[Congressional Record (Bound Edition), Volume 146 (2000), Part 14]
[Extensions of Remarks]
[Pages 20112-20113]
[From the U.S. Government Publishing Office, www.gpo.gov]



             DRUG PROFITS DISTORTING HOW DOCTORS PRESCRIBE?

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                      Thursday, September 28, 2000

  Mr. STARK. Mr. Speaker, in the September 19th Congressional Record, I 
provided some documentation of how profits from prescribing drugs may 
be causing some doctors to over-prescribe or change their prescribing 
patters, not on the basis of medical need, but simply for the sake of 
money.
  The enormous profits available to many doctors on the ``spread'' 
between what Medicare and other payers reimburse for a drug (the 
average wholesale price), and what that drug is really available for 
`on the street' may be one of the most serious ethical issues in 
American medicine today.
  I submit into the Congressional Record a letter I've sent to the 
Agency for Healthcare Research and Quality on why this is a problem 
which must be investigated as soon as possible and a memo in reference 
to physician prescribing practices in Japan.
  The Justice Department and the HHS Inspector General have, I believe, 
documents which show how drug companies have manipulated the AWP to 
move doctors to prescribe various drugs. These documents raise the most 
serious questions about the integrity of health care delivery.
  The letters follow:

                                      Committee on Ways and Means,


                                       Subcommittee on Health,

                                  Washington, DC, August 18, 2000.
     Dr. John Eisenberg,
     Administrator, Agency for Healthcare Research and Quality, 
         Washington, DC.
       Dear John: Nice Norman Rockwell exhibit at the National 
     Gallery--and nice paintings of doctors the way we want them 
     to be: grandfatherly figures we can totally trust our lives 
     with.
       But the data in various areas of health care show that 
     physicians are just like the rest of us mortals: they are 
     economic animals; they respond to financial incentives. We 
     see this economic influence in the fact that for-profit 
     hospitals do more Caesarian sections than not-for-profit 
     hospitals, because the fees and profits are higher for a C-
     section. We see this in the extensive literature that 
     physicians who own or invest in a downstream service (such as 
     a lab or MRI) tend to order many more tests (and more 
     expensive tests) than doctors who do not invest in such 
     facilities. We see this in foreign countries where physician 
     income is much lower than it is in the United States on 
     average, but physicians are allowed to make money on each 
     prescription that they write. As a result in Japan (and in 
     the past Italy) the patients get many more pills than 
     Americans do. Doctors in those countries make money by 
     pushing medicines on their unsuspecting patients.
       I fear the same thing may be happening here in the United 
     States on certain drugs, and I would like to request AHRQ's 
     help in determining whether Medicare's Average Wholesale 
     Price system of paying doctors for certain medicines may have 
     caused some distortions in prescribing practice.
       As you know, after years of work, the Justice Department 
     and the HHS OIG have finally persuaded Medicare and Medicaid 
     to use a more realistic set of data for purposes of paying 
     doctors 95% of the AWP. The use of the more accurate AWP data 
     will save taxpayers and patients hundreds of millions of 
     dollars a year. Of course, the physicians the savings are 
     coming from are lobbying furiously to block the cuts, saying 
     that they have used the profits from the difference between 
     95% of the AWP and the real purchase price to run their 
     offices. HCFA is investigating whether the practice expense 
     (PE) payment to doctors needs to be adjusted to pay more 
     accurately for the cost of administering the drugs. If the PE 
     payment is inadequate, we certainly should adjust it.
       But we should not, I believe, pay more for the drug than 
     the cost to the doctor of purchasing the drug. Otherwise, if 
     these other domestic and foreign examples apply, we will see 
     a misuse of the drug.
       To determine whether there has been misuse, would it be 
     possible for AHRQ to examine the use of chemotherapy drugs in 
     settings where there is no financial incentive to either over 
     use or not use (e.g., Kaiser, VA, DoD, etc.) versus 
     chemotherapy drug use in private, for profit, physician-run 
     oncology practices? Adjusting for severity of illness, are 
     the outcomes (remission, deaths, etc.) similar in these 
     settings? Is more or less chemotherapy medicine used? for 
     patients who die, is chemotherapy administered longer in one 
     setting versus another? is chemotherapy administered beyond a 
     point where the patient might be considered terminal?
       Thank you for your help in understanding whether there are 
     different patterns of chemotherapy drug use, depending on 
     whether one profits from the drugs' use, and if so, whether 
     there is any better outcome and quality as a result of 
     additional chemotherapy usage.
           Sincerely,
                                                       Pete Stark,
                                                   Ranking Member.

                                  ____
                                  

       In Japan, where physicians and hospitals are allowed to 
     make money on each prescription they write, there are high 
     levels of drug utilization and incentives for drug 
     overperscribing. For example--

[[Page 20113]]

       Health Affairs (Healthcare Reform in Japan), found that 
     pharmaceutical dispensing is more profitable for doctors 
     since physicians dispense drugs directly and profit by buying 
     from wholesalers at a discount and selling at the fee-
     schedule price. Japan has the highest per capita drug 
     consumption in the world.
       According to Asahi News Service, the cost of prescription 
     drugs represents 30% of all medical expenses in Japan. And 
     according to Financial Times, this is the highest proportion 
     in the EOCD and far higher than the 11% in the US and 16% in 
     the UK.
       Like physicians, hospitals in Japan also can make a profit 
     on the sale of medicines to their patients. The Asahi News 
     Service found that ``medications of dubious value are used 
     carelessly because information about their effects is not 
     made public . . . and that the more prescriptions hospitals 
     issue, the greater their profits will be, because of the huge 
     gap between the government-designated base prices and the 
     market price.''
       The Nikkei Weekly reported that in April of 1997, the 
     Japanese government proposed revision of the ``. . . drug-
     payment system, which has been criticized for enabling 
     doctors to line their pockets and causing overprescription.''
       Based on these facts, it is highly likely that Medicare's 
     Average Wholesale Price (AWP) system of paying doctors for 
     certain medicines causes distortions in prescribing 
     practices.
       European countries, in contrast, have, in the last ten 
     years, instituted practices to curb overutilization by 
     eliminating some financial incentives. Italy, Germany, 
     Sweden, Denmark and the Netherlands have introduced 
     ``reference pricing'' as a financial disincentive for 
     patients to accept and doctors to prescribe non-reference 
     drugs. These countries are probably not the best examples of 
     countries with overutilization. Japan is the best in this 
     regard (we are still trying to find another clear cut case, 
     like Japan).
       It's interesting to note that, on the flip side, 
     reimbursements for surgery are low in Japan and, as a 
     consequence, one third as much surgery is done in Japan as 
     the U.S.

     

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