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"Statistics are no substitute for judgment." - Henry Clay

The Right Medicine for Drugmakers

Public Citizen – Press Release – May 9, 2002

Bill Would Close Loopholes in Hatch-Waxman Act
That Allow Drugmakers to Keep Generics Off the Market

WASHINGTON, D.C. - A measure being considered today by Senate lawmakers would provide consumers with more timely access to lower-priced generic drugs, ultimately saving people billions of dollars in prescription drug costs.

The bill, the Greater Access to Affordable Pharmaceuticals Act (GAAP), S. 812, is being heard by the Senate's Health, Education, Labor and Pensions Committee. Its original sponsors are Sens. Chuck Schumer (D-N.Y.) and John McCain (R-Ariz.).

"This legislation will close loopholes that brand name drug companies exploit to extend their lucrative patents and deny consumers access to lower-cost generics," said Frank Clemente, director of Public Citizen's Congress Watch. "This will translate into billions of dollars of savings for consumers. We applaud Senator Kennedy for holding this hearing."

The GAAP Act closes loopholes in the Drug Price Competition and Patent Restoration Act of 1984 (Hatch-Waxman Act) that have allowed brand name drug companies to keep generic drugs off the market.

Hatch-Waxman was designed to increase timely access to generic drugs while ensuring that drug manufacturers have adequate patent protection to justify their investment in research and development. But loopholes in the act have allowed drug companies to delay generic drugs from coming to market by doing such things as paying firms to withhold generic drugs from the market and filing nuisance lawsuits that automatically delay the introduction of generics. Although the Hatch-Waxman Act has succeeded in opening the prescription drug market to generic competition, generics now constitute less than 10 percent of the dollar value of all prescription drugs sold in the United States.

Solutions in the Schumer-McCain bill include:

  • Eliminating the automatic 30-month stay in current law that has allowed brand name drug companies to keep generic drugs off the market by filing nuisance suits. The bill would require that brand name drug companies, just like patent holders in any other industry, prove in court why they ought to be granted a temporary restraining order preventing a competitor's product from coming to market;

  • Limiting collusion between brand name companies and generic firms that agree to withhold their drugs from the market. The bill would deny 180-day exclusivity to a generic company if it does not aggressively attempt to bring a generic version of the brand name company's product to market; and;

  • Requiring entities filing citizens petitions to disclose if they are acting on behalf of a brand name drug company to keep a generic off the market. Such petitions can be filed with the U.S. Food and Drug Administration (FDA) by anyone seeking to prevent a drug from being marketed. Brand name drug manufacturers increasingly use these petitions to keep generic competition at bay. Such petitions can delay the introduction of a generic alternative for a long time because the FDA is required by law to consider each one.

The brand name drug companies claim that by eliminating the automatic 30-month stay, this legislation would reduce their incentives to develop new medicines, because they would be denied the ability to defend their intellectual property. This is inaccurate. The GAAP Act is not a threat to drug companies' legitimate patents. By eliminating the automatic 30-month stay, this legislation would make it more difficult for companies to hide behind weak patents. Under this legislation companies would still be able prevent a generic, which is infringing on a well-founded patent, from coming to market. The only difference is that instead of automatically receiving 30 months of protection from competition, under GAAP, brand name companies will have to prove to a judge why a competitor's generic drug should be kept off the market.

"The passage of this legislation will be a boon for research in the pharmaceutical industry," said Clemente. "If drug makers know that they will not be able to extend their monopolies with frivolous patents and legal shenanigans they will be forced to invest in real innovation."

The new legislation comes at an important time. Brand name drug companies often charge U.S. consumers nearly twice as much as they charge consumers in other industrialized nations for the same prescription drugs. In the next five years, prescription drugs with annual sales of approximately $20 billion will be coming off patent. Given that generic drugs cost, on average, less than a fifth of what brand name drugs cost under the Medicaid program, the potential savings to taxpayers, consumers and patients from the timely availability of generic drugs is substantial.

Despite the Hatch-Waxman Act's loopholes, the legislation has been successful in saving consumers huge amounts of money by increasing their access to generic drugs. The Congressional Budget Office has concluded that Americans saved $8 billion to $10 billion in 1994 alone by purchasing generic drugs. But if the act's loopholes were closed, consumers would save even more, Clemente said.

Energy Choice: Money or Health

Raleigh News & Observer – March 17, 2002

(3/7/02) - Despite new evidence that power plant pollution can shorten people's lives, questions of money -- not science -- still dominate the debate over tighter state restrictions on North Carolina's 14 coal-fired electric plants.

People are more likely to die from lung cancer if they live in cities where the air is heavily polluted with fine particulates, according to a study published Wednesday in the Journal of the American Medical Association.

The biggest single producers of fine particulates -- essentially tiny particles of soot -- are the chimneys of coal-burning electric plants. In North Carolina, environmental and public health advocates plan to use that study to try to resurrect the "clean smokestacks" bill. The bill, they say, will reduce not only particulates but also ozone smog, acid rain and haze by imposing new pollution limits on the power plants. The bill passed the Senate last year but stalled in the House.

Manufacturing and agribusiness companies and other large electricity users object to the bill's "cost recovery" provision. It allows the owners of the 14 plants, Duke Power and Carolina Power & Light, to raise electricity rates for retail customers. The loud opposition to higher power bills in an economic downturn was enough to keep House Speaker Jim Black, a supporter of the bill, from bringing it to a vote.

"The cost is the issue on which the bill stalled," said William G. Ross Jr., Gov. Mike Easley's secretary of the Department of Environment and Natural Resources. Ross and other bill supporters say they're looking for different ways to pay for the pollution controls in order to get the bill passed.

Alan Briggs, president of the environmental group Save Our State, and others want to refocus the debate on the bill's health benefits. "There have been fairness issues raised that need to be addressed," he said. But the air pollution study makes an even stronger case for action, Briggs said. "When you begin to see these kinds of studies, it really makes people realize it is serious. It's one thing to be concerned about dying trees on Mount Mitchell. It's another one to be concerned about families."

Briggs said he's heartened to see groups such as the American Lung Association and the N.C. Medical Society stand up for the legislation. Stephen Keene, the medical society's general counsel, said doing nothing about power plant pollution also has its costs -- in higher health insurance premiums and medical bills, not to mention "human suffering."

"The standard needs to be reasonable," Keene said about the legislation, "but something needs to be done to address the health effects."

The U.S. Environmental Protection Agency may also force the state to reduce particulate-forming pollution if a 4-year-old federal standard on fine particulates survives court challenges. Monitors set up across the state reveal that particulate pollution in seven counties -- Mecklenburg, Guilford, Forsyth, Davidson, Cabarrus, Catawba and McDowell -- would violate the annual standard of 15 micrograms per cubic meter, according to Tom Mather, spokesman for the state Division of Air Quality.

Although the General Assembly doesn't convene until May 28, the lobbying has already begun. On Wednesday, an Asheville-based environmental group, Appalachian Voices, distributed a press release citing the study as a justification for the clean smokestacks bill. The John Locke Foundation, a Raleigh think tank that has led a yearlong campaign against the bill, released a report Wednesday stating that the problem of ozone smog in North Carolina is exaggerated.

The issue will also get publicity May 10, when Easley serves as host of the annual Southern mountain meeting on air quality. This year, the summit meeting will take place at the University Place Hilton hotel in Charlotte.

Power Plants and Lung Cancer

Addiction to Cash

CBS MarketWatch – by Thomas Kostigen – March 15, 2002

LOS ANGELES (CBS.MW) - People, posits psychoanalyst Theodore Kurtz, are focused on the wrong things to make them happy.

"We have built a society around the concept of consume, consume, consume," he says. "It's commercialism. It's advertising. It's what we are told will make us happy. Buy things. But that is exactly the opposite of the case."

Kurtz is a Freudian, following the thesis that our childhood shapes much of our personality. It's during that period that our psychological pain and happiness live. To alleviate the pain, to uncover the happiness, we must confront our childhood memories.

"'How much is enough?' is an issue I deal with all the time," Kurtz says. "The problem is there is usually no amount of money that feels right. It keeps going up."

Freud examined the issue of whether money could provide happiness, Kurtz says. "And what he came up with was that happiness would be the fulfillment of early childhood wishes. Money was never a childhood wish."

Ergo, no amount of money can buy happiness.

A sense of security

Kurtz lives and works on the North Shore of Long Island, where "old money" resides and "new money" encroaches. It's a telling geographical intersection. People with lots of money for lots of generations, and people who just made lots of money for the first time. Both can learn lessons of appreciation from the other.

"The pursuit of money becomes an addiction. If you cross the finish line, you no longer have the pursuit. And it's the chase that gets them high," Kurtz says.

"What many people attach to money is a statement about themselves. They think people judge them by it. For women, their pocketbook is the opening sign in terms of status, or their shoes. This is acceptance. It's a code to indicate 'You're okay.'"

The "you're okay" sentiment Kurtz is discussing falls into Maslow's hierarchy in the categorical need for love and belonging. Country clubs, he points out, are indicators of this need.

"A group is defined," Kurtz says. "Who is accepted and who isn't. It's us versus them. And the 'us' gives a sense of security."

Safety and security also are important psychological issues many people try to mask through such things as gated communities. They believe safety can be obtained by adding more locks, Kurtz says.

"But the thing is, this only increases the anxiety."

It's the same with money, according to Kurtz. "You can't get safety through money. And you can't get security through a mentality of 'us' and 'them.'"


"This undermines closeness and contact. You continue to feel more and more isolated."

Seeding consumerism

I mention to Kurtz that a number of wealthy people I interviewed on the subject of money and fulfillment suffered some type of loss. They either had been sick or another tragedy occurred to arouse their consciousness about money and its power. Money, it seemed, in large amounts, bred dispiritedness and even illness.

"The problem with money is that it's used to seed a side of consumerism as opposed to production," Kurtz says. "When consumerism doesn't make you happy, your whole value system becomes false. You fall into a funk. You can get depressed. Sure, you can become ill.

"Money for consumerism is tantamount to junk food - there's not a lot of nourishment, so you need to keep consuming. You have to balance consumption with productivity. It's that nutrition that provides the real growth."

In other words do something, don't just buy something. How much sense of accomplishment is derived from doing something yourself than buying something from someone else?

"When I work with children of wealthy parents, the first thing I have them do is produce something - whether it's playing an instrument or making something with their hands. It creates goals," Kurtz says.

The goals for money are twofold.

"Money is a commodity and a useful commodity. It can be used to buy things. And then once you have enough of that commodity, then you can use money for freedom," Kurtz says.

That is the normal thinking. That is the goal. But that is false.

"Money doesn't create freedom. It's a prison because it controls you," Kurtz says. "The one commodity you can't get back in life is time."

The focus of life should be on how we spend our time -- in the most productive manner and meaningful way.

"Am I doing what I want to do with the time I have?" should be the question," Kurtz says. "That activates the decisions and the values that make us happy."

Money is 'misused'

But there are forces against us.

"As far as we've gone as a society, we haven't gone very far with money. At all levels of our culture, it's misused. The wrong values are reinforced. The government reinforces this. The tax code reinforces this. Ultimately, we as a people have to decide what we want to encourage or discourage. And as far as messages, they are all toward consumerism.

Advertising is geared toward consumers not producers," Kurtz says.

Of course this is the case. We are inundated with calls, commercials, provocation to buy, buy, buy. What, at the end of the day, are we buying, however?

"It's all a sense of belonging and being hip," Kurtz says.

This goes back in society to idolatry. You worship something because of what it seems to provide. "You want the idol to give you something," Kurtz says. "If you worship the idol, you make a contract. If you worship, this is what you'll get in return. And most often, that was safety."

Today, it's much the same. "You'll be wanted, desirable, looked upon," Kurtz says.

Inherent in this, however, is existential anxiety. "We are a culture of people who belong. In the Amish culture, punishment is to be shunned. In jail, solitary confinement in the worst punishment."

We do what we have to do not be alone.

"Money insulates us from aloneness," Kurtz says.

The ultimate aloneness is death. This is the fear we are constantly fighting, whether we acknowledge it or not.

There are those that choose not to acknowledge this. They shun money, make the "anti" statement. "They say, 'We are not going to be like you,'" Kurtz says. "What they are trying to prevent is the problem. In shunning money, they are also being controlled by it. It's just the other side of the same coin."

This column is excerpted from the book "What Money Really Means." For more information, visit

Power Plants and Lung Cancer

New York Times – by Andrew C. Revkin - March 7, 2002

Prolonged exposure to air tainted with tiny particles of soot significantly raises the risk of dying of lung cancer or other lung and heart diseases, according to a new study of 500,000 people in 116 American cities. In fact, the authors say, many city residents face a long-term risk of fatal lung cancer similar to that of someone living with a smoker.

Because lung cancer is so rare among nonsmokers, that translates into just two additional lung cancer fatalities per 100,000 people, said a leader of the research project, Dr. George D. Thurston, associate professor of environmental medicine at the New York University School of Medicine. But, Dr. Thurston added, the finding helps suggest a cause for many otherwise unexplained lung cancer deaths and adds urgency to efforts to reduce fine-particle pollution, which comes from power plants and motor vehicles.

Earlier studies had hinted at a link between fine soot particles and lung cancer. But this one, whose results appear today in The Journal of the American Medical Association, was the first with sufficient breadth (involving the 500,000 subjects) and duration (16 years) to show a strong relationship.

The Environmental Protection Agency has written rules to crack down on soot pollution, but they have been held up by lawsuits brought by the power industry and by vehicle manufacturers and operators. Now, in the aftermath of a Supreme Court ruling favorable to the agency, the regulations could take effect late next year, and a senior E.P.A. official said yesterday that the new study suggested that "we're on the right track" in pressing for them.

Microscopic soot particles, far smaller than those that collect on urban windowpanes, have increasingly been identified as a leading pollution threat. The average level of them in American cities has declined by more than 30 percent since 1980, a result of existing broader regulations that do not make a target of these fine particles specifically. But a growing body of studies pointing to their threat prompted the environmental agency in 1997 to issue the restrictions subsequently delayed in court.

The average urban level of these particles in 1980 was 21 micrograms per cubic meter of air. In 2000, it was 14 micrograms. The E.P.A. standard would set an average annual limit of 15 micrograms for cities, but even so, experts expect many metropolitan areas to fail to meet the target.

The 500,000 adults on whom the new study focused were recruited in 1982 by the American Cancer Society for a lifelong project tracking their lifestyles, diets, work conditions and, ultimately, causes of death.

Experts who have spent years analyzing theorized links between pollution and illness generally gave the study high marks.

"One study alone doesn't answer these questions, but it opens the door wider on the issue of lung cancer and pollution," said Daniel S. Greenbaum, president of the Health Effects Institute, a pollution research group in Boston that is financed equally by the E.P.A. and manufacturing industries.

Dr. Thurston, co-author of the new study, said it carried both good news and bad.

"The bad news is that fine-particle air pollution is even more toxic than we thought before," he said. "The good news is we are addressing this problem and there are ways we can further reduce this risk, by moving forward with the Clean Air Act and cleaning up these power plants that are a major source."

Employee Advocate note: Click the links below to read earlier cancer articles:

Power Lines Create Health Risk

Are Researchers Downplaying Cancer Causes?

San Francisco Chronicle – by David Bragi – February 12, 2002

Christine Clark maintains a healthy diet, exercises regularly and avoids alcohol and tobacco. She thought she would be the last person on earth to get breast cancer. But last year, the 53-year-old Palo Alto, Calif., resident said, she became at least the sixth woman in her 50-house neighborhood to contract some form of cancer over the past 12 years. "This is only among the women I personally know," she added.

She suspects that a nearby electrical transformer station may be producing unhealthy levels of electromagnetic radiation, but she does not know how to prove or disprove it. "I felt angry as hell when I was diagnosed," Clark said. "I felt like I did everything possible to not get it. Every medical person I talked to all said they have no idea what causes it. I personally wish someone would investigate the environmental probabilities of this happening."

Across the country, citizens have become increasingly aware that toxic-waste dumps, pesticides, power lines and other sources of pollution or emissions may be creating cancer clusters in their communities. But many experts feel that cancer researchers and organizations tend to downplay these environmental factors and focus instead on lifestyle and genetic causes of cancer, leaving a big hole in our knowledge of the disease.

More Research Needed

There continues to be evidence of connections between exposure to environmental hazards and cancer, as well as considerable public interest in the subject. For instance, 3,500 residents of Anniston, Ala., are suing Solutia Inc. -- formerly known as Monsanto -- for allegedly contaminating the community with dangerous levels of polychlorinated biphenyls (PCBs), known carcinogens, from a local manufacturing plant over the course of several decades. And in Toms River, New Jersey, 69 families successfully settled a lawsuit filed against Ciba Specialty Chemicals Corp., Union Carbide Corp. and United Water Toms River for allegedly causing dozens of cancer cases in local children via polluted water.

Yet some cancer organizations minimize the potential hazards of industrial pollutants. For instance, the American Cancer Society's Cancer Facts and Figures 2002 report states, "Public concern about cancer risks in the environment often focuses on unproven risks or on situations in which known carcinogen exposures are at such low levels that risks are negligible."

When cancer researchers do study the effects of potentially harmful substances, they tend to focus on the effects of short-term and high-dose exposures, such as a chemical-factory worker caught in the middle of an industrial accident. What's lacking is much interest in studying long-term, low-dose exposures, such as the health effects of living close to the same factory for 20 years.

"Pollution has been overlooked and underfunded as a potential cause of cancer," said Gina Solomon, senior scientist at the Natural Resources Defense Council and an assistant clinical professor of medicine at the University of California at San Francisco. "There is more research being done now than there used to be, but it's still only a fraction of the total research that's being done on cancer."

Instead, cancer research generally concentrates on how an individual's personal behavior or genetic makeup can affect one's risk of developing cancer, which irks Samuel Epstein, professor of environmental and occupational medicine at the University of Illinois Medical Center/Chicago and an authority on the causes and prevention of cancer. "It's focused virtually exclusively on blaming the victim," he said. "If you have cancer, it's your own fault. You either chose the wrong [genetic] parents, or you drink too much or you eat too much fatty foods."

The kind of research required to determine the effects of long-term exposures to toxic chemicals is complex and expensive. For one thing, it is much easier and cheaper to ask tobacco addicts how many packs they smoke per day or whether their parents ever had cancer than trying to calculate how much contaminated water a person has ingested over a lifetime or how many vats of chemicals he or she has walked past at work. "To some degree, the science has followed the path of least resistance and worked to track down the links that can most easily be made," said Solomon. "So those were the low-hanging fruit; now we have to reach a little bit higher and try to use more sophisticated tools to do the research on the environment."

Follow the Money

Sophisticated research tools often require higher levels of funding, and much of the funding for cancer research comes from the very industries that produce toxic substances. Critics argue that this may be affecting the quality of cancer research. "People are following the money," said Solomon. "A lot of research is now being done with private funding, and, increasingly, major corporations are funding schools of medicine and other scientific institutions. There is a lot of concern that these institutions may not want to bite the hand that feeds them."

By example, Solomon cited the American Chemistry Council, a trade group that represents chemical manufacturers. The organization actively funds scientific research into possible links between chemical manufacturing and problems in the environment, such as health risks. Yet, she claimed, "for the most part, research funded by the American Chemistry Council comes out showing there are no links. Some scientists look with skepticism on those results."

According to a brochure put out by the council, in 1999 it committed $100 million over five years to fund health and environmental research related to chemical use. Many in the scientific community, and laypersons as well, however, remain unconvinced of the impartiality of their results. For instance, one of the findings in the brochure mentioned a recent study of "low-level environmental exposures to chloroform," which concluded that "tumor formation in animals is not relevant to chloroform risk assessment for humans."

David Clarke, senior director of the council's Science Policy Team, responds to allegations of bias by emphasizing the industry's reliance on scientific research. The council's confidence in science, he said, is based on the principle that it matters not who does the science, but how it is done. "That's why science is the most universally shared form of knowledge, and makes progress where mere opinion remains stalled," Clarke added. "It allows skeptics to check and recheck results, and to challenge them based on facts."

Doctors Who Don't Know

Regardless of how cancer researchers do their work, physicians who actually treat patients can make use only of the knowledge available to them. Yet medical schools pay little attention to the topic, according to Ted Schettler, a physician and the science director of the Science and Health Environmental Network. "You find very little in the way of course-material content being given to physicians in training with respect to environmental contributors to human disease," he said.

So when patients are diagnosed with cancer, attending physicians are likely to attribute the cancer solely to lifestyle or genetic makeup, which doctors are more likely to have studied.

"When a doctor sees a patient who comes in with lung cancer, that doctor will say, 'Did you smoke?'" said Solomon. "Even if the patient just smoked a tiny amount, that cancer is written down and written off as being smoking related, when that may or may not be true. That person might have smoked and gotten away with it if they hadn't also been exposed to asbestos or diesel exhaust, for example.

"So I think that in the overwhelming mass of smoking-related cancers, there are still a number of other environmental cancers that are hiding," she added, "and they may even be linked."

Even a knowledgeable physician may prefer to concentrate on those areas, such as lifestyle, where the doctor-patient relationship can have the most impact. "Physicians who see individual patients in their offices can talk to them about their diet, their exercise, their smoking habits, whether or not they wear seat belts, how much sleep they get, whether they abuse drugs and a variety of other personal habits that the patient has immediate control over," said Schettler. "There is little that that physician can say to the patient about avoiding breathing air pollutants or something that might be in the public water supply."

Going Forward

Critics of current trends in cancer research allege that America is poisoning its own nest. Those allegations need the opportunity to meet the test of thorough scientific research, free of political influence. Industry sources suggest that factories and buses and transformers are more reliable than our fears of them, but to be truly reassuring, these claims need to be confirmed or refuted by independently funded studies conducted by researchers with no financial interest in the outcome.

There is a need for more and better research into possible links between cancer and our modern world's highly industrialized, artificial environment. Cancer patients, as well as their physicians, families and neighbors, deserve some real answers.

HMO Contempt

Employee Advocate – – February 11, 2002

The National Law Journal has reported the results of its Juror Outlook Survey poll. HMO’s did not fair too well. The only hypothetical defendant rated lower by the poll was the asbestos defendant.

This, no doubt, explains why companies are loathed to face a jury in asbestos cases.

HMO executives are probably about as eager to see the inside of a court room as the Enron executives are.

Medicare Recommendation

Employee Advocate – – January 22, 2002

It was recommended by a federal advisory commission that Medicare payments be increased, according to The New York Times. If Medicare continues to pay cheaply for health care services, those depending upon Medicare will be excluded more and more.

At the same time, President Bush wants to squeeze more money out of Medicare. As the payments are decreased, those people will be treated more like second class citizens.

Already, many doctors will not accept new Medicare patients. Medicare does not cover all medical procedures either.

Those who are not on Medicare need not feel too smug; they may be on it one day. Duke Energy now cuts their employees loose when they retire at age 65. The promised retirement health care is gone. Medicare is all these retirees will have. If you can find a doctor to treat you, chances are that you will not run into Duke executives or G. W. Bush in the waiting room.

There may be some down-on-his-luck doctor, practicing out of the back of a pool room, that will accept Medicare when you need treatment. But after working 30 or 40 years, don’t you think that you deserve just a little more?

Patients’ Rights Hearing

The New York Times – by Linda Greenhouse – January 18, 2002

WASHINGTON, Jan. 16 — With patients' rights legislation stalled in Congress, the spotlight moved to the Supreme Court today for an argument on whether states have the authority to require an independent medical review of a health maintenance organization's refusal to pay for a covered service.

Forty states now require such outside reviews, which patients' rights advocates regard as an important protection in an age of managed health care. The legal question is whether these state laws are pre- empted by the federal law that regulates employee benefit plans, under which most Americans receive their health care coverage.

The case is from Illinois, which since 1987 has required outside review of any dispute between a patient's primary care physician and the H.M.O. providing the patient's coverage about whether a procedure is medically necessary.

The Illinois review is provided by a doctor who specializes in the relevant field of medicine, selected jointly by the H.M.O., the primary care physician and the patient. Under the law, the H.M.O. "shall provide" the service if the outside reviewer determines that it is medically necessary.

A federal appeals court upheld the law in October 2000, ruling on behalf of a woman who sought reimbursement for specialized shoulder surgery that she obtained at her own expense after her doctor recommended it but her health maintenance organization refused to authorize it. The H.M.O., Rush Prudential HMO, an Illinois affiliate of Wellpoint Health Networks, said it would cover a simpler and less expensive treatment for the severe shoulder pain the woman, Debra C. Moran, was experiencing. Arguing that the state law was invalid, it refused to submit the dispute for an independent review.

The United States Court of Appeals for the Seventh Circuit, in Chicago, ordered Rush Prudential to pay the $95,000 cost of Mrs. Moran's 14-hour surgery, which she obtained from an out-of-network specialist in Virginia and paid for in part by taking out a second mortgage on her home in Winfield, Ill. The appeals court rejected Rush Prudential's argument that the Illinois law was preempted by a 1974 federal law, the Employee Retirement Income Security Act, usually known as Erisa. The law, written before managed care became prevalent, is silent on whether insurers have to provide independent medical review.

Underscoring the complexity of the federal statute, an almost simultaneous ruling by the federal appeals court in New Orleans declared a similar independent review law in Texas to be pre-empted. The Supreme Court itself has decided many cases on the extent to which Erisa overrides state efforts to regulate employee benefit plans, without arriving at a one-size-fits-all formula that could answer a seemingly endless variety of questions.

Erisa says that it "shall supersede any and all state laws" that "relate to any employee benefit plan." At the same time, though, it exempts from that general rule any state law that "regulates insurance." Thus, one focus of the debate in the Supreme Court today was whether a state law requiring an independent medical review was a valid regulation of health insurance or a pre-empted effort to regulate an employee benefit. John G. Roberts Jr., representing Rush Prudential, said the Illinois law was not a regulation of insurance, but rather a state-mandated remedy for a medical-coverage dispute that "changes dramatically what the plan actually provides."

Mr. Roberts said that a 1987 Supreme Court decision, Pilot Life Insurance Co. v. Dedeaux, made clear that states could not provide additional or alternative remedies for dissatisfied beneficiaries. Nationwide uniformity was an important goal of Erisa, he said.

Last June, when the justices accepted the case, Rush Prudential HMO v. Moran, No. 00-1021, it appeared that Congress was moving toward adoption of an outside medical review requirement as part of patients' rights legislation. Enactment of such a provision would have made the Supreme Court case moot.

When Justice Sandra Day O'Connor asked Mr. Roberts what the status of the federal legislation was, he drew some chuckles when he said he only knew that passage had been reported as "imminent" from time to time, "and then it falls apart."

The Bush administration argued in support of the Illinois law. Both Edwin S. Kneedler, a deputy solicitor general, and Daniel P. Alberts, Mrs. Moran's lawyer, argued that the Illinois law was an aspect of insurance regulation that did not conflict with Erisa. "The processing of claims is an essential part of an insurance policy," Mr. Kneedler said. Thirty- two states, including New York, New Jersey, and Connecticut, filed a brief in support of Illinois, as did the American Medical Association.

Secret Kickbacks for Drug Middlemen

The New York Times – by Milt Freudenheim – January 7, 2002

As employers, consumers and government officials grow increasingly frustrated by upwardly spiraling drug costs, pressure is building against a handful of powerful companies that have prospered for years as middlemen between drug manufacturers and those who pay for medicines.

The companies, called pharmacy benefit managers, administer drug plans for some 200 million Americans and play a critical role in determining which drugs people take for different ailments.

But increasingly, large corporations and major public employers say pharmacy benefit managers have not done enough to stem the rapid growth in national spending on prescription drugs, which nearly tripled in the last eight years from $50 billion in 1993 to $150 billion last year.

Consumers and employers have filed lawsuits against several pharmacy benefit managers, claiming that they inflate drug costs for some customers and violate their duty to act in the best interest of customers. And pharmacists in a dozen states are pressing for laws that would tighten regulatory oversight of pharmacy benefit managers.

Officials at Merck-Medco Managed Care, a unit of Merck Inc. and the largest pharmacy benefit manager, said drug costs increased at a slower rate for its clients than the national average. Executives of several other big drug plan managers said that they had to provide savings for their customers or they would lose the business to rivals. "We don't switch to a higher-priced product," said Barrett Toan, chairman of Express Scripts.

David D. Halbert, chairman of AdvancePCS, said, "We are held accountable through the competitive bidding process."

But critics say the pharmacy benefit management companies negotiate deals with drug makers that benefit themselves and the drug companies more than anyone else.

Some say the drug plan managers actually contribute to rising medical costs because they strike deals that then lead them to induce patients to use more expensive medications.

For example, after Merck-Medco Care was sued by several employers and consumers who said the company was not serving customer interests, lawyers and consultants for the company said in court documents and interviews last year that Merck- Medco and other pharmacy benefit managers sometimes ended up promoting the most expensive drug in a class because Merck and other drug makers paid them the most to do that.

Pharmacy benefit managers often receive payments or rebates from drug makers to include their drugs on lists of preferred medicines. The benefit managers then structure the lists so that consumers pay less for those drugs than for other brand name drugs in the same class. Consumers are often happy to request those drugs from doctors because their own payments are smaller. But the employers covering the rest of the cost of the drug may have to pay more to treat a given ailment.

Drug plan managers say they allow clients to audit the rebates they receive, and they say they pass on at least some of the payments. But they rarely disclose the full terms and amounts of the payments they receive, and some critics have questioned whether the companies are cooperating with drug manufacturers to maximize their own profits rather than serving the cost-saving interests of their customers — corporations, government employers, union welfare plans, health maintenance organizations and other purchasers of health care.

Some of the drug plan managers' biggest customers are now demanding a more complete accounting. General Motors, which spends more than $1 billion each year on drug benefits, is second-guessing its pharmacy benefit manager, Merck- Medco, and closely monitoring drug purchases. The company's direct spending for drugs rose $143 million in 2000 and the increase will probably exceed $180 million this year, a G.M. spokesman said. "I monitor every drug in the top 100," said Cynthia Kirman, director of pharmacy at G.M.

Verizon Communications is encouraging Merck-Medco, its pharmacy benefit manager, to pay less attention to making deals with drug manufacturers and to focus more on getting the right drug to the right patient.

Prodded by customers like Verizon and General Motors, Merck- Medco contacted physicians and patients to urge them to switch to fluoxetine, the generic version of Prozac, after it became available last year. Jim Astuto, a regional manager in charge of employee health care at Verizon, said he did not count on rebates passed on by a pharmacy benefit manager to lower his company's $500 million in annual drug costs. "We declared the rebate strategy dead a couple of years ago," he said.

Officials of at least 20 states are going further, working on plans to stop using drug plan managers altogether or manage central elements of their own drug plans themselves for state employees and Medicaid members.

In a study last summer for a group of legislators from eight Northeastern states — New York, Connecticut, Pennsylvania, Maine, Rhode Island, Massachusetts, Hampshire and Vermont — Health Management Associates, a consulting firm, projected potential savings of $1.8 billion a year on drugs for Medicaid patients if the states created their own joint pharmacy benefit manager, or P.B.M.

"The P.B.M. model has failed," said Peter E. Shumlin, president of the Vermont Senate and chairman of the Northeast Legislative Association on Prescription Drug Prices. "The P.B.M.'s often negotiate secret kickbacks that don't benefit the purchaser."

The Northeast group will soon propose to negotiate with drug makers for better prices as a first step, adopting an approach taken by Florida last year, Mr. Shumlin said.

West Virginia, Missouri, Louisiana, Mississippi, South Carolina, New Mexico and Maryland have also banded together to demand better prices on drugs. The states, which together insure 1.5 million people, are evaluating seven bids from pharmacy benefit managers. The managers who are chosen would be paid only for handling the claims, and the states would receive rebates from drug makers themselves.

"Our spending on drugs is going up 20 percent a year," said Tom Susman, director of West Virginia Public Employees Insurance Agency, which provides health insurance to 200,000 people. The revenues of the pharmaceutical benefit companies' "are going up at the same rate," he said. "The sicker we get, the healthier they get, because they are paid on a percentage basis."

The drug plan managers' practices are also the subject of four lawsuits, all seeking class-action status. Two suits are against Merck- Medco and others were filed last month against Express Scripts and AdvancePCS. The main allegations in all four lawsuits are similar. The plaintiffs, including consumers with drug plans and several private employers, assert that the drug plan managers have fiduciary duties to insurers and consumers under the federal Employee Retirement Income Security Act, or Erisa. That law requires certain companies and professionals to act in the best interests of a client or customer. The plaintiffs say that by including expensive drugs on their lists of preferred medicines, the drug plan managers have promoted their own interests at the expense of their clients.

The pharmacy benefit managers, however, insist that Erisa does not apply to them because they make their financial arrangements with the drug manufacturers on their own, not, they say, as agents of employer drug plans.

"We are not a fiduciary under Erisa, and we don't claim to be," said David Machlowitz, general counsel of Merck-Medco. "We are not a public utility. We do help people save money. Otherwise we would be out of business."

In one Merck-Medco case, the plaintiffs also contend that the company inflated drug costs for some customers. They said the company promoted sales of Zocor, a cholesterol-lowering drug from Merck that has a significantly higher average wholesale price than other drugs in its class.

In Merck-Medco's mail-order pharmacy, more than one in five of all switches from any prescribed drug to an alternative brand were to Zocor, said Arthur N. Abbey, a plaintiffs' lawyer with the law firm of Abbey, Gardy & Squitieri.

Merck-Medco lawyers did not comment directly on Zocor. But James Tallon, a lawyer for Merck- Medco, described how his client made money in the past by persuading doctors to switch patients to particular drugs.

Merck-Medco, he said, received "hundreds of millions of dollars in revenue to Medco in terms of rebates" from contracts with Pfizer Inc. to persuade doctors to switch patients from the low-cost generic version of Adalat, a heart drug, to Procardia, which he described as "a Pfizer drug, and it's more expensive than Adalat."

Pfizer paid Merck-Medco every time a physician prescribed Procardia, Mr. Tallon said. "And that is a very, very valuable contract." Pfizer declined to comment.

Pharmacists, meanwhile, are lobbying in several states for laws that would regulate pharmacy benefit managers more tightly. Some of the companies run mail-order drug delivery businesses and those operations are regulated by states. But the pharmacists argue that the drug benefit managers are large and complex organizations, which should be licensed by state pharmacy boards and supervised by state insurance departments.

Asbestos Manufacturers Asking Congress

N. Y. Committee for Occupational Safety and Health - April 12, 2001

Asbestos manufacturing companies -- which incurred billions of dollars in liabilities as a result of an epidemic of asbestos-caused disease and property damage -- have tried every year since 1977 to pass a bill in Congress that would relieve them of some or all the cost of their actions. This year is no exception.

On April 4 Rep. Michael Collins (R-GA) introduced a bill that would give asbestos companies a one-dollar tax refund for every dollar that the companies have ever lost as a result of their asbestos operations. The bill (HR 1412) is identical to last year's HR 4543, which died last December in the closing days of Congress. The new bill has 75 sponsors, including 31 Democrats.

The bill, which is supported by lobbyists for the National Association of Manufacturers, the U.S. Chamber of Commerce, and many asbestos companies including Owens Corning, W.R. Grace, U.S. Gypsum and Armstrong, would give tax refunds to the companies on taxes that they paid as far back as the first decade of the 20th century. Existing law provides all companies tax refunds for product-liability losses, but only on taxes paid during the 10 years prior to the loss.

The tax-bailout bill would add more than 80 years to the period for which refunds could be claimed, and it would also allow asbestos companies to collect refunds for losses resulting from punitive damages. Punitive damages are levied by courts in product-liability cases when a company's conduct has been worse than merely negligent. Existing tax law does not allow a company to claim a tax refund for losses that result from fines or other court-imposed punishment. Last year the bill's backers estimated, very conservatively, that it would give the companies $2.2 billion by 2011. This year, according to a House staff member, the number is expected to be substantially higher.

When lobbyists were staging a major campaign to pass the identical asbestos-company tax-relief bill last year, the American Public Health Association (APHA) sharply opposed the measure. "This bill uses public funds to lighten the burden of liability for occupational disease caused by corporations that consciously, willfully and wantonly exposed workers and consumers to a deadly carcinogen," the APHA told members of Congress in an Oct. 3, 2000 letter. "In so doing, it encourages and vindicates heinous corporate crimes. As public health practitioners, we urge you to reject this legislation and support real public health measures to prevent this kind of situation and properly compensate those who suffer when they do occur." An APHA spokesperson told NYCOSH that the organization "is opposed to the bill this year just as strongly as we were last year."

"This is a bill with grave public health implications," said NYCOSH Executive Director Joel Shufro. "We are already hearing the same misleading arguments from its supporters that we heard last year. They are claiming that the refunded tax money will go to asbestos victims," Shufro added, "when the law would only require that the money be used by the companies for - asbestos-related expenses,' a category that includes the cost of defending against asbestos-injury compensation claims and the cost of compensating property owners for asbestos removal."

"If Congress wants to appropriate money to aid the victims of the companies' criminal behavior, this is no way to go about it," he added. "Giving the money to the same companies is inviting them to victimize every taxpayer in they same way they have already victimized millions of workers and consumers."

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