Drug corporations from manufacturers to retailers are rotten down the line

Drugs, drugs, drugs. We hear a lot about drugs. Especially about the Opioid Crisis, which is a very serious problem in the US. But the other drug problem we hear about is also very serious: the cost of drugs and the inability of people to access the drugs that they need, not to mention to save their lives, because of the cost.

One such drug is insulin, needed by people with Type 1 diabetes to survive. Stories of people dying from, or almost dying from, lack of access to insulin, or having to go to Canada or Mexico to buy it, are both sad and galling.  It is particularly so in the case of insulin because its discoverers wanted it to be free. In 1923, Frederick Banting and his colleagues Charles Best and James Collip sold the patent to the University of Toronto for $1 each, worried that if they did not patent it drug companies would patent an inferior version of insulin (imagine that!) and people would die. The University of Toronto gave the patent royalty-free to drug companies, specifically Eli Lilly.

Unsurprisingly, that marked the end of being motivated by the public interest. As early as 1941, Lilly and two other companies were indicted for price fixing of insulin, and it has gone on from there. In 1982, Lilly was able to synthesize human insulin (previously insulin was made from beef or pork pancreas, which had a lot of reactions, although pork was closer to human and thus preferred). Of course, the price took off. With the complicity of the government, worse in administrations that believed corporate profit (especially for big donors) was more important than human lives, the price continued to rise. This has led us to story after story about people with diabetes, like Josh Wilkerson, dying because they could not afford $1,200 co-pays. Banting and Best are turning in their graves.

Yes, pharmaceutical manufacturers are greedy and evil, whether they make insulin or Epi-Pen or colchicine, or other drugs (like pyrimethamine – see Martin Shrkeli) and deserve every bit of anger, hatred, and scorn that has been visited on them. They are continually the #1 (or, sometimes, #1!) profitable industry in the US, making lots of money because, well, people need their products to live. But they are not the only part of the drug industry that is responsible for bleeding us for profit. They are complicit with insurance companies, who agree to pay the outrageous prices that they demand (because, after all, they just raise their premiums), and with our bought-and-paid-for Congress. For example, when Congress passed the Medicare Part D Drug Act in 2003 it contained a prohibition against Medicare, the nation’s largest insurer, negotiating drug prices, thus ensuring that American pay far more for drugs than people in other countries (there is a reason uninsured folks go to Canada or Mexico)! As I noted recently, the idea is often put forward that without drug company profit, innovation in pharmaceutical discovery would grind to a halt, but in fact nearly 2/3 of discoveries are made outside the US and most of those in the US are discovered through research funded by the National Institutes of Health.

But beyond the usual villains, pharmaceutical and insurance companies, we have the wholesalers, retailers, and “bundlers” of drugs also making out like bandits (they are bandits, even if, thanks to that bought-and-paid-for Congress, their schemes are often legal) from our health needs. The “bundlers”, called Pharmacy Benefit Managers (PBMs) are contracted by large insurers to negotiate for the “best prices” with pharmacy retailers. For a positive spin on what they do, see this piece from “The Balance”. However, they are also responsible for a lot of the high cost of drugs, especially for those with worse, or no, insurance. In addition, they have a lot of practices that enhance their profit at your expense, many explained in this piece from the Commonwealth Fund, such as jacking up the price charged to insurers and pocketing the difference (“spread pricing”) and pocketing rebates from manufacturers. The entire role of PBMs is complex and bewildering, but they play a critical role in the important process of profiting off of your illness.

More recently, we have seen exposure of the nefarious practices of the final link in the chain of getting you your needed medicines, the retail pharmacies themselves. Of course, the old mom-and-pop drugstore on the corner is almost a thing of the past, having been replaced by mega-chain pharmacies such as CVS, Walgreens, Rite Aid and Duane Reed. (Of course, in many big cities they are still on every corner, not just competing with each other but with themselves; in places like New York City they are more ubiquitous than Starbucks!) These chains drove out the small drugstores by underpricing them, but having been successful in that, they have adopted practices that are frequently unethical, sometimes illegal, and always guaranteed to make them more profit. Indeed, two of the largest PBMs are now owned by these chains (Caremark by CVS and Envision by Walgreens), enhancing the vertical integration of the industry.

A New York Times exposé of January 31, 2020 by Ellen Gabler tells how retail pharmacies overwork their employees, sometimes with resultant errors such as patients getting the wrong medicines and often having adverse effects. It was titled “How Chaos at Chain Pharmacies is Putting Patients at Risk”, but this headline, while accurate, does not explain the real reason for the chaos, which is that these pharmacies are using an old and dishonorable technique made famous by Henry Ford in the early days of assembly lines called “speed up”. Speed-up, increasing the expectations for “production” (in this case, number of prescriptions filled per hour) has been a target of union contracts since the 1930s, but as the influence of unions has waned (with the collaboration of pro-corporate legislatures) these practices have increased. Pharmacists may be “professionals” (like nurses and doctors) but whatever your education and training, if you work for a large corporation who sets the rules and standard and has control, you are a worker, and need the protections that all workers should have. The most conscientious of these professionals have protested, often to the state boards that regulate them, as cited in the Gabler article:

In letters to state regulatory boards and in interviews with The New York Times, many pharmacists at companies like CVS, Rite Aid and Walgreens described understaffed and chaotic workplaces where they said it had become difficult to perform their jobs safely, putting the public at risk of medication errors.

They struggle to fill prescriptions, give flu shots, tend the drive-through, answer phones, work the register, counsel patients and call doctors and insurance companies, they said — all the while racing to meet corporate performance metrics that they characterized as unreasonable and unsafe in an industry squeezed to do more with less.

“I am a danger to the public working for CVS,” one pharmacist wrote in an anonymous letter to the Texas State Board of Pharmacy in April.

“The amount of busywork we must do while verifying prescriptions is absolutely dangerous,” another wrote to the Pennsylvania board in February. “Mistakes are going to be made and the patients are going to be the ones suffering.

So is the problem being addressed? You can be sure that it is, by the corporations that run these pharmacies. How? The complaints of the pharmacists are being taken care of in the way that big corporations often do, that is, ignoring them and deleting mention of them from their reports. In a follow up on February 21, 2020, “At Walgreens, complaints of medication errors go missing”, Ms. Gabler writes:

Pharmacy employees at Walgreens told consultants late last year that high levels of stress and “unreasonable” expectations had led them to make mistakes while filling prescriptions and to ignore some safety procedures.

But when the consultants presented their findings at Walgreens’s corporate offices this month, there was no reference to the errors and little mention of other concerns the employees had raised.

That’s because senior leaders at Walgreens had directed the consultants to remove some damaging findings after seeing a draft of their presentation, a review of internal emails, chat logs and two versions of the report shows.

In one instance, Amy Bixler, the director of pharmacy and retail operations at Walgreens, told them to delete a bullet point last month that mentioned how employees “sometimes skirted or completely ignored” proper procedures to meet corporate metrics, according to the chat logs and the draft report.

Good for you, Ms. Bixler! Took care of that problem! You should get a nice bonus this year!

If these practice are of concern to you, they should be. So should the price gouging up and down the line in the pharmaceutical industry, the drive to profit for manufacturers, PBMs, insurance companies, and retail pharmacies to make lots of money off you, or you die. “Your money or your life!” is an old cliché attributed to highwaymen. It should be the mantra of the pharmaceutical industry in this age of unfettered capitalism.

But no highwayman ever had the reach or power or ownership of politicians that these folks do. 

The denominator matters: we only have a quality health care system if everyone can access it!

Denominators.

Even if you are not a regular user of statistics, you probably remember that word from arithmetic. You know, the “4” in ¼, as opposed to the “1”, the numerator. Why is this important in the current policy debate? Well, if you know, for example, that a majority of, say, Republicans (or Democrats) like a policy, it would be a mistake to assume that a majority of all people like it. In health care policy, in particular, denominators, and how they are chosen, are important, because by choosing an inappropriate one you can “prove” a point that is wrong.

I recently was present for a debate on the issue of “health care is a human right” in an undergraduate class. The students did well, and although almost all personally supported the “pro” side, the “anti” side was able to find arguments in the literature, often from organizations like the CATO Institute. To a significant degree, however, they were either philosophical objections (“what is a human right?”) or, conversely, pragmatic irrelevancies to the issue (“a lot of doctors don’t take Medicaid”). Many of the assertions are belied by the facts. For example, the Northwestern economist Craig Garthwaite, interviewed in VOX, notes that if drug companies can’t make huge profits, innovation will go down, and most of the world depends upon the innovations discovered in the US. In fact, of all New Molecular Entities (NMEs) discovered, a little over 1/3 are in the US. But even this ignores another important point – many or most of these were not originally discovered by pharmaceutical companies using their hard-earned profits on Research and Development (R&D), on which they spend much less than on marketing, but by government (National Institutes of Health, NIH) supported university research, which the drug companies skim for the most promising ones. So what is the denominator there? All NMEs, or only those funded by drug companies?

The students also cited these opponents of healthcare-as-a-right or Medicare for All who also assert that, in a similar manner, it would cause quality to decrease. If everyone has access, and hospitals and doctors can’t make more money on some, they opine, then those people will not get all the best, most modern and effective care. This is where denominators come back in. Even if it were true that there might be decreased quality for those who currently have unfettered access (very questionable), it is obvious that the quality of care would increase for those who now get little or none! Overall, when the whole population is considered as the denominator, the quality of care would absolutely go up. Denial of care, as asserted long ago by Schiff, Brennan and Bindman, is “the gravest of all quality defects”.[1] If a hospital, for example, reports excellent outcomes for people treated there for heart attack, but only those with good insurance were admitted for treatment and the overall rate of death from heart attack in the community rose, it would be painting a very skewed picture. If what you mean is “I have real privileges, and I am afraid that by spreading access out to everyone I might lose that privilege”, then say that; don’t dress it up by pretending quality would decrease!

A common assertion we hear, particularly from “moderates”, or at least from the politicians, pundits, and media who assert that they speak for moderates, is that “Most people obtain health insurance through their employers and are generally satisfied with their choice of providers, coverages and the amount they contribute to their family’s healthcare.” This may be true, or it may not be. The majority of people current have health insurance coverage through their employer, but whether they are generally satisfied is another question. The main thing is that they are much more likely to be satisfied when they are healthy and do not have to utilize health care very much or at all. Even then, the copays and other surprise costs can prove burdensome, but it is only when something happens that causes them to need to use a lot of healthcare that it becomes critical, bankrupting them and often even making that care inaccessible. When you and the members of your family are not sick, costs can be low (and you can be satisfied) but when you are sick is when all the hidden costs kick in. In this case, the important denominator might be a smaller group, those who used healthcare, rather than everyone.

These excess costs include the various legal scams described by Elisabeth Rosenthal “Where the frauds are all legal” on December 7, 2019 in the NY Times (discussed by me in Scamming Medicare: It's the providers and insurers, not the patients!, December 19, 2019), when her husband had a serious accident. They also include the “surprise bills” that come because, even though you went to a hospital that was in your insurance network and saw a surgeon who was in your network, it turns out that the ER group or the anesthesiology group contracted by the hospital, or the assistant surgeon your surgeon picked, is not in network. Boom! $10,000, $100,000 bills! No one is “satisfied” by this.

Such problems are most often faced by those with multiple chronic diseases, often older people, who have to see the doctor, be hospitalized or be operated on more often. Most people, in most years, are not in need of major or expensive care, so they are the “satisfied well”. But something bad and expensive could happen to any of us any day: Your doctor surprises you by telling you that you have cancer! You are in a car (or bicycle) accident and need big surgeries! Your baby was premature and needs to be in neonatal intensive care! We are all at risk in a system where only some people are covered, and only some of the time, and for some things, and for certain providers.

Recently, there was big news when the large Culinary Workers of America union came out to oppose Sen. Sanders’ Medicare for All plan, which the union suggests would void the excellent health care coverage that they have won for their members. The union deserves tremendous credit for having negotiated this coverage in the current and recent negative environment for unions, especially for a membership that is largely relatively low-paid, minority, female, and often non-English speaking. However, to suggest that it would be a loss for their members is deceiving. For one thing, the coverage of a Medicare for All plan would be at least equal to this excellent plan; it would cover everyone for everything. Health coverage is a great benefit, but the money that employers pay for their contribution (which unlike workers’ contributions is tax-deductible) is money that they don’t pay in wages. The benefits of M4All compared to the CWA plan are well-described in this Quote of the Day by Dr. Don McCanne. And the CWA contract is a relative outlier and not guaranteed to be as good next time; remember the many General Motors workers who were the exemplars of having “Cadillac coverage” during prior healthcare insurance debates, but who lost most of those benefits when GM “restructured” after bankruptcy – if they were not laid off altogether?

At least as important are the relatives, friends, and neighbors of those covered workers who work for small companies without good – or any – health insurance plans, or are disabled, or unemployed for longer or shorter periods. This is the “community”, the “population” that needs to be considered as the denominator. Many CWA (and other union) members realize this; while the union leadership may rightly be proud of their accomplishments in negotiating, this does not bring excellent health coverage or care to all of the people. The denominator needs to be all of us.

Only a universal single payer system, an improved and expanded Medicare for All, will do that.

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[1] Schiff GS, Brennan AB, Bindman TA, A Better-Quality Alternative Single-Payer National Health System Reform, JAMA 272(10):803-808, September 14, 1994.

Yes, it's the insurance and drug companies, but it's the health systems also!

Much of the focus in discussions about the high (extremely high!) cost of the US healthcare system is on administrative costs (over 34%, per Annals of Internal Medicine article by Himmelstein, Campbell and Woolhandler)[i] and the profits taken by insurance companies and drug companies. This is totally right on, and are major reasons why a single-payer #Medicare4All system would save enough money to not only cover the tens of millions of Americans who currently do not have health insurance, but to provide decent, comprehensive coverage to the majority of Americans who have inadequate health insurance. This, of course, includes those who have marginal health insurance (like Blake Collie, an 8 year old boy with a cerebral aneurysm, whose parent bought a Christian insurance plan that was all they could afford, but would not pay for the treatment; the advice was “trust in God”), and those who have Medicaid, now aggressively being cut back, especially with new Trump Administration policies that allow states to slash it. And all the rest of us who pay large premiums but only find out what our insurance doesn’t cover and what our co-pays will be when we get sick. And then we get sicker.

In addition, we have Medicare Advantage (MA, also known as Medicare Part C) a deal which essentially can make a Medicare patient (for a little extra premium) an HMO patient.  For the patient this comes with the typical HMO advantages (such as vision and hearing and other coverages, and usually drug coverage so you don’t need a separate Part D insurance plan, and often little or no co-pay) and disadvantages (limited networks of doctors and hospitals, often poor out-of-area coverage), but it has real negative impact on the health system. MA programs get special treatment from the Center for Medicare and Medicaid Services (CMS), including a big increase in payments if they can demonstrate, with all the wizardry, bells-and-whistles, and large staff combing and padding the Electronic Health Record (EHR) that their patients are sicker. In fact, they are demonstrably less sick than traditional Medicare patients; indeed, the older and sicker MA patients are encouraged, subtly or not, to transfer to traditional Medicare. A recent article by Richard Kronick on the Health Affairs blog demonstrates that MA programs are being overpaid by $200 Billion. This is real money, and it is not by accident, as discussed by Don McCanne in his Quote of the Day.

But the less-discussed contributor to our high health costs are the hospitals and health systems that make big money. This is true even when those health systems are ostensibly not-for-profit. The for-profit hospitals and health systems are at least open about it, and they pay taxes. Non-profits do not pay shareholders, and also do not pay taxes. The presumed reason for this is because of the public service that they provide to their communities. But while this may be true of many small-town and rural hospitals, which are also in the most danger of closing and leaving their communities bereft of hospital care, it is often not at all the case for large urban health systems. They make money. For example, an interview on the NPR program “1A”, otherwise focused on the Peak Health System in Summit County, CO that has had some success in reducing costs in that rural tourist county, the Colorado insurance commissioner Michael Conway discusses the proposal for a “public option” in his state and notes that asking hospitals to give back a little is not too much for the urban hospitals making $2 billion a year (about 28 min in).

And, since they do not have shareholders to pay, the health systems reinvest most of the money they make into expanding hospital services or building new buildings. This could seem like a good thing, except that the choice of what services to expand is often (usually) based not on what services the community needs most, but what services will – make them more money! And, also, hopefully make them more desirable destinations for high-margin services than the other urban hospital systems with which they compete. So if, as is usually the case, cancer care and heart disease care and orthopedic care are big money-makers, they build fancy new cancer hospitals and heart hospitals and orthopedic hospitals to try to draw well-insured patients away from their competitors. Thus, we get redundancy and overcapacity in these high-end services in competitive cities, with each shiny new cancer center seeking to lure patients from the one that’s a few years older across town.

Meanwhile, these urban communities do have other, less lucrative, needs that are scarcely ever the target of major investment. In a rational system, the money made on those “profitable” services could be used to invest in and subsidize lower-profit (or in some cases money-losing) services that are in great demand in the community. These certainly include primary care, mental health/behavioral care, drug addiction treatment, and virtually any care delivered to poor or uninsured people. A reasonable health system would just subsidize this care, and not bill and dun people repeatedly for money that they do not have, and cannot and will not pay, ruining their credit, attaching their wages, and challenging their ability to pay for other things, like shelter, food, and clothing.

But privately-run health systems almost never work this way (even if “non-profit”) because their boards like them to make money. And reward them for making money. An article in GQ in April, 2019, reports that CEO salaries at our big health system are doing very well indeed; at the 62 largest, the 2018 salary averaged $18 million! The other “C-suite” executives (COO, CFO, CMO, etc.) are also very well paid; it would not be rare for a major hospital system to have 10 executives making over $1M a year. These CEOs are sometimes doctors, but often accountants or MBAs – basically they run their hospitals as a business, and often have no other context to relate to. When thinking about community benefit, they think of “community” as the “community of well-insured”, the “community of suburbanites”, and of course, especially the “community of potential donors” (cool that they can even get people to give them money and take a tax write-off!). They almost never think of the “community of need”. They are sometimes briefly interested as long as government will give them money for helping the needy, but return-on-investment (ROI) is always measured in dollars, not population health.

This is what happens when the private sector is given control of an industry; they pursue their own benefit. It is unconscionable that we do this in areas like health care which are needed by everyone. Virtually all decisions are made with their eyes on the bottom line. Is CMS going to pay for more residents? Let’s get more cardiology fellows to do procedures and make us money, not more family medicine residents who will go out and meet the needs of people, even if not in our hospital.

There are people who are concerned about government-run health care, and this spills over to their concern about government-financed health care, such as Medicare for All. The problem is that there is a status quo, and that status quo is destructive to the health of our people.

It needs to change.

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[i] Himmelstein DU, Campbell T, Woolhandler S, “Health Care Administrative Costs in the United States and Canada,

2017”, Ann Int Med, doi:10.7326/M19-2818, published online Jan 7, 2020.