Seniors have a large stake in the design
of a Medicare prescription drug benefit. If they think that they
will be able to have any drug that they need, without restriction,
through most of the proposals for Medicare that are currently being
considered, they are gravely mistaken.
All
of the major Medicare prescription drug bills that are now under
consideration in Congress focus on controlling the cost of
medications. To accomplish this, they would rely upon three basic
methods: restricting new drugs in favor of generic drugs; limiting
patients to one or two drugs of a particular kind (based on the
assumption that all medicines in a group are more or less
interchangeable); and replacing the judgments made by physicians
and their patients with those of a committee far removed from the
actual medical problem.
In
most cases, the drug limitations would be devised and enforced by
formulary committees--committees that develop lists of preferred
drugs that would be available to Medicare patients. Based on
experience with health maintenance organizations (HMOs) and other
restrictive private-sector plans, the primary concern of such
committees typically is neither the total cost of disease
treatment, nor the long-term well-being of the patient, but rather
the price and cost of the medicines. These formulary committees are
usually made up of pharmacists, physicians, economists, and
accountants who decide which drugs patients and doctors can receive
immediately, and which medicines should be categorized as
non-formula, requiring approval before a health plan covers their
payment.
Members of Congress who favor making drug
cost-containment a centerpiece of Medicare prescription drug
coverage often argue that they are simply following the model of
successful programs in the private sector. A recent article in the
New York Times favorably observed "Insurers around the country are
trying to...shift from brand-name to generic drugs as a way to slow
the rapid growth in spending on prescription medicines. They have
had some success. Almost every proposal in Congress to add drug
benefits to Medicare would strongly encourage the use of generic
medications. Otherwise, according to lawmakers, Medicare could not
afford the new benefit." The Times report notes that
such initiatives "offer important lessons for federal officials
seeking ways to help the elderly with drug costs."
Congressional supporters of these
restrictions fail to note that many patients enrolled in these
private-sector plans do not have the right to move to a health plan
that is better able to meet their needs, since their choices are
limited by their employers. Their situation contrasts with that of
individuals enrolled in the Federal Employees Health Benefits
Program (FEHBP), which covers Members of Congress and federal
workers and retirees. FEHBP enrollees have many options to choose
from and can drop plans that have overly restrictive drug
formularies that do not satisfy their needs in terms of coverage or
quality of care.
Members of Congress who support
formularies are ignoring studies that suggest that limiting the
elderly to older drugs or restricting their access to certain
medications would compromise their health and ultimately increase
their total health care costs. Conversely, while the most expensive
drug is not always the best drug for a medical condition, research
clearly shows that the introduction of new drugs has been
associated with a general improvement in patients' well-being,
better care, and a decline in total treatment costs in dealing with
numerous diseases--including depression, schizophrenia, cancer,
HIV, heart disease, and even ear infections.
The
formulary committees that confine seniors' choices to one or two
drugs in a particular therapeutic class, such as those envisioned
in the Graham-Kennedy-Miller bill (S. 2625), the leading Senate
Democratic bill, ignore individual differences in response to
treatment and medicines. This is especially true in cases of brain
diseases where many elderly patients suffer needlessly from
one-size-fits-all care. The congressional proponents of formulary
committees also ignore the facts that many seniors are on multiple
medications and that physiological changes in older persons affect
the absorption, distribution, metabolizing, and elimination of
medications. Because of greater physiological variability, the
elderly often respond to drugs less predictably than younger
adults. Comparable doses of drugs may have enhanced, diminished, or
different effects for the elderly than they would for the
non-elderly.
Patient Choice vs. Government
Dictates
To
ensure quality health care, Congress should encourage physicians
and patients to use the best medicines to prevent and control
disease in ways that improve health and lengthen life, rather than
relying on the Medicare bureaucracy to devise drug formularies. The
only proposal that comes close to ensuring that people will get the
best care they need, without government interference and without
fear of a huge financial burden, is a plan proposed by the Galen
Institute and the American Enterprise Institute, the Prescription
Drug Security (PDS) plan. The PDS proposal combines the key
elements of earlier proposals: a low-income subsidy, a discount
card, and catastrophic insurance protection. As in earlier
proposals, seniors with private health insurance and drug coverage
would keep their plans, but low-income seniors would receive
immediate financial assistance to enable them to purchase routine
medications. They would also receive private catastrophic coverage
for large drug expenses. However, there are important differences
between the PDS plan and other proposals. Under the PDS plan,
- Low-income beneficiaries would receive a
cash subsidy of up to $600 per year for medicine. Individuals would
access this subsidy through a PDS debit card. This card would also
automatically qualify the beneficiary for discounted prices at a
pharmacy. Unspent balances in the PDS account would be rolled over
to the following year, giving seniors a greater opportunity to
choose the drugs they want.
- Catastrophic insurance would pay 80
percent of beneficiaries' drug costs that are between $2,000 and
$6,000 a year, and would provide full coverage for drug expenses
that are above $6,000. Beneficiaries receiving the full cash
subsidy would pay no more than $2,200 in out-of-pocket costs for
medicine throughout one year; those who are not subsidized would
pay no more than $2,800. Low- and middle-income people would
receive a premium subsidy up to the full cost of the
insurance.
- Those who have higher incomes and are not
eligible for the full cash subsidy could make their own
tax-deductible contributions to the PDS card funds. Premium
payments would also be tax-deductible.
- The program would build on the existing
coverage that many seniors now have, rather than replacing that
coverage, and would be modeled after the Federal Employees Health
Benefits Program. Beneficiaries would be able to choose from a
variety of private drug plans and a wide range of medications,
rather than being limited to a single government plan and a
government formulary.
How Formulary Restrictions Hurt
Senior Citizens
Formulary restrictions are likely to
provide only "second-best" drug therapy, especially in the case of
the elderly. Restricted formularies limit the choices a patient has
within a particular class of drugs, and, in some cases, could force
seniors to choose a drug that leads to other illnesses that require
a doctor's attention--or worse, hospitalization.
In
1996, Dr. Susan Horn conducted a study of 13,000 patients from six
HMOs, titled the Managed Care Outcomes Project. This study found
that more restrictive drug formularies were correlated with an
increase in patients' use of more expensive medical services,
treatment in emergency rooms and hospitals, and visits to doctors'
offices.
Thus, formulary limitations and therapeutic substitution (to ensure
the use of formulary agents) not only place the elderly at
particular risk, but also ultimately increase the total cost of
their medical care.
Adjusting for differences in the severity
of illnesses and other variables, the significant associations
between formulary restrictions in a drug class and the greater
utilization of health-care services were often significantly
greater for elderly patients. For example,
- In comparison with younger patients,
seniors who were faced with formulary restrictions were twice as
likely to be hospitalized or to go to the emergency room for
treatment.
- The fewer drugs seniors were able to
choose from, the more likely they were to use inappropriate and
more expensive medical services.
- Greater limitations for the drug class of
anti-ulcer drugs were associated with higher total drug costs for
both elderly and non-elderly patients. However, greater limitations
within the drug classes of propionic acids, immediate-release
theophylline, and diuretics were associated with higher medical
costs for elderly patients, but not for non-elderly patients.
The Danger of Limiting Access to New
Prescription Drugs
The
use of drug therapy to treat depression provides a case in point
regarding the dangers of limiting access to a variety of
prescription drugs. Selective serotonin reuptake inhibitors (SSRIs)
are used to treat depression and a variety of affect disorders.
While there are more than a dozen existing SSRIs, under all the
proposed Medicare plans, seniors suffering from depression and
related disorders would be limited to one or two SSRIs. The three
most commonly prescribed SSRIs--fluoxetine, sertraline, and
paroxetine--are among the 10 most frequently prescribed agents in
the U.S. market. It is understandable that those who manage
pharmacy acquisition and delivery would consider purchasing a
single agent as an attractive option, particularly if the exclusive
purchase of one agent resulted in lower costs and more efficient
handling by the pharmacy. However, placing only one SSRI on a
formulary assumes that SSRIs are interchangeable. This is not the
case; there is evidence that different agents are not
interchangeable. The comparative acquisition costs of drugs should
not result in limiting the drugs that are available for seniors.
While acquisition costs are significant, pharmaceutical costs
represent only 10 percent or less of the overall cost of treating
depression.
The
practice of having a single SSRI on the formulary for a health plan
has proven to be ill-founded. In one study, approximately 25
percent of the patients who received an antidepressant did not
respond to, or could not tolerate, the drug on the formulary. When the
drug prescribed through the single-agent formulary was ineffective,
many of those who did not respond were sent for psychiatric
therapy, others were prescribed an alternative drug, and those
remaining dropped out of treatment. It is possible that patients
who must discontinue one SSRI (either because of a lack of
tolerability or a failure to respond) can often be treated
effectively with an alternative SSRI. However, the patients in the
study who switched antidepressants remained in treatment 50 percent
longer than those whose doctors had a choice of antidepressants,
including SSRIs.
Allowing physicians to choose among
several antidepressant drugs for their patients can increase the
possibility of continuing their treatment in a primary-care
setting. An exclusive focus on the acquisition costs of medication
ignores the benefits of offering options that will enhance the
potential to effectively treat depression--including fewer
hospitalizations, fewer adverse reactions to the prescribed drug,
reduced durations of medication therapy, and a greater likelihood
of taking appropriate therapeutic doses of medication. In sum, a
cost-conscious, short-sighted approach can ultimately result in
increased total costs for patient care.
A Flawed Model
The
Medicare drug benefit proposed in the Senate's
Graham-Miller-Kennedy bill (S. 2625) would establish restrictive
formularies modeled after those of the Department of Veterans
Affairs (VA). Regrettably, under the VA approach that limits
options to only the cheapest drugs, patients often suffer
ineffective treatment with older medicines before they are
prescribed newer drugs. For example, though studies show that such
patients hospitalized for schizophrenia experience a better quality
of life when they are treated with newer drugs, the drug prescribed
to them through the formulary is an older one. If a new drug is
prescribed, only one type is allowed because of price
concerns--despite evidence that individuals respond differently to
various drugs.
The
VA formulary regarding the newer antipsychotic drugs provides a
prime example of the way in which a Medicare formulary such as that
proposed in S. 2625 would adversely affect patient care. Although
the VA guidelines do not specifically restrict a treating physician
from prescribing any "atypical" antipsychotic drug that he believes
will best meet a patient's needs, in an environment that
prioritizes cost control, a doctor's options are effectively
limited. Both formally and informally, physicians are discouraged
from prescribing more costly atypical drugs. In some cases,
pharmacists have called physicians to ask that they change their
prescriptions to a less costly drug to comply with federal
"guidelines." Specific plans have been outlined to monitor
physician practices, ensure that more costly medications are
prescribed less often, and effectively penalize physicians who
persist in prescribing an atypical drug that is not designated in
the formulary.
Why Medicare Patients
Should Have Access to All New Drugs
Patients' access to new drugs is critical
to their health and beneficial in reducing overall health-care
costs. A recent study by Susan D. Horn showed an association
between greater use of newer asthma drugs and lower overall drug
costs and fewer physician visits. The study also found correlations
between the greater use of newer asthma drugs and fewer
hospitalizations and emergency-room visits. Newer non-asthma
medications were also associated with fewer emergency-room
visits.
The
findings from Horn's patient-level research are consistent with
findings of a study by Professor Frank Lichtenberg, an economist at
Columbia University. Lichtenberg found that hospital stays,
bed-days, and surgical procedures declined fastest for patients
with the greatest increase in the total number of drugs prescribed,
and for those with greatest increase in the use of new drugs.
Within the sample studied, an increase of 100 prescriptions was
associated with 1.48 fewer hospital admissions, 16.3 fewer days
spent in the hospital, and 3.36 fewer in-patient surgical
procedures. A $1 increase in pharmaceutical expenditure was
associated with an approximately $4 reduction in other health
expenditures.
Professor Lichtenberg also found that "in
the absence of pharmaceutical innovation, there would have been no
increase, and perhaps even a small decrease, in mean age at death,"
and that "new drugs have increased life expectancy, and lifetime
income, by about 0.75 percent to 1 percent per annum. Some of the
more conservative estimates imply that a one-time R&D
expenditure of about $15 billion subsequently saves 1.6 million
life-years per year, whose annual value is about $27 billion." In
addition, Lichtenberg found that, among the Medicare population,
the use of newer drugs reduces non-drug expenditures by all payers
8.3 times more than it increases drug expenditures, and it reduces
Medicare non-drug expenditure 6.0 times as much as it increases
drug expenditure. The study also found that the more new drugs
there are in a class, the greater the reduction in non-drug
expenditure and the greater the impact on patients' survival and
well-being.
Real Medicare Reform Based on Patient
Choice
Most
of the recent congressional legislative proposals providing for
Medicare drug benefits would not seriously improve the performance
of the Medicare program or guarantee senior citizens access to new
prescription drugs. These proposals focus almost exclusively on
providing drug benefits with conventional, flawed, cost-containment
mechanisms such as restrictive formularies, and they fail to use
drugs with an eye toward reducing total health care costs or the
long-term well-being of people. Most of these proposals would limit
patient choice and would take the decisions regarding the drugs
that should be prescribed out of the arena of physician-patient
consultation. Such provisions for prescription drugs in Medicare
would have adverse outcomes: total health care costs would rise and
the well-being of millions of Americans would be jeopardized.
Congress should go back to the drawing
board to develop a plan to provide prescription drug coverage to
Medicare patients. Rather than tinkering with restrictive
formularies and trying to design a stand-alone benefit with
separate premiums and co-payment arrangements, legislators should
work to integrate prescription drug coverage into existing
insurance plans, allowing the health plans to develop a regimen of
disease-management programs that incorporate drug treatment. In
other words, Congress should enact real Medicare reform.
While formularies exist in the private
sector, restrictions on choice vary and change in response to
patients' needs and consumer choice. There is a critical difference
between formularies dictated by an insulated government bureaucracy
and those developed in response to consumer choice and market
forces. To engender authentic reform and positive development
within Medicare, a prescription-drug benefit should enhance
consumer choice and put the patients, in consultation with their
physicians, in the driver's seat, allowing them to make key
treatment decisions. A model for such Medicare reform already
exists in the Federal Employees Health Benefits Program, the
consumer-driven health program that covers Members of Congress and
federal workers and retirees. All of the health plans of the FEHBP
provide prescription drug coverage, and the enrollees can choose
the specific prescription drug coverage that best meets their
needs.
Senior citizens should recognize that the
medical decisions made by the bureaucracies of Medicare and the
Department of Veterans Affairs are slow to change and cookie-cutter
in design. Medical progress emerges through a free market, where
the choices and observations of clinicians can be expressed most
freely. When the freedom of the marketplace is curtailed so too is
medical progress.
Conclusion
The
recent array of Medicare proposals on Capitol Hill focus on the
provision of prescription drugs. While this sounds desirable,
seniors should be aware that most of these proposals also include
restrictive drug formularies, or preferred drug lists, which would
restrict their access to new and effective prescription drugs. Although
the purpose of these formularies is to control costs, a strong body
of research has shown that, in fact, restrictions on prescription
drugs will increase overall health care costs; drive up the
utilization of other medical services, including hospitalization;
and result in adverse outcomes for patients' health. The evidence
also indicates that restrictive drug formularies have a greater
negative impact on senior citizens than the younger cohorts of
patients. Finally, there is strong evidence that access to new
drugs can reduce health care costs, including hospitalization and
other medical services, and improve the health outcomes for
patients.
The
best way to ensure seniors' access to new and effective drugs is to
transform Medicare into a new system based on patient choice and
market competition. Short of that, Congress should target funding
to low-income seniors who have financial difficulty in purchasing
prescription drug coverage.
As
the Medicare program is reformed, it should be restructured to
restore and enhance the doctor-patient relationship, acknowledging
that decisions regarding the choice and use of medicines are among
the most critical elements of this relationship. In contrast, the
proposed drug formulary restrictions contained in Congress's
current major Medicare prescription drug proposals would
significantly restrain that crucial relationship and obstruct
medical progress.
Congress can do much better for America's
senior citizens.
--Robert Goldberg, Ph.D., is Senior
Fellow and Director of the Center for Medical Progress at the
Manhattan Institute. Susan Horn, Ph.D., is Senior Scientist at the
Institute for Clinical Outcomes Research in Salt Lake City, Utah.
Fred Goodwin, M.D. is host of the nationally syndicated radio show,
The Infinite Mind, professor of psychiatry at the George Washington
University Medical School and former director of the National
Institute of Mental Health.