George McGovern on Health Care

George McGovern — of all people — has a fairly balanced and relatively free market op-ed on a number of hot-button issues facing the United States, including the health care crisis. As McGovern rightly points out, one of the reasons that health care is so expensive are all of the state regulations dictation what health care plans must offer,

Health-care paternalism creates another problem that’s rarely mentioned: Many people can’t afford the gold-plated health plans that are the only options available in their states.

Buying health insurance on the Internet and across state lines, where less expensive plans may be available, is prohibited by many state insurance commissions. Despite being able to buy car or home insurance with a mouse click, some state governments require their approved plans for purchase or none at all. It’s as if states dictated that you had to buy a Mercedes or no car at all.

In fact one of the more galling, but common state insurance mandates is for pseudo-medical interventions such as chiropractors, acupuncture, nautropathy and other nonsense. The Council for Affordable Health Insurance (which is a pro-insurance industry group) has a nice couple charts about mandates by state here (PDF download).

Should Americans Be Allowed to Import Drugs from Canada?

The whole reimportation of prescription drugs from Canada issues is a bit odd because it tends to reverse traditional political views. Democrats who complain about the horrors of outsourcing jobs and the evils of free trade suddenly find themselves on the side of free trade across the Canadian border. Republicans who are nominally the party of free trade suddenly find themselves talking like anti-globalization activists about the dangers of weak safety standards in countries where the drugs might be made (and, as Clark Venable notes, it’s misleading to claim that the reimported drugs are made in America or Canada).

I am a free trader, a fan of the pharmaceutical industry and an ardent supporter of reimportation. Clark Venable quotes from a New England Journal of Medicine article that purports to make the case against reimportation, but really offers up the main reason to support it,

The mass exportation of prescription medication to the United States threatens the preferential pricing set by the Patented Medicine Prices Review Board.2 Companies may also choose not to market medication in Canada in order to protect the larger and more lucrative U.S. market.3 At risk is nothing less than the ability of countries to set their own policy regarding pharmaceuticals. The availability of Canadian medication is not a viable long-term solution to the problems of drug costs in the United States and represents a substantial threat to the access and affordability of drugs in Canada.

Yes, absolutely — this is precisely what needs to happen to bring sanity back to prescription drug pricing.

The current situation is quite simple. Canada tells a pharmaceutical manufacturer that it will only buy a drug at say $2/pill. The manufacturer says fine, we’ll make that up by charging American consumers $4/pill. The end result is that Americans end up subsidizing Canada’s system of socialized medicine. They get all the benefits of the lower price, while Americans pay the price in higher prices and also to a certain extent a penalty that discourages innovative new products (since in order for a product to be truly profitable, a company has to be able to sustain high prices in the U.S. market, so there is a disincentive to develop products that might be profitable if there were a market system in other countries rather than only in the United States).

As the NEJM notes, allowing reimportation of drugs will go along way to busting up that system which is a very good thing for Americans. Canadians (and other countries for that matter) must know that they cannot be free riders on American consumers forever. If their governments are going to continue to demand below market prices from drug companies, they are going to have to face a tradeoff of important medications being withdrawn or not being made available at all.

It should also be pointed out that the U.S. government also artificially inflates the cost of drugs with requirements that companies sell drugs to Medicare at the lowest rate they are sold for in the United States. Hmmmm…so if a company offers a subgroup a discounted price, it has to offer the government that same discounted price. Guess how pharmaceutical companies decide to price drugs given those incentives.

The FDA Should Bring More Choice to the Prescription Drug Market

Should it be illegal to sell
cars because some drivers will inevitably choose to drive while intoxicated?
Should the government force glue manufacturers to withdraw their products
becomes some people will hurt themselves sniffing glue to get high? If
the Food and Drug Administration had jurisdiction over cars and glue,
these scenarios just might happen — so far this year, the FDA already
removed two popular, effective drugs because too many doctors and patients
were not using the drugs according to the instructions provided by manufacturers.

Rezulin, a drug produced by
Warner-Lambert, helped patients regulated their diabetes. Patients who
before were injecting themselves with insulin several times a day could
reduce their injection schedules to nice a day. Unfortunately, Rezulin
has a well-documented serious drawback — it can cause liver damage. To
prevent this, the materials Warner Lambert ships with Rezulin and which
it and the FDA have sent to doctors repeatedly, recommends all patients
get a baseline liver screen and then monthly liver monitoring at least
through the first six months of taking the drug.

The result — by and large
the instructions have been ignored. An FDA study found that fewer than
10 percent of patients taking Rezulin were given the full regimen of liver
monitoring. As a result the FDA concluded that the drugs risks more than
outweighed its benefits and forced Warner-Lambert to remove the drug from
the U.S. market.

Much the same thing happened
with Johnson and Johnson’s heartburn medication, Propulsid. LIke many
medications, Propulsid’s label lists a variety of side effects and warns
about potential risks when the drug is taken by people with various medical
conditions. Again, though, these warnings were largely ignored. An FDA
study of 270 adverse events involving Propulsid, including 70 deaths,
found 85 percent of the adverse events occurred in patients with medical
conditions mentioned as risky in the label. As with Rezulin, the FDA decided
to take Propulsid off the market.

The FDA did something similar
last year with a powerful analgesic designed for use in operating rooms
after surgery. The drug in that case was extremely effective, but if taken
for any long period of time could cause kidney failure. The instructions
with the drug clearly stated the drug was to be prescribed only for short
one to two week intervals. Instead doctors ignored the warnings and wrote
6 month and even year long prescriptions. After several people died from
prolonged use of the drug, the FDA pulled it off the market.

Is this a sensible way to manage
the regulation of prescription drugs? In effect, the FDA is setting the
risk threshold at the lowest common denominator of patient behavior. The
satisfied, responsible users of Rezulin, Propulsid and other drugs are
largely ignored while those who choose to ignore FDA and drug manufacturers’
warnings are allowed to drive the drug approval process. What sort of
screwy system denies some patients important medications due entirely
to the recklessness of other patients and doctors?

       The optimal solution — get
rid of the FDA and rely on private agencies to certify medications —
is politically untenable at the moment, but there is another option to
increase patient choice while relying on government to protect folks from
themselves. Although the situation varied widely decades ago, today all
the major Western industrial nations rely on very similar methods to certify
drugs as safe and efficacious. Today the main factor that keeps a drug
approved from being approved in all countries is not differing safety
and efficacy data, but rather different ways of interpreting that data
and judging risks and benefits.

Americans should have the best
of both worlds — the FDA should allow the import and sale of any prescription drug approved for sale in modern, industrialized nations.
There’s no reason an American citizen should have to travel to Europe
to buy a drug that’s approved for sale there but not here. To appease
the public health folks, the government could require that all patients
prescribed such medication be informed by both a doctor and a label on
the prescription bottle that the medication has been approved by a foreign
drug agency but not by the FDA.

Thankfully, in the United States
people have relatively more choice over health care than anyplace in the
world. Don’t want to be revived by extraordinary measures if you’re on
the verge? Just fill out a do not resuscitate order. Want to donate a
kidney to the next door neighbor kid who needs a transplant? Not a problem.
Surely if healthy people can decide for themselves to give an organ or
decide not to receive life saving treatment, those some people can decide
for themselves whether the risks of taking Rezulin or Propulsid outweigh
the benefits.

If the FDA really wanted to
improve American’s health, it could start by giving them more choice over
the prescription drugs they can take.

Are Pharmacy Technicians a Danger to Your Health?


Today’s Headlines from Libertarian Sites

Should End The Confusion Over Medicare Private Contracting

by Robert E. Moffit (Heritage Foundation)

Your Language
by Walter Block (Mises Institute)

More Great Presidents
by Robert Higgs (Mises Institute)

Man Grows Up: Can the nation’s premier underground event survive
its success?
by Brian Doherty (Reason)

Wisdom: Rediscovering the social norms that stand between law
and libertinism
by Jonathan Rauch (Reason)

Principles: An Interview with John R. Searle Eminent philosopher
John R. Searle defends free speech, free inquiry, and the Enlightenment

from Reason

Broken Blue Line: How to start a riot
by Jesse Walker (Reason)

Stickers: Indiana tries to punish a marijuana grower twice

by Stephen F. Hayes (Reason)

Surprise: The WTO protests caught free-traders off guard. They
shouldn’t have
by Virginia Postrel (Reason)

of Trade How to help all of Cuba’s children
by Nick Gillespie

Washington: How to make a killing in cable
by Thomas W.
Hazlett (Reason)

Bugs Class action lawyers discover Silicon Valley
by Walter
Olson (Reason)

of Our Fathers: The Unbelief of America’s Founding Fathers

by Jim Peron (Laissez-Faire City Times)

Freedom and Private Property Rights
by Tibor R. Machan (Laissez-Faire
City Times)

in America, Part 9: A Psychotic Social Psychology, Continued

by Robert L. Kocher (Laissez-Faire City Times)

Power of Openness: Why Citizens, Education, Government and Business
Should Care About the Coming Revolution in Open Source Code
from Laissez-Faire City Times

Popper and Friedrich Hayek: an Interview with Jeremy Shearmur

by Alberto Mingardi (Laissez-Faire City Times)

Against the UN Moynihan’s Rebellious Daughter
by Richard
S. Ehrlich (Laissez-Faire City Times)

Reflects New Deal View of Twisted Constitutional Views
Roger Pilon (CATO Institute)


The Associated Press recently
reported on the horror of the month — pharmacy technicians.

Pharmacy technicians are the
folks who do most of he work in modern pharmacies. Although they usually
lack any sort of formal training, they typically do the data entry for
drugs, count the actual tablets and slap the label on the pill bottle.
The pharmacist then checks everything to make sure the drug type and amount
is correct before the prescription is handed to the consumer.

According to some consumers
and regulatory bodies, this is an unacceptable state of affairs — they
want additional training required for pharmacy technicians and stiff licensing
requirements. The Associated Press gives a typical horror story. A woman
noticed the drug her 5-year old was taking contained a special warning
about giving it to children. The pharmacy technician told her this was
no problem. Unfortunately that was very bad advice, and as a result the
child suffered severe side effects including ongoing learning disabilities.

The Associated Press cites
a 1998 study by the Virginia Board of Pharmacy that found pharmacists
catching an average of 6.5 mistakes by technicians each week. Unfortunately
there are serious problems with that study. Only half of the 1,590 drugstores
surveyed bothered to respond and asking pharmacists to estimate how many
errors they spot in a given week is a very poor way of measuring the problem.

The real problem with the criticism
of pharmacy technicians, however, is that while technicians do indeed
make mistakes, the limited evidence available indicates they don’t make
mistakes any more often than regular pharmacists do. Last year, for example,
U.S. Pharmacopeia’s Medication Errors Reporting Program reported receiving
314 reports of pharmacy errors, half of which were made by technicians.
But what of the half that weren’t made by technicians? Logically, they
were almost certainly made by pharmacists.

Having spent a couple years
working as a pharmacy technician at a small pharmacy and a big chain the
basic problem in filling prescription is accurately processing data, not
having any special pharmaceutical skills or knowledge.

The main source of error is
still doctors who tend to right out almost unreadable prescriptions. It
is amazing in this day of hand-held computers, fax machines and cell phones
that doctors introduce a large risk into drug prescriptions by scrawling
out their drug orders. To really lower the risk of getting the wrong drug,
always have a doctor’s office phone in a prescription.

The second source of error
was the dizzying array of different compounds, many with similar names,
not to mention the occasional drugs that look very much alike (there are,
after all, only so many names and shapes available for the pills we take).
Such errors, in my experience, were uncommon but they did happen. However,
if a pharmacist and technician are doing their jobs, these never get out
the door. Not once did I ever see the process break down so a person go
the wrong drug.

On the other hand, such errors
are inevitable regardless of what sort of system is in place. States could
require that only licensed pharmacists have anything to do with dispensing
drugs, and such errors are still going to occur. There’s no way to get
around that.

But the presence of pharmacy
technicians probably increases the reliability of the system, since with
the pharmacy technician system the technician and the pharmacist both
check the prescription before it goes out the door. That is far superior
to having a single individual pharmacist doing the entire process from
beginning to end. To the extent that there is a problem with this system
it is that pharmacists don’t adhere to it. The Virginia Board of Pharmacy
interviewed dozens of pharmacists, with half of them saying they never
checked the results of their technicians.

Licensing of technicians or
limiting what technicians can do — both popular solutions among the regulate-it-to-death
crowd — will simply raise the cost of running a pharmacy while doing
very little to reduce the risk of a serious tragedy (largely because that
risk is probably already as low as it can get given the current economic
and time pressures).


of pharmacy technicians raises questions of quality
. The Associated
Press, February 14, 2000.

Banning Genetic Tests For Insurance Poses Threat For Consumers

Some time ago my wife and I
learned one of us might have inherited a genetic disease. Our biggest
concern was for our newborn daughter — might she be afflicted? If so,
could the results of genetic testing be used to deny her or us insurance?

Governor John Engler’s promise
in the State of the State address to prevent insurance companies from
requiring patients to take genetic tests struck a special chord with us
because it is such a misguided solution to the problem.

Insurance companies are the
target of choice for politicians. As Republican State Senator (and surgeon)
John Schwarz of Battle Creek told the Detroit News recently, “There are
members of the legislature that are too cozy with insurance companies.
This ought to be a no-brainer. We don’t want insurance companies denying
people coverage based on genetic disposition.”

The problem with this view
it represents a fundamental lack of understanding about how insurance
companies work and as a result poses a long term threat to the very existence
of private insurance.

Insurance policies for life
and health insurance first came into widespread use with the advent of
modern statistical analysis. Such methods give us important but incomplete
information about risks. Today statisticians can predict the general risk
of heart disease for a male nonsmoker in his 40s, but no one has the ability
to determine which particular men will get heart disease and which men
will remain free of heart problems.

Insurance companies distribute
risk by charging rates that adjust for this incomplete information. Those
who never suffer heart disease end up subsidizing those who do, but the
cost of insurance is spread over many individuals so the cost remains
relatively low.

Ironically, genetic testing
provides information that makes it extremely difficult to efficiently
distribute risk.

Imagine scientists discover
a gene that increases the risk of heart disease three-fold. All other
things being equal, men who test positive for this gene will load up on
health and life insurance and gravitate toward plans with the largest
benefits, while those who test negative will tend to reduce the amount
of health and life coverage they buy and gravitate toward plans with fewer
benefits and lower premiums.

As the role genes play in disease
becomes clearer, the result of this trend will be for health care costs
to rise dramatically for insurance companies as people whose genetic tests
reveal serious future health problems buy far more insurance than they
normally would and those who hit the jackpot with relatively healthy genes
buy far less insurance than they would have without genetic tests. The
insurance industry gets squeezed at both ends and may have trouble remaining
solvent even with extremely high premiums.

Isn’t there anything that can
be done to protect both the insurers and the insured? Andrew Tabarrok,
an assistant professor economics at Ball State University, suggests an
alternative solution that benefits all parties — require people receiving
genetic tests to purchase genetic insurance.

The logic behind Tabarrok’s
proposal is similar to the justification for mandatory automobile insurance
— the knowledge gleaned from genetic tests potentially imposes very large
costs on individuals and the rest of society (when individuals can’t afford
the costs of their health care.) Genetic insurance would cover just those
additional costs.

Unlike the Governor’s proposal,
which risks ballooning insurance premiums, Tabarrok’s idea might actually
lower costs in the long-term.

Since the cost of genetic diseases
is already included in current health care costs (people are already dying
from genetic diseases, after all, even if our ability to detect such diseases
is only in its infancy), Tabarrok’s proposal merely separates current
insurance policies into genetic and non-genetic components — the cost
of the combination would be no greater than the current cost of health

Since neither patients nor
insurance companies get short changed if policy holders test positive
for disease-causing genes, it is in the insurance companies’ interest
to encourage people to get genetic tests. People who test positive for
a heart disease gene, for example, could begin a low-fat diet and regimen
of exercise early in life thereby increasing the probability they will
avoid heart disease altogether. This benefits both parties by potentially
extending the life of patients and helping the insurance company to reduce
the costs spent treating disease.

The main defect of this system
is that it doesn’t lend itself very well to sloganeering. When Governor
Engler or some other politician says he’s going to solve a problem by
slapping another requirement on insurance companies, that’s a lot easier
to understand than Tabarrok’s somewhat counterintuitive (but effective)
scheme. Those who propose a more indirect route such as genetic insurance
risk being labeled as being “too cozy” with insurers.

It is quite clear, however,
that various mandates handed down to insurance companies in the past few
years are causing insurance premiums to rise dramatically, threatening
Americans’ ability to find affordable insurance. The new mandate Gov.
Engler proposes would only serve to needlessly exacerbate this trend.

Health Care Coverage Declining — Thank Your Government

       For several years now, both state
and federal lawmakers tried to score points with voters by piling mandates
on health insurance plans. From setting minimum hospital stays for women
who give birth to meddling in pharmaceutical drug coverage, the political
class claimed it could snap its fingers and make health care problems
disappear.       Unfortunately the bill
for this political meddling is now past due.

       A recent survey by Dun & Bradstreet
Corp. revealed that only 39% of small businesses now provide health care
benefits to their workers compared to 46% in 1996. From l996 to 1997 the
percentage of uninsured Americans increased from l5.6% to 16.1%. Why are
more Americans uninsured? Because, once again, medical costs and health
insurance premiums are rising.

       According to a survey by KPMG Peat
Marwick, rising medical costs caused insurance premiums to jump 3.3% this
year. In an article on the growing problem, Business Week cited
Thompson Marine Transportation Co. in Morgan City, Louisiana, which operates
tugboats. Thompson Marine saw insurance premiums for its 25 workers increase
50% this year. Although most small businesses won’t drop insurance coverage
altogether, they are asking their employees to assume more of the costs
of such insurance plans. Many employees are deciding the cost is simply
too high.

       So what is the government’s big
solution to the dilemma of increasing costs of health insurance premiums?
Add more mandates. The big piece of legislation on the horizon is the
so-called Patient Bill of Rights. Proposed by President Bill Clinton,
both Democrats and Republicans are offering competing versions of legislation
that would mandate even more spending by HMOs.

       In order to keep medical costs
down, HMOs have created a private sector version of Clinton’s own 1994
proposal for reforming the health care system. HMOs decide which medical
procedures, drugs and other items they will cover. If patients want something
that isn’t approved, they’ve got to pay for themselves (which is
the primary difference with the Clinton scheme, which would have left
consumers with no way to go around the government to obtain health care).

       The various Patient Bill of Rights
make such cost controls virtually impossible. For example, one of the
ways HMOs keep medical costs under control is by authorizing emergency
room visits only for genuine life threatening emergencies. Usage of emergency
rooms for nonurgent medical problems is a serious problem — some studies
suggest that close to half of all people who go to emergency rooms do
so for routine, nonurgent care.

       The various Patient Bill of Rights
proposals eliminate the ability of HMOs to save costs by preventing such
visits. For example, if I call my HMO tonight and complain that I have
an intense headache, they will tell me to take an over-the-counter pain
killer and see a doctor the next day if the pain persists. According to
some doctors and patient advocates this is a dangerously callous attitude
– my headache could actually signify any number of life threatening conditions
such as a brain aneurysm or tumor. Any number of seemingly nonurgent symptoms,
after all, could represent a life threatening problem.

       True as that may be, any health
care system which buys into that thinking will soon find medical costs
spiraling out of control. And that’s just what the Patient Bill of
Rights proposed to do – open the floodgates of medical spending.

       The end result will be a sort of
government-sponsored shell game with health care. As HMO spending increases,
so will premiums and fewer people will be able to afford insurance. This
decline will be used to justify ever more expensive regulations, which
in turn will raise the cost of insurance and so on in a vicious cycle
that will likely be resolved only with a return to free market principles
for medicine or, more likely, the continual socialization of health care
along the lines envisioned by President Clinton’s 1994 proposals.