The release of Medicare cost information has been debated in the press for a few days. I don't pretend to be an expert, but like everyone else I was shocked by the amount of money some doctors are getting for drugs they are prescribing. Of course, they have their excuses, but it would appear that the law as presently structured gives doctors a perverse incentive to prescribe the most expensive drug available to treat any given condition, along with an incentive to over prescribe the drugs they do prescribe. The best and most concise explanation of the problem that I've seen is here at Mother Jones, penned by Kevin Drum. He uses Lucentis as an example. That's the drug that the top “earner” among the doctors made so much money prescribing. It is a very expensive drug, yet it is no more effective than another drug (Avastin), which is much much cheaper. So why would any doctor prescribe Lucentis? Because the doctors get paid what amounts to a 6% commission on each drug the prescribe.
The backstory here is that Medicare used to set the reimbursement rate for “physician-administered drugs” based on an average wholesale price set by manufacturers. This price was routinely gamed, so Congress switched to reimbursing doctors based on an average sales price formula that's supposed to reflect the actual price physicians pay for the drugs. Then they tacked on an extra 6 percent in order to compensate for storage, handling and other administrative costs.
I don't know if 6 percent is the right number, but the theory here is reasonable. If you have to carry an inventory of expensive drugs, you have to finance that inventory, and the financing cost depends on the value of the inventory. More expensive drugs cost more to finance.
However, this does motivate doctors to prescribe more expensive drugs, a practice that pharmaceutical companies are happy to encourage. I don't know how broadly this is an actual problem, but it certainly is in the case of Avastin vs. Lucentis, where the cost differential is upwards of 100x for two drugs that are equally effective. And the problem here is that Medicare is flatly forbidden from approving certain drugs but not others. As long as Lucentis works, Medicare has to pay for it. That's great news for Genentech, but not so great for the taxpayers footing the bill.
via Mother Jones
Drum suggests paying the doctors a reasonable flat fee for every prescription. That would certainly be helpful, but my own feeling is that we should bring on those death panels, which are, of course, merely intended to curtail unnecessary or ineffective procedures. If a two dollar drug works as well as a two hundred dollar drug, then Medicare should be able to mandate the use of the two dollar drug. Of course the right would scream bloody murder (at the same time as they are voting to end Medicare altogether) , but they always scream bloody murder, and it's time we stopped listening.
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