Sam Uretsky

Drugs and the Marketplace

It wasn't supposed to be a major product. When intravenous immune globulin (IVIG) was first introduced to the market, knowledgeable physicians expressed the belief that it would have limited use, not to provide passive immunity to patients with impaired immune systems but, rather, to produce a spike in platelets prior to surgery. Platelets are blood cells that are essential for clotting, and a low platelet count can lead to excessive blood loss. Give a patient a dose of IVIG and their platelet count will jump up for a few hours -- and that was expected to be the primary use of the product.

Knowledgeable physicians have been wrong before, as anyone who has followed the career of Sen. Bill Frist can testify. IVIG turned out to be an essential product for patients with impaired immune systems. It also turned out to be a product in chronically short supply. There were problems making the product that forced plant shutdowns, and some lots had to be discarded because of concern about viral contamination. The US FDA started monitoring the supply of IVIG in 1997. In 1997, they found that the supply was 20% below the demand for the product. A year later, the shortfall was 30%.

The response by the medical community was to limit the use of IVIG to patients with the greatest need. Both the FDA and individual hospitals set out criteria for use of the product. Orders were monitored and cases prioritized. Even then, some patients missed doses, while others had their dose intervals prolonged. Prices rose, and even the most reputable suppliers pointed to the parts of their contracts that were written in a typeface so small that they had to borrow microscopes from the pathology department to read them.

The invisible hand of the market worked; there were fluctuations in both price and supply, with rather predictable lags in between, so that for a while, AAC was actually below AWP. AAC is "actual acquisition cost," the price that you actually pay for the drug -- what might be called the street price. AWP is the list price, supposedly "average wholesale price," which is equivalent to sticker price or the manufacturer's suggested retail price.

Years ago, insurance companies reimbursed pharmacies based on AWP plus a dispensing fee. The so-called "professional fee" was set so low that it barely covered the cost of the dispensing vial and label, but pharmacies made money on the drugs, because they were paying less than AWP. The insurers caught on to that pretty quickly. There are firm rules about who is allowed to make a profit these days, and reimbursement rates dropped.

On July 19, the New York Times reported that Medicare, the very same Medicare that has a drug benefit plan that insists on paying pharmaceutical manufacturers their full list price, has cut the reimbursement rates to physicians for IVIG. Recently, IVIG was selling at a discount and MDs were making a profit by administering it. Now Medicare is setting its own prices, just at the time that there's another shortage of IVIG.

The Times reports that physicians are no longer administering IVIG in their offices, because they can't afford to. While Medicare also reduced the amount it has been willing to pay for cancer drugs administered in medical offices, it raised the fee that physicians received for administering the drug. In the case of IVIG, Medicare lowered the professional fee at the same time that it cut the amount it would pay for the drug.

At one level, it's nice to know that the Department of Health and Human Services is looking after the federal budget; at another, it's offensive, in the same way that President Bush's presentation of his tax cuts by using the arithmetic mean was offensive. Government waste, as long as it's measured in billions and benefits corporations, is accepted as part of the way things are done. The Medicare drug benefit, with its no-haggling rules, is an immense giveaway to immense companies with no observable benefit to the citizenry at large.

In contrast, cracking down on the extra profit that a physician might make on administering IVIG in her office cuts into the income of a middle class (okay, upper middle class) professional who was saving a sick patient from having to travel to a hospital for this lifesaving product. It's up there with the IRS's practice of auditing more middle class people and leaving the rich alone.

According to the Associated Press: "In a report after the markets closed Thursday, Halliburton said it earned $392 million, or 78 cents per share, for the three months ended June 30." If the government is really into saving money ... nah, it'll never happen.

Sam Uretsky is a writer and pharmacist living on Long Island, N.Y.

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