Medicare Reform and the Prescription Drug Plan - What Are the Real Issues?

By: Debby Painter

Conspicuously absent from the Medicare Reform Bill is any solution to the question of drug re-importation. It is no wonder when you examine the real issues involved.

While drug manufacturers and FDA representatives flood the airways with statistics about the purported lack of safety of drugs from other countries, we do not hear much about the safety issues Americans currently face regarding our own domestic drugs. The truth is that if drugs from other countries are not safe, it is in part because the drugs sold in America are not safe, either. Since most of the so-called foreign drugs actually originate in the United States, we could vastly improve the safety of foreign imports if we only concentrated more resources into making our own American drugs safer.

[Fred A. Baughman Jr., MD: Fred Baughman, MD: Selling, not safety or efficacy is the bottom line. Mask the injuries and deaths, but, by all means sell. What does this government-pharma combine say about the state of our supposed democracy?]

According to a 1999 Institute of Medicine (IOM) report, more than one million preventable adverse drug reactions (ADR) occur each year, with as many as 100,000 Americans dying as a result of these reactions. This means that adverse-reaction deaths were the eighth-leading cause of death in the United States for that year. A 1997 General Accounting Office (GAO) report showed that preventable adverse drug events (ADE) increased hospital stays by almost five days and added an average of $4,700 to hospital costs. This represents an annual national cost of $2 billion for preventable ADEs.

Some argue that adverse events are often caused by doctors improperly prescribing medication or patients failing to follow drug or physician directions. But the truth is far more complex. Many medications are recalled due to improper manufacturing and/or labeling. It is hard to fault the doctors or the patients under such circumstances. The argument against the safety of drugs from Canada is something of a red herring.

[Fred A. Baughman Jr., MD: absolutely! This is the FDA as hatchet man for pharma, afraid a drug might be sold at cut rate, that is all it is about]

Despite the claim that drugs imported from other countries may not be safe, it is not widely publicized that many U.S. pharmaceutical companies import the base products for their medications from other countries and which are not always from their own manufacturing plants, assembling the final product here in the States. By assembling the final product in the U.S., drug makers are able to circumvent the "no-import" medication law. It is more than a little hypocritical that the pharmaceutical companies are allowed to purchase materials from any source they choose, deem them safe, while at the same time pressuring the U.S. government to prevent Americans from essentially doing the same thing.

The pharmaceutical industry enjoys not only relative freedom from effective control, but the luxury of imposing runaway consumer costs for their offerings.

[Fred A. Baughman Jr., MD: all bought and paid for from our Congress doing their bidding-nothing to do with our welfare, health]

Their reasoning for such high prices in this country is, of course, Research and Development costs. For example, GlaxoWellcome's quarterly income statement ending 6/30/2000 (prior to the SmithKline merger) alone showed gross profits totaling $5 billion, with less than 20% spent on Research and Development worldwide.

Okay, why bring all this up in the midst of the Medicare Reform issue? As one can see, many of the excuses given against the importation of lower-priced medications are basically nonsense. The out-of-reach pricing has little to do with Research and Development or the safety of the medications.

The AARP recently supported the Medicare Reform bill claiming that any bill is better than no bill. What are some of the provisions of this bill that will hurt more than help seniors and the taxpayers? Currently, insurance companies and HMOs may negotiate the price of medications with pharmaceutical manufacturers. Basically, the Republican bill specifically prohibits Medicare from negotiating lower prescription drug prices; thusly drugs will remain costly or continue to increase in price within the Medicare system under government's approval, while continuing to prohibit Canadian sales to Americans.

[Fred A. Baughman Jr., MD: We, the great democracy, the US with 43.6 million of it's citizens without health care insurance-an absolute obscenity, and still, the Congress sees to the benefit of Big Pharma and all business and the wealthy, not ours. If you wish to call this representative government and democracy, be my guest.]

What will Medicare provide in prescription drug coverage? For $35 a month, one will have a $250.00 deductible. The remaining 75% of drug costs will be covered in the $251.00-$3,600.00 range per year. There is no coverage for the amounts of $2,251.00 -$3,600.00 and 95% of drug costs will be covered for amounts over $3,600.00. Seniors with an income of $12,123.00 per year, per individual would also get the equivalent of a $600.00 credit for each of the two years the discount card would be valid. The Heritage Foundation found that the Senate bill would force the average Medicare patient to pay about $1,678 in out-of-pocket costs (plus premiums) in 2006. That's up 60 percent-or $621-from what they would pay under their existing drug coverage. So even under the new reform bill, it will still be cheaper to import the medication from Canada. Unfortunately, the Medicare Reform bill failed to legalize drug re-importation. So while the pharmaceutical companies do extremely well under the bill, the same cannot be said for many of our seniors.

So why with all of the above arguments has the Bush Administration and Republicans pushed so hard for passage of their bill? Perhaps $27 million in contributions by the pharmaceutical industry in individual, PAC and soft money donations during the 2002 election cycle -- 78 percent of which went to Republicans -- might play a part.

[Fred A. Baughman Jr., MD: Millions to reap billions, while you and I have a health care system that is perhaps the worst, most inhumane in the developed world and have no voice, no representation in Congress]

Breaking this down, Glaxo SmithKline alone spent $1.3 million in contributions (78 percent of that to Republicans). Amgen has been lobbying Congress to increase payments for its anemia drug as part of any Medicare bill considered this session. The company spent $2.9 million on federal lobbying last year and $912,000.00 in contributions (76 percent to Republicans). Eli Lilly contributed $1.6 million; Barr Laboratories, a little more than $180,000.00 (92 percent to Republicans), and Bristol-Meyers Squibb and Pfizer, more than $1 million (roughly 80 percent to Republicans). President Bush was a top recipient of donations from the pharmaceutical industry with nearly half a million in 1999-2000.

Besides persuasive contributions, the power of loyalty also goes a long way. Bush's father became a Director of Eli Lilly from 1977-1978. Eli Lilly has one of the worst records in the industry for using research subjects as human guinea pigs. Even the conservative Wall Street Journal has reported on this and yet Eli Lilly was still given the government contract to develop a new smallpox vaccine by the current administration. As for the rest of the Cabinet: