Two Hearings

The issue of drug pricing continued to dominate the health policy debate this week. The Senate Health, Education, Labor, and Pensions Committee held two hearings on drug importation, and several of our health policy colleagues were invited to testify: Stephen Pollard of the Centre for the New Europe in Brussels, Bob Goldberg of the Manhattan Institute, and Ben Zycher of the Pacific Research Institute.

Thursday’s hearing was entitled “Drug Importation: Would the Price Be Right?” You can read the solid and well-researched testimonies here. Some of the color from the hearings:

? Chairman Mike Enzi said that he was in the shoe business in Wyoming during the Nixon-era wage and price controls. “As soon as the price controls were announced, my wholesalers’ prices went up 30%. Just before the controls went into effect, prices went up another 20%. And every year, they went up the maximum 10% allowed. So my customers wound up paying a lot more for shoes because of price controls.”

? Stephen Pollard, an expert on the health care system in the U.K. and the E.U., said that the British “National Institute for Clinical Excellence,” or NICE for short, has become so restrictive in allowing access to medicines that it should be renamed NASTY, “Not Available So Treat Yourself.”

? Chairman Enzi asked Ben Zycher how he answers critics who say that drug importation is really about allowing free trade and open markets. Zycher responded: “Importing price controls is no more free trade than buying stolen merchandise from a fence.”

More drugs: Whether the issue is legalizing drug importation or allowing the federal government to “negotiate” prices for the new Medicare drug benefit, the basic question is whether or not the U.S. government should get into the business of imposing price controls on medicines, either directly or indirectly.

The evidence is mounting that Congress should just move on:

? Last year, Douglas Holtz-Eakin, director of the Congressional Budget Office, wrote a letter to Senate Majority Leader Bill Frist saying that the “CBO estimates that substantial savings will be obtained by private plans” negotiating for discounts and that HHS “would not be able to negotiate prices that further reduce federal spending to a significant degree.”

? In a memo released last week, Rick Foster, the chief actuary of CMS whose estimates of the actual cost of the Medicare bill differed significantly from CBO’s, agreed with CBO on whether the government or private plans would do a better job of getting the lowest prices for prescription drugs.

Foster concluded that “direct price negotiation by the [HHS] Secretary would be unlikely to achieve prescription drug discounts of greater magnitude than those negotiated by Medicare prescription drug plans responding to competitive forces.”


HSAs: The latest in a series of studies providing data on actual purchases of Health Savings Accounts shows that HSAs have broad appeal, including to people who have been shut out of the system. Our articles section below summarizes this new study from the on-line broker, eHealthInsurance.

One of the most important findings: Nearly one-third of HSA purchasers had previously been uninsured for at least six months, with the biggest increases in HSA purchases among those with incomes between $15,000 and $35,000.

Also, purchasers of HSA-eligible insurance policies skew older than those purchasing traditional plans and nearly half of purchasers are families. The biggest reasons people gave for buying HSAs? Purchasers said that they valued the “combination of cost-savings, good benefits after the deductible is met, and the flexibility and control of spending on medical services and products.”

Now this is free trade.

Grace-Marie Turner



? Health savings accounts: The first year in review

? A health plan that covers it all: cash

? Making association health plans a success

? Is labor out in front on health care?

? A limited solution for a limited problem. California’s program for affordable prescription drugs.

? Drug reimportation: The free trade solution


Source: eHealthInsurance, 02/15/05

Health Savings Accounts (HSAs) are affordable, comprehensive, and are being adopted by all income levels, according to an eHealthInsurance study which provides a snapshot of HSA plans purchased last year. The study analyzed 82,000 policies purchased through the on-line brokerage from March to August, 2004. Key findings: 40% of HSA-eligible plans were purchased by people with incomes of $50,000 or below; 89% of HSA-eligible plan purchasers paid $200 or less per person per month in premiums; 85% of HSA-eligible plans were comprehensive policies that paid 100% of office visits, surgery, hospitalization, and lab/x-ray services after the plan deductible was met; and 99.4% of HSA-eligible plans included prescription drug benefits. The study provides much more information on purchaser demographics and costs paid for HSA-eligible plans in the individual and family markets, as well as a side-by-side look at HSA-eligible plans and non HSA-eligible plans.

Full text:


Author: Nick Perry

Source: The Seattle Times, 02/15/05

“A growing number of Washington doctors, pharmacists and patients believe they have found an alternative to the spiraling cost and bureaucracy of health insurance. Cash,” writes Nick Perry, staff reporter for The Seattle Times. Washington State’s 600,000 uninsured residents and a rising number of employees with only catastrophic coverage have led to an increase in cash-only physician practices and pharmacies like the Save Now Discount Pharmacy. Save Now founder Todd McElroy says he is able to offer significant discounts “because he saves up to 30 percent of staff costs by eliminating insurance paperwork,” writes Perry. “That enables him to offer prices competitive with low-price Canadian pharmacies.” The article also features Dr. Vern Cherewatenko’s SimpleCare program and his positive experience with running a cash-only medical practice.

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Author: Nina Owcharenko

Source: The Heritage Foundation, 02/14/05

Association health plans (AHPs) would improve coverage options for Americans, but “Congress can make AHPs even more successful by advancing consumer-oriented mechanisms, such as competition, consumer choice, and a nimble regulatory structure,” writes Nina Owcharenko of The Heritage Foundation. The limitations of employer-sponsored coverage still exist under traditional AHPs, resulting in “lack of individual ownership, personal choice, and true portability.” The proposed expanded AHP model, which would allow non-employer groups like religious, charitable, and civic organizations to form AHPs based on individual membership, offers more advantages by helping to “promote continuity in care and coverage as well as [empowering] consumers to choose and own their own health care policies.” Owcharenko also suggests that Congress “tackle the tax treatment of health insurance? [to] ensure that individuals are able to choose, without bias from the tax code, the best source of health care and coverage for themselves and their families.”

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Author: Matt Miller

Source: The New York Times, 02/13/05

“Recent conversations with Morton Bahr of the Communications Workers of America and Andrew Stern of the Service Employees International Union suggest that at least some union leaders think about the health system in ways more sophisticated and businesslike than many chief executives do,” writes columnist Matt Miller. Labor understands that health insurance is really part of an employee’s compensation package. “There’s really one economic pot, and you argue essentially over the size of the economic pot and how it gets distributed,” said Mr. Bahr. While the leaders don’t believe that consumer-directed care is the answer, they also know that it is unsustainable for costs at companies like Verizon to rise to $21,000 a year for health insurance for a retiring worker by 2008, as anticipated. “We’ve got to find a common solution,” Bahr concludes.

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Author: Sally Pipes

Source: Medical Progress Today, 02/10/05

California Governor Arnold Schwarzenegger has proposed “a plan that would target Californians in need of less expensive medicines without spending millions of taxpayer dollars and creating a whole new bureaucracy,” writes Sally Pipes, president of the Pacific Research Institute. “Arnold did not bother with the seductive but ultimately empty idea of using taxpayer money to encourage Californians to break federal law and endanger their health by importing drugs from foreign countries.” Instead, under his program, “Pharmaceutical companies will spend $10 million to get the program up and running and then offer rock-bottom pricing to pharmacies,” she writes. The program will be targeted to lower income Californians without third-party coverage for drugs but “will not foist blanket price controls on drugs.” While the program is limited and targeted, “it’s a program that other governors who are interested in helping the few who don’t qualify for other programs would be wise to emulate,” concludes Pipes.

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Author: John C. Goodman

Source: National Center for Policy Analysis, 02/16/05

Importing prescription drugs from Canada is not the answer to high drug prices in the U.S., writes John Goodman, president of the National Center for Policy Analysis. Instead, we “need an aggressive free trade policy? [that] allows drug producers in one country to sell to consumers in any other country.” Goodman recommends three changes that would help move toward a more effective free trade policy: “First, we should insist that other countries respect patent rights, including the right of the patent holder to refuse to sell?Second, we need to allow issues of resale to be settled by contract. Let the pharmaceutical companies negotiate the terms of sale and the right to resell in the marketplace?Finally, other countries need to open their markets to American producers of generic and over-the-counter drugs. We should not allow regulation to function as protectionism under another name.”

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National Health Care Spending Projections

Health Affairs and Kaiser Family Foundation Joint Briefing

Wednesday, Feb. 23, 2005, 9:30 – 11:00 a.m. (registration and breakfast will begin at 9:00 a.m.)

Washington, DC

RSVP to Tiffany Ford at (202) 654-1319, or email


Making Coverage Affordable through a Nationwide Marketplace for Health Insurance

Cato Institute Policy Forum

Tuesday, March 1, 2005, 12:00 PM (Luncheon to follow)

Washington, DC

For additional details and registration information, go to:


Is America’s Hospital Sector Open to Competition?

Cato Institute Policy Forum

Tuesday, March 22, 2005, 12:00 PM (Luncheon to follow)

Washington, DC

For additional details and registration information, go to:


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