Friday, October 12, 2007

When It Comes To Drug Prices the Europeans Are Better Health Care Capitalists Than We Are!

Sometimes I think the government-run European health care systems do a better job of using market tools to control their drug prices than we do in the U.S. market.

For example, some government-run systems in Europe, France for example, are not afraid to take a drug off their official formulary if they don't get a competitive price.

In January, the Democratic House passed a bill requiring Medicare to negotiate prices with the drug industry. But for all their election-year bluster last year, the Democrats put no teeth in the measure. When the day was done, Medicare would have had no power to take a drug off the approved list if the government didn't get a good price. But being able to walk away from a vendor is how good capitalist market negotiations work. Would you go to the Chevy dealer, tell them you are going to buy the car no matter what the price, and then demand a better price and expect to get it? But, that's exactly what the Dems put in their Medicare drug price negotiation bill.

That bill later died in the Senate.

It is ironic that Part D insurance companies have the right to exclude a particular drug from their list if they can't get a good price--although they rarely do. Insurers are rightly required to include a wide range of drugs in each class--but not every drug available in a particular class.

It looks like those "sissy" Europeans have turned out to be better market capitalists once again.

This from today's Wall Street Journal:

"To overcome European state-run health-care systems' increasing stinginess about paying for new drugs, some pharmaceutical companies are taking a novel approach: pay for performance.

"Johnson & Johnson has promised to reimburse Britain's National Health Service when patients don't respond to the U.S. company's blood-cancer drug Velcade, in a deal expected to start later this month. In France, J&J has made another agreement on its schizophrenia treatment, Risperdal Consta, offering to pay back the French health-care service some of the money it spends on the drug if tests don't show the injectable medication helps patients stay on regular doses.

"And France's health-care service says it has discussed pay-for-performance contracts with GlaxoSmithKline PLC, but won't reveal details. A Glaxo spokeswoman says the company has talked with European governments about "pricing-for-value" deals, but declined to provide specifics.

"Drug companies are offering these deals instead of simply lowering prices in part because they are fearful of setting precedents that would cause insurance payers world-wide to demand price cuts.

"J&J spokeswoman Kate Purcell says J&J decided to offer a rebate on Velcade instead of lowering its price. "We know our drug works" and "don't accept that our drug wasn't cost-effective," she says. British officials had recommended late last year that the NHS not pay for Velcade because they didn't think the expensive drug was effective in enough people. A full course of Velcade can cost up to $49,000 per patient. J&J then offered to reimburse the NHS, in either cash or product, for patients who don't respond adequately to treatment.

"In the U.S., health-care payers -- which include employers and insurance companies -- have traditionally been more generous than European health-care services in paying for new drugs. Even so, Hartford, Conn.-based insurer Aetna Inc. is exploring pay-for-performance deals with drug makers..."

Let me repeat that last line: "In the U.S., health-care payers -- which include employers and insurance companies -- have traditionally been more generous than European health-care services in paying for new drugs."

Much is made about a government-run systems ability to unilaterally negotiate a price and therefore drive the cost down.

However, it has been my observation that in many European systems what they really do is go to the drug company and tell them straight out if you don't drop the price you will not be on our list. They pit one vendor against the other. Isn't that what we want the U.S. government to do when it comes to buying airplanes and tanks?

Is that government price controls or darn good capitalist negotiation?

Once again, when it comes to drug prices, some of these Europeans look to me to be better capitalists than we are!

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