Common Sense Pharmacy

In 1990 and 1991, I published a newsletter called "Common Sense Pharmacy"  It was designed for the lay reader, but the topics ranged from new drugs to events that would have an impact on consumers of health care.  Although they are 9 or 10 years old, I am reprinting some of the articles because I think they still have some relevance.  Where time has overtaken some predictions, there will be notes with actual results.

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Generics: What happened in the summer of scandal.
The crisis in health care


Generics: What happened in the summer of scandal.
Originally published May, 1990

Now that the dust has settled, it's possible to get a clear picture of what happened in the generic drug scandals of 1989.  Although much was written of an industry shaken to its foundation, the facts indicate the crisis was one of perception, rather than reality.  There is no question that greed and corruption played a role, but the remarkable aspect of the controversy is that so few people were involved in causing so great a loss in public trust.  The key events of the scandal included:

Three drug company executives were convicted of offering bribes to Food & Drug Administration personnel involved in generic drug approval.

Three FDA personnel pleaded guilty to accepting the bribes.

Bioequivalence tests  were faked by two companies for two different drugs and the records of one company led the government to question the results of its bioequivalency testing.

An FDA investigation of 13 generic drug manufacturers resulted in 11 being cited for manufacturing and record keeping deficiencies.

In the case of the bribes, Mylan Laboratories (one of the good guys) felt that the approval process for their products was being delayed while other companies received faster treatment.  Mylan hired investigators who uncovered illegal gratuities by competitors to FDA personnel.  The evidence included hotel receipts from an around the world cruise discovered by sifting through the trash of an FDA reviewer. Mylan, fearing the FDA might kill the investigation, took its evidence to the Subcommittee on Oversight and Investigation of the House Committee on Energy and Commerce. Chairman John Dingell (D-Mich) led the congressional investigation into the FDA and generic drug manufacturers.

—— The Dyazide mess

Dyazide is one of the most popular drugs on the market accounting for almost one-third of a billion dollars in sales annually.  When the drug's patents expired in 1981, it was expected that there would be a rush of generic products. None actually appeared on the market for six years.  The reason was that although Dyazide is an effective drug, it has a less  than stellar formulation.  Only 50% to 60% of any dose is  absorbed into the system. The FDA would not approve any generic that contained the same amount of drug but produced higher blood levels, and because they were urging Dyazide's manufacturer, SmithKline Beecham, to improve the product, they would not approve a bioequivalent generic.  Mylan developed an improved form and instead of seeking approval as a generic, received approval for its version, Maxzide, as an entirely new drug.  For marketing muscle, Mylan licensed Lederle Laboratories to market Maxzide under its label although it is still manufactured by Mylan.  In 1984, congress passed new drug laws and one clause said, essentially, that the FDA must approve any generic equivalent to any drug approved by the FDA.  Two companies, Vitarine and Bolar, brought Dyazide generics to market by 1987 and started taking a large share of the Dyazide sales. Vitarine, apparently unsure that its product would have low enough absorption, cheated by filling the test capsules with Dyazide.  Bolar, on the other hand, produced two versions, one of which passed bioequivalency tests.  It is unknown, however, which version was the same as their commercial product. Because of these questions, the Vitarine product was recalled by the FDA, while the equivalence rating for the Bolar product was downgraded.  While these products were on the market, there was no significant question about the efficacy or safety of the generics. Bolar has recently voluntarily removed its product from the market leaving only Dyazide and the improved version Maxzide.  Ironically, Dyazide which faced stiff competition for half the year ranked #16 in the American Druggist list of top 200 prescription drugs for 1989, while Maxzide was ranked #46.

During the summer, it was widely reported that eleven or thirteen  generic manufacturers inspected were cited for manufacturing and  record keeping irregularities.  These reports, coupled with the reports of bribery and the irregularities in the applications for  approval of Dyazide generics, caused concern about the integrity of the entire generic industry.  At about the same time, the FDA  also investigated Eli Lilly's Indianapolis dry products  manufacturing plant and released a 90 page report citing numerous  irregularities and finding "... objectionable conditions in nearly  every area inspected."  As a result, 18 lots of 10 products were recalled at the wholesale level, and Lilly halted shipments of all products from the plant for a period to make corrections.  Because press coverage was not widespread, however, most people were unaware of the problem at Lilly, a respected brand drug manufacturer.  It must be stressed that both  in the case of Lilly and the generic firms there was never any  evidence unsafe drugs actually entered the market.  

Following the summer of scandal, the FDA tested all forms of the 30 best selling generic drugs.  In November, then Commissioner Frank Young testified before the Dingell Subcommittee that of 2556 products tested, only 1.1% failed to meet quality specifications such as potency, purity and dissolution.  That rate, he said, is consistent with deficiency rates normally found.  He went on to testify "...we have seen no evidence to date indicating that generic medications now in use pose a serious safety threat."

—— FDA's dilemma

Although it appears generic drugs are safe, the ability of the FDA to fulfill its mission of ensuring the safe and effective drugs was called into question.  To answer those questions, the FDA commissioner has proposed a six step plan of action to prevent similar problems from occurring. Regrettably, the sixth step is "...continuing to seek ways to finance these activities and others carried out by the agency to protect and serve the American consumer." In this period of increasing budget cuts, it is doubtful FDA staffing will be increased to allow closer scrutiny of the drug industry.  Increased public awareness of deficiencies in the system will, we hope, cause the remaining manufacturers to hold to the highest standards to regain the public trust.

—— What to do

If you are currently taking generic drugs and are getting the desired results, by all means continue with them.  If you are starting a new medication or are considering switching to a generic, consult with your doctor and pharmacist.  Many drugs have generic equivalents which are safe, effective and priced to offer real savings.

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The Crisis in Health Care
Originally published June, 1991

In two recent columns in NEWSWEEK magazine, Robert J. Samuelson argued persuasively that our educational system is failing because kids don't have any necessity to study. Merely showing up for classes guarantees a passing grade and thus graduation without ever having to think. The number of colleges and universities has increased to the point that competition for students (which directly translates into money) forces a lowering of entrance requirements and standards. This economic hyperinflation which results in devalued academic degrees and poorly educated graduates is due to the fact that we don't demand responsibility.

Samuelson proposes the simple idea of requiring certification of grade level competence by standardized examination before a student could receive federal student aid. Thus would kids be given a powerful incentive to learn. So, too, would the fakirs and frauds, as well as the simply inept, among the teachers and administrators be exposed. Finally, because they would not need to spend all their time in remediation, the institutes of higher education would be free to ensure that the holder of their degree was truly an educated person.

Just as there is a crisis in the educational system, it is acknowledged that our health care system is failing. Costs are escalating to astronomical levels, while 34 million people have no health insurance. Government programs have literally run out of money. In Illinois, for example, pharmacists have not been paid by the state Medicaid program since March and funds will not be available until the next fiscal year starts this month. Those who have private insurance are finding more bureaucratic roadblocks to collecting on claims. Consumers are losing confidence that their insurance will stand behind them when it is needed. Meanwhile, politicians come up with 30 second non-solutions and point the finger of blame at their opponents.

Before any solution to the problem can be proposed, indeed, before a solution can even be formulated, it is necessary to define the shape and extent of the problem. A reality check, if you will, to separate fact from fantasy. Let's look, then, at some of the most important issues and see how they can fit into a solution.

—— The cost of care

In 1989, per capita health care spending was $2,354. This figure represents 12% of the Gross National Product (GNP—that magical number of which economists seem to be so fond and which is usually defined as "the sum of all the goods and services produced.") The current administration predicts that unless something is done to slow the growth of health care costs, by the year 2030 they will account for 37% of GNP. We suspect that this number is the result of a kind of Lake Woebegone Effect. Garrison Keillor used to describe is mythical home town as a place where all the children are above average. Inevitably, government projections say that this or that system is taking an increasingly larger section of the pie. If you add up all the totals, since each is growing above average, the sum of all the sectors is larger than 100% of the GNP (which is, of course, the sum of all the goods and service, etc.; clearly an impossibility). The catch is that the prophecy is weasled up with the disclaimer "if nothing is done...." It is unimaginable to expect that politicians will leave anything alone for 40 years. They might not do the right thing, but they will do something, of that you can be sure. Such predictions tend to be meaningless because they only look at one segment and ignore market forces which still drive our system. If they don't tell you what 25% of the GNP is going to take the hit, it is obviously just a puff piece designed to sway votes.

The true question is not how much will health care cost in such and such a year, but, rather, how much are the people willing to spend either directly or indirectly and how is that going to be financed. The politicians are unwilling to answer this question but prefer to distort the facts to the public. A Democratic health care plan, for example, would force businesses to either enroll employees in health insurance plans or pay into a fund which would purchase insurance for all Americans who are not enrolled in a business plan. Supporters claim that such a plan would save $78 billion over five years. It really doesn't because the $78 billion is still spent, but is paid by increased prices for everything from shoe polish to toasters to automobiles.

—— The Great Insurance Scam

There is no functional difference between buying an insurance policy and betting the roulette wheel at Las Vegas. Both make fabulous profits for their owners by paying back at less than the actual odds of an event occurring. A roulette wheel pays 36 to 1 for a single number, but because of the 0 and 00, the odds of any single number winning are actually 38 to 1. The difference goes to the house and makes millions (unless you are Donald Trump but that's a different story). Insurance companies hire scores of actuaries (people who calculate the actual odds of an event occurring) and pay off the unfortunate at a multiple of the premium less than the true odds  (Ed. note: Insurance does pay off at true odds, but the odds are ture only over the anticipated lifetime of the insured but not the anticipated term of the insurance.  In effect, this is rigging the odds.) The wheel in Las Vegas can be rigged with magnets, although that is illegal. Insurance companies can rig their wheel, too, although they usually do so legally. For example, many health policies that include prescription drug coverage will exclude birth control pills and smoking deterrent gum. Although the real costs of a pregnancy or a case of lung cancer are considerably higher than the price of the prescriptions, the exclusion is in place because the insurance company prefers a high future expense to a high current expense (The insurance company makes its profit on the future value of the premium. That is, on the return that the invested premium makes before they have to pay it back--the longer they can hold the money, the higher their profits)  Their logic is they know what the prescription costs and although they know the odds over the long haul, the woman may not get pregnant or the smoker may not develop lung cancer before the worker changes jobs and the policy is terminated (in which case the insurance company wins) Because Americans change employers as frequently as they do, it is not in the insurance company's interest to promote programs which reduce long term health costs.

For another example of the disparity between the insurance industry's words (their advertisements) and their actions, consider what would happen if automobile policies contained the following: "All claims against this policy will be null and void if the insured driver was found to have a blood alcohol level of 0.05ppm (1/2 the legal level for intoxication)." Drivers would be aware that they could be financially ruined if they were involved in an accident with alcohol on their breath. This would be a powerful incentive to not drink and drive and the losses due to alcohol related accidents would drop like a rock. Because premiums would be lower to reflect the improved safety, insurance companies would suffer decreased cash flow, the worst thing next to a slump in profits. That is why we keep killing ourselves on the highway at such an alarming rate.

—— Great Expectations

One reason used by the politicians to justify their caution in moving on public health questions is that the public wants quality health care but doesn't want to hear about the costs. That argument is, however, not valid. Obviously, we want as much as possible for free. However, if the public can accept that two cars in every garage and a chicken in every pot does not mean a Rolls-Royce Silver Spur and a Ferrari Testarossa and Coq Au Vin in bone china with crystal and silver, it seems reasonable to assume the public's expectations about health care can include comprehensive, basic care without some, or all, of the bells and whistles.

It is the responsibility of those entrusted with governance to provide the leadership which sets the national agenda on a course which is fair, compassionate and affordable. Instead we have such examples as last year's Pryor bill which, you may recall, we covered in detail. The selling point of this legislation was " will enable the poor to afford quality health care. They won't have to endure second class service." It does, in fact, no such thing but is merely an indirect tax (through higher prescription prices and hospital costs) to help reduce the government's cost of the Medicaid program. It is such vagueness and deceit which fuels the public's demand for "Quality health care for all" without any idea of what that means. Such slogans, then, become fodder for the aspirations of the political opportunists and justification for their inaction.

—— Designing a Health Care System

It is, surprisingly, not too difficult to design a health care system that meets the requirements of fairness, compassion and affordability. It only requires political debate based on truth and honesty (maybe for some that would be difficult). Let's point out in one possible direction and see where it leads.

The primary question should be what is the role of the government in any health care system? The options range from a pure market driven system where the level of care you receive is directly proportional to the thickness of your wallet, to pure socialized medicine which, experience has shown, lacks the innovation and vitality provided by the spark of capitalism. If, however, the function of government is to provide for the common good, it argues strongly that, just as with public safety and defense, the government should bear the primary responsibility of ensuring basic service to all. There are three mechanisms by which this goal can be accomplished: Changing the focus of health care, setting clear priorities and providing incentives for individual change.

—— Changing the Focus of Health Care

The current health care system operates on the philosophy that when some health care problem occurs, all the stops may be pulled out to treat that problem. Diagnostic methods and treatments are beyond what could reasonably called exotic. If you've ever wondered why it's easier to find a magnetic resonance imaging (MRI) device than it is a physician who will sit down with you for 15 minutes to listen to you, the answer is quite simple. One gets paid, the other doesn't. This is a direct result of the dominance of the private insurance system. As we've seen, the goal of insurance companies is not to encourage better health, but to increase the profit line. This is done by postponing current expenses (such as preventative services) to minimize them in favor of future expenses (such as acute treatment). From a business point of view, this makes sense, but from the aspect of improving public health, it is counter-productive. The emphasis should be placed on prevention and early detection so that heroic and technologically complex (and inevitably costly) treatments are less frequently required. The current fee system encourages physicians to specialize. Consequently, our most pressing shortage is among general practitioners, the physician the patient should see first and the one who can work with the patient to help develop a healthier lifestyle. Because of the current fee system, these physicians must now run their patients through the office like cattle in order to generate enough volume to maintain their income. By shifting the fee structure to emphasize the intellectual skills, such as diagnoses and counseling, as opposed to the merely technological (which is part of the reason that any visit to an office requires a whole battery of lab tests, a good money maker), physicians could spend more time with their patients and help get the problems straightened out before they occurred or when they were only minor.

The way to accomplish this is to break the stranglehold of the private insurers. Although the industry will argue that it is highly regulated, that regulation is in the form of state agencies. Because the industry's business is usually conducted in interstate commerce, those agencies are usually only paper tigers. The first step required would be the establishment of a federal agency to replace the state agencies under the concept that health insurance should be treated as a regulated utility. In that way, the insurance companies could be guaranteed a profit (like an electric generating company), in return for ceding the policy making function to a more health oriented view. Within such a system, insurance companies could increase their profits by streamlining and improving their administrative functions.

—— Setting Priorities

Currently, most third party programs (insurance or government programs such as VA, Medicare or Medicaid, etc.) will pay for almost any treatment as long as there is money left in the kitty. When the money runs out, either rates go up or the payments stop as we've seen in the case of the Illinois Medicaid pharmacy program. There is little or no sense of priority except who's the first to present the bill.

If you are buying a car, for example, you would not pick out a model and then start adding the options alphabetically until you hit your monetary limit. Rather, you would rank the options in the order of desirability and then choose them on that basis. The same approach should be done for the public financing of health care. The first step is to admit there is a limit on how much can be spent and then determine what the amount is. This is determined in the political debate over the level and type of taxation the citizens are willing to pay. The priorities on spending can then be determined. It is not difficult to list every disease or condition that can be treated along with the estimated associated costs. This list is then ranked in order of importance. For example, do we consider the treatment of broken bones more important than acne? Some choices like that are easy, but some calls are closer. Which is more important, a heart transplant or prenatal care? Who stands ahead of whom in the line for funding, the cancer victim of the person with diabetes? or AIDS? or a stroke? The choices may not always be easy but they can be done. At that point, then, you start at the top of the list adding up the associated costs. When the running total equals the amount of money available, you draw a line. Above the line there is full coverage, below it there is none.

Although it may seem unfair to someone who is caught below the line, by using such criteria as cost effectiveness and occurrence rates to select the priorities, funding will go to helping the most people most effectively within the framework of fixed available resources. Such a method also shows what incremental increases in funding can buy and lets the public decide if tax increases would be worth it.

—— Incentives for Personal Change

The present system does little to encourage people to live healthier lives. Although cigarette smoking is one of the greatest single causes of serious disease, the government still subsidizes tobacco growers (Why not pay them not to grow tobacco?) and offers no incentives for people to quit smoking. Pressure from non-smokers rights groups have had an effect and there are warnings on cigarette packages, but where are the economic incentives that would reduce the smoking rate? Examples could range from full coverage of smoking cessation programs to economic disincentives to continue smoking such as loss or reduction of benefits for treatment of lung cancer in smokers or higher taxes on cigarettes to cover the health costs. Five dollars a pack (or an equivalent amount for cigars and other tobacco products) that was earmarked for smoking related diseases would help reduce the funding crunch, and provide a good reason for people to stop smoking. As we mentioned earlier, the simple addition of no insurance coverage for alcohol related auto accidents would greatly diminish this problem without restricting people's freedom. Mammography, for example, is encouraged for women, yet insurance premiums don't differentiate between women who are compliant and those who are not. Such a differential would increase compliance and decrease subsequent health costs. People respond to economic incentives better than they do to health warnings. It makes sense, then, to encourage healthy behavior by making those choices economically advantageous to the individual.

—— Final Thoughts

The crisis in the health care system can be remedied. The solution, however will not be maintaining the status quo and pouring more money down a sinkhole. The responsibility for public health must be debated and defined. Priorities must be determined and the individual must be made a part of the system. As in the case of education that Samuelson presents, the answers are relatively easy, it's only the questions that are hard. What's needed is leadership with the courage to ask those questions.

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