The Enron scandal features trusted professionals -- auditors -- who turn
out to be corrupt, damaging the whole economy. Meanwhile, in what ought to
be recognized as the national health scandal, we have trusted professionals
-- doctors -- who are likewise corrupt, with even more expensive
consequences.
Doctors are supposed to advise patients on their health. But doctors face
financial incentives to be less than objective. Last year pharmaceutical
companies spent $7 billion on sending gift-laden salesmen to woo doctors and
another $2 billion on events for them. Doctors' coffee cups, stethoscopes
and pens all are adorned with pharmaceutical logos. Their expenses-paid
seminars in the Caribbean are conveniently invisible.
This is only the tip of the scandal. Doctors accept money from drug firms
to serve as "consultants," and sometimes there's a direct financial
incentive to push certain treatments. A blood-testing lab may pay doctors a
percentage on the business they pass on; a pharmaceutical company may
provide drugs to doctors at a discount so that they can be sold to patients
at a nifty profit. The Medicare system -- meaning taxpayers -- -loses
several hundred million dollars a year to this sort of scamming.
Hence Part I of the Enron parallel: Professional conflicts of interest.
Auditors are supposed to watch over corporate management, but managers
corrupt auditors' judgment with lucrative consulting contracts. Doctors are
supposed to advise patients on which drugs they need, but drug firms corrupt
their judgment with assorted blandishments. Corrupt auditors sign off on
dubious financial statements which -- when later corrected -- can cost
shareholders their shirts. Corrupt doctors sign dubious prescriptions that
cost patients multimillions.
How many millions? Consider one simple calculation. In 2000, according to
the Kaiser Family Foundation, Americans paid for 45 million prescriptions of
the anti-inflammatory drugs Celebrex and Vioxx, even though nearly all
patients could be treated just as well with over-the-counter ibuprofen. The
Celebrex and Vioxx cost $3.7 billion, whereas 45 million bottles of
ibuprofen at $3.99 a shot would have cost $180 million. In other words, dumb
prescriptions for just two drugs cost the economy more than $3 billion.
Those examples are not alone. Of the 20 most frequently prescribed drugs,
15 (including the inflammatory culprits above) are under patent. Several
could be partially replaced by generic drugs. But doctors stick with the
expensive branded drugs that company salesmen press on them. This is the
triumph of the Caribbean seminar. And this is why the price of the average
prescription jumped 10 percent last year, despite a general inflation rate
of about 1 percent.
The Enron analogy goes on. Just as the corruption of individual auditors
is reinforced by the cozy oligopoly of audit firms, so collusion
increasingly pervades doctoring. Hospital companies have been on a merger
binge; in several cities now, one or two chains control more than half the
hospital capacity. In Cleveland, for example, two systems control two-thirds
of local beds; in Richmond, one firm controls two-fifths of them. Naturally,
the hospital oligopolists are shoving prices up. In Richmond the average fee
for treating chest pain shot up 47 percent between 1996 and 2000, according
to the Wall Street Journal.
Finally there's politics. When government agencies tried to rein in
auditor conflicts of interest in the past, the firms lobbied them into
submission. Anyone who messes with the doctor-industrial complex risks the
same treatment. The Food and Drug Administration has preached the benefits
of cheap generic drugs, but the doctors only shrug. State governments have
tried to impose a list of cost-effective medicines for use by Medicaid, but
the pharmaceutical lobby is now suing them. In different ways, Bill Clinton
and Newt Gingrich tried to rein in health costs. Both fell victim to
shameless medagoguery.
The Enron factor in health care explains why costs are going through the
roof, with nasty consequences for everybody. Insurance premiums are shooting
up; firms will respond by holding down wages or cutting insurance coverage
in order to stay even; the ranks of the uninsured will swell beyond their
already shameful numbers. Containing this problem will take a national
campaign, and happily the first signs of one are visible. A new coalition of
businesses and state governments is pushing the cause of cheap generic
drugs, and the American Association of Retired Persons has thrown its
considerable weight behind this effort. Without reform, the health care
system is "like Venice, sinking into the sea," says William Novelli, the
AARP's boss. Last week, perhaps sensing the coming groundswell of outrage,
the drug industry cooked up a voluntary code that may perhaps temper the
worst of its marketing abuses.
