US Should Lower Co-Pays To Save Money: Study
12 CommentsBy Ed Silverman // December 16th, 2008 // 9:20 am
Imposing European-style price controls on meds in the US would yield only modest savings that would be more than offset by shortened life spans as the pace of drug innovation slows, according to a paper in Health Affairs*. Instead, lowering insurance co-payments would more effectively combat rising prrices in the US, which pays more per capita for pharmaceuticals than any other nation.
“We found policies that regulate the prices of drugs could result in modest savings for consumers, in the best cases on the order of $5,000 to $10,000 per person over a lifetime,” Darius Lakdawalla of the nonprofit Rand Corporation, who worked on two studies appearing in a special report on drug pricing, tells Reuters. “But in many other cases, those policies resulted in very substantial losses to consumers in the form of reduced life expectancy and those would be worth tens of thousands of dollars.”
The paper appears amid an ongoing debate over the use of price controls, which many European nations use to control costs and keep spending lower than in the US. And so the researchers used computer models of price regulation in 19 countries to simulate the impact of price controls that cut pharma revenues by 20 percent. And they maintain that using price controls in the US would cause less investment in developing life-saving drugs, which in the long run would reduce life expectancy.
“We found longevity declines on the order of about a half of year for people at the age of 55 when you look out to people who are alive in 2050 and 2060,” Lakdawalla tells Reuters, adding that a better approach would be to cut co-pays by 20 percent, which would increase US life expectancy by a half year by 2060, as more people take needed drugs and higher drug profits stimulate innovation. “In the best cases it would lead to a benefit on the order of $20,000 to $30,000 per person.”
The paper was funded by a grant from Pfizer and there was also funding from the National Institute on Aging.
Separately, FM Scherer, a professor emeritus of public policy and corporate management at the John F Kennedy School of Government at Harvard University, challenged some of those assumptions in a commentary. He wrote that the researchers exaggerated the long-run costs of price controls, and that the drugs chosen for the anaysis are neither the most therapeutically innovative candidates and nor ones whose development is most likely to be discouraged by price controls.
And in yet another paper in the same issue, three more researchers, including Harvard economist David Cutler, a health policy adviser for President-elect Barack Obama, suggested that drug prices had reached a “turning point.” They noted that while drug prices tripled from 1997 through 2007, spending last year grew just 1.6 percent, the slowest rate since 1974, as many brand-name drugs lose patent protection. As a resul, assumpions about spending based on older trends no longer apply.
“…the focus in the past few years on reducing rates of growth of drug spending is now coinciding with the loss of exclusivity for a substantial portion of that spending. This suggests that further efforts to limit the uptake of new therapies through extension of formulary design to tier four, switching to coinsurance rather than copayments, or reducing the effective period of exclusivity for products might not be necessary. Moreover, the long-term impacts of these measures on both the cost and the quality of health outcomes remain unknown.”
* a subscription to Health Affairs may be required
pharma professional
The Pitney-Bowes experiment, where they dropped the copays for asthma and diabetes drugs, has proved that this lowers overall health care expenses here in the US
Zach
Life expectancies are higher in European countries regardless of price controls due to healthier life styles…..but a pharma blog wouldn’t dare mention that!…because if we stop eating McDonalds and driving to work….we wouldn’t need so many drugs!
Ed Silverman
Dear Zach,
With all due respect, if you read this item carefully, you’ll note that I didn’t offer any opinion about the findings. I decided to let others take a whack, should they wish.
While you make an interesting point - lifestyles count for an awful lot, I agree - to suggest that I deliberately avoided mentioning this issue is, simply, incorrect.
Yes, this site is about the pharma industry and its issues, but if you have read closely over the past two years, there have been many items that are both favorable to - and critical of - the various companies at one time or another. But the purpose is not to slam or promote, but to inform and allow discussion.
In other words, your quick take on my motivation was off base. And for the record, I’m one of those people who mows his own lawn and rakes his own leaves, in part, for the exercise, something I’ve actually mentioned on this site in the past.
Cheers
ed
former marketing exec
Hmm, so, instead of lowering the costs of drugs through government regulation, we are going to lower the cost of co-pays by having the insurance plans pick up more of the cost of the drug? That would last how long - before the insurance companies raise premiums to off-set costs?
Government controls on essential life saving medicines should be seriously considered.
It would be interesting to know what an independent study on this matter might turn up - might be a job for someone in the new government in January…
Anon
Glaxo and WHO indicate that in the near future something like 16 of the top 30 illnesses will be psych illnesses.
There is currently a de-stigmatization effort as well as a screening effort for children underway as well as forced parity (i.e. legally mandated insurance companies must cover equally with other illnesses whereas in the past they have limited coverage).
Atypical antipsychotics are now beign promoted on and off-label for many illnesses they were antipsychotics were previously not used for or considered too dangerous for, e.g. depression, bipolar II, bipolar NOS, ADHD with irritability.
Since atypical antipsychotics have come on the market the life expectancy for schizophrenia has decreased by 15 years.
I will not comment on other diseases but for the pharmaceutical industry this will be a bonanza with increased utilization and possibly resulting in shortened life expectancy and serious long term toxicities especially in children. Based on public statements by Fred Hassan CEO of Schering Plough these children will likely have diminished growth, and cardiovascular disease and increased mortality in their 30’s. However never fear, if Vytorin/Zetia had worked SP would have had another treatment available.
This kind of goes along with today’s article on computer modeling of efficacy for cardiovascular illness doesn’t it.
http://www.pharmalot.com/2008/12/drug-experiment-fda-eyes-simulated-studies/
Which just so happens to be headed up by Bob Powell who was one of Fred Hassan’s VP’s at Pharmacia.
pharmavet
I’m not a statistician, but I’ll bet that if one analyzed the relationship between the change in percentage of R&D spend with change in life expectancy over the past 20 yeara, the correlation coefficient would be pretty low.
Trolla
I agree with the earlier post from Zach. Europeans walk to work and play, take lots of vacation time, limit the amount of junkfood in their diets, and enjoy plenty of supportive relationships and friendships.
Only healthier living will reduce our overall healthcare costs.
pharma professional
former marketing exec
The Pitney-Bowes experiment showed that lowering copays in asthma and diabetes, increased drug compliance, and which resulted in fewer expensive hospital visits and other complications. So, its not just cost shifting, it’s better drug utilization….if its done right.
Pitney-Bowes costs for those two diseases went down about 20%, and they are now expanding the program to selected other categories (e.g., osteoporosis.)
atlex
Ed,
I think you may have buried the lead. My reading of the wire service report and the studies suggest that the bigger news, whether one agrees or not, is that the research suggests that “using price controls in the US would cause less investment in developing life-saving drugs…in the long run would reduce life expectancy.” Obviously, that forms the crux of industry arguments against price controls. Thus data supporting this stance is critical given the likely discussions over noninterference in Congress this coming year.
Atlex
Ed Silverman
Hi Altex,
Yes, that phrase is rather more succinct, in some respects, than the chosen lede, but I can’t look back. Just the same, appreciate you pointing it out.
Regards
ed
former marketing exec
Pharma Professional,
I am familiar with the Pitney Bowes experiment,and the program does have very good merit. The program shows that if you reduce the cost of health care, people are more likely to adhere to treatment and improve their chances of a favorable response to treatment. In the Pitney Bowes experiment they not only look at the drug, but also what it is being prescribed to treat. So, a person who has an essential need for a drug will have lower co pays, whereas another person on the same drug but for “less essential” reasons, even if the drug is indicated for the condition, will pay a higher co pay. It gets a bit difficult to decide which drugs and which treatment are more important. For example someone who is taking an anti anxiety drug will have a higher co pay than someone taking the same drug to prevent a heart attack. However, there are studies that show people who suffer anxiety attacks have a three fold increased risk of suffering heart attacks within five years. Meanwhile people participating in the Pitney Bowes experiment, live first hand with the “cost shifting” that I was referring to.
The Pitney Bowes experiment is a step in the right direction, but still needs a lot of work.
We need to adopt certain parts of the EU health care system - input from the government on the cost of these drugs, incentives to doctors to get their patients healthier - eg. in the UK Doctors are given bonuses if they can get their patients to adopt a healthier lifestyle such as quit smoking, lose weight etc.
We need to do much more to educate our children at a younger age on healthy lifestyle choices, adopting better eating habits, and to step away from the computer and go outside. These are programs that we should all support.
showers
Loved the review I thought the same I cannot challenge it in anyway. Have you got a list of your current review for me to read? I have also created some reviews for you to read on my blog…