The worldwide battle over health spending, especially high drug prices, and whether it’s actually worth it. The view from afar.

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Commentary: Steve Walker

The “Medicare for All” plan embraced by leading 2020 Democrats looks more lavish than what other advanced countries offer, compounding the cost but also potentially broadening its popular appeal, says the Associated Press.

But while other countries do guarantee coverage for all, the benefits vary significantly. Canada, often cited as a model, does not cover outpatient prescriptions and many Canadians have private insurance for medications. Many countries don’t cover long-term care. Modest copays are common.

“Medicare for All proposals would leapfrog other countries in terms of essentially eliminating private insurance and out-of-pocket costs, and providing very expansive benefits,” said Larry Levitt, a health policy expert with the nonpartisan Kaiser Family Foundation. “It raises questions about how realistic the proposals are.”

Transferring the sprawling, incoherent US healthcare system to a government-run “single-payer” plan is one of the top issues in the 2020 Democratic presidential primary, but the candidates are divided. Some have endorsed Sen. Bernie Sanders’ (I-VT) call, while others want to expand coverage within the current mix of private and government insurance.

Independent studies estimate Medicare for All would dramatically increase government spending, from $25 trillion to $35 trillion or more over 10 years. It presently stands no chance with Republicans controlling the White House and the Senate, but it is getting hearings in the Democratic-led House.

The fundamental question of whether all the money we would spend under a “universal” coverage system would be worth it is answered skillfully in the following de-politicized (mostly) piece from The Economist earlier this week, which I recommend everyone read. I was surprised by their take, which I concede I had prejudged would be broadly critical of their former colony’s machinations. On the other hand, they have been working on this thorny question of “amount spent” vs. “value back” to the citizenry for a lot longer than we have.

Maybe, just maybe, other rich countries have learned a bit more than we have at this stage of our reckoning with the as-yet intractable cost vs. value conundrum. But will our President and our representatives on Capitol Hill take the time to listen and perhaps learn? Let’s hope so.

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May 21, 2019; The Economist

These days it is hard to find a government that is not struggling with the high price of medicines. In England, the government is fighting Vertex, a drug company, over the cost of a drug for cystic fibrosis, Orkambi. In America, diabetics have died because of the high cost of insulin. In the Netherlands, the government for a time stopped buying the immuno-oncology drug, Keytruda, because it was too expensive–even though it had helped to develop it. The list price of Orkambi is about $23,000 a month in America, and Keytruda is about $13,600 month (for as long as treatment continues). It has taken such rich-world dramas to force the unaffordability of medicines to the top of the global health agenda, even though poorer countries have complained about it for decades.

On Monday, May 20, governments started tackling the issue at the World Health Assembly (WHA), an eight-day policy forum where health ministers define the goals for the World Health Organization for the coming year. There is a lot for them to discuss, including the expansion of universal health care, antimicrobial resistance, the impact of climate change on health and the deepening crisis of Ebola in the Democratic Republic of Congo. Yet the hottest topic is the high price of new medicines, particularly cancer drugs.

In February the Italian health minister, Giulia Grillo, published a draft resolution on drug pricing. It calls for international action to improve the transparency of prices and R&D costs, as well as the costs of production of medicines. Firms will also be asked to divulge all the different forms of government support they receive. These may range from venture-capital funds and start-up financing to tax incentives and even research conducted by academics. The hope is that greater clarity should lower drug prices. The Italian proposal is backed by many countries, rich and poor.

Pharmaceutical companies currently publish only list prices. These are large, somewhat fictional numbers that are subject to being bargained down. Just how big a discount governments, insurers and other middlemen can secure is confidential. Many have concluded that all the secrecy is putting those who pay for the drugs at a disadvantage. Els Torreele of Médecins Sans Frontières, an NGO, says that different buyers–even those in the same country–can be charged widely differing prices. “Prices are kept secret and buyers are asked to sign confidential agreements,” she says. And despite the fact that, in theory, poor countries might be charged less than rich ones, there are concerns that the reverse may in fact be true.

Drug firms are not pleased. The International Federation of Pharmaceutical Manufacturers and Associations told Stat, a medical-news website, that the draft resolution would “divert attention and resources from finding sustainable solutions to access.” Britain, Germany and Denmark are trying to water down the proposal, probably under pressure from their large pharma industries—even though they are all facing growing drug-pricing problems at home. Pharma companies have long argued that the costs and risks of developing a drug warrant high prices. They argue that greater price transparency will mean that poor countries will no longer get good deals, because firms will not want to undermine their ability to extract high prices from wealthier states.

But the degree to which poor countries get favorable treatment is usually unknown, except for some high-profile cases: vaccines, perhaps, and antiretroviral drugs to treat HIV infections. The WHO estimates that 100m people fall into poverty annually owing to the prices they pay for medicines. Moreover, there is evidence that the prices charged for some drugs are, indeed, unreasonably high. A WHO report at the end of 2018, on cancer medicines, concluded that companies priced their drugs largely according to their expectations of income, rather than what the drug cost to make or how to maximize access to patients. That a firm is making as much profit as possible is, perhaps, unremarkable. However, drug firms are not ordinary companies. Their products are needed to save lives, and they obtain monopolies on their drugs through patent systems granted by governments and, by extension, society.

The WHO also found that, even acknowledging the high cost of developing drugs, cancer medicines are generating returns far in excess of the R&D costs, and far more than is necessary to finance and create incentives for future efforts. It also appears that cancer drugs are more expensive than other medicines–seemingly because buyers are willing to pay more to treat terminal conditions. Australian data show that the cost per prescription for cancer drugs is at least 2.5 times higher than for other medicines.

The pharma industry generates large profits. In America, 12 of the country’s most profitable drug companies reported more than $29B in profits in the first quarter of this year, according to Axios, a news website.

Advocates argue that transparency will allow people to judge whether governments have made good decisions about the medicines that they buy. In countries with weak governance, more transparent pricing should help to combat corruption.

America has made drug-pricing transparency a priority recently, and drugmakers must now disclose their list prices even on television advertisements. (List prices are important to patients because they may have to pay a proportion of this sum themselves.) Whatever the outcome this week at the WHA, pharma companies will face growing demands to come clean about the cost of life-saving drugs.

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