|Number 118||July 27, 2001|
I really got a remarkable number of responses to last week's Nygaard Notes, especially in response to the essay "Physical Health and Social Health." Some of the responses were fascinating, and I will be responding to them in these pages before too long.
One reader accused me of "denigrating" science. That was not my intention. What I was trying to do was to hint at the existence of a different kind of science entirely, one that is so different from the one we "Westerners" were raised with that many of us have a hard time thinking of it as "science" at all. It's a little tricky to do this in a few hundred words, so I acknowledge the need to revisit the subject. I'm just not ready to do so this week.
I do very much appreciate all those who wrote to me! Although many issues of Nygaard Notes are the result of mysterious processes that I couldn't begin to explain, many other issues are the direct result of feedback I get from my readers. Many of your letters are challenging and very creative...Perhaps you should consider doing your own newsletters! Seriously, though, please continue to send along your thoughts. I enjoy them immensely, and I count on them.
That's it. I'm out of space and out of time. Until next week,
-- This was Minnesota Attorney General Mike Hatch, speaking about Allina Health Care and, presumably, the people of Minnesota. Allow me to make three points about this "quote." 1) Hatch's "one goal" appears to be "two goals"; 2) We can only guess what he means by the second one, "more efficient premiums." Perhaps he means "cheaper." 3) He apparently believes that "more efficient premiums" are as important to Minnesotans as is good health care.
The following four quotations are a sort of "sneak preview" of a future edition of Nygaard Notes.
Here is the definition of health according to the World Health Organization:
This quotation is from an article entitled "Mind-body Medicine in Health Promotion: Science, Practice and Philosophy:"
And, from the same article:
This quote is from a British group called The Foundation for Traditional Chinese Medicine (TCM):
#1: Hospitals and Insurance
When going in for surgery, my partner wanted me to spend the post-surgery night with her in her hospital room. The dilemma was that her insurance would only cover the cost of a double room, and the hospital would only allow me to stay with her if she had a private room. So, we agreed to ask for the private room and pay the difference, if it wasn't too expensive. I called the billing department to find out if it was too expensive. "What's the difference in cost between a single and a double room," I asked. "About 35 dollars," the friendly woman's voice informed me. "That can't be correct," said I. She insisted, so I asked, "What, then, is the cost of a double room?" "$941.00," I was told. When I paused to ponder these numbers, the friendly voice started laughing out loud. "We don't like to tell people that, because then everyone would want a private room," she confided. (I'll bet. Since 35 bucks is cheaper than a night at Motel 6, every out-of-town patient would go for that deal, I'm thinking.) If that 96-to-4% split seems somewhat arbitrary, consider that it is likely more than a coincidence that the 96% is the part that is covered by insurance.
#2: The Ineffective Test That Wasn't
After the surgery, we were told that there was a certain test (a PET scan, for those of you who are keeping score) that would be the best for detecting the presence of cancer-like activity throughout the body. We had not been told about this at the hospital where the surgery was done, although we now know that it would have been good to have this test done before the surgery. When we called the oncologist to whom we had been speaking—very highly regarded, by all accounts—she confessed that she could, indeed, have ordered that test—in fact, her hospital has a machine on the premises, one of only three in the Twin Cities metropolitan area. She did not order that test, however, for reasons that she did not specify. She did say, though, that the machine at her hospital was "not very effective," which she explained was due to the fact that it wasn't really the right machine. In fact, it is only a retrofit of a different machine that was designed for a different purpose.
Why did she not recommend one of the effective local machines (to which a different clinic, with no apparent conflict of interest, did refer us at a later date)? Why does one of the largest medical establishments in Minnesota have an ineffective machine on its premises? Or, granting the organization the benefit of the doubt, why does one of their most highly-regarded oncologists think that their machine is ineffective?
In last week's "Tales from the Cancer Front," I told the tale (amusing, or sickening, or both) of the surprise $2,400 pharmacy bill to be paid out-of-pocket, with which we were presented at the end of my partner's first chemotherapy session. There is a larger context for this personal affront that is the subject of this essay.
Despite the rhetoric of "free trade" that one hears from most of our elected "leaders," in fact most of them—certainly President George "Free Trade" Bush—have a decidedly ambivalent position toward the "freedom" that they claim to support so strongly. This is illustrated by the near-unanimous support in official circles for pharmaceutical patent protection. Patent protection for prescription drugs, which the big pharmaceutical companies like to call "intellectual property rights," is the opposite of "free trade." Anyone who claims to support "Free Trade" and who also supports patent protection is lacking in either knowledge or sincerity. Currently, the U.S. government grants to corporations who develop new drugs a 17 year monopoly, called a patent. In exchange for granting these corporations monopoly rights, what do consumers (sometimes known as "people") get in return?
Supposedly, this patent protection provides the incentive for the pharmaceutical companies to make the investments in research that have allowed them to develop the drugs we all need (or think we need) and use every day. But is this how it really works? Perhaps more importantly, is this how it should work? As they say in the business pages: "Let's look at the numbers." (Warning: The following numbers are so big that no one can really understand them—just do your best.)
Depending on who you listen to, the pharmaceutical industry spends between 20 and 30 billion dollars a year on "research and development" (R&D). This is a lot of money, no doubt. Consider, however, that U.S. consumers spent about $106 billion last year on prescription drugs. Much of that spending is due to the monopoly pricing that comes with patent protection. Economist Dean Baker estimates that "the free market price for drugs averages about one-quarter of the monopoly price."
Mr. Baker's number is a guess (albeit an educated one) and, if anything, is conservative. The cost of a now-common AIDS drug "cocktail," for example, is currently about $10,400 per patient per year at monopoly prices. An Indian drug company called Cipla, Ltd, on the other hand, has recently said that it would make available the same cocktail—in direct defiance of U.S. patent law—for a price of about $350 per patient per year, or about one-thirtieth the cost of the monopoly price. Using the same reduction factor, my partner's recent $2,400 out-of-pocket bill for cancer drugs (eventually reimbursed by insurance) could have been as low as $80 in the absence of monopoly pricing.
Still, let's say that Mr. Baker's estimate is correct, and that "only" 75% of the cost of prescription drugs is due to monopoly pricing. This means that the elimination of this patent protection would save consumers about $79 billion per year, or about 30% more than the federal government spends on education each year.
In other words, patent protection "earns" an extra $79 billion for the pharmaceutical companies every year, and only about one-third of that goes into research (even less if you take out the money companies spend trying to "copy" already-profitable drugs that have been patented by their competitors.)
Where does this extra $50 billion go? Marketing, for one thing. Most of the major drug companies spend more on marketing these drugs than they do on R&D, often considerably more. Quite a bit of this surplus revenue is given to support the election of politicians who will preserve monopoly patent rights (i.e. campaign contributions; pharmaceutical companies rank near the top in this area). In addition, the pharmaceutical industry is the most profitable industry in the United States, harvesting returns of more than 18.5% for their investors, or more than four times the average of 4.5% for all Fortune 500 companies.
Who Will Do the Research?
If the drug companies didn't do all this research and development, who would? The federal government already spends about $18 billion per year on biomedical research through the National Institutes of Health and the Centers for Disease Control. Universities, private foundations, and charities conduct another $10 billion worth. The list of drugs for which government and other non-profit research has been in large part responsible includes penicillin, the polio vaccine, and the anti-AIDS drug AZT, according to Baker. It was government research, in fact, that developed one of the chemotherapy drugs my partner received just this week, Taxol.
So, my idea is that we eliminate this patent protection and replace the corporate research spending with publicly-funded research. Some would complain about the increase in taxes that would be necessary to replace the lost investments by the pharmaceutical firms. But once it was explained that the $30 billion in increased taxes was in exchange for a savings of $79 billion in the retail cost of prescription drugs, I think most Americans would see the light.