Obama's healthcare plan will hurt the pharmaceutical industry's ability to produce new medicines and save lives
By Jeff Stier, Esq., Henry Miller
Posted: Friday, August 21, 2009

EDITORIAL
Publication Date: August 21, 2009

This piece first appeared in The Guardian on August 21, 2009:

Once upon a time there was a horse that was so productive working in the field that he put all the other horses to shame. The farmer who owned him was proud of the animal but, always looking for ways to cut costs, halved the horse's feed. Still, he was more productive than any other. This continued, with the farmer cutting the horse's rations until finally, the now emaciated horse dropped dead while pulling the plough. The farmer scratched his head and said: "I wonder what happened. I'll miss him, because he was a terrific worker."

It has become fashionable at the White House and on Capitol Hill to try to cut costs at the expense of the pharmaceutical industry, although this sector has been one of the nation's most innovative and successful: in other words, the standout workhorse.

President Obama seems determined to cut the horse's rations further, to eke out huge cost savings at drug companies' expense. "You've heard that as a consequence of our efforts at reform, the pharmaceutical industry has already said they're willing to put $80bn on the table," he said at a town hall last month. "We might be able to get $100bn out or more."

Starving this industry would be shortsighted. Drugs often improve the span and quality of life in a remarkably cost-effective way, a fact of crucial significance not only to the individual patient but to society as a whole. Innovative new medicines, for example, have helped many patients avoid costly hospitalization. Between 1980 and 2000, the number of hospital days fell by 56%, and, as a result, Americans avoided 206 million days of hospital care in 2000 alone. And a study in 2000 sponsored by the federal agency for health care policy and research concluded that increased use of a blood-thinning drug would prevent 40,000 strokes a year, saving $600m annually. A 1997 study by the National Bureau of Economic Research found the costs of treatment per episode of major depression fell by 25% from 1991 to 1995.

Moreover, new drugs often confer an advantage over older ones in reducing mortality. A 2004 National Bureau of Economic Research study of patients who took drugs between January and June 2000 found that a higher percentage of those who took newer medications were still alive in 2002. The estimated mortality rates were directly related to the time that had elapsed since each drug was approved.

The president has promised that consumers will not be deprived of choices or high-quality care, so where will these cost savings come from? One approach is to adopt the pretence that the government can determine when one medicine is better than another, and then can predicate reimbursement based on those determinations. As Obama oversimplified it: " If there's a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that's going to make you well?"

The stimulus bill already has set aside $1.1bn to figure out how to distinguish the blue pills from the red ones, and reform legislation is expected to pour more money into these attempts to measure "comparative effectiveness." The Obama administration appears to favor the expenditure of healthcare resources in a way similar to the UK's National Institute for Health and Clinical Excellence model, which uses supposed experts to judge the cost-effectiveness of therapies, in order to determine which will be reimbursed by the government.

But this approach ignores the futility of such one-size-fits-all prescribing of medicines. For many classes of drugs -- among them statins, anti-hypertensives, pain-relievers and antipsychotic medicines -- the selection of the appropriate drug among many possibilities requires a delicate balancing of effectiveness and acceptable side effects in each patient.

Under Obamacare, you don't want to be one of those people who really need the more expensive red pill -- an example of which came to light this month when the food and drug administration approved pitavastatin, a new drug to control cholesterol. Why do we need yet another statin? Because pitavastatin is metabolised differently, it is not subject to the same dangerous interactions as other statins with drugs like the blood thinner warfarin (Coumadin). Therefore, it would be especially useful for patients who take multiple other medicines.

Once the cheap blue pill has been anointed as the one eligible for federal reimbursement, there will be little incentive for companies to pour billions of dollars into developing a new generation of drugs that might in fact prove to be better – but perhaps only for a small subset of patients. As it is, the direct and indirect costs to bring a new drug to market exceed $1.2bn, and only about three in 10 approved drugs recoup their development costs.

Politicians will probably continue to squeeze the drug industry. They're likely to end up beating a dead horse.


Henry Miller, a physician and fellow at Stanford University’s Hoover Institution, was an official at the FDA from 1979 to 1994. He is the author of To America’s Health: A Proposal to Reform the FDA. Jeff Stier is an associate director of the American Council on Science and Health.