Fred Hassan, chief executive officer of Pharmacia & Upjohn, is proposing a plan to cover prescription drug costs for seniors with chronic or devastating diseases. He says he is advancing the plan to assure that the U.S. preserves its free-market climate for drug research and development -- rather than follow the European model which attempts to limit health-care spending through implicit or explicit price controls.

• He suggests that government and private-sector insurers team up to provide a "stop loss" program that would fully cover all pharmaceutical costs of chronic or devastating diseases.

• The coverage would kick in once a preset level of out-of- pocket payments by those insured has been exceeded.

• Rather than establishing a separate federal program, Medicare would serve as a re-insurer of benefits delivered through a private drug plan of the beneficiary's choice.

• Because the benefit would be targeted towards those who experience extraordinary expenses, costs to taxpayers would be a small fraction of the entitlement-style solutions now on the table, he predicts.

Hassan estimates that the Clinton administration's current proposals for Medicare reform would result in government control of up to 40 percent of the medical marketplace through regional buyers' monopolies. The result would be fewer medical innovations, reduced choice for patients and major cost increases throughout the rest of the health care system.

It is no coincidence, he believes, that America has followed a largely free-market tradition in drug development and nearly half of all new therapies are discovered here.

Source: Fred Hassan (Pharmacia & Upjohn), "Free-Market Medicare Reform," Wall Street Journal, August 11, 1999.