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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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August 17, 2009

PhRMA's Negotiating Game

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Posted by Derek

Now for a bit on the pharma industry and the current fight over health care legislation. Does the industry want a new system to come into force, or not?

Depends on what that new system is, of course. But the industry is naturally trying to make sure that it has a hand in whatever passes. And here we come to a meeting of political interests. The administration would also prefer not to have the drug industry actively working against it, since drug companies have a lot of money to use for such purposes. Therefore, as anyone who knows politics could have predicted, a deal has been struck.

Or has it? As everyone has heard by now, Billy Tauzin, head of the industry's largest association (PhRMA), said that an understanding had been reached with Max Baucus of the Senate Finance Committee, with the approval of the White House. The industry would agree to come up with 80 billion dollars of savings, and the administration would then consider them to have done their part. More specifically, there would be no more talk of price negotiations for Medicare-approved drugs, of drug reimportation, or rebates for drugs prescribed to joint Medicare/Medicaid patients. The industry would also agree to support the new health plan by running ads (and, no doubt, by lobbying behind the scenes). Come, let us reason together.

It doesn't surprise me at all that such a quid pro quo would be worked out in advance - that's exactly how politics gets done. But what amazed me was that Tauzin would go around telling people. Predictably, many of the other players are now complaining, and PhRMA is reduced to saying that it's "counterproductive" to keep on talking about it.

Tauzin and PhRMA are also taking flak from their right - the Wall Street Journal blasted the whole idea of a deal the other day, calling it short-sighted. Congress could, after all, change the terms any time they can round up the votes, which would be any time it's convenient to blame the drug companies for something. I find myself more in this camp. I understand that PhRMA can't afford to stay out of this process (in which case the carving knives would come out sooner rather than later), but I think it's a sad business all the same, trading the threat of price controls now for the threat of price controls a little later on. Here's more complaining from National Review.

But that brings us back to Tauzin. I will work under the assumption that he's not an idiot, although I'm willing to listen to evidence for either side on that one. But if he isn't, why did he go around boasting of this wonderful backroom deal? All it seems to have done is endanger whatever agreement was reached. If my not-an-idiot stipulation is justified, though, the only reason I can see for doing this is as a tactic to get something even better. Did PhRMA look at the polls and decide the time was right to help torpedo everything? (And yes, I know the Rasmussen polls lean right, but I think they're picking up something real). Is that the game here?

Well, I get e-mails from people at PhRMA once in a while, and I'll probably get another one after I put this post up. Something tells me that I'm not going to get to hear what's really going on, but that doesn't stop a person from wondering.

Comments (50) + TrackBacks (0) | Category: Current Events | Drug Prices | Regulatory Affairs


1. Chemjobber on August 17, 2009 8:36 AM writes...

It's clear (to me, anyway) that it's the insurance industry that's the prime target here.

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2. Virtual Memories on August 17, 2009 10:06 AM writes...

I believe this can all be explained by a single quote from Tauzin during his days in Senate: "My vote cannot be bought . . . but it can be rented."

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3. Jesse on August 17, 2009 10:26 AM writes...

There are many ways to control chronic pain, and one of them is through anxiolytics, which are medicines that have obtained a better result than other drugs such as naproxen, aspirin, ibuprofen, medications that relieve pain but are not effective for these chronic cases, as these pains are more like a back pain that the world is one of the most common causes of absenteeism in findrxonline as indicated in your article on back pain and chronic pain, and opioid medications are as Vicodin, Lorcet, Meperidine to soothe the pain caused by this disease and we must be very careful.

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4. Sili on August 17, 2009 10:28 AM writes...

80 billion?

Forgive me for saying so, but what good is that gonna do? That is as pointless as the continued whining about NASA's teensy budget.


Get rid of the bloody profiteering insureres, you cowards.

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5. Cloud on August 17, 2009 10:52 AM writes...

I have no idea what PhRMA is up to. The entire health care "debate" has degenerated to such a point that I can barely stand to follow it. I suspect I'm a bit to the left of you on this one, though, Derek. I was really hoping we'd get something close to universal coverage this time, although I'm fine with us doing that using private sector insurance. I find our current system indefensible from both the humanitarian standpoint that everyone deserves basic health care and the economic standpoint that the current fallback of emergency room treatment for the uninsured is a ridiculously expensive way to provide health care.

It seems clear to me that eventually our industry is going to have to deal with price controls of some sort. It is just too hard to try to argue that American consumers should be the only ones in the rich world who pay "full price". We can argue about our tiny slice of the total health care cost and how drugs are a cost-effective treatment until we're blue in the face. It will still look unfair to most people that Americans pay more for their drugs than anyone else does, and eventually there will be the political will to do something about that. If PhRMA scuppers a chance at universal coverage just to delay the inevitable, then maybe they are as depraved as our detractors say they are.

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6. A New Plan on August 17, 2009 10:53 AM writes...

1. Cap Ins. Co. profit at 10%
2. Establish a baseline of mandatory coverage for every employee (if you are working you are insured).
3. Allow employers to deduct the cost of employee health care directly from their Tax burden (encourages offering the best coverage).
4. Tort Reform.

Ok, Tell me the problems with this so we can make it better.

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7. Cloud on August 17, 2009 11:24 AM writes...

@A New Plan- Do you know that insurance companies make a profit of more than 10% now? I don't know the numbers. What are you going to do for the people who aren't working? What about the self-employed? Are you going to mandate that they buy insurance? If so, how are you going to make sure they have decent, affordable options if the rest of us are still using group bargaining? The options they have right now are pretty bad.

I'd rather see the insurance-employment link broken. Right now, insurers compete to get my employer to pick their plan. They don't really compete to produce a plan that I actually want. At a big company, I might get some choice in plans- when I was at a company with 40k+ employees, there were three different insurance companies to choose from. At a small company (like where I work now-

Yes, I realize that the chances of this happening anytime soon are vanishingly small. I know some people will disagree with me- and I didn't really expect that the final plan would look like what I'd want. But we aren't even talking about this. We're arguing about "death panels" and a "public option" and we're vilifying entire industries. This entire thing has been a giant wasted opportunity.

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8. TFox on August 17, 2009 11:52 AM writes...

Up here in Canada, I'm covered. Work-based only (like #6) isn't enough, IMO: lose your job, or work as an independent contractor, and you can lose coverage, so you still have to deal with uncertainty. The joy of single payer is that there's no arguing about who is covered (all residents), what is covered (this changes a bit from time to time, eg Alberta just decided to cover midwifery, but patients don't need to worry), or who is supposed to pay for the treatment. Administration costs are therefore close to zero. It's great from a patient point of view too: I've never spent even five minutes trying to figure out who or how to pay for health care. Half-measures I think will suffer all the same problems of the current US system: complexity breeds cost.

The other aspect of a centralized system is that it makes cost control easier. Negotiations about drug prices, or physician reimbursements, are conducted between large powerful organizations (unions and multinationals on one side, health authorities on the other), so there's enough parity for reasonable results. I haven't heard much about cost control under the proposed US system, but I hope someone's been thinking about it.

WRT torts, universal health coverage means no one ever needs to sue just to get their medical bills paid. Malpractice, car accidents, industrial accidents, whatever. People can and do sue for other things, of course, but they aren't forced to for medical reasons. This means a lot less work for lawyers, but it's pretty good for the rest of us.

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9. Anonymous Coward on August 17, 2009 11:54 AM writes...

I think that the Wall St Journal "attack" actually raises some good questions, although it does the usual lousy WSJ job of answering them.

The "Why": WSJ was dead nuts on - if you aren't at the table, you're on the menu.

The "Value": this is unclear, but I'd say that PhRMA was looking to improve relations with the Dems. Frankly, the industry doesn't take nearly as many hits from the Right (exception: Sen, Grassly, who was riding the "New Healthcare Sheriff In Town" horse until quite recently.) as it does from the Left. I think that PhRMA took the political temperature, and figured that it made sense to be a Friend of the Left for the next 7.5 years rather than continuing to put all of their bets in the Right-wing camp (like they did for the previous 8-20 years, which hasn't worked out so well for the industry).

Perhaps one could see this as a relatively low-cost way (given the financial shenanigans outlined in the WSJ article) of making nice with the Dems? After all, can't we all just be friends?

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10. Compliance Analyst on August 17, 2009 12:00 PM writes...

If one more person uses the word deserve when we talk about health care, I think I will flip my lid. Too many people feel that they are entitled to everything.

I deserve filet mignon every night....but I have only earned enough to buy chicken.

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11. Hap on August 17, 2009 12:03 PM writes...

I don't figure that the system can and will persist in its current form, particularly when employers cut health insurance coverage (to cut costs/because they can) and lots of people can't get coverage - even if that doesn't happen, the rate of cost inflation seems to be high enough to ensure financial failure in the near future, which probably will do only the richest few any good at all (if anyone). I could deal with privately insured, but someone has to figure out how much profit the system can do (something government is poor at) and how to ensure that insurers don't dump their expensive patients on others/insurers of last resort (something insurers aren't good at). I don't think hoping that the market will magically solve the financial problems of health care (particularly with the constraint that we care for all who need care) is going to lead anywhere good.

Why couldn't Tauzin have just remembered Fight Club and left it at that? ("The first of Lobbying Club is, you do not talk about Lobbying Club.")

As my (probably) most useful comment, though, I'll just designate a target spammer (soon-to-be-ex-3) for eviction. Bye, bye now!

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12. barry on August 17, 2009 12:11 PM writes...

While the Insurance Industry's opposition to healthchare reform is pure and simple, Pharma's interest is more complicated.
There are only three bargains in healthcare: potable water, sanitary sewers, and vaccines. The first two aren't Pharma's business, but vaccines are. Vaccines make most sense when there is universal health coverage. The current American "system" renders vaccines unprofitable in most cases. The Pharma industry is therefore split on this policy debate depending on how invested any particular company is in vaccines.

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13. Cloud on August 17, 2009 12:19 PM writes...

@Compliance Analyst- I think your comparison of health care with a filet mignon is ridiculous, to say the least. You won't die if you have to eat chicken (or even beans!) instead of a filet mignon. People die without basic health care.

So yes, I think that all people deserve health care, regardless of how much money they make, because I don't think the penalty for poverty should be death.

In fact, our system already recognizes this, because hospitals cannot refuse emergency treatment based on ability to pay. The problem is that using ERs to provide primary care is very cost-inefficient. So let's stop wasting our time on patently absurd arguments and figure out how to get everyone access to actual primary care.

I take it from your comment that you want some personal responsibility in the equation. I agree. I have no problem with requiring people to purchase health insurance, if they can afford to purchase it, much like I am required to purchase car insurance.

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14. qetzal on August 17, 2009 1:26 PM writes...

@ Cloud

This is about much more than providing good (primary) health care to the poor. We've already got Medicaid for that. Maybe it's not good enough as is (I don't claim to know), but in that case we'd only need Medicaid reform.

Also, health insurance and car insurance are fundamentally different. You're required to buy car insurance to pay for any damage you might cause to someone else. You're not required to cover your own damages. At least, not in the states where I've lived. Plus, you're only require to buy car insurance if you choose to drive.

Note that I'm not saying mandatory health insurance is necessarily a bad idea. Just that it doesn't have anything to do with health care for the poor, and isn't analogous to car insurance.

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15. Compliance Analyst on August 17, 2009 1:32 PM writes...

Yeah it is supposed to be ridiculous. Just as ridiculous as people "deserving" to use my tax money because they don't take care of themselves. Guy has a heart attack and requires heart surgery because he smokes, drinks, eats McDonalds for most of his meals, and doesn't exercise to boot, but I have to pay for him to undergo triple bypass?

I think it was Hawaii that tried the universal healthcare for children for those uninsured kids. They ended the program 7 months in because people all jumped to the universal healthcare for children and bankrupted the system. When people have an option, they will always go the free route and not take any accountability. Someone always ends up paying, and it is not the person that is happy living at the bottom and has no incentive to do something about it. Being poor is not supposed to be fun nor comfortable.

I know most people are not happy being poor or at the bottom. But how do you differentiate between the people that are not trying to better themselves, and those that are.....

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16. Alig on August 17, 2009 1:35 PM writes...

We have universal health care in Massachusettes. Why does the Federal government need to get involved? If one state can do it, so can others.

And to Cloud's point about ER visits, since Mass. got universal coverage, ER usage has not declined. So it does not reduce costs there.

I agree that we should provide basic coverage to all because it's actually very cheap to do that, but people do not die because of lack of access to basic coverage. They die because of lack of access to expensive and experimental procedures.

I don't have the figures at hand, but something like 80% of your healthcare dollars will be spent in the last year of your life. So the only way to reduce the costs of the healthcare system is to actually let people die. Now who decides whom gets what lifesaving care is what the debate should be about. The person/organization who pays the bills will be the one deciding. Currently this is insurance/medicare/individual, in the future it will likely be a government panel.

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17. Derek Lowe on August 17, 2009 1:58 PM writes...

Alig, it's far from clear that Massachusetts can do it. You'll note that the legislature has been arguing for some time now about the costs of the program, which are running well ahead of estimates.

And as for your last paragraph on saving health care costs by letting people die, I am assured by many Good People Who Have My Best Interests At Heart that no such thing could ever happen, and that anyone who thinks that it could is completely delusional. Your mileage may vary.

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18. metaphysician on August 17, 2009 2:25 PM writes...

In my opinion, if there's a flaw in the current system, it goes way deeper than "single payer or not." The fundamental problem is treating health care as 'insurance.'

Insurance is about managing risk. You manage risk, by pooling it across a large body of people worried about that risk. Only a certain percentage suffer the risk, and they have that risk covered by the insurance payout; everyone benefits, because everyone only has to spend the resources to cover the aggregate risk, rather than everyone having to spend resources to cover against the contingency that they suffer the risk.

Example: life insurance put up against mortgage debt. If you have $100K of mortgage debt, you have a couple options in case you die. One, you can keep $100K in assets on hand, so your heirs can pay off the debt. Two, and much more likely, you can gamble that you won't die before its paid off. . . in which case your heirs are ruined if you do.

Or, you can get together with a few thousand people who all have the same situation, spend a tiny fraction of the money at risk, and avoid gambling all together.

The problem? Insurance is based on the idea that you base the price of insurance on the probability of the risk occurring, and you either charge more or exclude those with an inordinately high risk. When the 'risk' is 'I need health care', though, the probability is something approaching 100%. We *all* need health care, of some kind at some point. And excluding or over-charging those who have a much higher risk. . . is exactly what nobody wants to do.

So, in a nutshell? Trying to treat health care as insurance is a bad idea, and probably was a bad idea from the get go.

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19. Cloud on August 17, 2009 2:42 PM writes...

@quetzal- Medicaid isn't a blanket program for all poor people (check out their eligibility info: It doesn't even begin to cover all of the poor. Even within the groups it covers, the income cutoff is quite low, and not everyone who is not covered can afford to purchase private insurance, which in our current system is actually pretty expensive. In my opinion, the most important thing we can do with health care reform is fix this situation. You can call it whatever you want- health care reform, health insurance reform, Medicaid reform.... I don't care.

Now, if you want to also improve my quality of care while you're at it, great. I also think it would be dandy if we'd also work on reducing costs and making our system more evidence-based and rational. However, since the one tiny-step taken in that direction resulted in the "death panel" nonsense, I don't hold out much hope for that.

@Alig- Of course people die because they don't get basic coverage. They don't get good treatment for their asthma or diabetes, they only get emergency care. And eventually they die from these manageable diseases. They don't go to the doctor until their cancer has progressed beyond a treatable point, and they die from cancer that could have been treated- the most common example of this in my neck of the woods is skin cancer. It might look like they are dying because they can't afford some expensive treatment, but in many cases, the need for that treatment could have been avoided by getting better care earlier.

I haven't seen the data from Mass. since the change in health care. If ER visits truly aren't going down, I'd like to see some careful analysis to figure out why. I'm all for injecting actual data about what has and has not worked into this debate.

I agree we should talk about who decides what care is covered, but let's do it from an honest starting point. I haven't seen any indication that we're about to make it illegal to pay a doctor directly to perform a service that is not covered by whatever plan you're on.

Right now, my insurance company decides what they'll pay for, and if I want something different, I can go purchase that directly from the doctor. Why is it so much worse to have a government panel decide what they'll pay for? If I want something different, I can still go purchase that directly from the doctor. In fact, in many countries that have single payer systems, there is still a private insurance industry. People purchase private insurance to help them purchase care that is not covered by the government.

What's so scary about the government panel method of setting the standard of care, if that is indeed what we end up with? A government panel would consist of members appointed via some sort open process. They may be susceptible to political pressure, but the panel would operate in public following guidelines set down in law. I suspect there would be some sort of oversight on the panel, too.

Compare that to what we have now: a group of people hired by your insurance company decides what to cover. I don't know the names and educational backgrounds of this group at my insurance company, although perhaps if I called and asked them, they would tell me. These people can be fired by the company if their actions don't meet the company's needs. They operate in secret, by a process that I've never seen explained anywhere- it certainly isn't disclosed to me during open enrollment. If there is oversight, I'm unaware of it.

Which system should scare me more? I don't know, but I usually opt for the system with the greater transparency.

I should have known better than to try to argue this topic here. I know I am in the minority on this site, and I'll never convince any of you to change your views. Similarly, you'll never convince me that we shouldn't reform our system to truly cover everyone. So I'll bow out and let you get back to discussing what Derek really wanted to discuss- which is what is PhRMA up to? I'm sorry my original comment hijacked the thread, Derek.

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20. CMCguy on August 17, 2009 3:04 PM writes...

#8 TFox extols the "wonders" of the Canadian system but ignores the problems such systems create. As stated "The other aspect of a centralized system is that it makes cost control easier. Negotiations about drug prices, etc." is part of what PhRMA is attempting to avoid with US Government mandated price for drugs that are at the heart of the debate. Because, as Cloud suggests, the US is bearing a disproportionate burden to fund drug companies profits such anti-capitalistic measures would have a direct negative impact on R&D/innovation toward future drugs. So Canada, and may other countries, are not paying a "fair share" of global drug development. Companies must adhere to the price controls if they wish to sell products in these controlled markets but ultimately probably don't earn enough to support risky pipelines. Without a global overhaul I don't see a way out if US goes to stringent price controls, unless can fix Patents and Tort issues simultaneously (good luck on that), to continue to provide financing for new drugs whether in Pharma or Biotech.

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21. FormerMolecModeler on August 17, 2009 3:11 PM writes...


Do you have parents? Are they on, or will they be on medicare at some point? If one of them develops some kind of condition that requires expensive treatment, why should my tax dollars pay for YOUR parents? YOU take care of them.

Or do you represent that they did everything "right" (by your standards), and therefore are entitled to my tax dollars? Can I review their entire history of health-relate choices and determine for myself whether they did everything right?

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22. FormerMolecModeler on August 17, 2009 3:19 PM writes...

Tort reform is the biggest red herring in the world. Study after study has shown that torts, by which we really mean putting caps on awards in medical malpractice suits, contribute a small percentage to the over all cost of health care.

I believe California and Texas have instituted tort reform. How's that working out for them?

Suppose we cap awards at $250K. Suppose your family member undergoes some medical procedure which leaves them incapable of doing anything for themselves and requires constant care and there was clear negligence. You get $250K at most, even though the cost of care for their lifetime will far exceed that total. Will you be saying to your self, "Thank God for tort reform!" ? How will you pay for their medical care if your insurance company successfully denies or drastically limits coverage?

Everyone thinks it can't happen to them, until it does.

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23. Mutatis Mutandis on August 17, 2009 4:31 PM writes...

Did anyone notice that Roche jumped ship from the PhRMA? I regard it as one of the better-run pharma companies, and they seem to have judged that the PhRMA no longer served their interests well.

As four the country's sky-high healthcare costs,
I would be inclined to believe that the famous litigiousness of the Americans contributes a lot to them... Not so much by the awards made in court cases, as by the actions doctors take to avoid being sued. Which includes, for example, ordering the full battery of diagnostic tests for every pregnant woman who can afford them, even when there is no reason to believe that something is wrong. So-called "defensive medicine" has been identified as one of the great money-wasters of US health care. At some point, doctors started looking after themselves more than the patient.

And remember that it is not only money that is at stake in such behaviour. Needless use of medical tests can hurt patients; needless use of prescription drugs such as antibiotics is guaranteed to hurt the population as a whole.

There is a relationship, although not a linear but a logarithmic one, between the amount a country spends on health care and the care it actually delivers. However, there are some outliers, and the US is one --- it is way below the curve. Americans pay several thousand dollars per head too much for the quality of care they actually get. Apart from the money that is drained off by insurers and other indirect beneficiaries of the system, it is also fundamentally wasteful. The biggest problem with the proposed reform is that it is too timid and far too concerned with not hurting the greediest players on the field. In reality, looking at the global figures, the USA should be able to cut spending by about $600 billion AND improve quality of care.

Would that hurt the pharma industry? Probably, but I think predictions of doom are way overstated. There are also steps the authorities could take to save money in the pharmaceutical industry, for example by regulating advertisements and marketing much more strictly, that could save the industry a lot of money.

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24. Marty on August 17, 2009 4:43 PM writes...


Every tort reform proposal I've ever seen (and the Texas law) only puts caps on non-economic damages (pain and suffering). So you don't really know what you're talking about, do you?

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25. qetzal on August 17, 2009 4:52 PM writes...

Compliance Analyst wrote:

I think it was Hawaii that tried the universal healthcare for children for those uninsured kids. They ended the program 7 months in because people all jumped to the universal healthcare for children and bankrupted the system. When people have an option, they will always go the free route and not take any accountability.

I don't think that can be a definitive comparison either. The fact is that there are multiple nations that provide universal health coverage (Canada, UK, etc.), and they're not being bankrupted by it. If anything, they supposedly spend significantly less than the US, and have longer life expectancy.

I don't necessarily trust those comparative cost and health numbers. I recognize there are a lot of ways to fudge them (and I've seen a number of such arguments made.) I also recognize that there are problems with those other systems, and it's arguable whether they are better or worse than ours.

But clearly, it is possible to run a universal health care system that doesn't spin entirely out of control.

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26. Hap on August 17, 2009 5:29 PM writes...

Marty - Perhaps, if FMM is clueless, you could explain then where the large disparity in health care (or, more directly, malpractice insurance) costs between tort-reformed states and non-tort-reformed states is, because I wasn't aware there actually was one.

If tort reform were useful in cutting malpractice costs, you'd probably expect a shift of doctors to states with tort reform, and eventually a decrease in doctors' costs in them - unless increases in facilities and insurance costs have eaten that up, you'd expect to see a lower cost to patients and insurers, as well. If that had happened, I would figure that the tort reform crowd (and their Republican allies) would have a hard time keeping it under their hats - two birds with one stone (limiting damage awards and lowering medical care costs and hurting opposition supporters) seems awfully efficient. If any of these are happening, then at least half of the argument ("tort reform hurts patients and doesn't cut costs.") would be addressed more directly. I'm going to make the WAG, though, that they haven't and aren't, and that tort reform is great for screwing lawyers (hope you're wearing protection!) but little else.

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27. DH on August 17, 2009 5:46 PM writes...

With its latest sellout to ObamaCare, it appears that PhRMA is about as effective at defending big pharma's interests as Wesley Mouch was at defending Hank Rearden's. (Mouch was Rearden's "man in Washington" in Atlas Shrugged.)

One part of me says that these cowardly bastards deserve what they're going to get for such a sellout. In the fight against the government takeover of medicine (and for the rights of doctors, patients, and drug companies), I share the attitude expressed in this Rearden quote from the novel: "I am sorry I will be obliged to save your goddamn necks along with mine."

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28. Theodore Wilson on August 17, 2009 6:12 PM writes...

I would like to present a moderate opinion on the discussed concept of entitlement. I would agree with "Compliance Analyst" that physicians are not owned due to a fundamental right to their skills. However, and I would hope that we can agree that medicine is a different kind of service then other businesses. Sadly with American medicine there is a tremendous amount of profiteering that goes on, even in the "not for profit" sector. Part of the root is that we have some amazing treatments something that didn't really exist fifty years ago, many of which were developed or strongly based upon research in the public sector, sadly the flip side is those treatments can be withheld for large amounts of money and providers can take a very fat cut off the top because people have to have healthcare. The fat cut doesn't help the system. It is nothing less then exploitation by providing non-choices. What I would assert is that people are 100% entitled to a system where their healthcare dollars are actually being spent on healthcare. This is something that we do not have. You could argue about how much you should contribute for someone else's bypass surgery, but I argue about how much they should contribute to the personal jets for share-holder and executives.

Hawaii was mentioned as an example. For those not familiar with their medical system two main groups HMSA and Kaiser are in control. While HMSA is supposedly non-profit they are repeatedly criticized for having million dollar upper management salaries, remember it is a really small state. Meanwhile Kaiser which has more expensive albeit expansive policies still has limited facilities on the outer islands, that isn't really a choice. Furthermore, there is disagreement among doctors about a variety of treatments so how can we expect someone not trained in medicine to be able to adequately compare policies? Under these kind of conditions the burden of proof is on the proponents to show that the market can sort these difficulties out.

To give further examples. Statins, beta blockers and ace-inhibitors are the best interventions for cardiovascular disease, which is still the #1 killer in America. If you got say "fatty Joe" on these medications he wouldn't need that bypass. The generic form of these medications are overwhelmingly cost effective except they are not easily given out to anyone who would like to take them. Right now most insurance companies can see that if their average enrollee is only going to stay for a few years there is zero incentive to invest in these life and money saving interventions. If anything most people retire, and when they hit 65 are automatically put into medicare so collectively are outside the realm of any private insurance corp. There is just too much money to be made by shuffling patients around, rationing treatment, and denying pre-existing conditions for as long as possible. So much money actually, that even if you were to pay for that bypass under a broader system (assuming for whatever reasons he isn't on blood pressure medications) you could still be money ahead.

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29. Theodore Wilson on August 17, 2009 6:23 PM writes...


"In many states, malpractice premiums have increased up to 30% per year across most specialties, and up to 70% per year for physicians who practice obstetrics, a specialty in which law suits are more common. In Colorado, annual premiums have increased an average of only 14% per year since 2002."

From Colorado Rural Health Physicians

If doctor's wanted to work in rural CO they would have great mal-practice insurance. However, most physicians choose their locations for a number of reasons not simply insurance. Things such as family and interesting metropolitan environments come to mind.

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30. Hap on August 17, 2009 6:27 PM writes...

The Republican Party bears much greater similarity in its behavior to James Taggart than Hank Rearden, and its definition of saving appears to be consistent only with either the Hebrew OT definition of complete destruction of things and people for dedication to God, or with its use by commanders in Vietnam (destroying villages to save them). Given those considerations I wouldn't worry about any obligations to "save" the rest of us.

You do remember how Atlas Shrugged turned out, right? If that's a happy ending, well, that's about all I need to know.

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31. metaphysician on August 17, 2009 7:29 PM writes...

IMO, the tort reform we need isn't caps on awards, but caps on lawyers fees. . .

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32. Bored on August 17, 2009 7:30 PM writes...

We are ancient Rome, right near the end. It was nice while it lasted.

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33. Ancien on August 17, 2009 9:28 PM writes...

With respect to the specific questions first posed:

1. As a significant percentage of Rx's written are never filled (many due to issues of affordability), Pharma was willing to give up margin to increase unit sales. Optimists will view such as an opportunity, while pessimists might look at it as making the best of a bad situation.

2. IIRC, Tauzin went public after Henry Waxman did his bad-cop number by threatening the deal, and Billy wanted to make sure that he wasn't whipsawed between Henry and Obama. That $120 mil in TV ads supporting ObamaCare hasn't been spent quite yet. Maybe it shouldn't be.

Rule I of politics and late-stage drug development: Never back a loser.

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34. Theodore Wilson on August 17, 2009 10:04 PM writes...

"In many states, malpractice premiums have increased up to 30% per year across most specialties, and up to 70% per year for physicians who practice obstetrics, a specialty in which law suits are more common. In Colorado, annual premiums have increased an average of only 14% per year since 2002"

That is from the Colorado Rural Health Physicians. Links seem to be censored though this information can be found at their website under library, fact sheets, medical malpractice. We do have fairly aggressive tort reform laws here with a one million dollar cap for economic damages and a three hundred thousand dollar cap for non-economic damages. I can see how many would see that as a bit too limiting. Still many including myself also advocate for other options of "tort" reform include jailing surgeons who practice under the influence of alcohol. Certain punishments for physicians that are extremely negligent are way too light.

Colorado also runs a not for profit medical malpractice insurance co-op with no executive being paid more then a practicing physician. They also have a very proactive "adverse event" service which includes extremely expedited and free medical services for many cases. Most of these adverse events are not due to negligence just bad luck. Still, these instances end with less legal costs and the patients tend not to pursue for non-economic damages. The satisfaction rating on these cases is also phenomenal. In total an obstetrics premium here is around $50,000 while in other states may be as high as $200,000. In total malpractice insurance alone accounts for up to ten percent of healthcare spending and fosters a larger system that promotes "defensive" medicine at an unknown cost.

It is also a little closeted to think that physicians will shop around for the state that has the best malpractice insurance as the above has suggested. A lot of things go into where a physician practices include desired patient demographics, spouses work, local politics, religion, family, recreation, local school systems etc... And you have to understand that those all come together to "rural CO" in a very few instances.

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35. CMCguy on August 17, 2009 10:42 PM writes...

Perhaps I misrepresented the term Tort Reform as was thinking more about the impact of the "Sue Happy Culture" that currently exists and has negative impact to innovation. I believe this underlying tort element has a significant inherent impact in "cost of doing business" particularly when it comes to drugs. I have no reliable statistics but observations suggest much activity (20-33%) is not done because science necessity but from motivations that are rooted in CYA legal or regulatory requirements (process which I should have included as another thing that needs correction but unlikely to be meaningful). I think it is disingenuous to introduce price controls without addressing certain things that increase the costs without adding value. Overly short Patent life's (relative to development time) and overly litigious society both skew the cost upward and makes decisions regarding what projects to pursue more difficult.

At the same time it still amazes me when people argue automatically to reduce Marketing Expenditures as cure for Pharma assuming the money will be diverted to R&D. Marketing is revenue generating and more often than not works well so in end supports R&D. Decrease revenues and R&D budgets usually get hit hard.

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36. researchfella on August 17, 2009 11:43 PM writes...

I'm a dual US/Canada citizen, lived for many years in both countries. It's pretty clear to me: if you work for a decently large company and/or have a lot of money, you get better healthcare in the US; if you're a waiter/waitress or a sales clerk or something like that, you're much better off in Canada. Can't anybody come up with some compromise system that takes the best of different systems?
It's criminal that our country (USA) prides itself on being so humanitarian and civilized, yet basic healthcare is not provided for all citizens and residents. This should be a higher priority than universal basic education, surely.

When your kid doesn't quite finish college, but he/she moves out of the home and tries to make an honest and independent living as a sales clerk or waiter or something lowly like that, and he/she has no health insurance nor can afford any, you'll understand how I feel. I'm paying for my kid's emergency hospital insurance, at least, so I can sleep at night.

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37. Scandinavian Chemist on August 18, 2009 6:43 AM writes...

@ Compliance Analyst: You say that your tax money shouldn't pay for other peoples health care since they should know enough to take better care of themselves. Does the same go for police or fire fighters? Should your tax money pay for other people forgetting a candle or walking around in the wrong neighbourhood and being mugged?

When it comes to what taxes should and should not pay for, I believe that what's acceptable comes down to what you are used to. Anything outside that get's axed down to cries of accountability. As you say, the difficult thing is to know just where to draw the line. Maybe it's just my being used to a scandinavian system that makes me think that people should deserve health care in the same way that we expect there to be an emergency number to the police and fire department.

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38. Compliance Analyst on August 18, 2009 6:59 AM writes...


My parents have not been and may never be on Medicaid/Medicare. But these are the same people that have worked for years and paid into the system. What I am complaining about are the people that do nothing and leech on the system, which I believe universal healthcare abets. My grandma had two strokes and payed for things with her own money. My mom and I spent a lot of time with her up until the end.

Maybe instead of the current system, the insurance companies need to go back to catastrophic insurance where you pay for visits out of your pockets and major occurrences are paid out of an insurance policy. It seemed to work back then and I actually remember talking to my doctor about my health and not feel like I was getting "drive-thru" healthcare.

As for my Hawaii reference, it just shows the mentality of the public. People moved their kids off their own insurance and moved them onto the "free" care. I just forsee the same thing with this version of healthcare. I know that the system is too complex to fix piecemeal, so why not get some more people around the table and take a hard look at it instead of throwing together a system that seems doomed to failure.

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39. Compliance Analyst on August 18, 2009 7:05 AM writes...

There is also a fine line between negligience and accidents....

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40. DH on August 18, 2009 8:42 AM writes...

Hap writes, "The Republican Party bears much greater similarity in its behavior to James Taggart than Hank Rearden... Given those considerations I wouldn't worry about any obligations to "save" the rest of us."

I completely agree with your point about the Republican Party, and Billy Tauzin is another disgusting example of this. (I used to think he was better. But with Republicans, you get used to disillusionment.)

I feel no "obligations" to save those such as PhRMA who are trying to sell the rest of us down the river for short-term gain. The point of the Rearden quote is that those of us defending the right to control our own health care are by that process also defending PhRMA's rights, even though they are fighting us every step of the way.

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41. Hap on August 18, 2009 9:06 AM writes...

Sorry. I was catty. I guess I don't really trust that the market is going to be able to solve health care problems (well, most people's anyway). I also made the mistake of confusing libertarian/market people with Republicans (or old-style Republicans with new-style ones).

I did actually like Atlas Shrugged, though I don't believe the underlying philosophy. I actually manage to admire her characters, unlike The Fountainhead, where there was no one I really cared about.

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42. Hap on August 18, 2009 9:14 AM writes...

True, but CA and NY both provide a variety of environments (and a lot of the things that people seem to prefer, despite the costs).

The other caveat I neglected is market size - if MS caps non-economic damage, I think few doctors would move there, not only because of the place, but because there are only so many patients and so much money - lots of doctors chasing few patients isn't going to work well. In CA, for example, though, that isn't likely to be as much of a factor, and you'd expect tort reform to have a bigger effect there. I would have thought that CO would get more people though, but if it's only rural, well, that's the MS problem again.

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43. Cloud on August 18, 2009 10:36 AM writes...

@compliance analyst- your parents will be entitled to Medicare when they reach 65. If they choose not to use it, that's their business.

Anyone wanting a quick comparison of the US system with the systems in several other industrialized countries can take a look at NPR's guide:

I personally think we're headed towards something that looks more like the Netherlands or Switzerland than the UK.

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44. Compliance Analyst on August 18, 2009 11:57 AM writes...

Yup....I was mainly commenting back to Former and Scandanavian.

Thanks for the link to the NPR guide....actually quite helpful and intersting.

Do they also take into account our healthcare costs in relation to the amount of hours worked in a week, diet, etc?

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45. Cloud on August 18, 2009 12:28 PM writes...

I haven't read any studies, but I'm sure some have been done trying to correlate lifestyle and health care costs.

However, it seems to me that if hours worked per week were the problem, Japan's costs should be higher than ours, and they are not.

And I don't think the diet in the UK is really much better than ours.

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46. Compliance Analyst on August 18, 2009 12:51 PM writes...

I guess I am used to working with our German colleagues that are impossible to get a hold of in the summer because they have "holiday" and are out for a month or two. On top of that I think France only has a 35 hour work week.

The one funny things about Japan was hearing about a stress reliever that a company had where a guy would come in a body suit and for like $40 you could just pummel the person. Sounded brilliant. I would think that the Japanese diet is much healthier than the American. Apparently there is also a trend of working shorter hours in japan.

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47. alig on August 18, 2009 1:09 PM writes...

Here is a link that provides obesity stats by country:
You will notice that 30% of America is obese, while 23% of the UK and only 7.7% of Switzerland is obese. It's a testiment to the healthcare system here that we live as long as we do.

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48. handsoffmyhealth on August 18, 2009 9:12 PM writes...

The argument that we should be required to have health insurance because we are required to have car insurance is really, really, illogical. Car insurance is for catastrophy and negligence; it doesn't cover gas, basic maintenance, repairs (except sometimes because of accident). "Health" insurance doesn't and can't cover "basic health care" it is only crisis and chronic illness care. It never covers preventive care and would not be profitable to do so. I don't want health insurance-I will not go to a doctor that will only treat me according to an insurance company's dictates and who gets paid to prescribe one size fits all drugs. Every health problem I've ever had has been caused by a doctor under insurance dictates misdiagnosing, misprescribing, allergic reactions and adverse events from the drugs and tests. I stay healthy by not going to doctors, by judicious use of vitamins and supplements, by heeding Hippocrates "Let medicine be thy food and thy food be thy medicine". Why should I be forced to pay for others poor lifestyle choices? Chronic illnesses are the bulk of our healthcare costs and they are the result of poor nutrition and lifestyle choices-diabetes, heart disease, smoking, legal drug use. The drug companies have created a huge percentage of the costs with drugs, mostly unnecessary and their lobby to keep prices unnecessarily high (The Medicare Prescription drug act-case in point- ensures that the govt and patients pay full retail for drugs, no price negotiations, no generics and as soon as the legislation passed, prices increased 100-1000%) Want reform? Repeal the Medicare Prescription Drug Act and save 600 BILLION! Allow low cost generic drugs to be manufactured by supplement companies under GMP. Prevent Pharma from paying doctors and insurers to prescribe drugs. Divorce health insurance from employment. Eliminate government subsidies of insurance companies. Allow beneficiaries to opt out of Medicare Part A. Make incentives to ensure true competition among insurance companies. (Repeal laws that set prices) Encourage preventive care. Allow insurance companies to sell across state lines. Encourage functional and integrative medical practioners. Allow HSA's with much higher contribution levels without requiring insurance policies and allow the contributions to build year to year like IRA's. Allow the HSA's to be spent for vitamins, supplements, yoga, exercise programs, accupuncture, etc. Reward people for staying healthy and not using "the system". Give rebates much like earned income credit for those who manage to stay healthy. Catastrophy insurance, cheap, for trauma, hospitalization and major illness would be useful and not currently available and/or affordable.

Heed the words of Thomas Jefferson "If people let government decide what foods they eat and what medicines they take, their bodies will soon be in as sorry a state as are the souls of those who live under tyranny." Do not encourage tyranny by calling for mandatory and/or universal insurance coverage. We need a new health paradigm, not more of the same garbage, insurance and drugs that got us here.

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49. David Christopher Rogers on August 18, 2009 11:26 PM writes...

That $120 mil in TV ads supporting ObamaCare hasn't been spent quite yet.

And remember, they haven't sent in the final cut for the ads yet... a nice reminder to the writers (or editors) of the final bill to play nice.

Having paid for $120M of air time cuts both ways.

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50. alig on August 19, 2009 6:16 AM writes...


I don't know where you got your stats, but prices for drugs did not increase 100-1000% after the medicare durg act was passed. Also, drugs only make up ~15% of healthcare costs and their prices are increasing at a slower rate than other areas of healthcare. See:

I agree with you about HSAs supplemented with catastrophic insurance. I think this is the best way to go.

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