What About Those Discounts??

The front page of The New York Times has an article today describing how certain kidney and cancer specialists receive the drug epogen, which raises red blood cell count, at a volume discount. This discount allows large groups to profit from the use of this drug in their office. The Times quotes several sources showing that groups were able to make a significant percentage of profit based on the sales of this drug. The Times also points out that the US gives higher doses of this drug to more people on a per capita basis, than any other country. It finally points out that recent studies showing that, like chocolate, to much epogen is too much of a good thing.

I don't disagree with the premise that physicians shouldn't be driven by profit any more than I think my lawyer or accountant should be. We all want to pay our professionals to provide necessary service and no more. And it is true that "volume discounts" give providers an extra incentive to given even more drug. But there are several caveats that need to be noted.

First of all, small practices do not benefit from these discounts in the same way. Medicare reimbursement is often slightly lower than the actual "retail" cost of a drug to a physician. Discounts given by manufacturers at this level are in effect just an agreement to not lose money each time you give something in the office. This gives large groups a further competitive advantage over small groups: further eroding small practices in this age of declining reimbursements and increasing expenses. Large practices tend to have non-physician business managers, who, in my experience, are much more aggressive than the average doctor at trying to maximize reimbursements.

As much as people don't like doctors profiting off of potentially unneeded therapies, the opposite effect: poor reimbursements leading to not giving a therapy, is also bad. A perfect example is the new Shingles vaccine recently released. This vaccine is recommended to all adults over the age of 60 who have not had shingles. The drug is not covered under Medicare Part B (doctors office): it needs to be filled at a pharmacy or the patient has to pay cash to us and then seek reimbursement from Medicare, Part D (pharmacy). This is different from other vaccines, such as flu-shots, which are covered in the doctors office. One large commercial insurance company is paying our office 70% of the cost we pay for the vaccine: we lose 45 dollars every time we give that vaccine in the office.

Not surprisingly, patients are not receiving the vaccine in large numbers. We can't afford to stock it for commercial payers: we give people a presrciption for the pharmacy and tell them to get it there or come back. And Medicare patients have not been paying us upfront for the drug: again we give them a script (which theoretically should be covered by part D) and tell them to come back with it. However, for the same reasons we can't afford to stock the drug, I get the feeling pharmacies don't like it, either. So very few people are getting vaccinated.

The final part of the article describes how, as studies showed higher doses of these medications may not be as benign as physicians thought, use has scaled back. At least everyone seems to be following the mantra "first, do no harm" even if they're sort of up to no good.