Job One

We are much relieved that Dr. Mark McClellan was confirmed by the Senate soon after midnight today as director of the Centers for Medicare and Medicaid Services. (Why do the health care votes all seem to come in the middle of the night?)

Senate Majority Leader Bill Frist?s statement following the vote captured the sentiment of Mark?s legions of fans: “Dr. McClellan is the right person to lead CMS. He is an extremely bright and capable public servant. I am pleased the Senate has confirmed Dr. McClellan, providing strong leadership at this critical time.” He was confirmed by a voice vote with no debate.

Job One: Educate the public about the new Medicare law.


Unfortunately, Mark?s confirmation skirmish (you really can?t call it a battle) opened more debate over drug importation from Canada — price controls packaged under a different name.

?One indication of the shifting political winds came from Sen. Trent Lott, R-Miss.? who, until now, has opposed drug importation, the Associated Press reports. ?I cannot explain to my mother any longer why she should pay twice to two-thirds more than what is paid in Canada and Mexico,? Lott said.

Maybe he should start by telling her that if the United States takes the road to price controls that we will surely follow other countries in the decline of new drug development.

?From 1998-2002, U.S. companies launched 88 new drugs versus 44 in Europe,? according to drug importation opponent Rep. David Dreier, R-Ca. ?That?s an astounding reversal in innovation based on the previous five years when Europe launched 71 new drugs compared to only 48 in the United States.? Price controls are the main reason.


And speaking of private sector innovation, a blockbuster study conducted by Bristol-Myers Squibb was released this week showing that patients taking high doses of the cholesterol-lowering drug Lipitor were 30% less likely to die from heart disease than those on a standard dose of another statin, Pravachol.

The study provides important clinical information, but the real news is that the study was initiated by Bristol-Myers Squibb, which makes Pravachol, and showed that higher-dose Lipitor made by its major competitor, Pfizer, produced better results.

Clearly, the study did not help Bristol-Myers Squibb, but the company is to be commended for the study and for putting a summary on their website. The results will likely cause a new assessment of clinical guidelines, which had said the lower-dose therapy was sufficient. The study was conducted by Harvard researchers and released Monday at an American College of Cardiology meeting in New Orleans.

My take from this: Private-sector competition precipitated this study. We don?t need the heavy hand of government-dictated ?evidence-based medicine,? which will quickly become outdated. Clinicians can much more quickly respond to the fast pace of medical information like this when guidelines aren?t locked into law or government regulations.


And finally, take a look below at the testimony that my colleague Greg Scandlen presented before the Health Subcommittee of the House Ways and Means Committee this week. Chairman Nancy Johnson had the wisdom to call a hearing on the underlying causes of the problem of the uninsured. We?ve provided a link in the articles section below to Greg?s newsletter summarizing the hearing, but his basic premise is refreshing: What we have been doing clearly isn?t working, so maybe it?s time to rethink the problem.

Grace-Marie Turner


? Testimony of Greg Scandlen before the Health Subcommittee of the Committee on Ways and Means

? The potential impact of the Medicare prescription drug benefit on pharmaceutical companies

? The new Medicare drug discount card: An advance prognosis

? A new policy framework for health care markets

? Why not ?Europeanize? healthcare?


Source: Galen Institute, 03/09/04

In testimony earlier this week before the Health Subcommittee of the House Ways and Means Committee, the Galen Institute?s Greg Scandlen said that ?short-sighted and ultimately misguided? state and federal policies are key underlying causes of the uninsured. Scandlen argues that tax policies and the Employee Retirement Income Security Act (ERISA) have especially distorted the market and made coverage more expensive and less accessible for anyone not in the subsidized systems of Medicare, Medicaid, and employer-sponsored health insurance. ?Change should be made carefully and thoughtfully,? Scandlen cautions. ? But having an understanding of this history and the consequences of well-intentioned policies should make it more feasible to tailor changes that can work.?

Greg?s summary of the hearing:

Full text of all testimony:


Author: PricewaterhouseCoopers, Health Policy Economics group

Source: Pacific Research Institute, March 2004

A widely cited study by Alan Sager and Debora Socolar of Boston University ?significantly overestimates? the impact of the new Medicare law on pharmaceutical company revenues and profits, according to a new Pacific Research Institute report prepared by PricewaterhouseCoopers. Sagar and Socolar estimate that the new Medicare law will increase pharmaceutical industry revenues by 11.4%. But the PRI study finds that the Medicare legislation will cause drug industry revenues to increase at most by 3.2% or decrease by up to 1% from 2006 to 2013. The report finds three key shortcomings to the Sager-Socolar study: 1) The assumptions about the cost of the legislation used to estimate the change in revenues are inconsistent with the Congressional Budget Office total; 2) The increase in drug spending is almost four times larger than the increase calculated using generally-accepted measures; 3) It ignores the impact of changes in discounts that both government and private sector analysts expect.

Full text:


Source: U.S. Senate Special Committee on Aging

?While not a drug benefit, the voluntary drug card program is an important first step in providing Medicare beneficiaries with the tools they need to better afford the cost of prescription drugs,? Acting Medicare Administrator Dennis Smith told the Senate Aging Committee at a hearing Tuesday. The new Medicare drug discount program will begin in June and is expected to save seniors without coverage between 10 to 25% on their total prescription drug spending, with low-income seniors receiving an additional $600 in assistance. ?The $600 will be added to the card this year and will operate like a debit card from a bank. That will truly help seniors who need help the most purchase the medications they need,? said Committee Chairman Larry Craig. Jim Firman, President and CEO of the National Council on the Aging, provided examples of how the 2004-05 savings to low-income participants could be a great deal more than $600. And Forest Hunter of Pfizer said, ?Every day, we donate well more than $1 million in medicines through our U.S. outreach programs?we are actively working with other companies to create a cooperative program which brings together leading healthcare organizations to offer America?s 40 million Medicare beneficiaries immediate assistance in getting needed medicines through the Interim Medicare-Approved Drug Discount program.?

Full text of press release and testimonies:


Author: Stuart M. Butler

Source: Health Affairs, March/April 2004

?The frustration with health care markets recorded in the paper by Len Nichols and colleagues reflects the general, and accurate, perception that these markets typically do not work well,? writes Stuart Butler of the Heritage Foundation. ?But markets respond to the framework of rules and tax incentives in which they must operate, and in health care this framework works against efficiency.?

Butler?s paper in the latest edition of Health Affairs responds to Len Nichols et al?s findings from the Community Tracking Study that, ?Major barriers to efficient market outcomes exist amid growing willingness to consider renewed government interventions.? Butler argues that the appropriate answer is not to reject market base approaches, but ?instead to fix the framework so that markets will foster efficiency? through changes in tax policy, information, new insurance pooling arrangements, and strong competition.

Full text (free for subscribers or available for purchase):


Authors: Brian Lee Crowley and Johan Hjertqvist

Source: Atlantic Institute for Market Studies, 03/01/04

?The citizens of the European Union have considerably more health are rights than Canadians,? write Brian Lee Crowley of the Atlantic Institute for Market Studies and Johan Hjertqvist of Sweden?s Health Consumer Policy Centre of Timbro. The EU has laid the groundwork for a consumer-driven revolution in health care by ?opening up a European health care market where patients may travel and use the health care services they deem necessary without the permission or interference of their national health care authorities.? The authors say that Canada would be wise to follow this example by allowing citizens to travel among provinces to obtain the care they need. ?In Canada we still have provincial public-sector monopolies in charge of health care. They live within their budgets by restricting access to care through queuing and other forms of rationing because they do not bear the costs of the pain and suffering of their patients,? write the authors.

Full text:


Consumer-Driven Health Care: Implications for Providers, Payers and Policy Makers

Manhattan Institute Forum

Wednesday, March 31, 2004, 12:00? 2:00 p.m.

New York, NY

This forum will feature Harvard Business School Professor Regina E. Herzlinger. RSVP by calling (212) 599-7000 ext. 414 or send an e-mail to

The Coming Generational Storm: What You Need to Know about America’s Economic Future

Cato Institute Book Forum

Monday, March 15, 2004, 4:00 p.m.

Washington, DC

For additional details and registration information, go to:

?Lessons Learned in the Fight Against HIV/AIDS: Experience in Africa?

GlaxoSmithKline Event

Thursday, March 18, 2:00 – 3:00 pm

U.S. Capitol (HC-7)

Washington, DC

This event will feature Dr. Dickson Opul, Executive Director and Founder of the Uganda Business Coalition and HIV/AIDS Prevention and Treatment Initiatives. Call Victoria Archibald at (202) 778-1253 for more information or to RSVP.

The Promise and Pitfalls of Disease Management in Medicaid and Medicare

American Enterprise Institute Health Policy Conference

Monday, March 22, 2004, 9:00 a.m.?noon

Washington, D.C.

For additional details and registration information, go to:,eventID.775,filter.all/event_detail.asp.

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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