The Less You Change, The More It Costs

Nathan Cortez, Southern Methodist University Dedman School of Law

Today, on his Washington Post blog, Ezra Klein described how the estimated price tag of health reform is giving Congress sticker shock, and how Congress seems to be responding with less reform, not more. However, as widely-respected Princeton health economist Uwe Reinhardt explains, the status quo of our current system is too expensive to maintain. Thus, Klein notes perceptively that, “In health care, the less you change, the more it costs.”

With Congressional Budget Office estimates sinking in, Congress might be drifting towards compromises that could scale back proposed government involvement in offering health insurance. But as Tim Jost explained in a previous post, public plan alternatives like cooperatives probably won’t solve our problems without concerted and long-lasting support from the federal government anyway. In search of a viable alternative, conservatives have struck a familiar pose, decrying rationing and more government intervention, instead proposing market-based solutions like tax rebates and consumer-directed incentives.

However, conservative proposals would take the United States health care system further out of the mainstream and make us even more of an international outlier (relying primarily, as we do, on private, voluntary health insurance). These proposals don’t seem to hold water at a time when international experience suggests we should be moving in the opposite direction. As Timothy Noah explains (and as Tim Jost has argued persuasively elsewhere), American exceptionalism isn’t necessarily a good thing in health care. We spend nearly twice as much per capita as any other country, and we account for roughly half of all worldwide health care spending each year (roughly $2 trillion out of $4 trillion). Meanwhile, we leave around 47 million people uninsured, and another 25 million don’t have adequate insurance. Finally, we don’t rank particularly well compared to our peer countries on many quality measures. If we don’t start seriously revamping the way we provide and pay for health care, we’ll continue our dubious exceptionalism.

So as we deal with sticker shock, let’s remind ourselves where we stand in the health care world. Taiwan, given the chance, avoided our model like the plague. As one observer notes, “Taking lessons in health care policy from the United States is like receiving lessons in seamanship from the crew of the Titanic.” Why should we accept going down with the ship?

The Life Cycle of Objectionable Drug Marketing Practices

Professor Nathan Cortez

[This is a guest post by Nathan Cortez, assistant professor of law at the Dedman School of Law at Southern Methodist University. Cortez has published in the peer-reviewed Food and Drug Law Journal and teaches international health, pharmaceutical and administrative law. I've learned a lot from his work, and I'm happy he's agreed to let me post this here.]

By Nathan Cortez

The pharmaceutical industry spends some serious coin on sales and marketing-anywhere between $30 billion and $57 billion per year. And this money funds much more than the ubiquitous ad campaigns to which we’ve grown accustomed (sing along if you know the “Viva Viagra” jingle). Over the years, sales and marketing departments have conjured up increasingly creative marketing practices of questionable legality. For example, drug companies have funded “research” and “educational” grants of questionable validity, sponsored continuing medical education (CME), paid ghost writers to generate favorable journal articles, provided free gifts, meals, and entertainment to prescribers, paid prescribers as speakers, consultants, or preceptors, and even hired former college cheerleaders to gain access to prescribers. Most of these practices have been condemned, and many have been prosecuted, resulting in billions in settlements for federal and state governments. The pharmaceutical industry can’t even give away free drugs without being punished.

Last Monday, the New York Times highlighted yet another objectionable drug marketing practice: targeting medical schools. As the article explains, drug companies have long had ties to medical schools and their students by funding endowed chairs, faculty prizes, research grants, capital improvements, and even volunteering employees to teach classes. Students get showered with enough free pizza and trinkets to think that they might already have prescribing privileges. More recently, the Times reports that the faculty at Harvard Medical School has come under fire for its ties to drug companies that hire faculty as speakers, consultants, or even board members. More than 200 Harvard Med students have objected, leading the school to convene a 19-member panel to reevaluate the school’s conflict-of-interest policies (meanwhile, the University of Minnesota Medical School is loosening them).

In the “Life Cycle of Objectionable Drug Marketing Practices,” we’re currently at the “media coverage and public outrage” phase. Gradually, most of the practices listed in the initial paragraph have either disappeared or have lost their allure. Media coverage and public outrage is quickly followed by government outrage (possibly even Congressional hearings) and promises of self-regulation by the drug companies to preempt more stringent regulation. Self-regulatory efforts like the PhRMA Code and the AMA Ethical Guidelines provide some bright-line standards for complying with ridiculously broad laws like the federal anti-kickback statute and its complicated safe harbors. If companies still don’t get the hint, the government simply tells drug companies what not to do.

And if none of these events ends the Life Cycle of the Objectionable Drug Marketing Practice, litigation usually does. Pretty much every major pharmaceutical company has settled a Corporate Integrity Agreement with the government for violating federal drug marketing laws-the latest being a staggering $1.4 billion settlement paid by Eli Lilly to settle claims that it illegally marketed its anti-psychotic drug Zyprexa. By settling, companies thus avoid the “death penalty”–being excluded from Medicare and Medicaid.

Although the drug companies never die, the practices usually do, precipitated by an avalanche of government investigations, whistleblower suits, shareholder suits, and even marginally-related product liability suits. Federal and state lawmakers also pile on. In the last few years, nine states have enacted (and dozens have considered) pharmaceutical marketing laws, requiring disclosures of marketing payments made by drug companies to potential prescribers, in addition to caps on payments, disclosure of sales representative activities, and other prohibitions. Indeed, the Senate Finance Committee is currently considering a federal bill that would explicity preempt state laws.

Thus, the Objectionable Drug Marketing Practice dies a violent death. It can rest in peace, but the sales and marketing departments can’t. Because they have to find new ways to drive market share.