LTC Bullet:  Drugs, Technology and LTC

March 15, 2002


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*** Items to be added to our donor-only zone "LTC Week in Review" feature on Monday, March 18, 2002 are listed after this Bullet and before the boilerplate. ***

What's the connection between drugs, technology and long-term care?  An interesting juxtaposition of articles on the pharmaceutical industry got us thinking about that relationship recently. 

On the surface, the connection is very simple.  When medicines and technology can delay the onset or control the symptoms of chronic illness, everyone wins.  Patients benefit; physicians are more effective; and drug companies profit. 

Disease management is a good example.  According to an article in the Wall Street Journal (1/4/2), disease management is the close monitoring of patients with chronic ailments such as heart disease, diabetes and asthma to prevent symptoms from worsening into life-threatening events, such as heart attack or stroke.  "The need is great for better tools in disease management . . ..  [C]hronic diseases account for more than 75% of national direct medical expenditures.  The number of Americans suffering from chronic conditions, now nearly 100 million, is expected to increase to 157 million -- half the population -- by 2020, as aging Baby Boomers deal with heart disease, arthritis, hypertension and other ailments.  About 80% of those 65 or older now have at least one chronic condition."

Who's pushing "disease management"?  Nancy Steele, vice president of Pfizer Health Solutions, a unit of the pharmaceutical giant, says effective disease management "is the one remaining opportunity to make the U.S. health system cost-effective."  Indeed, it is not difficult to see the staggering potential value of disease management to our long-term care service delivery and financing system.

Consider another aspect of the relationship between drugs, technology, and long-term care.  Forbes Magazine (1/7/2) ran an article about the huge risk another pharmaceutical giant is taking "Betting on the Brain."  Patent protection is about to end on meds to reduce cholesterol and control high blood pressure that Merck--another big pharmaceutical company--developed in the 1980s and '90s.  So Merck is "taking a giant gamble on the last big frontier in medicine:  the brain."  The company "will spend nearly $400 million of its $1 billion basic science budget on brain research this year, up tenfold from five years ago."  Merck wants to do for "Alzheimer's disease, stroke, Parkinson's and schizophremia" what the company did for heart disease:  "Thousands of people are living longer, and Merck has reaped billions in profits."

What do Pfizer's advocacy of disease management and Merck's flyer on brain research have in common?  Both companies are taking huge financial risks in the hopes of making bigger-than-ever profits by providing wonder drugs and treatments that make the lives of people with chronic illnesses better and longer.  Would they take these chances and do this path-breaking research if huge potential profits were not part of the gamble?  Probably not, but that doesn't make them evil, just pragmatic.  And who cares what their motives are if we all benefit?

A recent Wall Street Journal editorial ("Europe's Addiction," 1/2/2) sheds light on this issue.  "Everyone likes to complain about the prices Americans pay for prescription drugs, with the political blame falling mostly on the supposedly price-gouging drug companies. . . .  In . . . Europe, by contrast, governments usually act as monopsonist price setters.  (A monopsony market is one in which there is only one buyer for a commodity or service.)  For political reasons, governments force down prices, which means that European consumers pay less but also that European countries are in effect refusing to pay their fair share of drug R&D costs.  In other words, American consumers are financing the drug innovations that couldn't be developed as quickly, if at all, at European prices."

So, let me see if we have this all straight.  American pharmaceutical companies invest billions and take huge risks in order to develop miracle drugs and treatment modalities that benefit everyone who has now or will ever have a chronic illness.  But Canada, Europe and other countries arbitrarily cap the price of these drugs thus forcing American consumers to pay the lion's share of the cost for research and development.  These other countries are getting the best of both worlds--great drugs developed by American companies and paid for by American consumers at artificially low prices.

In that case, why not cap the prices here too so we get the same benefit?  Then there would be no incentive for the pharmaceutical companies to spend the money and take the risks to develop the new products.  We'd lose out and no one would get any new wonder drugs at any price. 

Well, then, why not stop selling drugs we paid to develop to other countries at arbitrarily low, government-capped prices?  That may be the only solution in the long run.  In the meantime, however, manufacturing more pills or capsules once a drug has been developed and approved by the FDA is very inexpensive.  At that point it's profitable to sell each marginal unit even at extremely low prices.  If companies refuse to sell, they lose. 

You can see the dilemma.  We don't want to go without our wonder drugs, so we pay for them.  Once they exist, and others want them too, the temptation to sell marginal units even at low prices is great because it maximizes revenue.  But if companies do sell at the low prices, they are fostering the other countries' "entitlement mentality," their belief that they are somehow entitled to the products developed and paid for by Americans without bearing a fair share of the costs.  Once you understand this, it is easy to see the ridiculousness of urging Americans to go to Canada or overseas to buy drugs developed in the United States at cheaper foreign prices.  When we do that, we just become part of the problem instead of part of the solution.

The WSJ opined "that the price of socialism is fewer life-easing and life-saving products."  We've been paying that price for others by shouldering here at home most of the cost to develop new drugs and treatments.  We're either knowing benefactors or unknowing suckers.  This being the case, why are so many people angry at the pharmaceutical companies and not at the free riders who are shifting the burden and expense onto us?

*** LTC Week in Review items for the week of March 18, 2002:  "Medicaid Problems Intensify," "How to Discuss LTC With Parents and Elders," "On Middle-Aged Motorcyclists, Osteoporosis, and Alzheimer's," "LTCI Up Big Although from a Small Base," and "Taxing Sin to Support LTC."  To find out how to qualify for the Center's donor-only zone, email ***