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Jewish World Review April 24, 2002 / 13 Iyar, 5762

Morton Kondracke

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Consumer Reports

Partial fixes won't solve crisis in health care costs | Surging health costs and insurance premiums - and increases in the number of uninsured Americans sure to follow - cry out for Washington politicians to begin thinking comprehensively about America's impending health care crisis.

One of these days, they will - ideally, as part of the 2004 election campaign. But for now, they are taking only piecemeal whacks at the problem.

Sometimes incrementalism in Washington produces good results, such as creation of the State Children's Health Insurance Program that widened Medicaid benefits for lower-income families.

But often it simply results in efforts by one group in the health care industry - say, doctors or hospitals - to get the upper hand over another, such as pharmaceutical or insurance companies.

A huge, multibillion-dollar battle of that type is set to surface in earnest this week when the Senate Commerce, Science and Transportation Committee begins hearings on legislation to limit current patent protections for drug companies.

The bill's sponsors, Sens. John McCain (R-Ariz.) and Charles Schumer (D-N.Y.), say that their bill would hasten the arrival of generic drugs to market and "achieve monumental savings for seniors and families ... upwards of $71 billion over the next 10 years."

On the other side, Pharmaceutical Research and Manufacturers of America argues that further reductions in already-falling profits of brand-name drug companies will prevent development of new medicines to cure diseases.

McCain and Schumer - who have an unlikely collection of liberal consumer groups, insurance companies, unions, HMOs and auto companies in their corner - contend, correctly, that generic drugs cost considerably less than brand-name drugs.

But PhRMA, the pharmaceutical lobby, argues - also correctly - that generic companies don't have to risk hundreds of millions of dollars developing and testing new drugs, only one-tenth of which ever make it to market.

To bolster its case, PhRMA is about to release a national survey of 400 physicians conducted by Republican pollster Whit Ayres showing that two-thirds of those surveyed think that weakening patent protections for new prescription drugs will hurt research and innovation.

More than 85 percent of the doctors credit new prescription drugs with reducing the need for surgery and shortening hospital stays, which tend to reduce overall health-care costs.

Part of the battle between the brand-name industry and the generics is legal, revolving around the 1984 Hatch-Waxman Act. That law gives generic companies access to brand companies' trade secrets and allows them to get products ready to market the moment a brand's patent expires, usually after 12 years.

The law also extends the patent for an additional 30 months if the brand-drug company sues a generic. McCain and Schumer contend that the brand-name companies regularly game the system to extend patent protection and that they aim to restore the intent of the 1984 law.

Which side is right is a murky matter. But it is true that rising outlays for drugs is the largest single contributor to exploding health-care costs.

But according to the Kaiser Family Foundation, the most important reason for rising drug expenditures is increased usage and ever-newer products, not price increases for individual drugs.

There's clearly a balance needed between saving money on drugs and saving lives. What's also clear is that drug outlays are just part of a systemwide cost crisis in health care.

The crisis was dramatized last week by the decision of the 1.2 million-member California Public Employees Retirement System to raise premiums by an astonishing 25 percent, forecasting an even bigger increase next year.

CalPERS is the second-largest buyer of health insurance in the nation after the Federal Employees Health Benefits Program, whose own premiums are going up 14 percent this year.

Such massive premium increases will be duplicated for employers all across the country - and will lead some to decrease coverage or drop it, swelling the ranks of the uninsured above 40 million.

Even CalPERS, which theoretically has huge bargaining power with health insurers and providers, has been unable to hold down costs. Most employers lack that power.

So CalPERS has joined the National Coalition on Health Care in urging a new comprehensive look at the health crisis - the first since the ill-fated 1993 Clinton health care plan. The group comprises business, labor, consumer and religious groups, and large-state pension plans.

President Henry Simmons says the group has no plan of its own, but that debate should start over three basic models. One is "play or pay," in which employers continue to provide most insurance coverage and would receive government help if they can't do so.

A second, favored by liberals during the 1993 debate, is a single-payer system in which all citizens would get their health insurance from Medicare or another government program.

The third, proposed by some Republicans, would impose an individual requirement on all citizens to have health insurance and offer government subsidies to those who can't afford it.

Democratic presidential contenders need to be heard on this issue soon, and they should pressure President Bush to be heard, too.

JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.

© 2001, NEA