Generic Cancer Drug Shortage

Today’s Managing Health Care Costs Indicator is 14

Ezekiel Emanuel has a column in this weekend’s NY Times  pointing out that there are currently national shortages of 14 of 34 generic cancer drugs currently on the market.  As a result, oncologists are rationing care, and some with leukemia are unable to receive the standard care.  Here’s a link to a Boston-affiliate public radio interview on the same topic.

The underlying problem here is that the 2003 Medicare Part D act, which limited oncologist payment for chemotherapeutic drugs, also put in place a cap of price increases for these generic drugs.   This cap, while well-meaning, has turned out to be too low to support new generic company capital investments in plants to manufacture generic chemotherapy drugs .

It’s possible that we’ll need some type of price control for branded pharmaceuticals.  Sometimes a branded oncology drug costs as much as $90,000 – and there is no competition for unique medications still under patent.   However, price controls can cause unexpected market distortions – like the problem we’re having now with oncology medications.  European governments extensively regulate drug prices, but their generic cancer drugs prices are higher than ours, and they are not suffering from supply shortages.

I’ve written in the past about apparent drug discounts which can actually raise overall costs.  In many cases a pharmaceutical company offers a discount to patients, which undermines a higher differential cost patient share and eliminates price sensitivity.  This raises the average price paid by all purchasers.

The shortage of generic cancer drugs is another example where the lowest unit price doesn’t lead to the best value in health care purchasing.

Health Care Adds Jobs

Today’s Managing Health Care Costs Indicator is 26.8%

The Bureau of Labor Statistics reported that health care added 31,300 jobs in July – over a quarter of the new jobs added in the US.

The underlying problem is likely that we aren’t adding enough jobs in the rest of the economy.  There are good reasons why we might be adding more jobs in health care than elsewhere – as our population ages. 

Still, this is a great illustration of our mixed emotions about the cost of health care.  As long as health care is adding 26.8%  the new jobs in our economy , the cost of health care will continue to grow at a faster rate than the overall economy.

We can’t celebrate health care job growth at the same time we complain of increasing health care costs.  Earlier post on this topic. 

A brief personal note.  The Pan Mass Challenge was a great ride this past weekend – about 190 miles cycling from Sturbridge to Provincetown, and about $30 million raised for cancer research.   I had three flat tires, and the sky sprinkled us a bit –but the rain held out until after we reached the end of the ride.  A few hundred of the ~5000 riders were cancer survivors, and cancer has touched all of our lives.  I spend a lot of my time most weeks thinking about how to make health care cost a bit less.  From my saddle, I spent this past weekend thinking about how we have to invest more in research so that more people who are afflicted with cancer can live long, normal, healthy lives.  

2011 Health Care Lobbying Intensifies

Today’s Managing Health Care Cost Indicator is $119,267,285

Click to enlarge. Source 

Good article in the Washington Post yesterday about how the debt ceiling bill will pit the health industry lobby against the defense industry lobby.  Both are highly invested in a Congressional settlement to avoid mandatory cuts, which could be devastating for each industry. The number above is the spending so far this year for pharma industry lobbying. There’s also an intriguing article in Bloomberg Business Week analyzing the debt ceiling imbroglio from a game theory perspective. It asserts that the outcome was inevitable given each party’s position. The author considered the Democrats, the Republicans, and the Tea Party separately.

The grid above shows lobbying expenses by industry for early 2011.  It’s from the Center for Responsive Politics, which does a great job of displaying this information in a timely and accessible fashion.  You can drill down at their site to see lobbying expense by industry segment and by company.

I’ll be off blogging for the weekend – cycling my fourteenth Pan Mass Challenge from Sturbridge to Provincetown, Massachusetts.  It’s 192 miles and raises money for cancer research.  I’ll be tweeting the ride @jeffnlinda. 

Mandatory Coverage of Contraception Could Increase Use of Expensive Agents

Today’s Managing Health Care Costs Indicator is $919.86

Click to enlarge. Source: Drugstore.com 

Full coverage of contraception should be a money-saver, as I noted in an earlier post.    However, my reading of HHS’s announcement makes me worried that the requirement for health plans to cover all contraceptives, regardless of cost, could lead to much higher use of less cost-effective birth control options.   

The new regulations require that  long-term contraceptive methods, such as an IUD, be fully covered, even though the woman might well be on a different health insurance plan a short while after receving this.  This is good from a societal point of view.  The long-term contraceptives (IUDs and depo-provera) are more reliable, since they don’t require users to take a pill or insert a device frequently. This increases effectiveness in real-world use, and these long-term agents tend to cost less over their duration than oral contraceptives.

Here's the worry with mandatory access to all contraceptives without patient cost-sharing.  There is a ten-fold difference in price between generic oral contraceptives and newer, heavily-marketed, branded oral contraceptives.   If insurance companies are mandated to cover each with no patient cost sharing, we could see a migration from cost-effective generics to newer drugs which cost far more and are not any more effective.  Further, when physicians prescribe these newer medicines, they don’t know whether broad community use will unearth side effects not recognized during limited pre-marketing testing.

My suggestion – the regulations should be clear that patient cost sharing is not allowed for generic oral contraceptives. Patient cost-sharing does lower utilization, and there are some costly medications which could otherwise increase the cost of health care.  Ideally, regulations should also set a maximum acquisition cost for longer term contraceptives to prevent massive future price increases.