premium (see Canadian data paragraph 1) that we are being charged if we simply negotiated with the manufacturer.

Despite such logic and the immorality of price gouging in health care, there are cries of agony from PHARMA’s friends.

One hopes that the new Congress will look carefully at this issue and do the right thing.