NCPA Commentaries by Devon Herrick

Devon Herrick is a Senior Fellow for the National Center for Policy Analysis. While Herrick works on a number of issues, he concentrates on health care issues, such as Internet-based medicine, health insurance and the uninsured, as well as pharmaceutical drug issues.

  • Jan 11, 2007

    Wal-Mart Drug Discounts Increase Competition and Lower Prices

    In September 2006, Wal-Mart rolled out a plan to sell 291 generic prescription medications at $4 for a 30-day supply at selected pharmacies in Florida. At the same time, it announced plans to expand the program to 14 additional states.

    By late October, another 12 states had been added to the program, and the number of generic medications available had increased to 314, including multiple doses of the same drug. In mid-November the company announced it was adding 11 new states and 17 new prescriptions to the program, bringing 38 states under the $4 drug umbrella.

    Excluding multiple doses, Wal-Mart now sells about 160 unique drugs at $4 per prescription.

    Generic drugs are a bargain for Americans. In 2005, they rang up sales topping more than $28 billion in the United States, according to IMS Health, a market research firm that tracks the pharmaceutical industry.

    The Generic Pharmaceutical Association estimates that although generic drugs represent only about 12 percent of drug spending, they comprise more than 53 percent of all drugs sold in the United States.

    Discounting Popular Meds

    RxList.com, an independent Web site, features a list of the most widely prescribed medications. Nearly one-third of the 30 most prescribed drugs are available at Wal-Mart for $4 (an additional one-third of the top 30 prescribed drugs are branded medications).

    According to Wal-Mart, the list of discounted drugs represents about 25 percent of the drugs it sells.

    Dr. Gerald Musgrave, president of Economics America, a consulting firm in Ann Arbor, Michigan, and coauthor of the book Patient Power, said that by announcing flat pricing and publishing a list of drugs offered at the discounted price, Wal-Mart has created greater competition in the generic market.

    "Making its list of covered medications public is squaring off directly against its big-time competitors, as well as the dwindling fringe of local mom-and-pop pharmacies. Both are formidable adversaries," Musgrave said. "If Wal-Mart has its traditional success in raising the living standards of millions of customers, via lower drug prices, it may also generate new detractors who will seek political advantage to accomplish what they can't win in the marketplace."


    Forcing Competition

    Within a day of Wal-Mart's initial announcement, other retail stores followed suit.

    Target announced it would match Wal-Mart's price, and K-Mart has begun selling 184 generic prescriptions at $15 for each 90-day supply. At press time, two chains, Giant Eagle and Meijer, had plans to give away seven different generic antibiotics at their locations.

    Actions like this worry Dr. Stephen Schondelmeyer, director of the Prime Institute College of Pharmacy at the University of Minnesota, who cautions against using drugs for the wrong reasons.

    "Getting the best value on a drug is a good thing. But it is not the best value if the drug is not needed or [not] used appropriately," Schondelmeyer explained. "[The antibiotic] Amoxicillin is a good drug. But we shouldn't be using this to treat a viral cold just because it only costs $4, or even if it is free."

    Schondelmeyer urges caution. He says patients should not ask their doctor to prescribe drugs only from Wal-Mart's $4 list, because a few of the drugs on it are not the safest, best generic drug available for a particular condition. In other cases, some of Wal-Mart's $4 drugs are good but are already available over the counter.


    Driving Prices Down

    Dr. Robert Graboyes, a senior fellow at the National Center for Policy Analysis who teaches economics and health policy at three universities in Virginia, thinks Wal-Mart's move could affect the pharmaceutical industry.

    "The real story here is not so much quantitative, but qualitative. The news is not how much they might drive down prices, but rather the fact that somebody is driving down prices at all," Graboyes said.

    "Assuming the program works well for Wal-Mart, the effect on competitors could be profound," Graboyes continued. "That's been the case with so much of Wal-Mart's product line. They've demonstrably driven down consumer prices nationally."


    Increasing Business

    Wal-Mart will likely see its business increase. According to the National Association of Chain Drug Stores, in 2005 the average generic prescription drug sold for about $29.82 (compared to $101.71 for name-brand prescriptions) for a 30-day supply.

    A Kaiser Family Foundation report released in October found the average co-pay for generic drugs on an employer-sponsored health plan is about $11. At that rate, paying retail at Wal-Mart is nearly two-thirds less expensive on some generic drugs than a standard drug plan co-payment.

    Wal-Mart's standard pricing and published list will surely save consumers some of the effort of calling numerous locations, Graboyes said. The price of generic drugs varies widely from region to region and from one store to the next.

    For instance, the Web site MyFloridaRx.com tracks retail drug prices across the state of Florida. A search made in November found prices for Fluoxetine (30 20mg capsules), the generic form of Prozac, ranging from $5.20 at Citrus Health Network Pharmacy to $142.30 at a pharmacy owned by Luper Corporation.

    Once the Web site is updated, the lowest price on Fluoxetine in the state of Florida should be $4 at Wal-Mart.


  • Jan 11, 2007

    Canadians Wait Longer for Medical Care

    In recent years, patients treated by the Canadian health care system have increasingly experienced lengthy waits to see providers.

    According a new study on medical care in Canada, released in October 2006 by the Fraser Institute, "waiting times are the legacy of a medical system offering low expectations cloaked in lofty rhetoric."

    Since the mid-1980s, the Vancouver-based think tank has produced an annual report on how long patients are required to wait for medical care in Canada. As a result of the group's research, treatment waiting times are now part of the public policy debate on the quality of the Canadian health care system.


    Waiting ...

    In its 16th annual installment, the report titled "Waiting Your Turn" tracks how waiting times vary across Canadian provinces depending on the type of treatment needed. The report also documents waiting times for referral to specialists and the subsequent amount of time spent waiting for actual treatment from the specialist.

    "Despite all of the promises made by Canada's provincial and federal governments, and despite the fact that Canadians are spending more on health care than ever before, the total wait time in Canada continues to hover near the 18-week mark as it has since 2003," coauthor Nadeen Esmail said in an interview for this article. "Equally troubling is the reality that the total wait time in 2006 is 91 percent longer than it was in 1993."

    These findings should give pause to proponents of universal coverage, who often cite Canada as an example of a country where health care costs less than care in the United States and everyone has free health care at the point of service.

    "While many proclaim Canada's Medicare program to be one of the best in the world, or suggest it should be the model for reform in the United States," Esmail said, "the reality is that health spending in Canada outpaces that in most other developed nations that, like Canada, guarantee access to care regardless of ability to pay, and yet access to health care in this country lags that available in most of these other nations."


    ... and Waiting

    In 2006, the average amount of time spent waiting to receive treatment after referral by a general practitioner averaged 17.8 weeks across Canada. At 14.9 weeks, Ontario had the shortest waits. Prince Edward Island, Saskatchewan, and New Brunswick had average waits of 25.8 weeks, 28.5 weeks, and 31.9 weeks, respectively.

    Patients referred to a neurosurgeon waited an average of 21 weeks just to see a specialist. Getting treatment required an additional 10.7 weeks.

    Patients waited an average of 16.2 weeks to see an orthopedic surgeon, and another 24.2 weeks for treatment to be performed after the initial visit.

    The number of people routinely waiting for services is staggering, according to the report. In 2003, the most recent year for which data were available from Statistics Canada, approximately 1.1 million people had trouble accessing care on a timely basis.

    About 201,000 had problems obtaining non-emergency services. An additional 607,000 had problems getting in to see a specialist, and about 301,000 patients experienced problems obtaining diagnostic procedures.

    "So much for the myth of government-run health care being compassionate and fair," said David Gratzer, a Canadian doctor and senior fellow at the Manhattan Institute. "Canadians wait and wait and wait."


    Rationing

    In Canada, waiting lists are considered a way of rationing medical care and holding down health care spending. Because health care in Canada is largely free at the point of service, demand is likely to exceed supply.

    In a typical market system, the price would adjust to the point where the quantity of services provided is equal to the amount patients are willing to buy. But in a system devoid of a market mechanism, scarce resources are rationed through means other than price.

    "The long waits for needed care in Canada show the danger of abandoning markets in favor of central planning," explained Sean Parnell, vice president of external relations at The Heartland Institute, an Illinois-based think tank. "Just as there were long lines for food and other basic necessities in the old Soviet Union because planners couldn't accurately match supply with demand, the politicians and bureaucrats who run health care in Canada can't provide enough health care to meet the citizens' needs."

    Gratzer agreed.

    "It's like the old Soviet system," Gratzer said. "Everything is free, but nothing is readily available. Except that we're not talking about lining up for toilet paper in Russia in 1976, but queuing for surgery in Canada in 2006."

    Economists generally agree such "non-price" rationing of resources is less efficient than a system that uses prices. One reason is that productivity is lost when people are unable to work due to treatment delays. Also, the risk of death while waiting is higher for serious conditions such as cardiac care.

    Waiting lists are consequences of the way the Canadian health care system is structured, not a lack of money, critics say.

    "The fact that this is the 16th annual report on wait lists for needed care should be enough to prove that the problem isn't a temporary one that can be fixed with just a little more money, as defenders of Canada's government-run system have claimed for years," Parnell said.

    "Long waits and widespread denial of needed care are a permanent and necessary part of government-run systems," Parnell noted.


    Spending

    According to the study, Canadian provinces with higher spending per capita did not experience shorter wait times than provinces that spent less.

    In fact, increased spending was associated with longer waits, unless the increased spending was targeted to physicians and pharmaceuticals.

    "The current health care model simply does not deliver to Canadians the access to care they should expect for the amount of money their governments are spending," Esmail said.


  • Mar 01, 2006

    Consumers Demand Better-Fitting Health Plans, Study Says

    Early 2006 reports on the kinds of health plans Americans are purchasing signal a shift away from comprehensive health insurance with first-dollar coverage toward plans more tailored to individual or family needs.


  • Feb 01, 2006

    Experts Doubt Survey Findings on Health Plan Owners' Satisfaction

    A December 2005 survey found people with consumer-driven health care (CDHC) plans were less satisfied than those in comprehensive health plans. The Internet-based survey by the Employee Benefit Research Institute (EBRI) and Commonwealth Fund paints a far bleaker picture than CDHC proponents believe is true.


  • Jan 01, 2006

    Demand Growing for Corporate Practice of Medicine

    Americans often find themselves taking half a day off from work and waiting an hour in a physician's office, only to see a doctor for 10 minutes. And the primary reason people see a doctor is for access to prescription drugs.


  • Sep 29, 2004

    Kerry health plan barely trims ranks of uninsured

    Democratic presidential candidate John Kerry is proposing to transform the U.S. health-care system with a costly plan that will expand government control without appreciably reducing the level of uninsured.


  • Mar 30, 2004

    Kerry would bust the budget on healthcare

    Now that the presidential nominees of both major parties are known, it's appropriate to focus attention on their plans to deal with one of the nation's major public policy problems: insuring the uninsured. The differences between the two plans are enormous.


  • Nov 01, 2001

    Drug Industry Profits Are Good for Everybody

    Americans' intake of prescription and non-prescription drugs has now surpassed $250 billion annually, reflecting a steady increase to new record levels each year.

    Click here to read the entire commentary.






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