Twists and Turns

Drug importation hit the news again this week as a group of legislators continued to press for a vote to lift the ban before Congress adjourns. The debate has taken a bizarre turn as a “dissident” Pfizer executive was featured at a news conference on Thursday, surrounded by 10 legislators, saying, against the evidence, that safety is not an issue.

Peter Rost, a VP for marketing at Pfizer, is not an expert on importation, but he said he sees himself as a whistle-blower on the pharmaceutical industry. His contention: 10 years ago cigarette company executives testified to Congress that cigarettes were safe; today pharmaceutical companies testify that importation is unsafe, arguing that executives will be held responsible just like tobacco executives.

What a misguided analogy! On the one hand, we have companies that produce products that can kill people and on the other, companies that save people’s lives. And the drug importation safety concern has been documented over and over, including by government agents who found that nine out of 10 packages of imported drugs they sampled didn’t meet Food and Drug Administration standards.

The Institute for Policy Innovation is hosting a program next Tuesday with Dr. Graham Satchwell of the UK. Dr. Satchwell will be discussing his forthcoming book to be published by the Stockholm Network, which shows links between cross-border imports in Europe, which have been legal for years, with counterfeiting, organized crime, and terrorism. See the events section below for details.

(Senate Majority Leader Bill Frist, BTW, says the Senate is unlikely to have time to debate the issue before adjournment, and reiterated that he also doesn’t believe importation can be done safely.)


The war of numbers continued this week, taking another bizarre twist. John Sheils, a vice president with the Lewin Group which does economic and actuarial analyses, released a report with yet another cost analysis of the Bush and Kerry health plans.

He concluded that Sen. John Kerry’s health plan will cost federal taxpayers $1.2 trillion over 10 years but still save the average American family $451 a year. Further, he says the Bush plan would cost families an additional $68 a year and cost federal taxpayers $228 billion over 10 years.

Larry Lewin, former president of The Lewin Group, wrote a fiery rebuttal saying “the level of due diligence and exchange of views, characterized in previous Lewin Group reports, does not appear to be reflected in the analysis being released today.” Even more amazing, Lewin argues that the analysis understated the savings from the Kerry plan and overstated the estimates of the number of people that would get insurance under the Bush plan (8.2 million).


Trying to bring some sanity to the debate, the National Center for Policy Analysis hosted a Capitol Hill briefing on Wednesday featuring Emory University’s Ken Thorpe and NCPA president John Goodman.

The two agreed that “health care is the most important domestic policy issue in the presidential election and the one that most differentiates the two candidates.” And Thorpe said that he thinks Health Savings Accounts are good as an option to finance health care.

But that is about as far as the agreement went. Goodman said that estimates of the cost of the Kerry plan are far too low and estimates of the number of newly-insured far too high. And Thorpe used much of his time to argue for the Kerry plan and to further discredit the Lewin study.

Only in Washington are these kinds of disputes fascinating. But the good news is that detailed analyses are being done of the two candidates’ health care proposals before the election rather than after to give voters a more informed choice.


The House once again turned down an amendment that would have made HSAs a less attractive option in the FEHBP. By a vote of 224-175, the House voted down an amendment that would have required any federal worker who picked the HSA option to be locked in to the program for three years. (All other federal workers can reevaluate their choice annually.)

This would have been a deterrent since this is a new concept. Twenty-one Democrats joined the majority in defeating the amendment, but seven Republicans voted for the three-year rule. HSAs win again.


And for a fresh look at how to think about the uninsured, don’t miss Greg Scandlen’s new paper, featured below.

I now head into hurricane country for a speech tomorrow in Orlando!

Grace-Marie Turner



? Rethinking the uninsured

? Expanding consumer choice and addressing ?adverse selection? concerns in health insurance

? Miracle cure: How to solve America?s health care crisis and why Canada isn?t the answer

? Canada agrees to increase spending on its health care

? Prescription for health-care reform

? The impact of drug reimportation and price controls: The U.S and Massachusetts


Author: Greg Scandlen

Source: Galen Institute, 09/23/04

Greg Scandlen, director of the Galen Institute’s Center for Consumer Driven Health Care, examines the problem of the uninsured and the role of insurance, arguing that “instead of thinking about insured versus uninsured people, policy makers should be thinking about insured versus uninsured services.” Scandlen provides his own analyses and cites research from other top scholars on topics including coverage decisions, adverse selection versus moral hazard, insurance versus third-party payment, and risk pooling versus pre-paid health care. Scandlen also offers solutions that would “secure wider and more appropriate coverage and create a health care system that is more responsive to consumer demands.” He recommends that policy makers amend U.S. tax policy to make the same subsidy available to all Americans regardless of how they finance their health care needs, reform and simplify the insurance market to allow consumers to tap into a national market for health insurance, and allow Medicaid and SCHIP funds to be used to buy private coverage.

Full text:


Source: Joint Economic Committee, 09/21/04

The key problem with private health insurance in the United States is not that “the insurance is expensive and unattractive for high risks; it is that in some cases it is expensive and unattractive for all risks,” Wharton Professor Mark Pauly testified at a Joint Economic Committee hearing this week on “Expanding Consumer Choice and Addressing ‘Adverse Selection’ in Health Insurance.” Pauly noted that “community rating” and “risk rating” are unfair and inefficient tools for dealing with variation in health risk among insurance consumers, and he examined three alternative solutions: 1) guaranteed renewabiltiy at uniform premiums; 2) group insurance; and 3) high risk pools. He concludes that larger and more generous subsidies to the uninsured and greater marketing efforts to attract “low risk healthy twenty-somethings” are needed to create a better functioning health insurance marketplace.

Full text:


Author: Sally C. Pipes

Source: Pacific Research Institute, September 2004

Sally Pipes, president and chief executive officer of the Pacific Research Institute, has written a new book detailing problems with the U.S. and Canadian health care systems and offering solutions for both countries. “Sally Pipes deftly and authoritatively skewers the government-controlled Canadian system for its cruel rationing of care,” writes Harvard Business School Professor Regina Herzlinger. “No booster of the U.S. system either, she tackles such problems as the uninsured, rising costs, and government’s ever-larger role in health care. With engaging style and clarity, she offers a consumer-driven policy prescription that could best cure these ills,” Herzlinger concludes. The book is available for purchase online at

News release:


Author: Clifford Krauss

Source: The New York Times, 09/17/04

The New York Times reports that Canadian Prime Minister Paul Martin reached a midnight agreement last week with provincial and territorial leaders to “increase federal spending for Canada’s ailing $60 billion national health care system” by $14 billion over six years. “Still, the agreement will fall short of fulfilling Mr. Martin’s upbeat pledges in the recent election campaign to ‘fix the system for a generation,'” according to the Times. The meeting “highlighted the stark shortcomings in the health care system, including the growing shortage of doctors and nurses, the lengthening of waits for cancer care and surgery, and the mounting costs of drugs for an aging population,” the Times reported. Critics see the agreement as “only a stopgap solution” and predicted that, absent real reform of the system, “leaders are likely to have to return to the bargaining table in a few years to pump even more money into the system.” Some argued for an alternative approach including “allowing private clinics to provide services to those willing and able to pay.”

Full text:


Author: R. Glenn Hubbard

Source: Business Week, 09/20/04

Health Savings Accounts (HSAs), an integral part of President Bush’s proposed Ownership Society, “can be enhanced to improve markets for health care,” writes R. Glenn Hubbard of the American Enterprise Institute. Hubbard proposes “a simple change” that would “improve HSAs as a tool of health policy and the Ownership Society: Let all Americans deduct expenditures on insurance and out-of-pocket expenses as long as they purchase at least insurance against catastrophes.” This would eliminate the tax-code bias for high-cost, low-deductible insurance and allow for deductibility of out-of-pocket expenses. As people shift to plans with higher deductibles and co-insurance, health care utilization will be reduced, with a net decline in spending he estimates at more than $65 billion a year. “HSAs also offer a vehicle through which health assistance to low-income households could be distributed,” Hubbard concludes, “helping families buy insurance in private markets and save for old-age medical expenses.”

Full text:,filter.all/news_detail.asp


Authors: David G. Tuerck, John Barrett, Douglas Giuffre, Zaur Rzakhanov

Source: Institute for Policy Innovation, 09/22/04

Lifting the ban on drug importation would destroy 3,957 jobs in Massachusetts over the first six years of enactment, and by 2010, the state would lose $247 million annually in economic activity, according to a report by the Boston-based Beacon Hill Institute, published by the Institute for Policy Innovation. Massachusetts is home to nearly 10% of the nation’s biotech and pharmaceutical research but it also is home to some of the most vociferous advocates of reimportation. Price controls and the reimportation of prescription drugs “could have significant negative impacts on innovation and on the regional economies in which the pharmaceutical and biotechnology industries play an important role,” according to the report by David Tuerck, et al. In the 12 years following the implementation of reimportation, the report estimates that R&D spending by pharmaceutical and biotechnology would fall by $14.8 billion nationally; price control policies would lead to the abandonment of an additional 262 drugs; and only nine new drugs would likely be approved in a year, a decrease of more than 70% from the current average of 31.

Full text: 

In a related study, University of Michigan Professor Dean G. Smith examines the economic effects of prescription drug importation on the state of Michigan and finds that it would result in significant job loss (20,000 to 133,000 jobs) and “substantial reduction in personal net income over the next decade ($6 to $35 billion in discounted, 2004 dollars).”

Full text:


Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer

Heritage Foundation Event

Tuesday, September 28, 2004, 12:00 noon

Washington, DC

For additional details and registration information, go to:

Prescription Drug Reimportation: A Risky Scheme

Institute for Policy Innovation Policy Luncheon

Tuesday, September 28, 2004, 12:00 noon

Washington, DC

For additional details and registration information, go to

Competing Visions for Health Reform

Cato Institute Book Forum

Wednesday, September 29, 2004, 4:00 p.m.

Washington, DC

For additional details and registration information, go to:

HSA’s Gaining Ground in the Marketplace

Flint Hills Center for Public Policy Events

Wednesday, September 29, 2004 at Noon in Wichita, Kansas

Thursday, September 30, 2004 at Noon in Kansas City, Missouri

Greg Scandlen of the Galen Institute will give presentations over the lunch hour at the Hyatt Regency in downtown Wichita on September 29th and at the Kauffman Foundation Headquarters in Kansas City on September 30th. For additional details and registration information, go to:

CAHI/Zogby Poll Reveals Americans Willing to Cross State Lines for Access to Affordable Health Insurance

Council for Affordable Health Coverage Press Conference

Thursday, Sept. 30, 2004, 10:00 – 11:00 a.m.

U.S. Capitol, Room HC-7

If you wish to attend or for more information, please contact CAHI Communications Director V. Tom Gardner at (703) 836-6200 x386 or

Health Policy Matters is a weekly newsletter containing commentary on health policy developments, summaries of timely and informative studies and articles on free-market health reform, and notices of upcoming events. It features research and writings by participants in the Health Policy Consensus Group. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about this newsletter and our organization, please visit our website at

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