Monday, August 08, 2011

ObamaCare's Early Results - Rationing Cancer Care Drugs

ObamaCare has yet to be fully implemented, but some nice previews of the early results have started to show up. In the Sunday New York Times, of all places, bioethicist Ezekiel Emanuel writes about how government prices controls on generic cancer drugs have resulted in shortages of generic drugs used in treating cancer patients, creating what amounts to a rationing of care:

If the laws of supply and demand were working properly, a drug shortage would cause a price rise that would induce other manufacturers to fill the gap. But such laws do not really apply to cancer drugs.

The underlying reason for this is that cancer patients do not buy chemotherapy drugs from their local pharmacies the way they buy asthma inhalers or insulin. Instead, it is their oncologists who buy the drugs, administer them and then bill Medicare and insurance companies for the costs.

Historically, this “buy and bill” system was quite lucrative; drug companies charged Medicare and insurance companies inflated, essentially made-up “average wholesale prices.” The Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed by President George W. Bush, put an end to this arrangement. It required Medicare to pay the physicians who prescribed the drugs based on a drug’s actual average selling price, plus 6 percent for handling. And indirectly — because of the time it takes drug companies to compile actual sales data and the government to revise the average selling price — it restricted the price from increasing by more than 6 percent every six months.

The act had an unintended consequence. In the first two or three years after a cancer drug goes generic, its price can drop by as much as 90 percent as manufacturers compete for market share. But if a shortage develops, the drug’s price should be able to increase again to attract more manufacturers. Because the 2003 act effectively limits drug price increases, it prevents this from happening. The low profit margins mean that manufacturers face a hard choice: lose money producing a lifesaving drug or switch limited production capacity to a more lucrative drug.

The result is clear: in 2004 there were 58 new drug shortages, but by 2010 the number had steadily increased to 211. (These numbers include noncancer drugs as well.)

In other words, take the market out of it and limit what pharmaceutical companies can charge to recoup their costly R&D, and they simply opt out. And instead of seeing low cost generics readily available as pharmaceutical companies compete, we simply see less drugs available at any price.

So where does ObamaCare come in? Well, rather than fix this problem, the president and the Democrats want to extend the price controls to Medicare part D! So we can enjoy shortages of all pharmaceuticals instead of just singling out cancer drugs.

Watch as the same government over-regulation and limits does the same thing to healthcare in general as it curtails the supply of physicians, just as it has in most other countries with similar nationalized healthcare scams.

Get ready for the wonders of ObamaCare America!

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1 comment:

Soccer Dad said...

Rahm's brother calls "rationing" and unintended consequence? I thought he considered a desired outcome.