Editor’s Note: President Brody is traveling overseas this week and requested that we once again run this column for its continuing timeliness. It first appeared in Change in the June 18, 2004, issue.
By a serendipitous juxtaposition of events, I happened to spend a Saturday with a CEO of a major pharmaceutical company last winter, and on the very next day I had a chance meeting with a noted health care economist (not from Johns Hopkins, by way of disclaimer). To each I posed this identical question: “What do you think of the recently enacted Medicare drug benefit legislation?”
From the pharma CEO came the reply (paraphrased slightly), “It’s a terrific piece of legislation. It will give our seniors access to the drugs they need to ensure their health.”
And from the health care economist: “A very bad piece of legislation. Seniors will have a hard time figuring out how to avail themselves of the benefits by way of the drug discount cards, and the costs of implementation haven’t been fully acknowledged by the administration.”
I quickly surmised that the pharmaceutical companies must have scored a major victory. I must admit I was nonplussed by the CEO’s gleeful response initially, since I knew that the pharmaceutical industry had long been opposed to government-backed drug benefits, as they believed that price controls would inevitably follow. Of course, as we know, the Medicare legislation specifically forbids the government from negotiating prices for drugs with the pharmaceutical manufacturers and opts instead to allow a secondary private market to offer the so-called drug discount cards. Still, I wondered why the drug companies would be pleased with any program that provided an option for discounting.
Wondered that is, until recently, when I came across an article in USA Today, which quoted two studies documenting significant increases in drug prices in the four years prior to enactment of the Medicare drug legislation. One study, commissioned by AARP, looked at 155 brand-name drugs and found a price increase of 27.6 percent over four years compared with a 10.4 percent inflation rate. In 2003 alone, prices for these drugs increased 6.9 percent, more than triple the 2.2 percent inflation rate. The second study, by Families USA, documented similar increases.
Of course, this is hardly news to health care providers, who have seen pharmaceutical costs for hospitalized patients rising often by double digits annually, driven both by expensive new drugs as well as inflationary pricing.
I teach an undergraduate class called “Uncommon Sense” that focuses on reasoning and problem solving applied to real-life situations. One of the things I talk about is interpreting human behavior. I advise my students that when they can’t understand why someone behaves in an unpredictable way, they should look for “sex, drugs or money” as a possible causative factor. In the case of an industry acting seemingly against its stated interests, and including Viagra in the equation, maybe what we should be looking at is sex, drugs and money.
