High cost for me-too drugs

THE MEDICARE prescription drug benefit was a terrible piece of legislation. It prohibited Medicare from negotiating drug prices, even though those prices rise much faster than inflation. Containing costs was left to a few thousand private insurance companies, which also select the drugs covered and set premiums, deductibles, and co payments. Medicare simply pays the bill -- or some of it -- according to a complicated formula that can most charitably be called capricious. Patients can spend up to $3,800 a year out of pocket.

Yes, the benefit does help some people, but mainly it's a windfall for the pharmaceutical and insurance industries. Representative Billy Tauzin , the Louisiana Republican who chaired the House Energy and Commerce Committee (which oversees the drug industry) and co sponsored the drug bill, left Congress almost immediately after the legislation passed. He was rewarded with a high-paying job as chief executive of the pharmaceutical industry's trade association.

Industry influence ensured that the drug benefit would not be administered by Medicare, unlike every other part of the program, and that drug prices would not be regulated, unlike doctors' fees and hospital and home health reimbursement. As President Bush's new budget makes clear, the government will have to squeeze other parts of Medicare to pay for it. The irony, then, is that a benefit meant to expand Medicare may begin to dismantle it.

So shouldn't we all applaud the House bill, enacted in the first heady 100 hours of the new Democratic Congress and now before the Senate, that directs Medicare to negotiate prices directly with drug companies? I'm afraid not; it would have very little effect because it forbids Medicare from excluding drugs from coverage -- and thereby denies it the leverage needed for bargaining. Other big purchasers, including the Department of Veterans Affairs, Medicaid, and large private insurers, create lists of covered drugs . By excluding drugs that are not cost-effective, they get much better deals than the smaller insurers that now run the Medicare drug benefit.

The ostensible reason for not permitting Medicare to use these lists, or formularies, is that beneficiaries would not stand for any limitation on their choice of drugs -- a self-serving claim by the pharmaceutical industry and its acolytes. Even if true, it is based on misinformation about drugs. Most new drugs are not advances over old ones, but minor variations with new patents and higher prices. In other words, "me-too" drugs. According to FDA classifications, fully 80 percent of drugs that entered the market during this decade are unlikely to be better than existing ones for the same condition.

Drug companies get away with flooding the market with me-too drugs because the FDA doesn't require them to compare new drugs with old ones, just with placebos. So while they may be better than nothing, they might not work better than what people are already taking, and may be worse. The top-selling drug in the world, Lipitor, is one of a class of six me-too drugs, two of which are available as much cheaper generics; they are rarely compared in clinical trials at equivalent doses.

No less an authority than Dr. Robert Temple , director of the FDA's Office of Medical Policy, was quoted in 2004 as saying, "I generally assume these drugs are all the same unless somebody goes out and proves differently. I don't think you lose much if you just always use the cheapest drugs."

The industry inundates doctors with free samples of exorbitantly priced me-too drugs and promotes them to the public as though they were proven medical advances. They aren't. If more people understood this, resistance to a Medicare formulary would disappear, as long as the list included at least one drug from each class. That would force prices down. Drug companies protest that lower prices would stifle research, but that argument can't be taken seriously, since they spend over twice as much on marketing and administration as on research and development -- and have more left as profits.

Medicare needs a prescription drug benefit. It should be treated like the rest of Medicare -- directly administered, with negotiated prices, and without a requirement for intermediate businesses to feed at the public trough. But to have any real leverage, it must be able to use lists of covered drugs based on their cost-effectiveness. Without that, all Medicare can do is talk.

Marcia Angell, a guest columnist, is a senior lecturer at Harvard Medical School.