Anthony, the future is indeed " Blue ". Here are 2 propos articles, by the same author,Lucette Lagnado, from today's WSJ on spiriling Health care costs out of control. Next year 7-8% Health Insurance premiums are coming on, up from previous 10 -15 years' 2-3% increases. Businesses will have to tag that onto further belt tightening needed because of world wide competitive constraints brought on by world wide deflation were pricing power will be weak, Something's got to give: inline, IMHO, are the combined profits of the Health Care Industry, everybody included, drug companies too: Slim picking in 1999.
Getting ready to short PFE, and a whole bunch of other overvalued stocks. Shorting scenario is warming up I think,
TA
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November 17, 1998
Drug Costs Yield Grim Choice
Of Medicines Over Necessities
By LUCETTE LAGNADO
Staff Reporter of THE WALL STREET JOURNAL
An aging black-and-white photograph sits on a coffee table in Jewel
Brown's immaculate home on a quiet street in Durham, N.C. It shows her
as she was half a century ago, a dazzlingly pretty young woman with dark,
wavy hair and a hopeful smile.
Today, Mrs. Brown is elderly, ailing and all
but broke. She suffers from chronic
emphysema, high blood pressure and arthritis.
She nearly died from pneumonia earlier this
year, and in October was hospitalized for
major complications. Now age 70, she
qualifies for Medicare, the federal
government's massive program that is
supposed to insulate the elderly from the
devastating costs of health care.
Yet Medicare has always had a glaring hole in the safety net: With few
exceptions, it doesn't cover the costs of prescription drugs -- the single
largest health-care expense for the elderly.
As a result, some months Mrs. Brown
spends up to $400 for medications, more
than 30% of her income. Prilosec calms her
stomach but sets her back $102.59 for a
30-day supply. Then there are Norvasc for
her blood pressure ($43), two inhalers to
help her breathe easier ($88 total), two pain
medications ($70), nitroglycerin patches for
angina ($27.89) and Theophylline to clear her lungs (a bargain at $16.37).
Recently, her doctor prescribed Miacalcin, a nasal spray that helps
strengthen her bones but depletes her purse by $55.43 a month.
"I need help, I need help real badly," Mrs. Brown says in a raspy voice.
She worked for years as a short-order cook and as a caretaker for
Alzheimer's patients but gets no pension, living on $780 a month in Social
Security and $500 a month in rent from a boarder. She ran up more than
$12,000 in credit-card charges between 1994 and 1996 to buy the
medications she otherwise couldn't afford. Her daughter, Rebecca, who
lives with her, took a second mortgage on their home to pay off her
mother's high-interest debt, but Mrs. Brown has had to charge another
$2,500 in drugs. She recently resorted to applying for food stamps, but
was given only $10 a month in benefits.
Pricey prescription drugs are driving a new surge
in health-care costs, but most Americans don't feel
it: Their employer insurance plans typically cover
most of the expense. But for Mrs. Brown and
millions of people in the ranks of "the uncovered,"
the impact is far more severe.
About 19 million elderly people in the U.S. have
little or no drug coverage at all, according to the
Congressional Budget Office. Nor do an estimated
43 million younger Americans -- the unemployed,
the working poor, immigrants, illegal aliens, single
mothers in part-time jobs -- who lack health
insurance of any kind.
"There is an absolute inequity in our system," says Aaron Miller, a
neurologist who treats multiple-sclerosis patients at Maimonides Medical
Center in Brooklyn, N.Y. "The sickest patients are also the most
disadvantaged when it comes to drugs." Many of his patients can't afford
the $10,000 a year that the newest MS drugs cost, so he tries to get them
into clinical trials -- even though they have only a 50% chance of getting
the real thing rather than a placebo.
Fixed-Income Busters
America's top-selling drugs are used heavily by seniors, one of the groups least able to afford them. Sales and ranking data are for January through September 1998.
Drug
----
Usage
-----
Price (one-month supply)
------------------------
1997 Sales (billions)
------------------------
% of Sales to Seniors
-----------------------
Prilosec
Anti-ulcer
$116.09, 20 mg
$2.1
33%
Prozac
Antidepressant
$75.04, 20 mg
1.7
9
Lipitor
Controls cholesterol
$84.60, 20 mg
1.2
38
Zocor
Controls cholesterol
$105.48, 20 mg
1.2
47
Zoloft
Antidepressant
$71.41, 50 mg
1.1
16
Claritin
Anti-allergy medication
$69.57, 10 mg
1.0
12
Paxil
Antidepressant
$71.84, 20 mg
0.9
16
Prevacid
Anti-ulcer drug
$107.83, 30 mg
0.9
28
Norvasc
Controls high blood
pressure
$70.23, 10 mg
0.9
49
Augmentin
Antibiotic
$97.34*, 875 mg
0.7
7
*10-day therapy
Sources: Scott-Levin, Newtown, Pa.; Upchurch Drugs & Optical
Center, Durham, N.C.
The drug crunch is worst for America's elderly. People age 65 or older
make up 12% of the U.S. population but consume almost 35% of all
prescription drugs. Excluding insurance premiums, drugs account for 34% of older people's total health-care bill, more than doctor visits (31%) and
hospital admissions (14%), according to David Gross, a senior policy
adviser at the American Association of Retired Persons.
What's more, about 65% of people 65 and older have two or more
chronic diseases, as do 80% of people over 85, the AARP says. As a
result, one in five elderly people takes at least five prescription drugs a day.
About 2.2 million seniors shell out more than $100 a month for medication,
and many pay even more.
Yet Medicare pays for none of it. Medicare, the Great Society program
enacted under President Johnson in 1965, now covers health care for
nearly 40 million people, including millions with disabilities, at a cost of
$200 billion a year. Expanding it to pay for drugs would cost an extra $20
billion annually, according to the CBO. But in an era when balancing the
federal budget has been a top priority, Congress has consistently resisted
such action -- in no small part because of intense opposition from the drug
industry, which fears that Medicare coverage might open the way for
government price controls.
Five of the 10 top-selling prescription drugs in
the U.S. are products heavily used by elderly
patients. The aged account for 33% of the
sales of No. 1-ranked Prilosec, the anti-ulcer remedy, and generate almost
50% of the sales of the No. 9 entry, Norvasc for high blood pressure,
according to Scott-Levin, a research firm in Newtown, Pa.
Roughly half of Medicare-covered patients get some drug assistance,
because they are also covered under employer-sponsored insurance plans
for retirees, are members of HMOs or are poor enough to qualify for state
Medicaid programs, which do pay for prescriptions. But the other half go it
alone, and the sicker they are, the less likely they are to get any kind of
prescription benefits from insurers. "They don't sell insurance plans to
houses already on fire," says Michael Knipmeyer, a lawyer at a legal clinic
for seniors run by the George Washington University Law School in
Washington, D.C.
Left to their own devices, millions of these
elderly resort to resourceful but dubious
solutions. They rack up big credit-card debts,
plead with their doctors for free samples and
forgo basic necessities and little luxuries. Some
cross the border into Mexico or Canada,
where some drugs are much cheaper because
of government price controls. Others go without their prescriptions
altogether or skip doses to stretch out their supply, often resulting in
medical complications that can send them to the hospital.
Cora Albright, an 84-year-old widow who lives 10 minutes away from
Jewel Brown, sometimes skips her medications to make them stretch, a
classic habit of the "near poor" elderly. Mrs. Albright, who worked for
more than 30 years in a hospital laundry, subsists on a pension of about
$90 a month and $700 a month in Social Security. But she spends $200 a
month -- more than 25% of her income -- to stock her medications,
including Prilosec, the Astra anti-ulcer drug that costs her more than $100
out-of-pocket, Megace to increase her appetite and Remeron, an
antidepressant.
"Then there is the oil bill, the telephone bill, the water bill, the light bill. I
have to pay them, and it is a struggle," says Mrs. Albright, who spends
much of the day in a wheelchair in her dark living room, her swollen legs
swathed in bandages. "It takes about everything I get to make ends meet."
"People are making big-time decisions on what
medicines they'll take versus what utility bills they
will pay," says Gina Upchurch, director of Senior
PharmAssist, an organization she founded in
Durham that helps seniors who make too much to
qualify for Medicaid but are too poor to afford
their medicines. Yet hers is a small program, and
there is a long waiting list of people hoping to get
in, including Mrs. Brown and Mrs. Albright.
"The system makes no bloody sense," says Frank
Larkin, president of Good Samaritan Hospital in
Brockton, Mass. "Does it make sense that we give
people costly surgeries but we can't give them prescriptions?"
The uncovered elderly, moreover, can end up paying higher prices than the
rates paid by HMOs and drug-benefit programs. The drug industry has
always denied that such "cost-shifting" occurs. But experience reveals
otherwise. At Upchurch Drugs, an independent pharmacy in Durham,
owner David Upchurch notes that HMOs get a month's supply of
Norvasc, for hypertension, for $33.80 -- 25% less than what Jewel Brown
pays.
"Prices are going up for those people who pay cash," Mr. Upchurch says.
"We don't have any choice. If you are forced to raise prices, it will happen
only where you can -- and that tends to be the elderly."
Medicaid's Role
In the absence of a federal drug-benefit program, the poorest of the elderly
get some help from Medicaid programs for the indigent. In the past four
years, Medicaid's costs have grown by 6% a year, while the cost of drug
benefits rose at more than twice that rate, according to data collected by
the federal Health Care Financing Administration. "It's one of the
fastest-growing parts of the Medicaid budget, and a part that is
exceptionally hard to control," says James Verdier, a Medicaid expert at
Mathematica Policy Research Inc., a Washington, D.C., social-service
research firm.
But even Medicaid is a patchwork. In North Carolina, people's earnings
must be 26% below the poverty level to qualify for Medicaid (the federal
poverty level is pegged at $8,052 a year for an individual and $10,860 a
year for a couple). In Illinois, an older person's earnings must be 46% of
the poverty level. In Massachusetts, patients can earn 33% more than the
federal poverty level and still get state benefits; that, however, doesn't
apply to the elderly, who have to be at the poverty level to qualify,
according to Health-Care for All, a Boston advocacy group.
So in some states, thousands of older and disabled people are too poor to
afford their prescriptions, yet not impoverished enough to receive
coverage. Experts use a buzz-phrase for these patients: the near poor.
Not Poor Enough
Roland and Bessie Pennington, who have been married for 57 years and
live in a modest housing project in the shadow of the Capitol in
Washington, would seem to be a slam-dunk for Medicaid. Mr. Pennington
is 84 and has been retired from his boiler-repairman job for 26 years. He
takes 10 prescription drugs to quell high blood pressure, gout, arthritis pain
and angina, meticulously tracking every expense and saving every receipt.
Last February, for example, he spent $235.09 on drugs, 32% of his
monthly Social Security payment of $739. Mrs. Pennington's
$350-a-month Social Security check is used by the couple to buy
groceries and pay $255 in monthly rent, which was recently reduced to
$83.
Yet Mr. Pennington has applied for -- and been rejected by -- Medicaid
four times. Under local Medicaid rules, the couple's combined income is
$154 a month over the limit.
So Mr. Pennington improvises. Early each month, he buys only half the
prescribed quantity of his most expensive drugs, such as Nitrodur for
angina ($51.29 for a full month's supply); then he buys the rest two weeks
later -- his fear is that he will run low on cash, and so this is his way of
budgeting. And rather than use the drugstore a block away from his home,
he drives his temperamental 1987 Chevrolet six miles to his old
neighborhood and the Safeway he has patronized for 20 years. When he is
short of money, the Safeway pharmacist advances him some pills, knowing
Mr. Pennington will promptly return to pay up when his Social Security
check arrives. The pharmacy near his current home refused to do that.
Sue Andersen, a lawyer at the George Washington University legal clinic,
has been trying to help the Penningtons qualify for Medicaid. "The very
poor get a free ride, but it is the lower-middle classes who are stuck with
bills of $2,000 or more a year," she says.
A $300 a Month Drug Bill
Even aging patients who are financially better-off can feel the pressure.
Nathaniel Ashkenaz, 79, a retired appliance repairman, and his wife
Thelma, 75, live in El Paso, Texas, on a comfortable pension of $22,800 a
year. Yet he worries constantly about how to pay $300 a month in drugs
to treat his ulcer and Thelma's diabetes. He crosses the border into Juarez,
Mexico, each month to buy 100 Zantac tablets for his ulcer for $24,
one-fourth the price he would pay in Texas. But his wife's medications
must be purchased stateside: $117 for Rezulin, $126 for
cholesterol-lowering Zocor, $33 for Norvasc.
To offset some of the cost, Mrs. Ashkenaz tried to purchase through the
AARP a "Medigap" insurance policy, which typically covers half of drug
costs. But she was turned down because she was on too many medicines,
her husband says. "They said 'Sorry, we can't accept you.' " Then in
September, his wife underwent an emergency quintuple-bypass operation,
and since has required a slew of additional medications, including
Coumadin, at $47, and Amaril for diabetes, at $23.29.
"We are retired and we are getting by, but we aren't rich," Mr. Ashkenaz
says. "We can't afford luxuries. We would like to take a trip or go on a
cruise, but it isn't feasible."
Waiting for Free Prescriptions
The high cost of drugs also shakes the lives of the young and uninsured. In
Brockton, a depressed mill town in eastern Massachusetts, local churches
and synagogues have banded together to raise money to dispense free
drugs to the poor. On a recent evening, the small waiting room of the
Brockton Neighborhood Health Center is crowded with two dozen people
hoping to snare free prescriptions -- mothers struggling to rein in their
children, young men, elderly couples -- most of them immigrants from
Haiti, Cape Verde, Puerto Rico, Swaziland and the Caribbean.
Maria Chadderton, 41, sits nervously fingering the six prescriptions she has
never filled. They are dated from June, and include drugs she needs to
manage her diabetes and high blood pressure. "I couldn't fill them. I
scarcely have money to get to work," she says. Her take-home pay for
working up to 12 hours a day as a home health-care aide has been at most
$800 a month, she says. Filling the prescriptions, which include pricey
drugs such as Vasotec for blood pressure and Glucophage for diabetes,
would set her back a couple of hundred dollars, leaving her unable to pay
the rent and buy groceries, she says.
As someone who cares for the ill, Ms. Chadderton has no illusions about
the risks she is taking by forgoing the drugs. "I can go into a coma," she
says.
"We see this all the time," says Sue Joss, the Brockton clinic's director. "It
becomes a choice between filling a prescription and eating." Even so, she
says, clinic doctors are under strict orders to give out free medication only
to those who expressly state they can't afford it. "If we met all the demand,
we would go bankrupt," she says.
The Costs of No Medication
Yet even higher costs loom when people don't get adequate access to
prescription drugs, says Stephen Soumerai, who has studied the issue and
is chairman of Harvard University's Drug Policy Research Institute. Elderly
people who don't get sufficient medication often get too sick to stay
independent and end up in the hospital or a nursing home, where care is far
more expensive, he says. About 75% of doctor visits result in
prescriptions, yet Medicare pays for the visit but won't pay for the resulting
therapies, he complains.
"Drugs are the glue that holds the medical system together," Dr. Soumerai
says. "We can't afford not to cover people with chronic illnesses, or whose
independence rests on access to medications."
Four hours away from Brockton, in the quaint Norman Rockwell country
of western Massachusetts, day laborer Ralph Carsno is learning the hard
way what it means to be both unhealthy and uninsured. A 38-year-old
diabetic, he returned to North Adams, his hometown, a year ago after
losing his job in Florida. In July he underwent emergency surgery to clear
blocked heart arteries. The surgery was free under a Massachusetts
program for the uninsured, but he balked when the pharmacy wanted to
charge him more than $200 out of pocket for two pricey medications --
Lipitor and Zestril -- to manage his cholesterol and hypertension problems.
Half a Prescription
"It was a pretty good chunk of money to spend the day I got out of the
hospital, and it really would have put a dent in my budget," Mr. Carsno
recalls. He purchased only half the prescription, hoping to scrape together
enough money to fill the rest later on. So far, though, he has been
recuperating and hasn't earned enough to follow through.
A local aid group, Ecu-Health Care, which comprises local doctors,
hospital executives and volunteers, has been trying to help Mr. Carsno.
Officials successfully prevailed upon the two companies that make Lipitor
and Zestril -- the Parke Davis division of Warner-Lambert Co. and
Zeneca Group PLC -- to hand out free supplies to tide Mr. Carsno over
for several months until he can find a job with full drug benefits.
The industry pledged to redouble its efforts to help the indigent even as it
fought the Clinton health-reform plan in the early 1990s, but progress has
been uneven. The industry says it helped nearly a million people last year
with drug giveaways, but the application and approval process differs from
company to company.
But Ecu-Health Care officials see the Carsno victory as merely a
temporary and unsatisfactory solution. "It's hit and miss -- we don't know
what we are going to do for folks from month to month," says Charles
Joffe-Halpern, Ecu's director. He offers people hope only "on a temporary
basis," he says.
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