The US healthcare system is wildly overpriced and delivers mediocre outcomes. And while the many of the problems are well known, such as bad incentives for doctors, patients trained to equate over-testing and over-treatment with high quality care, high administration costs, and unrestricted drug pricing (despite lavish public funding of drug research), Obamacare has sided with industry incumbents, namely Big Pharma and health care insurers, at the expense of everyone else.
We predicted that one outcome would be overpriced insurance that didn’t cover much (note for middle class and affluent consumers, it would probably be better to have only catastrophic coverage and self insure for the rest; the worst is pricey insurance that leaves you carrying meaningful costs, particularly for major medical procedures). We seem to be moving in that direction already.
Reader bob alerted me to a news item that also seems to have gone below the radar of most finance and economics bloggers: that of an FDA proposal to have more drugs available on an over-the-counter basis, including ones for diabetes (insulin), high cholesterol, allergies, and migraines.
On the surface, this seems like a great cost saving move. You could get meds with no doctor visit. But most people I know who are treated for these conditions don’t get prescribed them via a separate office visit; they get a scrip in the course of getting an annual checkup. And if you wanted to reduce the doctor cost element, in Australia, a doctor will dispense a scrip to an established patient for a minor administrative charge (when I was there ten years ago, $15).
But the stealth part of this is by making drugs for certain widespread chronic conditions and frequent ailments OTC, the result will be to move the cost onto the consumer. And this is a feature, not a bug. Per the Washington Times:
By removing the prescription requirement from popular drugs, the Obama administration could ease financial pressures on the overburdened Medicare system by paying for fewer doctor visits and possibly opening the door to make seniors pay a larger share of the cost of their medications…
“We would expect that out-of-pocket costs for insured individuals, including those covered by Medicare, would be increased for drugs that are switched from prescription to OTC status,” said Dr. Sandra Adamson Fryhofer, who testified last month on behalf of the American Medical Association in an FDA-held public hearing.
To the extent the media is covering this story, it appears to be focusing on the fight between physicians and pharmacists, with physicians concerned about the loss of effective oversight and revenues while pharmacists are keen for the boost in stature. And no one seems to have discussed the additional risk of drug overconsumption. With drug companies already spending more on marketing than on research, expect a blizzard of ads to boost sales of any drugs that go from prescription to OTC to the worried well.
USA Today has come out in favor of the FDA’s plan, arguing that it promotes consumer choice and that plenty of drugs have gone from prescription to OTC with no mishap. But those almost without exception are drugs that have gone off patent and where the FTC has also approved the switch (there are plenty of old drugs, like tetracycline, that are still prescription only). That means that there was a very long period of use (and thus plenty of experience) before the medication was made freely available to consumers.
Given horrorshows like Vioxx, a mere substitute for aspirin that was marketed aggressively to people who had no reason not to use aspirin, I don’t trust Big Pharma as far as I can throw it. But the more important issue is that this measure, which is presented as enhancing consumer choice, is actually about reducing medical insurance coverage. And this move is unlikely to reduce health care costs; it merely changes the payment scheme.