When tomorrow never comes... the rising cost of health care

"This weekend, I had the opportunity to read Matt Miller’s outstanding upcoming book, The Tyranny of Dead Ideas. In his chapter on the folly of employer-provided health insurance, Miller gives us today’s startling factoid: 'It’s crazy but true: Starbucks spends more on health care than on coffee; General Motors spends more on health care than on steel.'"

Daniel Pink

What is the world coming to when the cost of basic health care is so exorbitant? The National Coalition on Health Care has some startling facts:

"In 2007, total national health expenditures were expected to rise 6.9 percent — two times the rate of inflation.1 Total spending was $2.3 TRILLION in 2007, or $7600 per person. Total health care spending represented 16 percent of the gross domestic product (GDP). U.S. health care spending is expected to increase at similar levels for the next decade reaching $4.2 TRILLION in 2016, or 20 percent of GDP."

When we look back at Starbucks and GM, we find that in 2007, employer health insurance premiums increased by 6.1 percent, which is two times the rate of inflation. The annual premium for an employer health plan covering a family of four averaged nearly $12,100. For many in more expensive cities that will only cover a family of two people.

Washington's focus on drug costs is in many ways displaced, because like earmarks it represents a very small proportion of the total budget. Meanwhile, the health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste and fraud. These problems significantly increase the cost of medical care and health insurance for employers and workers and affect the security of families.

But is anything done about this excessive waste and bloated administration?

Rising medical costs correlate to drops in health insurance coverage. That's not a good thing because ultimately, people who do drop coverage and then get ill will end up paying more for their health care if something goes wrong. If you get cancer or need a bone marrow transplant, it could wipe you out.

There is no doubt that health care reform is essential, the issue is what's the best way to go about it? In the current Presidential election, the two candidates have very different approaches to the problem. McCain is offering a $5,000 tax credit towards the cost of the annual health care plans. Obama believes that health care is a right and people should not be denied access, while there should be stricter rules for insurers.

In the McCain approach, one key detail missing from the plan is whether the tax credits created by eliminating employer-based tax benefits would keep up with the cost of medical care. This plan favours the young, fit and healthy. Those who are older, unfit and have a family history of medical problems will likely end up with higher costs.

In contrast, cost is the key detail missing from the Obama health reform plan. The campaign has not said how large the tax would be for businesses that opt not to offer insurance, or how small a business would have to be to be excluded from the requirement. If the payroll tax is too low, say 6 percent, many businesses may opt to pay it instead of offering insurance, sending their employees into the public program and boosting federal costs. Overall, it sounds very similar to the successful MA health care plan introduced by then Governor Mitt Romney, where no one was denied coverage, but the plan cost was adjusted according to people's means.

Either way, whichever candidate gets in will have to grapple with many of the same issues and the inertia that has confounded health reform for decades.

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Medicare Part D - new data available

Academy Health has published a useful report on Medicare Part D and what information is available as part of the CMS Medicare Part D claims data.

You can download the report here.

Market Intelligence: China muscles in on pharma competition

Hot on the heels of news that Wal-Mart and Target have lowered the cost of prescriptions for cheap generics, China is preparing to compete in the generic market.

Reuters reported on the Chinese strategy as follows:

Pharmaceutical information group IMS Health Inc said last year's first okay from the U.S. Food and Drug Administration for a Chinese generic, a copy of AIDS drug nevirapine, was a sign of things to come.

China is already the world's biggest producer of active pharmaceutical ingredients (APIs), the chemical raw materials needed to manufacture medicines, but to date it has not been a significant supplier of finished generic pills.

Zhejiang Huahai Pharmaceutical Co Ltd won a U.S. green light last July to sell generic nevirapine, once the patent held by Germany's Boehringer Ingelheim expires in 2012. At least 10 other Chinese companies are set to follow suit with other generic products, according to IMS. Some could be available as early as this year. The result will be increased competition in a generic drugs industry that is already struggling with tumbling prices.

Overall, the Chinese move is expected to drive down generics prices below current market rates. After the recent heparin scare where questions were raised about the quality of the raw and integrity of materials in China, consumers and healthcare professionals may be nervous.

Market trends - cheaper drug prices in US

Walmart announced yesterday that it was lowering the cost of a number of a broad range generics to $4 or $5 for a months supply and $10 for some on 90 days supply. These include generic anti-hypertensives, anti-cholesterol agents as well as may others, including even cancer drugs such as tamoxifen.

No doubt Target and K-Mart are forced to follow suit in order to compete.

The days of US citizens having to surreptitiously order and pay for prescriptions through Canadian internet pharmacies may be under threat.

Meanwhile, the several companies continue to kick the pharma industry while it's down, profiting off the patent losses of others and further extending their grip on the generic marketplace.

As healthcare costs continue to rise in the United States and big pharma companies watch their pipelines dry up, generic companies such as Teva Pharmaceuticals are doing well with a number of products that have recently gone off patent, such as the multiple sclerosis drug, copaxone. Aventis held the original approval, but since it went off patent, Teva manufactured Copaxone (glatiramar acetate), which passed over $500M in quarterly sales.