Competition and 1300% Price Increases

The cost of healthcare has escalated from a few skirmishes and an occasional battle to outright war. Arguments that we have the “best healthcare system” in the world are seldom coupled with the words “for those who can afford it.” With 47 million folks falling through the system, we may soon be back to square one if the reconfigured House of Representatives (all appropriations bills much originate in that legislative body) figures out how to turn off the financial tap to fund the recent healthcare reform legislation, particularly that apparently unpopular mandate that persons who can afford insurance must opt for coverage or pay a fine. Add to this mix that state governments have been charged with creating the alternative healthcare “exchanges,” and you are likely to see some very strong resistance/foot-dragging or a move towards pure privatization from states with Republican leadership… which may force federal intervention and a confrontation at that level.

Reality dictates that healthcare costs and insurance have nowhere to go but higher, until… someday… there may be few dissenting voices in the body politic that something has to change. I hear union members complain that they are increasingly being required to pay a greater share of the cost of insurance, some even up to $500/month, but for those who have to pay for all of their own insurance – often at three or more times that number – it sounds like a gift. The target of Republican wrath – President Obama’s healthcare bill – was a lot less intrusive that legislation suggested by conservatives like President Richard Nixon in the late 1960s. There is an awkward balance between quality healthcare and universal access that is very difficult to achieve, and I suspect all we will see in the next two years is war. In the meantime, trust me, we will pay.

It is galling to know that when they can, where there are no alternative medications available (or no perceived medical alternatives), pharma companies are very happy to push prices beyond tolerable, particularly where a physician’s prescription is permitted virtually without reference to costs. Medical patents are often traded like baseball cards or high-value stock. Take for example Indocin IV, a medication used to treat pre-mature and very-low-birth-weight babies with a defect in their hearts’ arteries. Acquired by one pharma – Lundbeck, Inc. – from another – Merck & Co. – this patented medication traveled to its new home, without a noticeable increase in price. There was only one other drug being used to treat sort of the same issues – NeoProfen – that launched shortly thereafter.

But then Lundbeck and Abbott Laboratories jointly acquired NeoProfen. Guess what happened? The October 29^th theDeal.com explains: “In December 2008, almost three years after the acquisition, the FTC and Minnesota filed a complaint in federal district court alleging that Lundbeck's acquisition of NeoProfen substantially lessened competition between it and Indocin IV. In a press release, the FTC emphasized that, after allegedly eliminating competition from NeoProfen, Lundbeck increased its price for Indocin IV by 1,300%.

“Following trial, the district court dismissed the complaint, saying the FTC and Minnesota failed to prove that NeoProfen and Indocin IV are in the same relevant product market. The court apparently concluded that those choosing between the two do not make their choice on the basis of price. Having failed to establish the relevant product market, the court ruled that the FTC and Minnesota ‘failed to demonstrate that Lundbeck's acquisition of the rights to NeoProfen substantially lessened competition or tended to create a monopoly’ in a relevant market. The FTC and Minnesota may appeal this decision to the U.S. Court of Appeals for the 8th Circuit.”

This is a little example, a small story, but it exemplifies that state of our system of medical care. Doctors are getting paid less, their malpractice insurance costs are still soaring, but we are all paying more for medical care, all of us. Who’s making the money? With 31% of every medical dollar being absorbed in administrative costs, you know the insurance industry is making a killing, particularly as they increase the level of outsourcing for those same administrative functions to countries like India and the Philippines, killing American jobs along the way. And, well, the pharmas aren’t exactly hurting either… except when a patent expires on a popular medication and they now have to compete with generics.

I’m Peter Dekom, and the more you know about how our medical “system” works, the scarier it gets.