Econ 101. Incentives matter.

Economics 101: Incentives matter.


What you won’t see in this brief editorial piece is the full history of the Lucentis/Avastin issue – including the drug company trying to stop shipping the lower-cost one for ocular use (around 2007 or 2008) and later on, Medicare reimbursements for the off-label use of the lower cost drug being only about 1/3 the cost while leaving the plain 20% copay in place for the expensive one. And lastly, you also won’t see mention of the “copay card” that the drug maker uses to help people cover the 20% copay on the expensive drug (thereby helping themselves keep getting the full cost minus that “help” back from their insurance companies, and defeating the purpose of copays in the first place — this one doesn’t cover Medicare folks, though), nor the “Medicare Supplement” plans which cover the 20% copays so that there’s no disincentive whatsoever for folks to get these more expensive treatments.

Perhaps some of this could be justified if there was any clear evidence that this more expensive drug was, in fact, that much better than the cheap one. The editorial says it isn’t. I’m not sure they’re right, though I did see something about how when this started, there weren’t adequate studies on the cheaper alternative (partly because the drug company which makes it didn’t want them, since – you guessed it – it could have hurt sales of the more expensive drug).

But the bottom line is, of course, Econ 101. People respond to incentives. Even people with the best of intentions. And this doesn’t just affect Medicare. A little closer to me is, well, pretty much the entire financial industry. But on tax day, when we note that in 2013, $498 *billion* dollars was spent on Medicare, it seems like a good day to highlight this one.