Hearing: Drug Shortages: Why They Happen and What They Mean

Comments for the Record

United States Senate Committee on Finance

Hearing: Drug Shortages: Why They Happen and What They Mean

December 7, 2011, 10:00 AM

215 Dirksen Senate Office Building

by Michael G. Bindner

The Center for Fiscal Equity

Chairman Baucus and Ranking Member Hatch, thank you for the opportunity to address this topic. Our response will be within the context of our four part tax proposal, which includes a VAT to fund discretionary spending, payroll taxes to fund Old Age and Survivors Insurance, an income surtax on higher income individuals and families to fund overseas military deployments, debt reduction and net interest and a Net Business Receipts Tax to fund social spending, including health. We will not duplicate witness statements that lay out the problem, except to assert that the largest driver of drug shortages is an uneven relationship between drug manufacturers and consumers.

One feature of the NBRT is that it allows employers to fund health plans for workers and retirees or provide direct services in lieu of paying taxes so that individual benefits can be funded. Of course, in a single payer or public option environment, the government would be the 800 pound gorilla driving negotiations with drug companies to guarantee the availability of drugs and disbarring any companies that engage in price gouging.

One feature of the NBRT, either with single-payer or without it, is that employers could be given an incentive to offer alternative care arrangements, either a better plan than is available under single-payer or direct care with staff physicians, contract facilities and contract specialists for employees and even retirees as an offset to a portion of the NBRT payment. This feature provides an incentive for significant cost savings.

Employers who fund catastrophic care or operate nursing care facilities would get an even higher benefit, with the proviso that any care so provided be superior to the care available through Medicaid.

Making employers responsible for most costs and for all cost savings allows them to use some market power to get both lower prices for drugs and the ability to demand that lower cost drugs be available – leverage that individuals just don’t have.

This proposal is probably the most promising way to arrest health care costs from their current upward spiral – as employers who would be financially responsible for this care through taxes would have a real incentive to limit spending in a way that individual taxpayers simply do not have the means or incentive to exercise.

While not all employers would participate, those who do would dramatically alter the market. In addition, a kind of beneficiary exchange could be established so that participating employers might trade credits for the funding of former employees who retired elsewhere, so that no one must pay unduly for the medical costs of workers who spent the majority of their careers in the service of other employers.

Thank you for the opportunity to address the committee. We are, of course, available for direct testimony or to answer questions by members and staff.