In "Bitter Pills for the Elderly Poor" [op-ed, June 23], Robert Kuttner asserts that "drug prices are between a third and a half higher" in the United States than in Europe. In fact, a multinational study by Wharton School economist Patricia Danzon found that when consumer buying power, generics and different drugs available here but not in Europe are taken into account, drugs cost about the same here as they do in other industrialized nations.
Kuttner also claims that "half the prescriptions written go unfilled because many elderly literally choose between drugs and food." No scientific data support this oft-repeated claim. Many surveys do suggest, however, that most seniors do not have a problem getting the drugs they need. In a report published in 1997, the Department of Health and Human Services found that only 2 percent of people 65 and older did not have access to medications when they were needed. A consumer expenditure survey conducted by the Census Bureau also found that even seniors with the lowest incomes were more likely to spend more on dining out than on prescription drugs.
Kuttner is accurate when he writes that "52 percent of all drug costs are now being paid out of pocket." What he does not note is that Medicare's own beneficiary survey shows that nearly 75 percent of all seniors spend less than $500 a year on medications. To be sure, about 2.6 million elderly poor don't have drug coverage. And some poor seniors without coverage do spend thousands a year on medications. But the number of number of people choosing between food and medicine is far smaller than Kuttner suggests.
Finally, he describes proposals to force drug companies to sell drugs for seniors to pharmacies at prices 40 percent lower than other health plans as simply "trading higher sales volume for lower prices." He argues that other large government drug purchasers, such as Medicaid and the Department of Veterans Affairs, do just that, so why not Medicare?
Here, too, he fails to provide all the relevant facts. Under these plans, Medicare would control nearly 60 percent of all drugs prescribed. By contrast, the VA makes up only one-half of one percent of all drug sales. And the discounts are anything but. By law, a company must sell all of its drugs to the VA at a government-set price or sell nothing at all. These are price controls, plain and simple.
Forcing any industry to sell to 60 percent of its existing market (remember, most seniors get the drugs they need, so the sales increase Kuttner predicts wouldn't happen) at 40 percent below the lowest market price would be a prelude to financial ruin. For biotechnology and drug firms that must spend $500 million to develop one drug, it would mean obliteration.
Moreover, the effect on seniors would not be much better. When Congress considered extending the discount to other agencies, the General Accounting Office warned that it would lead to lengthy price negotiations and would, as a result, delay access to new medicines. It also found that such price controls would cause drug prices in the private sector to go up. Similarly, when companies were required to give Medicaid the same price they gave other health plans and then some, the number of private-sector plans getting discounts fell and the amount of the discount dwindled.
The result? Medicaid recipients now wait two to four years for the best medicines and are restricted to cheaper, older drugs. And those with private coverage face higher prices. Price controls for the uninsured elderly would lead to similar limits on access to better drugs and higher drug costs for the 70 percent of seniors who have some form of drug coverage.
Millions of poor seniors need insurance that covers prescription drugs. Congress could deal with their needs now through three simple steps: enrolling the 60 percent of seniors who are eligible for Medicaid; raising reimbursement of Medicare-HMO plans that already cover drugs; providing the poorest seniors with vouchers to buy supplemental insurance that includes drug coverage.
But Kuttner overstates the problem and ignores the true costs of price controls on the health and well-being of seniors. Ultimately, he is out of touch with the "needs of elderly Americans."
The writer is a senior research fellow at the Ethics and Public Policy Center.