Americans are just beginning to understand what the health care industry's secrecy costs them. New federal data about individual doctors' Medicare billing practices sheds needed light on how unintended consequences of government policies and long-held assumptions drive up the cost of medical care. Part of the solution to slowing the nation's growing health care costs is more transparency and ensuring doctors' duty to patients isn't undermined by a drug reimbursement scheme. The more consumers are aware of how choices drive costs, the better.
As the Tampa Bay Times' Jodie Tillman revealed last month, a major reason that ophthalmology ranks as the highest reimbursed specialty for Medicare is an extraordinarily expensive drug used in an in-office treatment to combat age-related macular degeneration, the leading cause of blindness in the elderly. Lucentis costs $2,000 a dose and is used in a two-year, 24-injection course of treatment. Medicare reimburses doctors based on the average cost of the drug plus 6 percent for their service.
Doctors have a less expensive option that has been confirmed by clinical trials. Avastin, which costs an average of $50 a dose, also works the same way in blocking growth of abnormal blood vessels and leakage of fluid that causes so-called "wet" macular degeneration. Combined with the doctor's fee, Medicare's cost would come in around $53. A 2011 report from the federal Office of the Inspector General estimated Medicare could save $1.4 billion if doctors switched to the lower-cost drug. But there are various policies — some of them well-meaning — that discourage Avastin's use and inflate Lucentis' cost.
First, federal law prevents Medicare from negotiating lower drug prices. That was part of the political calculus Congress made in crafting Medicare Part D, and President Barack Obama agreed to continue the ban on negotiating in order to secure the pharmaceutical industry's support for the Affordable Care Act. It is absurd that the nation's largest health care insurer cannot negotiate lower rates and save taxpayers millions.
Second, Medicare provides a financial incentive to doctors to prescribe a more expensive drug. Why aren't they paid a flat fee for administering a drug?
Third, a well-meaning federal policy requiring drug companies to seek regulatory approval for how they market drugs to doctors does not work well. Lucentis has been approved for treating "wet" macular degeneration, but Aventis, a cancer drug, has not been, even though the Food and Drug Administration has encouraged its maker to do so. But what incentive does manufacturer Genentech have to do so? It makes both drugs.
Finally, the nation's long record of inadequately regulating compounding pharmacies, where Aventis is broken into small enough doses for eye treatments, has created a prejudice against its use — particularly after a high-profile incident last year in New England where several patients died after a compounding pharmacy made a mistake. Congress has responded and there is now new regulation, but it is still unclear if it will go far enough in reducing bias against that supply chain.
The Affordable Care Act has helped millions of Americans get health coverage. But that progress could be for naught if the nation does not find a way to significantly bend the cost curve for health care and eliminate policies that encourage unnecessary spending.