Topic: Health Care

Government Encourages Third-Party Payment, Which Drives Health Care Prices Higher

Cato adjunct scholars Charlie Silver and David Hyman have an important oped in today’s Houston Chronicle explaining how third-party payment increases prices for drugs and other medical goods and services. An excerpt:

If you’re like us, your health insurance coverage includes a prescription drug benefit. The benefit isn’t free, but you’re willing to pay for it because it saves you money every time you have a prescription filled. You are responsible for your co-pay, and your insurer pays the rest.

At least, that’s how it is supposed to work. But the truth is that your insurer often pays nothing. Your co-pay is all the pharmacy receives. Not only that, but your co-pay often exceeds the amount that someone without insurance would have paid for the drug. That’s right: People who don’t have insurance are paying less than you are for the same drug…

The scam works by taking advantage of consumers’ naive belief that their insurers are watching out for them. Suppose you have high blood pressure and your doctor prescribes amlodipine, a medication used by millions. If you have insurance, you probably think your insurer negotiated a great deal because a month’s supply at the pharmacy costs you only $10. But if you paid cash for the same drug at Costco, you’d have to pay only $1.85…

The real problem is that insurance is a terrible way of paying for things that we can and should pay for directly. Price-gouging does not happen with drugs that are sold over-the-counter at retail outlets like CVS, Costco or Wal-Mart. Those prices are transparent and easy to compare. When people pay directly for drugs, there are no hidden transfers between pharmacies and PBMs either. Competition does for cash customers what PBMs and pharmacies don’t seem able to do for one in four of the prescriptions filled by insured customers — reduce drug prices to the lowest sustainable level.

Overcharges occur throughout the rest of our health care system too, and they drive up the cost of all sorts of procedures. Why? Because insurers don’t care about costs nearly as much as patients do. If we want to get health care spending under control, we should pay for it directly as often as we can.

Read the whole thing.

Attorney General Sessions Proposes An Even More Destructive Opioid Policy

Speaking to a group of law enforcement officials in Raleigh, NC yesterday, Attorney General Jeff Sessions announced proposed rule changes to the way the Drug Enforcement Administration sets quotas on the manufacturing of opioids. The DEA now presumes to be able to divine the likelihood a particular type of prescription opioid will be diverted to the illegal market when setting production quotas. 

The Attorney General said, “Under this proposed new rule, if DEA believes that a company’s opioids are being diverted for misuse, then they will reduce the amount of opioids that company can make.”

The DEA ordered a 25 percent reduction in opioid production in 2017 and another 20 percent reduction for 2018. The tight quotas on opioid production contributed to the acute shortage of injectable opioids being felt in hospitals across the nation. It is not only making patients suffer needlessly but places them at increased risk for adverse drug reactions or overdose. Just the other day, after pleas from numerous medical professional associations, with the shortage reaching crisis levels, the DEA announced it will begin to relax this year’s quotas. But it may take months before things improve. 

The damage to hospitalized patients is an unintended consequence of central planning and should come as no surprise. DEA administrators had the fatal conceit of believing they could determine just how many opioids should be produced for what they call the “legitimate” pain control needs of the nation’s patients. Yet even after the DEA recognized that the quotas caused harm, with these new proposed regulations they are determined to get back up in the saddle and ride that horse again.

Despite the reduction in opioid supply and a 41 percent reduction in the prescription of high-dose opioids by health care practitioners since 2010—the year prescribing peaked—the overdose rate continues to soar, having increased 20 percent from 2015 to 2016. According to the National Survey on Drug Use and Health, nonmedical use of prescription opioids peaked in 2012, and total prescription opioid use in 2014 was less than in 2012. The evidence is that nonmedical users migrate to cheaper and easier to obtain heroin and fentanyl when diverted prescription opioids become less available. The overdose rate from fentanyl has increased at a clip of 88 percent per year since 2013, and the overdose rate from heroin increased 19 percent per year for the past 2 years after increasing at a rate of 33 percent per year from 2010-2014. Meanwhile, the overdose rate increase for prescription opioids has been unchanged at 3 percent per year since 2009.

The Attorney General and the DEA administrators seem unable to learn from their mistakes. They continue to view the opioid overdose crisis as a product of the number of pills produced or prescribed. They have been wrong about this from the get-go. It has always been the result of nonmedical users accessing drugs in a black market fueled by drug prohibition. The underground market responds quickly. It provides nonmedical users with cheaper and more dangerous and deadly drugs in response to prescription opioid restrictions. 

Not content with the damage they have already caused, regulators appear ready to double down on the supply-side approach to the overdose crisis. This means America’s hospitals can look forward to more and possibly greater shortages of vitally needed opioids, while first responders swell their emergency rooms with ever growing numbers of heroin and fentanyl overdoses.

The Beginning of the End for Cannabis Prohibition?

The Boston Globe reports Colorado Senator Cory Gardner is crafting a bill that would prevent the federal government from interfering with states that have voted to legalize cannabis for recreational or medicinal purposes. The Senator is busy recruiting several co-sponsors for the bill, and he has received assurances from President Trump that he would sign such a bill into law.

This would be a step in the right direction and would alleviate concerns in many states that the Department of Justice, under new guidance from Attorney General Sessions, might enforce federal marijuana prohibition.

Unfortunately, as long as the Drug Enforcement Administration continues to classify cannabis as a Schedule 1 drug, quality clinical research on the potential medical applications of cannabis will remain significantly inhibited. By definition, a Schedule 1 drug has “no currently accepted medical treatment use.” Recent studies have shown that chronic pain patients have been able to reduce their opioid dosage and consumption by adding cannabis to their pain management regimen. A study of Medicare Part D patients from the University of Georgia published in JAMA earlier this month demonstrated this effect in states where medicinal marijuana has been legal. Another study published the same week from the University of Kentucky showed this effect was even greater in states where marijuana is legal for recreational use. And another recent study from the Minnesota Department of Health earlier this year found 63 percent of patients taking medical marijuana for their chronic pain were able to reduce or eliminate their opioid use within 6 months.

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Democrats Ask Trump Administration to Block Consumer Protections

In a recent letter to the Trump administration, leading congressional Democrats ask the administration not to allow protections for enrollees in short-term health plans.

Yes, you read that right. Dated April 12, the letter comes from Sens. Patty Murray (WA) and Ron Wyden (OR), as well as Reps. Frank Pallone (NJ), Bobby Scott (VA), and Richard Neal (MA), each the top Democrat on a different congressional committee with jurisdiction over health care. They ask the administration to withdraw in its entirety a proposed rule that, if implemented, would offer significant protections to enrollees in so-called “short-term limited duration plans.”

The administration has proposed lengthening the maximum term for such plans from 3 months to 12 months, which had been the limit for nearly two decades before the Obama administration shortened it. The administration has also asked for public comments (due April 23) on whether it should allow insurers to offer short-term plans with “renewal guarantees”—a consumer protection that allows enrollees who develop expensive illnesses to continue paying low, healthy-person premiums.

The letter asks the administration to “withdraw the proposed rule in its entirety,” which would block those consumer protections. These Democrats literally want to prevent short-term plans from giving consumers the peace of mind from knowing they will be covered for an entire year. Worse, these Democrats want to prohibit short-term plans from offering a consumer protection that protects the sick from premium spikes. 

The reason for this animosity toward short-term plans is rather clear: ObamaCare supporters don’t want the competition. Federal law exempts “short-term limited duration plans” from ObamaCare and other federal health-insurance regulations. Short-term plans free consumers to purchase only the coverage they want, rather than have ObamaCare force them to buy coverage they don’t want, including coverage for things they may find morally repugnant. ObamaCare supporters do not want consumers to have that freedom, because when consumers leave ObamaCare coverage for short-term plans, ObamaCare premiums will reflect more and more of the cost of that law.

New Study from American Action Forum Adds to the Argument Against Present Supply-Side Opioid Policy

On April 11 the Washington Post cited a new study from the American Action Forum that reinforces arguments I have made here and here, that despite a dramatic reduction in the opioid prescription rate—a 41 percent reduction in high-dose opioid prescriptions since prescriptions peaked in 2010—the overdose rate continues to climb, as nonmedical users have simply migrated to more dangerous substitutes like fentanyl and heroin while the supply of diverted prescription opioids suitable for abuse continues to come down.

I have a minor quibble with the study’s finding that “the annual growth rate of prescription opioid-involved overdose fatalities significantly slowed from 13.4 percent before 2010 to just 4.8 percent after.” In fact, the Center for Disease Control and Prevention end-of-2017 Data Brief No. 294 reported:

The rate of drug overdose deaths involving natural and semisynthetic opioids, which include drugs such as oxycodone and hydrocodone, increased from 1.0 [per 100,000] in 1999 to 4.4 in 2016. The rated increased on average by 13% per year from 1999-2009 and by 3% per year from 2009-2016. (Emphasis added)

As an aside, it is worth mentioning that four researchers working in the CDC’s Division of Unintentional Injury Prevention reported in the April 2018 American Journal of Public Health that the CDC’s method for tracking opioid overdose deaths have over-estimated the number due to prescription opioids, calling the rate “significantly inflated.” Many overdose deaths actually due to fentanyl are folded into the “prescription opioid” numbers since, technically, fentanyl is a prescription drug even though it is rarely prescribed outside of the hospital in a form suitable for abuse. 

The AAF report understates the significant role that the abuse-deterrent reformulation of OxyContin and other opioids have played in driving nonmedical users to heroin and fentanyl. The researchers “suggest” abuse-deterrent formulations “could be a major factor driving the rise in heroin fatalities.” But evidence of the connection is much more powerful and convincing, as I presented in the Cato Policy Analysis “Abuse-Deterrent Opioids and the Law of Unintended Consequences” in February of this year.

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Marijuana Legalization and the Opioid Crisis Creates Strange Bedfellows

In a surprising move, former House speaker John Boehner has joined the board of directors of Acreage Holdings, a multi-state company focused on growing and selling marijuana. Boehner was a long-time opponent to marijuana legalization but is quoted in the Washington Post as saying:

I have concluded descheduling [marijuana] is needed so that we can do research and allow [the Department of Veterans Affairs] to offer it as a treatment option in the fight against the opioid epidemic that is ravaging our communities.

The Post article goes on to note that:

Descheduling cannabis would not legalize it nationally, but it would end federal marijuana enforcement and allow states to set their own marijuana policies without federal interference.

It remains to be seen whether Boehner’s reversal on marijuana legalization is indicative of a larger trend, but at a minimum it is a step in the right direction.

From “Opioid Epidemic” to “Stimulant Epidemic”

Speaking at the National Rx Abuse and Heroin Summit in Atlanta, John Eadie, coordinator for the National Threat Initiative, warned, “We’re now facing a very significant stimulant epidemic.” Abuse of prescription stimulants such as Adderal and Ritalin (used to treat Attention Deficit Disorders) as well as illicit stimulants, like cocaine and methamphetamine, are surging. “No one is paying attention to this,” Eadie said, because the focus has been on opioids.

Law enforcement has seized 15 kilograms of stimulants for every kilogram of heroin it has seized during the last 5 years. The Centers for Disease Control and Prevention reports that psychostimulant overdose deaths rose 30 percent in the past year. There is evidence to suggest stimulant abuse is now outpacing opioid abuse. And the Drug Enforcement Administration reports that cocaine use and availability are at their highest level in a decade.

I wrote here about the resurgence of methamphetamine abuse once meth labs, especially in Mexico, found a substitute for Sudafed after the federal and state governments made it more difficult to obtain. And Oregon health authorities reported overdose deaths from heroin dropped in 2016 to 107 while overdose deaths from methamphetamine rose to 141.

There are lessons to be learned from this news if anyone chooses to learn them. The obvious one is that the “War on Drugs,” America’s longest war, is unwinnable. This lesson was apparently not learned when the nation experimented with alcohol prohibition in the early 20thcentury. When a market exists for willing buyers and sellers, prohibition just drives that market underground. Waging a war on drugs is like playing a game of “Whac-a-mole.”

But the other lesson relates to current opioid policy. Policymakers seem stuck in what should, by now, be an obviously false narrative: that the opioid overdose crisis is a product of doctors prescribing opioids to their patients. And even after considerable reductions in the prescribing and manufacturing of opioids for patients has shifted non-medical users over to heroin and fentanyl—now the dominant causes of opioid deaths—policymakers can’t disabuse themselves of this false narrative. They continue to double down on restricting prescriptions of opioids and make many patients suffer in the process. 

The opioid overdose crisis has always primarily been the result of non-medical users seeking opioids in the illicit market—where the dose, purity, and even the actual identity of a substance can never be known with confidence. 

The resurgence of stimulant abuse and overdose should not be viewed in isolation. It should be integrated with the opioid issue. Both should be viewed in the broader context of substance abuse in the presence of drug prohibition. Sociocultural and psychosocial factors may ultimately explain why the use and abuse of mind altering drugs is on the rise across much of the developed world

As long as policymakers continue using supply-side interventions, hoping to win an unwinnable war, the problem will continue to grow.

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