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David Vitter and the advantages of single-payer health care

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Louisiana Senator David Vitter (R) is speaking on the floor of the Senate right now in favor of Byron Dorgan's amendment allowing the "reimportation" of drugs from, among others, Canada. "This amendment gives Americans immediate relief from high prescription drug prices," he promised.

The case for drug reimportation, as Vitter says, proceeds from the recognition that residents of other countries get much, much lower prices on drugs than Americans do. Many of these drugs were invented by American companies and produced in American factories. But Canada gets them at a discount. Why?

Well, Canada's government bargains its prices down. So does the French government, and the German government, and the British government. The results of this strategy are not in doubt: These countries pay far less than we do for the exact same drugs. Our solution? We will go to these countries and buy these drugs!

But that's an odd solution. It's as if Wal-mart noticed that Costco had better prices on moisturizer and so directed its employees to go buy moisturizer from Costco. But Wal-Mart is, of course, bigger than Costco! It can get better prices by negotiating on its own behalf. And it wouldn't be paying Coscto's mark-up, to boot.

But Medicare, and the federal government more generally, are barred from doing the same. And this isn't just about drugs. The story is similar for everything from surgeries to doctor's visits. It's just harder to ship those over a border, and so there's no demand to do so. But we could bargain prices here as surely as they can bargain them there. The fact that we can't mimic Canada's prices through an inefficient and illogical program doesn't mean we couldn't do it through a straightforward and logical one.

In closing, Vitter urged the Senate to "take this step and do what we all say should be a top priority and actually lower health-care costs. I urge all my colleagues to come together and do this in a bipartisan way." Boiled down to its essentials, Vitter just made a case for a bipartisan embrace of a single-payer system.

Photo credit: Manuel Balce Ceneta/AP.

By Ezra Klein  |  December 9, 2009; 12:48 PM ET
Categories:  Health Reform  
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Next: Design matters

Comments

Or its basically just making canada and other countries pay their fair share for the cost of drug development. If a company wants to sell that to another country for a certain price then in a world of reimportation then the US gets it for the same price. It would let the market set the price of drugs instead of simply price fixing.

Posted by: spotatl | December 9, 2009 12:51 PM | Report abuse

I guess replacing the current system of monopoly patents for new drugs with rewards didn't make it into HCR.

Posted by: redwards95 | December 9, 2009 12:55 PM | Report abuse

I think that we get the patent system pretty close to right. IF someone invents a new drug that wouldn't exist otherwise let them charge whatever they like for some number of years. After that time let anyone who wants to create a generic alternative and drive the price down. I just look back and think of a world where 50 years ago the US put strict price controls on drugs and think about how many more generic drugs exist today that wouldn't otherwise. Price controls make people in the short term better but in the long term worse. So I think the best way is simply to spread out the funding for these new drugs and allowing reimportation is the best way to ensure that everyone is paying their fair share.

Posted by: spotatl | December 9, 2009 12:59 PM | Report abuse

That's not really the right conclusion.

Merck Medco (one of the largest PBMs that negotiates drug prices for private insurers) has more covered lives than most single-payer systems. So theoretically, the should have more negotiating leverage. Why don't they? Because Merck Medco actually needs to get drugs to be part of their formulary. People would revolt otherwise. In other single-payer systems, there is real risk that pricing authorities will just go without a drug-- and Pharma knows this. So leverage ends up being higher with single-payer systems because they REALLY mean business in these negotiations. Americans? We like having everything covered regardless of cost. So that's what we get. You don't need single-payer to fix that dynamic. You just need people with greater exposure to health care costs-- as you suggested the other day.

Posted by: wisewon | December 9, 2009 1:12 PM | Report abuse

spotati would make more sense if the high cost of drugs in the US was due to R & D. Alan Sager has shown that big Pharma spends about 11% on R & D, 19% on profit and 34% on marketing which includes not only the odius ads, but the pushers they send to every physician and the payments to doctors both direct and indirect.

The purpose of this "marketing" is to get us to use drugs we do not need and to get physicians to prescribe new expensive drugs even when older cheaper drugs would do as well if not better. We could cut drug prices by a third and not touch R & D or their profit (which BTW is about double the avergae of all US industries)>

Posted by: lensch | December 9, 2009 1:16 PM | Report abuse

I have no problem with a company advertising drugs. The real issue is that we don't care what we spend on drugs. If there is a drug that is 10% more effective but costs 4 times as much we'll always pick the more expensive drug because the cost to us is exactly the same with someone else picking up the bill. If people had more reason to care what they spent on drugs then the advertising problem would completely take care of itself. The problem is that currently neither patients nor doctors have any reason to care about what treatments are cost effective.

Posted by: spotatl | December 9, 2009 1:20 PM | Report abuse

wisewon,

the only problem with using a Merck Medco as an example is that they are the developer and seller of the drugs. Look at the drugs on their higher level (lower cost to consumer) formulary. Its their own drugs. Its like if Comcast were to now move all NBC channels on their cable systems to the lower numbers and make CBS, ABC and Fox difficult or near impossible to find.


The other issue which Ezra evades is that I'm sure that while Mr Vitter believes in this idea he wouldn't believe in the idea of a government administering it.

Posted by: visionbrkr | December 9, 2009 1:25 PM | Report abuse

I have a big problem with drug advertising. It is not designed to inform consumers but to get them to want specific drugs whether or not they would be beneficial for them. This puts unneeded pressure on doctors who must discourage patients from particular drugs if they are not recommended for their conditions or have other negative consequences for the patient. The obvious consumer reaction is to find another doctor who will prescribe unneeded drugs to satisfy the artificial demand created by drug ads.

Posted by: srw3 | December 9, 2009 1:30 PM | Report abuse

and srw3- that would all be eliminated if either the doctor or the patient actually cared what the drugs cost. To me thats the real problem and it affects FAR more than just drugs. Tests are the same way- if you don't care what it costs then why not? SOMEONE has to care about the cost of things. When no one has any reason to care you end up with the system we currently have. If a generic alternative exists for a drug thats being advertised on TV in my opinion the ONLY way to get people to choose the generic is to make people pay a portion of the difference in cost

Posted by: spotatl | December 9, 2009 1:34 PM | Report abuse

The price discrepancy isn't just the result of purchasing power of single payer systems. The reimportation ban effectively allows drug companies to price discriminate by nation. That leads to wealthier nations like the US paying higher prices than poorer nations. Remove that ability to price discriminate, and we'll see a slight lowering of prices for the US market, and a significant rise in prices for all other markets. Sorry that I don't have a link to the study, it's been a long time.

Posted by: etdean1 | December 9, 2009 1:37 PM | Report abuse

What? The first thing Obama did was cut a deal with big Pharma. I'm sure vitter is just trying to make the dems look stupid. If the Dems say to Vitter, that's a good idea, he'll just ask why they gave Pharma such a great deal if they were looking to bring drug prices down.

Posted by: obrier2 | December 9, 2009 1:49 PM | Report abuse

"Vitter just made a case for a bipartisan embrace of a single-payer system."

so let me see we let Lieberman take out the trigger so he can say it his idea is validated...and we get his vote...

let the Republicans come up with the idea of a single-payer system really bending the cost curve and presto-chango we have a deal...

as Bob Barker would say "Come on down and let's make a deal!"


Posted by: teoc2 | December 9, 2009 2:02 PM | Report abuse

This is great. And so true. If you want to save money, use bargaining power. It's why bigger companies have better health insurance plans too.

Posted by: ideallydc | December 9, 2009 2:03 PM | Report abuse

Diaper Dave prolly just wants cheaper boner pills.

But yes, why haven't we fixed Part D to allow us to negotiate prices? That was a pretty big error and everyone knows it is a gross giveaway to industry.

Good numbers, lensch.

Posted by: luko | December 9, 2009 2:11 PM | Report abuse

I don't understand why Ezra had to inject "single-payer" into this issue; after all drug prices are much lower in *every* universal health care system, whatever the financing model used. Using it as another hook to promote single-payer distracts from the opportunities available.

It seems to me that dropping the prohibition on Medicare negotiating for drugs, coupled with a ban on direct to consumer advertising, would be a much more responsible bargaining chip with respect to the public option than the faux offer of Medicare to under 65s. That at least would actually save the government money.

Posted by: Athena_news | December 9, 2009 2:13 PM | Report abuse

Hmmmm... do you think if buyers in the US are allowed to engage in arbitrage that the relative prices of drugs across countries just might change?

Posted by: ostap666 | December 9, 2009 2:29 PM | Report abuse

Athena - I think consumer ads are a small part of marketing, but I don't have the figures. You can read about pushers in http://www.theatlantic.com/doc/200604/drug-reps
and about an example of payments to physicians in http://www.nytimes.com/2007/11/25/magazine/25memoir-t.html

BTW Spotatl, except for a 2 year period when I tried Part D, I have always paid for my drugs directly. Even if you know what they cost and have to pay it yourself, it is impossible to get good info. Very few effectiveness tests are done and the companies lie.

Also even if you try to run your own test as I did with statins, what do you do if the best drug is the most expensive?

Frankly, I think this whole idea that a well informed consumer can save money in health care is a myth.

Posted by: lensch | December 9, 2009 2:33 PM | Report abuse

lensch,

you mean to say you paid "retail" price for drugs or prices via canada? If you paid retail then luckily for you you're very healthy. Those that are not and on many prescriptions could never afford that, espeically many senior citizens on fixed incomes.

As far as a well informed consumer saving money, IMO they can't necessarily save money but they can avoid overspending as many consumers do. To me there's a subtle but costly difference.

Good to see you back around BTW even if we mainly disagree.

Posted by: visionbrkr | December 9, 2009 3:09 PM | Report abuse

visionbrkr, I don't think Ezra was dodging the fact that Vitter wouldn't support single payer. He's making a snarky point about the fact that Vitter is arguing for reimportation of drugs using the very arguments that support a single payer system.

Posted by: MosBen | December 9, 2009 3:24 PM | Report abuse

Actually I buy my drugs from India through a firm in Canada, and the drugs are shipped from Germany, but my credit card payment goes to a firm on the Isle of Jersey.

I think there is material for an international crime thriller somewhere in there.

How can they avoid overspending? My doc says I need a blood test, an MRI, a mole cut out, a bone marrow sample, etc., etc., etc. How can I tell if he/she is correct?

Posted by: lensch | December 9, 2009 3:32 PM | Report abuse

" I think consumer ads are a small part of marketing, but I don't have the figures." - lensch

The issue with consumer directed advertising is not really the expense but its purpose: to encourage consumers to ask (in many cases demand) products that are more expensive than less expensive and equally effective.

Consumer directed marketing doesn't stop with the television and magazine advertising, it includes the co-pay rebate cards that encourage patients to request products that cost insurance companies significantly more than their generic equivalents.

Posted by: Athena_news | December 9, 2009 3:40 PM | Report abuse

Athena - Right!, but the other parts of marketing directed to the physician do the same and are more effective since after all in most cases the doctor decides what drug you get.

Posted by: lensch | December 9, 2009 3:44 PM | Report abuse

Count me as a supporter of the Vitter amendment. His idiotic, convoluted method beats the insane, ass-backward policy we currently have.

Posted by: bcbulger | December 9, 2009 3:51 PM | Report abuse

lensch- in the case of a wildly expensive drug like a statin, I think the proper result is for that company to be able to make all the money they possibly can off of it while they have the patent. They invented something wildly useful and they should make a ton of money off of that. And then once the patent has worn off then anyone can buy a generic form of it and anyone who is still buying the brand name is just a sucker. This doesn't help you in your situation- but if the drug wasn't invented in the first place then it wouldn't help you either. And if all wildly useful drugs had strict price controls 50 years ago then I think its highly unlikely the drug useful to you would have even been invented.

And thats what this is to me- allow drug reimportation so that all civilized countries are equally footing the bill for drug discovery. There is no good reason the company should be selling drugs in Canada for far less than they are selling them here.

Posted by: spotatl | December 9, 2009 3:57 PM | Report abuse

But spotatl, statins were not discovered by a drug company, but by two Japanese academics. Very little basic research is done by drug companies.

Look at the figures I quoted above, and you will see A) Research is not a big item for them and B) they make a huge profit.

There is a very good reason that they sell drugs in Canada for less and that is the Canadian health care systen sets the price. Since they can still make a bundle at the Canadian price, they go along. Anyway, if they refused to sell to the Canadians, the Canadians could just allow generics like India.

Posted by: lensch | December 9, 2009 4:31 PM | Report abuse

"They invented something wildly useful and they should make a ton of money off of that. " -- spotl.

Actually, in most cases they haven't invented anything; they take the basic research funded by government grants -- for which they pay no royalties -- and market products derived from that research. That's why their marketing expenses far exceed their research budgests.

Six out of ten of the world's largest pharmaceutical companies are headquartered in countries with universal health systems and they do just fine there. It is not true that drug companies depend on the profits from the US to fund research; they depend upon the US to generate profits that are higher than just about any industry outside petroleum.

Posted by: Athena_news | December 9, 2009 4:39 PM | Report abuse

lensch- do you think that if we had put strict price controls on all drugs 50 years ago how do you think it would affect the number of drugs available today? I think that those huge profits give pharma companies a VERY important incentive to try and create useful drugs.

Posted by: spotatl | December 9, 2009 4:42 PM | Report abuse

How can they avoid overspending? My doc says I need a blood test, an MRI, a mole cut out, a bone marrow sample, etc., etc., etc. How can I tell if he/she is correct?

Posted by: lensch | December 9, 2009 3:32 PM | Report abuse


another reason we need more capitation and less FFS.

Posted by: visionbrkr | December 9, 2009 4:48 PM | Report abuse

spotatl - You really shouldn't ask a question like that to someone who stands slightly to the right of Leon Trotsky.

The drug companies developed very little as Athena has been saying. I think if we had required fair drug prices like all other wealthy countries, if we had restrcited marketing, we would have just as many drugs at a much lower price. Furthermore if we had a top notch government run drug program instead of drug companies we would have had better drugs, drugs that were developed to cure diseases (even diseases that few people have), not to prolong a patent or to prevent generic sales.

Look this whole myth about US development of all medical advances because we have a competitive system is pure bunkum.

MRI - UK
Artificial joints - France
Even the prostate treatment that Rudy G spoputed off about was invented in Denmark.

Well. you ask for it.

Posted by: lensch | December 9, 2009 5:28 PM | Report abuse

"There is no good reason the company should be selling drugs in Canada for far less than they are selling them here."

When you're being ripped off, it's a bit silly to blame the people who aren't.

"Look this whole myth about US development of all medical advances because we have a competitive system is pure bunkum."

There's an argument that the megabucks in the US system plays some role in bringing advances into the mainstream -- though that's more evident with relatively simple outpatient procedures like Lasik (devised in Colombia, developed in Russia and used outside the US before receiving approval).

Posted by: pseudonymousinnc | December 9, 2009 6:28 PM | Report abuse

I have no problem with a company advertising drugs. - spotatl

I cannot for the life of me understand why anyone would say that, anyone not dependent on the drug industry anyway. The advertisements that we get exposed to are designed to induce people to request a particular drug from their doctor based on pretty pictures and drug company designed graphics. Not all doctors can always resist the pressure. This ends up with people getting treated with drugs that they either don't need or which are inferior to other drugs in either results or cost. The only other country in the world that allows drug companies to advertise directly to the public is New Zealand, and they also are in the process of trying to cut it back.

Before it was allowed, drug treatment in the US was a lot more rational than it is now. But going to the public over the heads of the doctors, who actually know much more about what is going on or at least have much better access to information about the particular drug than the general public does, has resulted in an explosion of drug use that cannot be justified rationally. Along with this comes the bitter reality that people have ended up dead because some drug company did an advertisement blitz to sell a product that didn't deserve it.

Posted by: dkmjr | December 9, 2009 7:58 PM | Report abuse

"that would all be eliminated if either the doctor or the patient actually cared what the drugs cost. "
"And then once the patent has worn off then anyone can buy a generic form of it "
"There is no good reason the company should be selling drugs in Canada for far less than they are selling them here."
"I think that those huge profits give pharma companies a VERY important incentive to try and create useful drugs."

I really, really suspect that spotatl benefits somehow from high drug costs. I may be wrong, but given the evidence above, I would need strong contradictory proof.

Even if the doctor or the patient cared about the cost, there would still be too many people swayed by the advertising to ask for particular drugs they don't need. And when the patent is about to run out, the drug company just changes something minor and the patent starts all over again. The reason that drug companies sell for a lot less in Canada (and everywhere else, for that matter) is that they are still making large but not obscene amounts of money that they would have to forego if they weren't selling in those countries. And finally given that the drug companies make a lot more off every dollar invested in marketing than they do from money invested in actual R&D, I see absolutely no reason why they would invest in developing new drugs rather than tweaking the ones they already have and then launching massive advertising campaigns.

Remember that the majority of drug research is done at medical schools and research universities, not drug companies. That cuts Big Pharm's research budget a lot so that they can invest in other areas that give a higher return, marketing. And most "new" drugs are "me-too" drugs, slight modifications on something that recently boomed on the market. Very few are actually novel drugs with entirely new mechanisms of action. Only rarely do drug companies come up with those.

Posted by: dkmjr | December 9, 2009 8:22 PM | Report abuse

No big mystery to understand here - Diaper Dave and other legislators who oppose U.S. govt. negoitiation of prices but support importation are simply opportunistic horse's asses who understand how to reflect the ignorance of their constituencies. But is there anything that would prevent legislation requiring drug companies to sell their products in highest price they sell it for in any other country? Then we could get the benefits of single payer without the bloodbath that would be required to have our dim-witted, bought and paid for legislators enact a rational policy here.

Posted by: exgovgirl | December 9, 2009 8:59 PM | Report abuse

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