MPR: Prescription for Change (Part 1)

Prescription for Change: Government Policy
By Tom Scheck
July 25, 2000

The rising cost of prescription drugs has become a prominent issue this election year, pushed by the growing ranks of senior citizens whose prescriptions are not covered by Medicare. Minnesota Public Radio looks at the problem in the first of two parts in our series Prescription for Change.

Prescription for Change
This report is the first of two parts in MPR's series Prescription for Change.

MORE THAN FIFTY different bills have been introduced in Congress this year concerning the cost of prescription drugs. Now state governments are taking up the issue as well. During the week of July 7th, New England governors announced a plan to create a regional drug-buying pool to get their residents cheaper drugs. In June, Minnesota House DFLers called for the state to control prices on the cost of prescription drugs. House Minority leader Tom Pugh said there's a wide disparity in how much Americans pay for drugs compared to Canadians and Europeans.

"Minnesotans are fed up with the being charged the world's highest prices for prescription medications and we want to tell members of Congress that if they don't act, the states are ready to step in and solve this problem for our citizens," he said.

The difference in prices between the U.S. and other countries is so dramatic that people in Northern Border states regularly see Canadian pharmacies advertising the deep discounts. For example, Americans pay two times more than Canadians and Mexicans for the cholesterol lowering drug, Zocor and the osteoporosis drug, Fosamax, is three times more expensive in the U.S.

As a political statement many politicians are holding bus trips to Canada to point out the disparities.

A Kaiser Family Foundation study says the aging of the baby boom generation has pushed the issue into the political spotlight because as boomers get older they become more dependent on prescription drugs. The study said America's overall use of prescription drugs jumped 15% between 1997 and 1998, but as use has gone up, so have prices.

Prescription prices higher in Minnesota Here are many costs for the five drugs most commonly prescribed to seniors.
Drug	Canada	Mexico	U.S.	Minn.
Zocor	$46.17	$67.65	$106.68	$108.86
Norvasc	$89.81	$99.32	$118.18	$124.72
Prilosec	$55.10	$32.10	$116.52	$116.53
Procardia	$74.25	$76.60	$132.48	$137.42
Zoloft	$129.05	$219.35	$222.19	$232.90
National average is the average of prices found in 43 congressional districts. Source: Prescription Drug Pricing Report: An International Comparison, U.S. House Committee on Government Reform, minority staff report

Kaiser Family Foundation's Larry Levitt says most people don't see the effect of rising usage and prices because they're shielded from the full impact by employer-subsidized health insurance. He says employers are watching their health care costs jump 15 to 20% a year.

"A lot of people would be surprised to learn, if they have good insurance coverage, how much these drugs cost because when they walk into a pharmacy, they're paying 5, 10, 15 dollars for a prescription," Levitt said. "And they'd be quite surprised to know that that prescription can easily be 50 or 100 dollars or more."

The consumers who are aware of these rapidly rising costs are seniors on Medicare. When the government introduced the program in 1965, prescription drugs played only a small part in the health care system so the federal government left such medications out of the coverage plan.

As a result, one in three seniors, who rely exclusively on Medicare for health coverage, pay full price for medications.

Many say they have to decide between buying groceries, paying their rent or buying the medications they need to live.

A handful of seniors gathered at the Minnesota Senior Federation office in Saint Paul to discuss the issue. Everyone said that they can afford the costs of medication, but struggle to make ends meet. Tom and Pat Medley from Bloomington spend $300 a month for his heart and diabetes medication as well as drugs to treat her bone loss and nerves.

"We can afford it, she's making a sacrifice, maybe we can't do things we want to, maybe go on a trip or something..," Tom explained.

The seniors sitting at the long card tables say cost is a bigger factor for their friends on tighter incomes, but reiterate that all seniors could use some help paying for drugs. They don't understand how there can be a wide price disparity between pharmaceuticals in the U.S. and other industrialized countries.

For the past 30 years, Steve Schondelmeyer has been following drug prices and kept a catalog of every drug and it's price sold in the U.S. since 1980. The head of the University of Minnesota's pharmaceutical care and health systems department says Americans pay more for pharmaceuticals because other countries negotiate price with drug companies while the prices in the United States are unregulated.

"Every other major industrialized country other than us regulates price or profit of drugs. So all of the world is squeezing on this balloon and there's only one place where there's no pressure, and that's in the U.S.," Schondelmeyer stated. "So if you squeeze the balloon on all places except for one place, you know what's going to happen? The balloon's going to bulge out in that one spot."

One way Schondelmeyer feels the government can lower prices is by forcing manufacturers to reveal prices to consumers. He says drug companies offer deep discounts to federal employee groups and HMO's that buy drugs in bulk for members, but those discounts are not disclosed, even to the doctor who makes the prescription decision for the patient.

Since different companies make drugs to treat similar ailments, Schondelmeyer thinks making price information public would let doctors and patients decide the most cost effective drug for the patient.

"What probably needs to happen in terms of U.S. policy is to create some pressure back on that bulge," he says. "I would not advocate that we would push back so hard that we have a lower price than the rest of the world, but we need to squeeze back as a society on the U.S. so that that bulge doesn't continue to be the growth in revenue.."

Officials who work for drug companies say they aren't the problem. They blame an arcane Medicare system that hasn't covered prescription drugs. Jeff Trewhitt, a spokesperson for Pharma, a Washington DC based trade group that advocates for the major drug companies in the U.S. agrees that low income seniors need help paying for prescription drugs. He attributes the problems to a Medicare system that pays thousands of dollars for a heart bypass surgery won't pay $900 a year for a drug that prevents that ailment.

Trewhitt says his organization supports a house republican plan that would have the government reimburse private health plans for drug costs. Pharma opposes any government price controls on medication because he says it would hinder the drug companies' efforts to come up with newer, more powerful drugs. Last year alone, Trewhitt says U.S. drug manufacturers spent $24 billion on research and development and he expects those numbers to rise.

"It would be tragic because the U.S. research based pharmaceutical industry is far and away the most innovative pharmaceutical industry, bar none," Trewhitt said. "It takes all of the nation's of Europe combined with Japan to reach the level of research and development spending of the U.S. industry as one industry."

Trewhitt's organization is fighting to make sure the government supports Pharma's proposal. Over the last year and a half, The Center for Responsive Politics, a group that tracks political contributions, says Pharma and it's public relations arm "Citizen's for Better Medicare" spent $24.5 million lobbying in Washington.

President Clinton wants to create a national drug buying cooperative for all seniors while some house and senate democrats want price controls. Most experts don't expect meaningful reform to come out of Congress this year, but say the issue will resonate in this election season and into next year.

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