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Sunday, February 01, 2004

Drug money

I'm listening to Howard Dean on "Meet the Press" rail against the just-passed prescription drug benefits legislation on grounds that it will give money to drug and insurance companies instead of to seniors.

How exactly are you supposed to have legislation paying for prescription drugs that doesn't channel money to drug and insurance companies?

What does Dean want?  Should we pick seniors who need help paying for prescription drugs and insurance, and give them money — but then forbid them to spend it on prescription drugs and insurance?

What am I missing here?  How can this be understood as anything other than populist demagoguery directed to the extremely stupid?

Comments are open, just in case some browsing Dean supporter can enlighten me.

Posted by Beldar at 10:18 AM in Politics (2006 & earlier) | Permalink


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(1) Zarate made the following comment | Feb 2, 2004 9:20:47 AM | Permalink

I'm not a Dean supporter, but I don't mind enlightening you.

Dean was making an admittedly quick reference to a point he's made continuously in his campaign: that the Medicare bill does nothing to combat ever-escalating prescription drug costs, and that its neglect to do so constitutes de facto protection of them. In fact, the law includes a provision that prohibits the government from negotiating lower prescription drug costs, and increases the penalty for importing drugs from Canada.

Dean's position is that prescription drugs need to be more affordable, and regulating the industry to keep prices low is an acceptable means to that end. Current marketing practices are the major contributor to escalating drug prices; the law's failure to address any aspect of price control--except to specifically prohibit it--is what Dean is referring to when he states that too much money is being given to the pharmaceutical companies.

PS: Google is your friend; "dean medicare" would've have gotten you the above pretty quick.

(2) Augie De Blieck Jr. made the following comment | Feb 2, 2004 12:07:52 PM | Permalink

Having worked in a pharmacy for a number of years and growing up with a pharmacist for a father, I can tell you what's driving the prescription costs through the roof: insurance companies.

The average consumer doesn't see what they pay for prescription drugs anymore. They have their $5 or $10 co-pay, and then rail against the pharmaceutical companies the second their co-pay increases to $10 or $15, on a drug that would normally cost them $100 without insurance.

But, hey, the insurance company is covering it, so what does it matter? The insurance companies run the pharmaceutical business these days, right down to telling the doctors which drugs they can and cannot prescribe by way of lists of pre-approved prescription drugs.

And the pharmacies are built around insurance plans. It's their only way to get the kind of money flowing in that they need to survive. And the independent pharmacies go out of business because they can't keep the same low profit margain that a CVS or an Eckerds can. And those companies do it by lowering their overhead to the point where they rarely have enough pills in stock to cover a full prescription. Why risk having those pills sit on a shelf unsold for -- gasp! -- a full week or two? That's a waste of shipping costs, or something.

Sorry, I think I'm just rambling now.


(3) Zarate made the following comment | Feb 2, 2004 2:45:14 PM | Permalink

Well, Augie, being presently employed by a health insurance company, I can tell you that you're half right. Sure, co-pays shield consumers from the true cost of prescription drugs, but remember, health insurance companies don't set these co-pay amounts ... employers do. Consumers consider good health coverage to be an essential component of job compensation, and push their employers to give them the best benefits possible. When co-pays go up, consumers don't rail against pharmaceutical companies, they rail against their HR department. The reason they're shielded from the true cost of health care is because they like it that way.

When you think about how insurance works, health insurance companies make more money when co-pays are HIGHER, because consumers are less likely to go the doctor or buy a brand-name drug. Insurance companies have been trying for years to make employers raise co-pays and educate their employees about the true cost of health care. But during the days of the good economy, companies weren't listening ... it was all about the perks, and employers were willing to foot the bill. Now that things have cooled off, employers are looking at how their percentage of health care costs has skyrocketed, and you're finally starting to see higher co-pays, higher contrib rates, and more consumer education.

The pharmaceutical companies, meanwhile, took advantage of the situation and began a marketing frenzy. They knew that consumers had the real power to spend their employers' money. Congress helped them out by lifting a TV ad ban and loosening restrictions on print ads. There's also some shameful hanky-panky going on between drug companies and health care providers, and yes, in rare cases, between drug companies and formulary (preferred drug listing) administrators.

Prescription drugs are not like candy bars or milk, where the economy is fairly simple and pretty much regulates itself. It's complicated by the health care industry, the health insurance industry, and the job market. It's begging for regulation, but guess who doesn't want it? Pharmaceutical companies.

And the people that have been hit hardest by the health care crisis are those who pay for their own coverage and those that are limited in their choices, i.e., the self-employed, the unemployed, and seniors. That's why the recent Medicare reform upsets Democrats so much, because it's a well-intentioned bill that ends up being negatively affected by special interest pressure from big business.

(4) Beldar made the following comment | Feb 3, 2004 3:39:04 PM | Permalink

Zarate, your explanation makes more sense than Dean's, but I'm not at all sure it's what he meant. I'd actually looked at his position papers on his campaign website, but couldn't make the leap from what they said to what I heard him saying on TV.

Of course, if he said on TV what you translate him to have meant — and which really translates into "I'm in favor of price controls like they had in Communist Russia" — that would tend to drive away even the very stupid populist voters. I still think he was engaging in shallow demagoguery.

Augie, I don't think you're rambling at all. I agree, in fact, that a major problem with insurance — not with insurance companies in particular, but with the concept of insurance and the way it translates into practice — is that it dilutes or even removes any incentive for health care consumers to make rational economic decisions. That makes me quite receptive to fairly radical free-market-driven solutions which are almost certainly politically unthinkable.

Crushing or trying to constrain Adam Smith's "invisible hand" gets you a healthcare system that at its best looks like Canada's and at its worst, and unfortunately its inevitable, looks like the Soviet Union's or Cuba's.

Thank you both for posting!

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