Government

AMA to study drug pricing to see if limits are warranted

A board trustee says amending long-standing Association policy against price controls would require careful review.

By David Glendinning — Posted July 3, 2006

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The American Medical Association has several strongly worded policies against government price controls on prescription drugs. But the first few months of physician experiences with Medicare Part D has prompted some doctors to say these policies could use some tweaking.

Delegates at the Annual Meeting debated a resolution that would have had the AMA call for the development and regulation of a maximum allowable cost for all prescription drugs sold in the United States. But although at least three Association policies reject such price ceilings, the House of Delegates referred the measure to the Board of Trustees for a report back at a future meeting rather than reject it outright.

Times have changed in the world of pharmaceuticals and health care since AMA delegates last amended the policies more than a decade ago, AMA Trustee Edward Langston, MD, said after the referral vote. Drug development and pricing has become much more of an international process that is often difficult to understand, and Medicare's new drug benefit adds a new layer to the system on which physicians must get a handle, he said.

"It seems appropriate to say, 'Let's take another look at these policies because the context has changed,' " Dr. Langston said. "Part D is part of that context, because seniors now have a source and a resource for drugs that has not been there."

Physicians arguing for a review of the AMA's policies said the study could shed more light on how much drug development really costs and how firms set prices accordingly. With the advent of Medicare-subsidized drugs that are offered to seniors and people with disabilities who pay fixed co-payments, the need to control rising drug prices becomes even more urgent, some delegates said.

Several speakers made a direct link between high prices and Medicare drug plans forcing physicians to jump through numerous administrative hoops to get the more expensive prescriptions approved for coverage.

"A lot of the consternation that we are all experiencing in our offices right now ... is the direct result of the fact that most of our patients have an insurance benefit that has a fixed-dollar co-pay," said Richard Warner, MD, an alternate delegate from Kansas.

"They have no concern about the price of their prescriptions, and therefore some other mechanism has to be put in place to control that," he added. "That's done by way of a managed care company imposing a formulary in its procedures."

Some physicians said this pressure on physician practices could be relieved if drug companies were encouraged to exercise more restraint in pricing their drugs. If doctors and their patients get a better idea of how much medications cost them compared with drug firms' development costs, they might have more leverage to reduce their pharmacy bills, the delegates said.

AMA Trustee Ardis Hoven, MD, said it would take a major effort to overturn long-standing Association policy against establishing mandated ceilings on drug prices. Even if it never gets that far, the Association hopes to learn more about the administrative and development costs that go along with producing medications.

"The AMA has been against price controls on drugs," Dr. Hoven said. "Before we change our policy on that, it's going to take a lot of information and knowledge to understand the industry a lot better than we do now."

The pros and cons

Other physicians said they knew enough about the industry to conclude that mandated limits are necessary now to curb skyrocketing medication costs and record profits for drug manufacturers. The concept of limits is not foreign to the health care system, some argued.

"Maximum allowable costs already exist for physicians," said Arvind Goyal, MD, a delegate representing the American Assn. of Public Health Physicians. "They exist for many of the goods and services that are provided by the Medicare program and insurance plans."

The AMA already is on record supporting legislation that would let the federal government negotiate directly with drug firms to lower Medicare Part D costs. Pharmacy benefit managers that administer the drug benefit have said this would amount to government-imposed price controls.

Some physicians warned that fixing drug prices would lead to fewer incentives for drug makers to develop new medications and subsequent shortages of needed therapies.

And several delegates said physicians would be hypocritical to clamor for a dedicated federal price limit on each drug when they so vigorously oppose attempts to limit their own reimbursement rates.

"How can we, in full confidence and full faith, demand price controls in other areas of medicine when we ourselves are opposed to that very thing?" asked Shane Gailushas, a medical student delegate from Louisiana.

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