Pharmaceutical pricing and healthcare access: lead policy agenda: rising healthcare costs and pressure to expand healthcare coverage focus public attention on the costs of prescription drugs - Washington Report

Despite enactment of Medicare prescription drug legislation last year, healthcare coverage and costs remain prime concerns for the nation. Proposals to expand coverage for the growing number of uninsured Americans are attracting more attention, along with initiatives to curb the rising cost of prescription drugs. These proposals continue to spur calls for access to lower cost drugs from Canada, while FDA promotes generic drugs and new drug development as better ways to improve public access to needed medicines.

Democratic contenders for the White House are touting a number of healthcare proposals, which they claim will help more of the nation's 43 million uninsured obtain care than will less-ambitious initiatives proposed by the Bush administration.

The campaign to cover the uninsured gained impetus from a report issued by the Institute of Medicine urging policymakers to establish a universal health insurance system by 2010. The panel announced in January 2004 that current incremental coverage efforts are failing to reduce the number of uninsured, resulting in inadequate care and catastrophic costs for millions of Americans (see sidebar, "Coverage for all").

Rising expenditures

The continuing rise in US spending on healthcare is spurring the debate. Total outlays on healthcare and products hit $1.6 trillion in 2002--nearly 15% of the nation's total economic output (gross domestic product). The main factor driving these outlays is rising hospital bills, but increased expenditures for prescription drugs are a prime culprit in the public's eye. The main reason is because many people have to pay for their medicines out of pocket.

Drug spending rose by 15.3%, an increase that is actually slightly less than it was for the previous two years, but still greater than that of other healthcare components, according to an analysis by the Department of Health and Human Services (HHS), which was published in the January-February 2004 issue of Health Affairs. The HHS analysts note that demand rose for pharmaceuticals in 2002 but was offset by several factors, including:

* States made greater use of preferred-drug lists and prior-authorization policies for Medicaid and pharmacy assistance programs.

* Fewer new drugs with premium prices entered the market.

* Direct-to-consumer (DTC) advertising declined slightly.

* Generic drug prescribing rose.

* Healthcare plans and payers boosted tiered copayments.

This last trend is important in the political arena. Although only about 10% of US healthcare spending involves prescription drugs--a percentage that has remained fairly steady during the past 30 years--consumers now are shouldering a larger share of the bill. Drugs account for 23% of what Americans had to pay themselves on healthcare and for more than half of the total increase in all out-of-pocket healthcare spending in 2002.

Modest Bush proposals

In his January 2004 State of the Union speech, the President offered proposals for expanding access to healthcare, although domestic policy initiatives ran a poor second to the administration's emphasis on the need to guard against international terrorism. Bush declared the rising cost of healthcare a "critical issue," but largely reiterated previously announced market-based approaches for expanding coverage and controlling healthcare costs. The President called on Congress to make healthcare coverage more affordable by taking action to:

* adopt additional tax credits to help low-income individuals purchase health insurance

* permit a tax deduction equal to 100% of the cost of catastrophic health insurance when purchased as part of a health savings account

* support formation of association health plans, which allow small businesses to pool together to purchase less costly health coverage for employees

* reform the medical malpractice system by seeking limits on damage awards in malpractice suits as one way to curb rising provider fees and insurance premiums

* computerize healthcare records to reduce medical errors and improve care.

Democrats seek more

Democratic candidates for the White House are offering more-ambitious plans to expand coverage for the uninsured, along with proposals to curb prescription-drug prices to limit government spending on healthcare. The challengers aim to keep healthcare at the top of the political agenda.

Advocates of single-payer plans have pretty much dropped by the wayside. Republican Dennis Kucinich (OH) sought to expand Medicare into a national single-payer system at a cost of $6 trillion over 10 years. Republican Richard Gephardt (MO) proposed a $2.5-trillion 10-year program that mandated employer coverage, with tax credits to offset employer and individual costs.

Other Democrats have offered more-centrist initiatives including:

Governor Howard Dean (VT). The doctor from Vermont proposes a major expansion of Medicaid and children's health programs plus tax credits for individuals to purchase coverage, new group purchasing options and incentives for employers to offer coverage. The program aims to cover 31 million uninsured at a cost of almost $1 trillion over 10 years. Cost-containment provisions would control pharmaceutical costs by boosting regulation of DTC advertising, thereby reducing patent abuses, promoting formularies, and encouraging state drug cost control programs.

Senator John Edwards (SC). The most modest Democratic proposal relies on tax credits and broader public programs to expand coverage to more children and parents. It would spend $590 billion over 10 years to cover 22 million. Edwards advocates controls on DTC advertising, an expansion in comparative drug efficacy information, and penalties for companies that overcharge the federal government.

Senator John Kerry (MA). A major expansion in Medicaid and children's health programs plus tax credits for individuals and employers and new group insurance options would extend coverage to 27 million uninsured at a cost of $900 billion over 10 years. The proposal controls pharmaceutical costs by promoting generic prescribing and encouraging state discount programs.

Senator Joseph Lieberman (CT). This more-balanced plan offers a mix of tax credits for individuals and small businesses, new group purchasing options, incentives for employer coverage, and public program expansion with a special focus on coverage for children. It would spend $747 billion over 10 years to cover 32 million uninsured. Lieberman also emphasizes initiatives to improve quality of care by speeding generics to market, permitting safe drug reimportation, promoting disease management, and reducing medical errors.

Several Democrats also emphasize the importance of supporting biomedical research. Lieberman wants to encourage increased use of evidence-based medicine and more R&D. Ret. General Wesley Clark, Dean, and Lieberman have said that one of their first actions as president would be to cancel the Bush administration's curbs on stem cell research.

States seek imports

With elections looming, though, Congress is unlikely to approve any major healthcare initiatives proposed by the Bush administration or the Democratic contenders. The legislators will hold hearings about proposals for covering the uninsured, but chances for action are very low. Democrats on Capitol Hill also want to expand the Medicare pharmacy benefits program, primarily by strengthening controls on pharmaceutical prices and permitting drug reimporting. However, Bush has threatened to veto any bills revising the Medicare program, further dimming prospects for healthcare initiatives this year. Instead, the Bush administration will be busy implementing the highly complex Medicare legislation, starting with a pharmacy discount card (see sidebar, "Medicare discount cards to offer first pharmacy benefits").

This puts pressure on state governments to find new ways to hold the line on pharmacy bills for Medicaid and state prescription drug programs. Despite continued opposition from FDA leaders, governors and local officials are lining up to seek access to lower-cost Canadian prescription drugs just across the border:

* A West Virginia proposal calls for partnering with a wholesaler that would purchase drugs from Canada to distribute to state pharmacies.

* New Hampshire wants to establish a state Web site to provide residents with access to certain certified Canadian pharmacies. The state also would purchase Canadian drugs directly for its prisons and Medicaid beneficiaries and provide options for state retirees.

* Minnesota is developing a Web site to identify credible and accredited Canadian Web sites for state citizens to access.

* Vermont asked FDA to approve a program that requires Canadian doctors to review patient medical histories and write prescriptions that would be filled by licensed Canadian pharmacies.