Making Billions from Dangerous Drugs

Great Washington Post story today, by Peter Whoriskey, on the anti-anemia drugs sold as Epogen, Procrit and Aranesp, which are artificial versions of the hormone erythropoietin. The drugs were intended to help patients on dialysis or certain chemotherapy regimes, which cause anemia and used to require regular transfusions of red blood cells. And apparently the drugs do help some patients. But they don't help everyone, and they have serious side effects. They got to be blockbuster best-sellers mostly because of clever marketing and intensive lobbying:

Americans might like to think that doctors focus on only their health. But physicians and hospitals have to pay the bills, too, and, in some cases, the more they treat a patient, the more they earn. This was especially true in the case of the anemia drugs: The bigger the dose, the more they made. Unlike medications that a patient picks up at the store, drugs administered by a physician, as these were, can yield a profit for doctors if there is a “spread” — a difference between the price they pay for the drug and the price they charge patients.

In this case, drugmakers worked diligently to make sure that doctors had an incentive to give large doses — that the spread was large. They offered discounts to practices that dispensed the drug in big volumes. They overfilled vials, adding as much as 25 percent extra, allowing doctors to further widen profit margins. Most critical, however, was the company’s lobbying pressure, under which Congress and Medicare bureaucrats forged a system in which doctors and hospitals would be reimbursed more for the drug than they were paying for it.

The markup that doctors, clinics and hospitals received on the drugs given to Medicare patients reached as high as 30 percent, according to the Medicare Payment Advisory Commission, a group that advises Congress. And the markup on doses given to patients covered by private insurance was even larger.

The result is that the drug was used for more and more conditions, at higher and higher doses, doses that we now know cause fatal heart disease.

Americans have a weirdly naive faith in their doctors, but this is just one of many cases in which "health care bureaucrats" do know more than most doctors, and their recent efforts to reduce the use of these drugs have saved billions of dollars and many lives.