The real reason biotech industry opposes Medicare advisory panel

A page-one story in The Boston Globe today spotlights the Massachusetts biotech industry's effort to block a key piece of President Obama's health care overhaul: the creation of an independent payment advisory board (IPAB) that would make recommendations on how to trim wasteful and counterproductive Medicare spending.

The presidentially appointed board, to be comprised of representatives from hospitals, physicians, patients, drug and device companies and other health care constituencies, is supposed to recommend program changes that will hold Medicare spending increases to levels that are no greater than the pace of economic growth (GDP) plus one percent. As Merrill Goozner explains in gooznews, the board can recommend replacing fee-for-service with bundled payments or pay-for-performance schemes. It can penalize health care organizations for lousy care and give them incentives for higher quality care. Whatever the board recommends must be passed by Congress, which also has the option of substituting its own cost-cutting measures.

As Goozner, Paul Krugman and others note, the board will have much less power than comparable boards in Europe. Even so, the IPAB has come under attack from Republicans such as Paul Ryan (R-Wis.) and conservative columnists such as David Brooks. And now we see the biotech industry coming out against it.

Why? The Massachusetts biotech executive council says it's because the board would stifle innovation and hurt the state's economy. May I point out this is the same old canard the drug and medical device industry trots out whenever they don't like a particular regulation aimed at protecting American consumers? They trotted out the same argument when opposing Massachusetts' pioneering ban against gifts and free meals for doctors and then calling for its repeal -- see here. And they dusted it off again to pressure the FDA into backing down from its recent efforts to ensure that unsafe drugs and medical devices are kept from the market -- see here.

The real reason the biotech, drug and medical device companies are opposed to the creation of the independent board is because its recommendations that hospitals and doctors dispense effective but less expensive drugs and procedures would cut into industry's profit margins. Industry representatives don't seem to care that the board's decisions might actually improve the quality of patient care. Consider, for example, the metal-on-metal hip implants that Barry Meier wrote about in Sunday's New York Times. As it turns, these new implants, which were not fully vetted by the FDA, caused considerable pain and health problems for many patients.

If the independent payment advisory board had already been set up, it might have recommended that hospitals and doctors first consider older, safer hip implants for their patients. Likewise, as Meier points out, there are many older drugs that are just as effective, and in many cases, safer than the costly brand names. (Vioxx, Avandia, Seroquel and Zyprexa are just a few of the new drugs that were trumpeted as more effective and safer than existing meds but turned out to be the exact opposite). Yet the pharmaceutical industry does a masterful job -- through heavy marketing and lucrative doctor payments (some would call them kickbacks) -- of convincing physicians to prescribe costly new drugs instead of equally effective generic drugs. And as we can see from the soaring cost of health care, private insurers (the free market that Rep. Ryan is so fond of extolling) have done a lousy job of reining in these excesses.

The purpose of the independent advisory board is not only to cut such wasteful and counterproductive spending but to help doctors and hospitals reach more considered decisions about how to improve the quality of health care for Medicare patients. But the drug and medical device industry doesn't like that idea one bit.