Health Care Talking Points
Medicaid/Medicare
What is Medicaid? Who benefits from it?
Title XIX of the Social Security Act is a Federal/State entitlement program that pays for medical assistance for certain individuals and families with low incomes and resources. This program, known as Medicaid, became law in 1965 as a cooperative venture jointly funded by the Federal and State governments (including the District of Columbia and the Territories) to assist States in furnishing medical assistance to eligible needy persons. Medicaid is the largest source of funding for medical and health-related services for
Within broad national guidelines established by Federal statutes, regulations, and policies, each State (1) establishes its own eligibility standards; (2) determines the type, amount, duration, and scope of services; (3) sets the rate of payment for services; and (4) administers its own program. Medicaid policies for eligibility, services, and payment are complex and vary considerably, even among States of similar size or geographic proximity. Thus, a person who is eligible for Medicaid in one State may not be eligible in another State, and the services provided by one State may differ considerably in amount, duration, or scope from services provided in a similar or neighboring State. In addition, State legislatures may change Medicaid eligibility, services, and/or reimbursement during the year.
Basis of Eligibility and Maintenance Assistance Status
Medicaid does not provide medical assistance for all poor persons. Under the broadest provisions of the Federal statute, Medicaid does not provide health care services even for very poor persons unless they are in one of the groups designated below. Low income is only one test for Medicaid eligibility for those within these groups; their resources also are tested against threshold levels (as determined by each State within Federal guidelines).
States generally have broad discretion in determining which groups their Medicaid programs will cover and the financial criteria for Medicaid eligibility. To be eligible for Federal funds, however, States are required to provide Medicaid coverage for certain individuals who receive federally assisted income-maintenance payments, as well as for related groups not receiving cash payments. In addition to their Medicaid programs, most States have additional "State-only" programs to provide medical assistance for specified poor persons who do not qualify for Medicaid. Federal funds are not provided for State-only programs. The following enumerates the mandatory Medicaid "categorically needy" eligibility groups for which Federal matching funds are provided:
· Individuals are generally eligible for Medicaid if they meet the requirements for the Aid to Families with Dependent Children (AFDC) program that were in effect in their State on
· Children under age 6 whose family income is at or below 133 percent of the Federal poverty level (FPL).
· Pregnant women whose family income is below 133 percent of the FPL (services to these women are limited to those related to pregnancy, complications of pregnancy, delivery, and postpartum care).
· Supplemental Security Income (SSI) recipients in most States (some States use more restrictive Medicaid eligibility requirements that pre-date SSI).
· Recipients of adoption or foster care assistance under Title IV of the Social Security Act.
· Special protected groups (typically individuals who lose their cash assistance due to earnings from work or from increased Social Security benefits, but who may keep Medicaid for a period of time).
· All children born after
· Certain Medicare beneficiaries (described later).
States also have the option of providing Medicaid coverage for other "categorically related" groups. These optional groups share characteristics of the mandatory groups (that is, they fall within defined categories), but the eligibility criteria are somewhat more liberally defined. The broadest optional groups for which States will receive Federal matching funds for coverage under the Medicaid program include the following:
· Infants up to age 1 and pregnant women not covered under the mandatory rules whose family income is no more than 185 percent of the FPL (the percentage amount is set by each State).
· Children under age 21 who meet criteria more liberal than the AFDC income and resources requirements that were in effect in their State on
· Institutionalized individuals eligible under a "special income level" (the amount is set by each State--up to 300 percent of the SSI Federal benefit rate).
· Individuals who would be eligible if institutionalized, but who are receiving care under home and community-based services (HCBS) waivers.
· Certain aged, blind, or disabled adults who have incomes above those requiring mandatory coverage, but below the FPL.
· Recipients of State supplementary income payments.
· Certain working-and-disabled persons with family income less than 250 percent of the FPL who would qualify for SSI if they did not work.
· TB-infected persons who would be financially eligible for Medicaid at the SSI income level if they were within a Medicaid-covered category (however, coverage is limited to TB-related ambulatory services and TB drugs).
· Certain uninsured or low-income women who are screened for breast or cervical cancer through a program administered by the Centers for Disease Control. The Breast and Cervical Cancer Prevention and Treatment Act of 2000 (Public Law 106-354) provides these women with medical assistance and follow-up diagnostic services through Medicaid.
· "Optional targeted low-income children" included within the State Children's Health Insurance Program (SCHIP) established by the Balanced Budget Act (BBA) of 1997 (Public Law 105-33).
· "Medically needy" persons (described below).
The medically needy (MN) option allows States to extend Medicaid eligibility to additional persons. These persons would be eligible for Medicaid under one of the mandatory or optional groups, except that their income and/or resources are above the eligibility level set by their State. Persons may qualify immediately or may "spend down" by incurring medical expenses that reduce their income to or below their State's MN income level.
For more information, please visit Centers for Medicare and Medicaid Services Medicaid: A Brief Summary http://www.cms.hhs.gov/publications/overview-medicare-medicaid/default4.asp
Children in Poverty
The
· The
· Nationwide, 7.8% of infants weighed less than 5 1/2 pounds at birth (Lexington Herald-Leader, 7/27). The rate was 7.7% in 2001 (Kaiser Daily Health Policy Report, 6/3/04);
· The
· The
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Foundation President Douglas Nelson said that the report indicates "the end of a lot of good trends," adding, "Clearly, some of that momentum and progress has stalled or been compromised. We think it's cause for pause" (USA Today, 7/27).
Children and Adults with Disabilities
· Medicaid is the most valuable resource for children and adults with disabilities to access health and long-term supports and services in the community. The nation’s largest program serving the needs of low-income Americans with disabilities, Medicaid serves 7.5 million people with disabilities
· Generally, people with disabilities receiving Supplemental Security Income (SSI) are considered "mandatory Medicaid beneficiaries" and people with disabilities above SSI income and resource levels are "optional Medicaid beneficiaries.
· At a minimum, states must offer mandatory services to the mandatory eligibility groups. Generally, when states add optional services or populations to their Medicaid plans, they must make available to any eligible person any of the services the individual needs (except for people who are medically needy or receiving services under a waiver).
· The Administration’s budget proposals for the past two fiscal years provide insight into the proposal for FY 2006. The FY 2004 Medicaid reform proposal, which included "allotments" or caps, would have fundamentally altered Medicaid, eliminating much of the individual entitlement to critical health and long term services
· Important federal protections regarding service access and service quality would have been at risk.
· Comprehensive benefits would have been preserved for people in "mandatory" coverage groups, while states would have flexibility to tailor coverage for "optional" groups and services
· Federal funding would no longer automatically rise to meet increased need due to recessions, epidemics, demographics, or other factors.
· While the Administration’s budget proposal for FY 2005 did not specifically request an allotments proposal, it stated, "Building on the foundation of last year’s Medicaid and SCHIP modernization proposal, the Secretary will work with Congress to pass an option for States to receive Medicaid and SCHIP funds in the form of flexible allotments."
· the Administration has been aggressively encouraging states to accept a global cap on the states’ overall Medicaid programs through the Section 1115 waiver process. States considering such limits are enticed into the block grant approach to avoid significant administrative burdens caused by newly aggressive federal oversight of how states derive their state share of Medicaid expenditures.
· The President’s budget proposal for FY 2006 calls for $60 billion in cuts in the Medicaid program over 5 years by cutting back on the allowable sources of the states’ matching funds. In addition, the Administration’s budget proposes to "provide states with additional flexibility in Medicaid to further increase coverage among low-income individuals and families without creating additional costs for the federal government." No dollar estimates are included in the budget proposal for these flexibility changes to Medicaid
· In a meeting with advocates, Department of Health and Human Services Secretary Leavitt indicated that the Administration would not limit mandatory benefits for mandatory beneficiaries. Left unsaid was what would happen to optional beneficiaries and optional benefits.
· Congressional Budget Committee Chairmen in both the House and Senate are discussing the use of the budget reconciliation process to achieve major savings in entitlement programs, including Medicaid. It is anticipated that the proposals would change Medicaid from an open-ended financing system to one that limits the level of federal funding. This could result in a huge cost shift to states and could harm beneficiaries by leading to severe benefit cuts, reduced provider payments, or extreme eligibility restrictions.
· The Administration has also proposed some demonstrations and other initiatives more in line with the disability community’s goals for more consumer control and direction, such as the Money Follows the Person Rebalancing Demonstration
· These initiatives have appeared in previous budget proposals, but have not yet been enacted. Chances for passage may be slim, given the thrust of the rest of the budget proposal.
· Under the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), dual-eligibles (those who receive Medicaid and Medicare benefits) will be transferred from Medicaid prescription drug coverage to the new Medicare Part D benefit which will be provided by private plans.
· Advocates are concerned that approximately 500,000 dual eligibles with developmental disabilities may be harmed because the private plans may not cover the medications they need, may impose access barriers which make it more difficult to get the medications they require, and may require complex appeals when coverage is denied. As a result, many dual eligibles will incur significant out-of-pocket costs to pay for the prescription drugs they need.
· The bipartisan Family Opportunity Act (FOA), also known as the Dylan Lee James Act (S. 183), would allow low and middle-income families of children with significant disabilities to buy into Medicaid coverage for their children on a sliding scale. The House has not yet introduced a companion bill.
For more information, please see Medicaid Fact Sheet: Critical for Children and Adults with Disabilities and Their Families by The Arc and UCP Disability Policy Collaboration
Health Insurance Premiums in 2005 and 2010, the Cost of Uncompensated Health Care in 2005 and 2010, and the Uninsured
Health Insurance Premiums in 2005
· Health insurance premiums for families who have insurance through their private employers, on average, are $922 higher in 2005 due to the cost of health care for the uninsured that is not paid for by the uninsured themselves or by other sources of reimbursement
· In six states, health insurance premiums for families are at least $1,500 higher due to the unreimbursed cost of health care for the uninsured in 2005. These states are
· Health insurance premiums for individuals who have insurance through their private employers, on average, are $341 higher in 2005 due to the unreimbursed cost of health care for the uninsured
· In eight states, health insurance premiums for individuals are at least $500 higher due to the unreimbursed cost of health care for the uninsured in 2005. These states are
Health Insurance Premiums in 2010
· By 2010, health insurance premiums for families who have insurance through their private employers, on average, will be $1,502 higher in 2010 due to the unreimbursed cost of health care for the uninsured
· In 11 states, health insurance premiums for families will be at least $2,000 higher due to the unreimbursed cost of health care for the uninsured in 2010. These states are New Mexico ($3,169); West Virginia ($2,940); Oklahoma ($2,911); Texas ($2,786); Arkansas ($2,748); Alaska ($2,248); Florida ($2,248); Montana ($2,190); Idaho ($2,152); Washington ($2,144); and Arizona ($2,028)
· Health insurance premiums for individuals who have insurance through their private employers, on average, will be $532 higher in 2010 due to the unreimbursed cost of health care for the uninsured
· In eight states, health insurance premiums for individuals will be at least $800 higher due to the unreimbursed cost of health care for the uninsured in 2010. These states are
Costs of Uncompensated Care
· In 2005, the cost of health care provided to people without insurance that is not paid out-of-pocket by the uninsured themselves will exceed $43 billion nationally
· In 11 states, the cost of care that the uninsured cannot pay will exceed $1 billion in 2005. These states are California ($5.8 billion); Texas ($4.6 billion); Florida ($2.9 billion); New York ($2.7 billion); Illinois ($1.8 billion); Ohio ($1.4 billion); Pennsylvania ($1.4 billion); North Carolina ($1.3 billion); Georgia ($1.3 billion); New Jersey ($1.2 billion); and Michigan ($1.1 billion)
· By 2010, the cost of health care provided to people without health insurance that is not paid out-of-pocket by the uninsured will exceed $60 billion
· In 17 states, the cost of care that the uninsured cannot pay will exceed $1 billion in 2010. These states are California ($8.2 billion); Texas ($6.5 billion); Florida ($4.1 billion); New York ($3.8 billion); Illinois ($2.6 billion); Ohio ($2.0 billion); Pennsylvania ($2.0 billion); North Carolina ($1.9 billion); Georgia ($1.8 billion); New Jersey ($1.6 billion); Michigan ($1.6 billion); Virginia ($1.4 billion); Louisiana ($1.4 billion); Washington ($1.3 billion); Indiana ($1.3 billion); Arizona ($1.3 billion); and Tennessee ($1.2 billion)
Uninsured People
· In 2005, nearly 48 million Americans will be uninsured for the entire year
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· In 2010, the number of Americans who will be uninsured for the entire year will be more than 52 million
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For more information, please see the fact sheet from Families
The Uninsured
· In most other economically developed countries, governments guarantee health coverage, or require that citizens have it. In the
· Because of job mobility and eligibility requirements for public coverage programs, those who have insurance today may not have it tomorrow
· According to the U.S. Census Bureau, 41.2 million lacked insurance for all of 2000, but in 2003, the latest figure available, that number had grown to 45 million people.
· The majority of non-elderly people in the United States—161.8 million workers and their dependents in 2003—get their coverage through their employers, a decline of 1.9 million people from 2002 and a decline of 4.8 million since 2000.
· An estimated 45 million Americans, or 15.6 percent of the population, were uninsured for all of 2003, according to the U.S. Census Bureau.
· In 2003, 33 percent of Hispanics, 20 percent of blacks, 19 percent of Asians and Pacific Islanders and 11 percent of non-Hispanic whites were uninsured for the entire year.
· More than eight out of 10 of those who lack insurance are in working families.
· Uninsured trauma victims are less likely to be admitted to the hospital, receive fewer services when admitted, and are more likely to die than privately insured trauma victims.
· Uninsured people are almost twice as likely as the insured to delay getting needed medical care (15.7 percent vs. 8.6 percent).
· Cancer patients who don't have coverage die sooner than those with insurance, largely because of delayed diagnosis.
· Eight out of 10 people who are uninsured are in working families.26
· The uninsured do have less income on average than those with insurance but almost 30 million of the uninsured in 2003 had household incomes of $25,000 or more, compared with 15.3 million in households earning less.27 (The federal poverty guideline for a family of four in 2002 was $18,100. That has increased to $18,850 for 2004.)
· About 18,000 Americans die each year of treatable conditions because they don't have health coverage, according to the highly-respected, nonpartisan
For more information, please see
· More than half of all uninsured Americans are unaware of a community safety net provider where they can receive lower-cost, affordable health care, according to a national study released today by the Center for Studying Health System Change (HSC).
· a striking number of uninsured people—about 7.9 million—are unaware of a safety net provider despite living within 5 miles of a community health center (CHC).
For more information, please see Health Care Safety Net Awareness Low Among Uninsured People: Few Uninsured View Hospitals as Safety Net Despite Reliance on Emergency Departments News Release Nov. 17, 2004
· The number of uninsured Americans under age 65 increased by 5.1 million between 2000 and 2003.
· During that same period, however, the number of uninsured children declined by about 250,000, according to two recent studies by Washington, D.C.-based Urban Institute on behalf of the Kaiser Commission on Medicaid and the Uninsured
· The decline in uninsured children is attributed to increases in enrollment in Medicaid and State Children's Health Insurance Programs.
· "The uninsured increased in the
· "This occurred because there were fewer full-time workers of that share of the population, and also because there was a decline of employer-sponsored insurance among workers."
For more information, please see The ''Under-65'' Uninsured
By Lee Ann Runy Monday March 14, 2005
· Uninsured adults with chronic conditions are 4.5 times more likely than their insured counterparts to report an unmet need for medical care or prescription drugs.
· When hospitalized, uninsured patients are likely to be in worse condition than insured patients, and they are three times more likely to die in the hospital than insured patients.
· More than one-third (35 percent) of the total cost of health care services provided to people without health insurance is paid out-of-pocket by the uninsured themselves.
For more information, please see “Paying a Premium: The Added Cost of Care for the Uninsured” Families USA Foundation 2005
Racial and Ethnic Disparities in Health Care
· Racial and ethnic minorities constitute about one-third of the total
· Without Medicaid, the number of racial and ethnic minorities who are uninsured, which already is staggering, would undoubtedly be much higher.
· Disparities in health: Disparities in health refer to differences between two or more population groups in health outcomes and in the prevalence, incidence, or burden of disease, disability, injury, or death.
· Infant mortality rates for African Americans and American Indian/Alaska Natives are more than two times higher than that for whites.
· American Indian/Alaska Natives have diabetes rates that are roughly three times the rate for the nation overall.
· African American and Latino adults (aged 18 years and older) are disproportionately more likely than whites to suffer from chronic conditions such as heart disease, cancer, asthma, depression, diabetes, high blood pressure, obesity, and anxiety.
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· African American women are roughly four times more likely than white women to die during childbirth or from complications during pregnancy.
· Latinos and African Americans are less likely than whites to undergo the procedures used to diagnose and effectively treat heart disease. For example, Latinos are about half as likely as whites to undergo angioplasty, and African Americans are less than half as likely as whites to undergo bypass surgery.
· The leading causes of death among Asian Americans and African Americans aged 25-44 are cancer and HIV/AIDS, respectively. For all other groups of the same age, the leading cause of death is accidents.
· Disparities in health care: Disparities in health care refer to the differences between two or more population groups in health care access, coverage, and quality of care, including differences in preventive, diagnostic, and treatment services.
· no single factor contributes more to disparities in health and health care than does access to health care.
· When individuals have reliable, consistent access to health care, they have greater access to health monitoring, are more likely to receive screenings, timely diagnoses, and appropriate treatment of chronic diseases and conditions, and thus are more likely to have better health outcomes. However, racial and ethnic minorities are disproportionately more likely than whites to be underinsured, to have less access to health care, and to lack health insurance coverage altogether.
· More than one in three (35 percent) Hispanics, one in four (27 percent) American Indians/Alaska Natives, nearly one in five (19 percent) Asian Americans, and one in five African Americans (20 percent) are uninsured, compared to roughly one in 10 (12 percent) whites.
· Racial and ethnic minorities make up a disproportionate share of Medicaid enrollees. Roughly one in five non-elderly Latinos, African Americans, and American Indian/Alaska Natives, and about one in 10 non-elderly Asian Americans, rely on Medicaid for health care.
· Consequently, the recent proposals to cut or cap Medicaid, while racially neutral, will significantly diminish—if not completely eliminate—access to regular and adequate health care services for racial and ethnic minorities. This will only exacerbate racial and ethnic health disparities.
· Many current proposals to reduce Medicaid spending focus on cutting so-called “optional” acute care benefits. These “optional” benefits include diagnostic, screening, preventive, and rehabilitation services, prosthetic devices, and specialist medical or remedial care. They also include some so-called “optional” long-term care benefits, including case management, personal care, and home health care services.
· There is also evidence that racial and ethnic minorities already have less access than their white counterparts to specialty care such as adequate cardiac care and appropriate diagnostic and screening services. For example, 41 percent of Chinese-Americans, 22 percent of Hispanics, and 16 percent of African Americans reported having “a major problem” getting specialty care, compared to 8 percent of whites.
· Under proposals to restructure or cut Medicaid, the specialty care and diagnostic and preventive services that so many racial and ethnic minorities disproportionately need, yet do not receive, are the same care and the same services that are at greatest risk of being cut or eliminated.
· The problem of racial and ethnic disparities in health and in health care has led the U.S. Department of Health and Human Services (HHS) to establish, as a national goal, the elimination of health disparities by 2010. Additionally, members of Congress in both the House and the Senate—and on both sides of the aisle—have introduced, championed, and supported legislation that aims to eliminate racial and ethnic disparities in health and in health care. However, the recent proposals to cut and cap the Medicaid program will exacerbate—not eliminate—racial and ethnic health disparities.
For more information, see “Medicaid and Minority Health: Why Cutting Medicaid Will Exacerbate Health Disparities” or go to http://fusa.convio.net/site/DocServer/Minority_Health.and.Medicaid_Cuts.pdf?docID=8041
· The health insurance gap among Latino, black and white Americans persisted in 2003, with one in three Latinos, one in five blacks and one in 10 whites under age 65 lacking health insurance, according to a national study released today by the Center for Studying Health System Change (HSC).
For more information, see Health Insurance Gap Persists Among Latino, Black and White Americans Oct. 28, 2004
· Whites live significantly longer than blacks. Black males have a life expectancy of 68.6 years, compared with 75 years for white males. Black female life expectancy is 75.5 years, compared with 80.2 years for white females
· Having a usual source of care is an indicator of adequate access to preventive and other health services. About 30 percent of Hispanics (of any race) and 19 percent of blacks report that they have no usual source of care, compared with 17 percent of non-Hispanic whites.
· Hispanic children (of any race) are more than twice as likely as non-Hispanic white children to lack a usual source of care (17 percent versus 7 percent).
· Minority populations are uninsured at a much higher rate than whites. Uninsured rates vary according to race and ethnicity: 32.7 percent of Hispanics (of any race), 19.6 percent of blacks, and 18.8 percent of Asians, compared with 11.1 percent of non-Hispanic whites.
· The National Healthcare Disparities Report, produced for the first time in February 2004 by the Department of Health and Human Services, concluded that minorities receive less care, and lower quality care, than whites.
· Race and ethnicity alone don't necessarily condemn a person to bad health or lack of access to quality health care. Other factors associated with race and ethnicity intervene — in particular, income. Those with higher incomes enjoy better health. And minorities' incomes consistently lag behind those of whites.
· In 2003, about 24 percent of blacks and about 22 percent of Hispanics had incomes below the federal poverty level, compared to only about 10 percent of whites.4
· African-Americans are almost twice as likely as whites to be uninsured; Latinos are almost three times as likely
· Many minority patients experience difficulties in communicating with their health care providers. Some do not speak English well and others don't speak English at all. Often they cannot find providers who speak their language.
· One recent study found that one-fifth of Spanish-speaking Hispanics reported not seeking medical treatment because of language barriers.
For more information, see
· Over one-third of Latino adults report lacking health insurance. In addition, almost six in ten (59%) of those who do have health insurance say that they personally know someone who does not (38% of all Latinos).
· Two-thirds of Latinos who report being uninsured are employed (63%).
· Foreign-born Latinos (42%) are more likely to report being uninsured than Latinos born in the
· Health insurance status also differs by country of origin, and by state of residence. For example, Mexicans (39%) and Salvadorans (41%) are considerably more likely to report being uninsured than are Puerto Ricans (18%), Cubans (20%), Dominicans (29%), or Colombians (30%).
· Latinos in
For more information, see http://www.kff.org/kaiserpolls/upload/Health-Care-Experiences-2002-National-Survey-of-Latinos-Survey-Brief.pdf
Bankruptcies
· Medical problems contributed to about half of all bankruptcies, involving 700,000 households in 2001, according to a story published today as a Web Exclusive by the journal Health Affairs.
· about 700,000 children lived in families that declared bankruptcy in the aftermath of serious medical problems. Another 600,000 spouses, elderly parents and other dependents brought the total number of people directly affected by medical bankruptcies to more than two million annually.
· Surprisingly, most of those bankrupted by medical problems had health insurance. More than three-quarters were insured at the start of the bankrupting illness
· Often illness led to job loss, and with it the loss of health insurance. Out-of-pocket medical costs (for co-payments, deductibles and uncovered services) averaged $13,460 for those with private insurance at the onset of their illness, vs. $10,893 for the uninsured. The highest costs - averaging $18,005 - were incurred by those who initially had private coverage but lost it in the course of their illness.
· In many cases, high medical bills coincided with a loss of income as illness forced breadwinners to lose time from work.
· Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection. Families with coverage faced unaffordable co-payments, deductibles and bills for uncovered items like physical therapy, psychiatric care and prescription drugs.
For more information, see “Illness and Medical Bills Cause Half of All Bankruptcies” from the Journal Health Affairs or read it online at http://www.worldhealth.net/p/533,6517.html
Big Pharma
· The pharmaceutical industry spends about one-fifth of what it says it spends on the research and development (R&D) of new drugs, destroying the chief argument it uses against making prescription drugs affordable to middle and low-income seniors, a Public Citizen investigation has found.
· A Public Citizen report reveals how major
· PhRMA's central claim is that the industry needs extraordinary profits to fund "risky" and innovative research and development to discover new drugs. In fact, taxpayers are footing a significant portion of the R&D bill, which is much lower than the companies claim.
· This R&D scare card is built on myths and falsehoods that are maintained by the drug industry to block Medicare drug coverage and measures that would rein in skyrocketing drug costs.
· The actual after-tax cash outlay - what drug companies really spend on R&D for each new drug (including failures) - is approximately $110 million (in year 2000 dollars.) This is in marked contrast with the $500 million figure PhRMA frequently touts.
· The NIH document shows how crucial taxpayer-funded research is to the development of top-selling drugs. According to the NIH,
· about 22 percent of the new drugs brought to market in the past two decades were innovative drugs that represented important therapeutic advances. Most new drugs were "me-too" or copycat drugs that have little or no therapeutic gain over existing drugs, undercutting the industry's claim that R&D expenses are used to discover new treatments for serious and life-threatening illnesses.
· The drug industry is stealing from us twice:
· First it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies.
· Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation.
For more information, see http://www.mercola.com/2001/aug/4/drug_industry.htm
· Last year the House Committee on Energy and Commerce discovered that 81 scientists at the government's National Institutes of Health (NIH) were secretly on the payroll of pharmaceutical companies as consultants. Between 1999 and 2004, the fees ranged from $5 to $517,000.
· Of the 81 scientists under scrutiny, 44 violated NIH rules by either failing to disclose income from private work, failing to receive NIH permission for private consulting or conducting private research on government time. Nine scientists are being referred to the Department of Health and Human Services' Inspector General for possible criminal charges.
· Amidst widespread conflict-of-interest allegations, NIH Director Elias Zerhouni issued sweeping ethics changes last February prohibiting consulting deals between NIH scientists and the pharmaceutical industry. Top scientists were told to sell their shares in such companies.
· But Zerhouni faces internal opposition, especially from an 18-member executive board whose members took $400,000 from big pharma--and has resisted making the new ethics guidelines permanent.
· Reigning in the pharmaceutical industry, which has spent $800 million in federal lobbying and campaign contributions over the past seven years--more than any other industry, won't be easy. But it's about time the government tried.
For more information, see “Big Pharma's Best Friends” at http://politics.yahoo.com/s/thenation/20050719/cm_thenation/137185
Big Pharma Background
· Perhaps the most quoted source of statistics on the pharmaceutical industry, IMS Health, estimated total worldwide sales for prescription drugs to be about $400 billion in 2002. About half were in the
· The election of Ronald Reagan in 1980 was perhaps the most fundamental element in the rapid rise of big pharma — the collective name for the largest drug companies. With the Reagan administration came a strong pro-business shift not only in government policies but in society at large.
· Beginning in 1980, Congress enacted a series of laws designed to speed the translation of tax-supported basic research into useful new products — a process sometimes referred to as “technology transfer.” The goal was also to improve the position of American-owned high-tech businesses in world markets. The most important of these laws is known as the Bayh-Dole Act, after its chief sponsors, Sen. Birch Bayh (D-Ind.) and Sen. Robert Dole (R-Kan.). Bayh-Dole enabled universities and small businesses to patent discoveries emanating from research sponsored by the National Institutes of Health (NIH), the major distributor of tax dollars for medical research, and then to grant exclusive licenses to drug companies.
· Until then, taxpayer-financed discoveries were in the public domain, available to any company that wanted to use them
· Similar legislation permitted the NIH itself to enter into deals with drug companies that would directly transfer NIH discoveries to industry.
· Bayh-Dole gave a tremendous boost to the nascent biotechnology industry, as well as to big pharma. Small biotech companies, many of them founded by university researchers to exploit their discoveries, proliferated rapidly.
· Usually both academic researchers and their institutions own equity in the biotechnology companies they are involved with. Thus, when a patent held by a university or a small biotech company is eventually licensed to a big drug company, all parties cash in on the public investment in research.
· These laws mean that drug companies no longer have to rely on their own research for new drugs, and few of the large ones do. Increasingly, they rely on academia, small biotech start-up companies and the NIH for that
· The Reagan years and Bayh-Dole also transformed the ethos of medical schools and teaching hospitals. These nonprofit institutions started to see themselves as “partners” of industry, and they became just as enthusiastic as any entrepreneur about the opportunities to parlay their discoveries into financial gain.
· Starting in 1984, with legislation known as the Hatch-Waxman Act, Congress passed another series of laws that were just as big a bonanza for the pharmaceutical industry. These laws extended monopoly rights for brand-name drugs.
· Exclusivity is the lifeblood of the industry because it means that no other company may sell the same drug for a set period. After exclusive marketing rights expire, copies (called generic drugs) enter the market, and the price usually falls to as little as 20 percent of what it was.
· There are two forms of monopoly rights — patents granted by the U.S. Patent and Trademark Office (USPTO) and exclusivity granted by the Food and Drug Administration (FDA). While related, they operate somewhat independently, almost as backups for each other.
· Hatch-Waxman, named for Sen. Orrin Hatch (R-Utah) and Rep. Henry Waxman (D-Calif.), was meant mainly to stimulate the foundering generic industry by short-circuiting some of the FDA requirements for bringing generic drugs to market. While successful in doing that, Hatch-Waxman also lengthened the patent life for brand-name drugs.
· In the 1990s, Congress enacted other laws that further increased the patent life of brand-name drugs. Drug companies now employ small armies of lawyers to milk these laws for all they're worth — and they're worth a lot
· The result is that the effective patent life of brand-name drugs increased from about eight years in 1980 to about 14 years in 2000.
· As their profits skyrocketed during the 1980s and 1990s, so did the political clout of drug companies. By 1990, the industry had assumed its present contours as a business with unprecedented control over its own fortunes.
· In 2001, the 10 American drug companies in the Fortune 500 list (not quite the same as the top 10 worldwide, but their profit margins are much the same) ranked far above all other American industries in average net return, whether as a percentage of sales (18.5 percent), of assets (16.3 percent) or of shareholders' equity (33.2 percent).
· The most startling fact about 2002 is that the combined profits for the 10 drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses put together ($33.7 billion).
· The biggest single item in the budget is neither R&D nor profits but something usually called “marketing and administration” — a name that varies slightly from company to company. In 1990, a staggering 36 percent of sales revenues went into this category, and that proportion remained about the same for more than a decade. Note that this is two and a half times the expenditures for R&D.
For more information, see “Are
Excerpted from “The Truth About the Drug Companies” by Marcia Angell, M.D. Copyright© 2004 by Marcia Angell.
What the Polls Say
· (63%) of U.S. adults cite lowering the costs of health care and health insurance as a top priority for the President and Congress, followed by making Medicare more fiscally sound for the future (58%) and increasing the number of Americans with health insurance (57%).
· Overall,
· Lowering the cost of health care and insurance was named as a top priority for the President and Congress by 63% of the public, and by an equal share of Republicans (61%) and Democrats (61%).
· Asked about the causes of rising health care costs, 29% of Americans say that high profits made by drug and insurance companies are the most important factor
For more information, see http://www.kff.org/kaiserpolls/pomr011105pkg.cfm
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