Yes, pharmaceutical companies are evil

Wow.  Really, really good Washington Post story about how there’s a $50 treatment for a serious eye disease that affects the elderly, but doctors regularly choose the $2000 treatment, bill Medicare, and we all pay.  Ugh.  The lede:

The two drugs have been declared equivalently miraculous. Tested side by side in six major trials, both prevent blindness in a common old-age affliction. Biologically, they are cousins. They’re even made by the same company.

But one holds a clear price advantage.

Avastin costs about $50 per injection.

Lucentis costs about $2,000 per injection.

Doctors choose the more expensive drug more than half a million times every year, a choice that costs the Medicare program, the largest single customer, an extra $1 billion or more annually.

How can that be you ask?  Why politics, of course.  Especially serious pharmaceutical industry lobbying and questionable behavior from the drug manufacturer:

Many ophthalmologists, however, are skeptical that it provides any added value over the cheaper alternative.

“Lucentis is Avastin — it’s the same damn molecule with a few cosmetic changes,” said J. Gregory Rosenthal, a Toledo ophthalmologist who, outraged by the price, co-founded a group called Physicians for Clinical Responsibility to protest its use. “Yet Americans are paying a billion dollars every year for no good reason — unless you count making Genentech rich.” …

Why does Medicare pay 40 times as much for the same efficacy?  Because it has to by law and there’s your story:

To begin with, the Medicare agency is blocked from seeking better drug prices by negotiating directly with the drug companies, as health agencies in other countries do. Authorities in Britain, for example, have negotiated a price of about $1,100 per dose of Lucentis, and in the Netherlands a dose sells for about $1,300.

Moreover, in cases in which two equivalent options are available, such as Lucentis and Avastin, Medicare is forbidden from restricting payment to the amount of the less costly alternative. [emphasis mine] After it sought to do so in 2009, a federal appeals court said it lacked that authority…

Medicare officials said they have no choice but to pay the bill when a doctor prefers to use Lucentis.

“We do not have the authority to dictate treatment based on cost,” Tami Holzman, a spokeswoman for the Centers for Medicare and Medicaid Services, said in a statement. “Under current law, Medicare must cover treatment that is deemed reasonable and medically necessary by a physician or other provider.”

Pharmaceutical firms argue that this is the way it should be.

The industry’s main lobbying group, known as PhRMA, opposes allowing the government to negotiate prices with companies — a process it calls “price controls” — and similarly opposes attempts by Medicare to pursue a policy of paying only for the least costly alternative.

But why would doctors order this way more expensive but not at all more effective (or any more lacking in side effects) drug?  Well, there is this:

Doctors, meanwhile, may benefit when they choose the more expensive drug. Under Medicare repayment rules for drugs given by physicians, they are reimbursed for the average price of the drug plus 6 percent. That means a drug with a higher price may be easier to sell to doctors than a cheaper one. In addition, Genentech offers rebates to doctors who use large volumes of the more expensive drug.

A long, sad story.   And another great example of why health care is so much more expensive in the US than the rest of the world.  Other countries simply don’t get lobbied into wasting money on Lucentis when Avastin will do the trick nor are their doctors financially rewarded for doing so.  And do you know what you call a federal bureaucracy that says don’t waste money on Lucentis?  A “death panel.”

About Steve Greene
Professor of Political Science at NC State

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