The California threat to drug research

Last November, 61 percent of California voters decisively defeated Proposition 79, which would have forced drug companies to give discounts to poor and middle-income residents. At the time, Gov. Arnold Schwarzenegger vigorously opposed the measure.

So, it may come as a surprise that -- just nine months after it was roasted in the polls -- Arnie is now serving up the same legislative turkey he helped send back to the kitchen. The new measure is just like Proposition 79, in that it calls upon drug manufacturers to offer huge discounts on prescription medications -- up to 40 percent on brand-name drugs and a whopping 60 percent on generics. Specifically, the discounted drugs would be available to uninsured Californians with incomes less than $29,400 -- or about $60,000 for a family of four. Certain Californians -- such as a family earning less than $70,626 -- with significant un-reimbursed medical expenses would also qualify. Schwarzenegger is touting his plan as "voluntary" -- the implication being that drug companies should offer these discounts out of the goodness of their hearts. But in fact, it's the same old ham-fisted attempt to impose price controls.

Drug companies that don't "voluntarily" sell at government-imposed discounts will be bludgeoned into submission. They'll have just three years to comply, after which they'll be kicked out of selling drug to Medi-Cal, the $2 billion health-coverage system for low-income Californians. Imposing price controls on prescription drugs has always been a terrible idea. That's because, unlike our politicians, economic gravity does not reverse direction in an election year.

Perhaps Schwarzenegger could use a quick refresher course in why he opposed a price-control plan the first time. For starters, most drug companies already have programs offering discounted -- or even free -- medicines for those in need. Schwarzenegger might argue that beneficiaries of these existing discount programs must apply individually with every pharmaceutical company whose drugs they require. But that's because drug companies aren't legally allowed to combine their individual plans into one simple-to-join program. Anti-trust laws prohibit them from doing so. That's right: It's illegal for private companies to work together to set prices -- even discount prices for poor people.

Schwarzenegger's plan might make sense if government price controls worked. But they almost always have the exact opposite of their intended effect. In this case, pharmaceutical companies would need to compensate for the forced discounts by raising prices on those people who don't qualify. A family of four with a household income of $72,000 and a child with cancer might see its drug bills increase to offset discounts on hyperactivity medicines available to a family making $70,000.

Over the long term, Schwarzenegger's price controls would have an even more perverse effect. They would lead to fewer new medicines, particularly if other states follow California's example. Today, it costs between $800 million and $1 billion to bring a new drug to market. Cancer patients have hope precisely because companies are willing to risk that money in developing drugs such as Avastin, Erbitux, Gleevec, Herceptin, Nexavar, Sutent and many others.

Ironically, if Schwarzenegger's plan had been implemented across the country 25 years ago, very few of these drugs would have been invented. There would be no life-saving medicines to discount.

If state governments make breakthrough drugs unprofitable, companies will simply stop trying to invent them. Researchers at the University of Connecticut's Center for Healthcare and Insurance Studies found that, since 1960, government interference in drug pricing resulted in $188 billion in lost spending on research and development. The "lost" medicines that might have been developed with that money would allow more people to have lived longer.

Once upon a time, the governor understood this: "I adamantly oppose efforts to impose price controls on prescription drugs because they will have a chilling effect on the research and development of life-saving medicines." Except in an election year.

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Criminal doctors OK by the "regulators"

It was a brutal crime, committed by a drug addict with a long history of erratic behaviour. The accused had already lost several jobs as a result of his drug addiction, and he was allegedly becoming increasingly violent. On November 3, 2000, the Queensland man dragged a woman into a bedroom, bashing her as she screamed and attempted to escape. He forcibly removed her clothes and raped her. In 2002 he pleaded guilty to rape, deprivation of liberty and assault and was sentenced to five years' jail.

However, the case stands apart from other cases of sexual assault because the rapist is a doctor, and last month the Medical Board of Queensland renewed his registration. James Samuel Manwaring had previously been struck off the register in the mid-1990s after a psychiatric evaluation found "he constitutes a significant danger to any patient he may have to look after".

However, Manwaring is not the only doctor in Australia with a criminal conviction. Two weeks ago, another Queensland doctor had his registration cancelled after it was revealed he failed to disclose a previous rape conviction. In 1981 Eugene Sherry and two other doctors were convicted of raping a nurse in the US. Sherry was imprisoned for six months and moved to Australia in 1984, and worked in Sydney for 20 years. His 2004 application to work in Queensland was approved under a process that allows doctors to be mutually registered in other states. Sherry disclosed the conviction to the NSW Medical Board, but when he moved to Queensland the NSW board did not inform its Queensland counterpart, and nor did he.

The cases illustrate weaknesses in Australia's fragmented medical registration system and raise the question: should doctors convicted of sexual assault be allowed to practise? In many instances, medical boards allow doctors found guilty of sexual assault to continue to practise if they are closely supervised, or a "chaperone" is present during consultations.

The NSW Medical Board decided last year that a cosmetic surgeon charged with aggravated sexual assault on a patient could continue to practise as long as a nurse was present when he examined female patients. However, Joanna Flynn, president of the Australian Medical Council - which assesses overseas-trained doctors and accredits medical colleges - told The Australian that doctors who cannot be trusted to treat patients unsupervised should be struck off the register. Flynn, who also is president of the Medical Practitioners Board of Victoria, says "if a determining body believes it is necessary to have a doctor chaperoned because they are not confident the patient would be safe, in my view that doctor should not be registered. "Patients must be able to trust their doctor. They may want to question the doctor on medical information, but they need to be able to trust they won't be mistreated by the doctor."

The Australian Medical Association's Queensland president Zelle Hodge says the idea of supervising doctors with a criminal past is fine in theory, but almost impossible to implement. She says medical boards and organisations that employ medical staff don't have the time to consistently monitor doctors. "The medical boards simply do not have the resources to go out and police these restrictions," Hodge says. "It's up to the doctor's employer to monitor the doctor's performance and make sure they are supervised, and sometimes that doesn't happen."

In a case currently before the Medical Practitioners Board of Victoria, a GP is facing suspension for a second time over allegations he conducted a pap smear that was more "sexual than medical", while making sexually suggestive comments to the patient. The GP, Richard George Young, had his licence suspended for 15 months in 2001 after engaging in sexual relationships with two vulnerable female patients. His licence was renewed on the condition a chaperone be present when he examined female patients.

NSW Medical Board chief executive Andrew Dix defended the use of chaperones to monitor doctors who had committed serious offences. But he admitted the system did not guarantee the doctor would not re-offend. "We have a comprehensive chaperoning protocol which requires the regular submission of the chaperone's reports to the board," he said. "But if doctors are determined to be dishonest, some will manage to get away with things." Dix says it's a balancing act to ensure the patient's right to the best possible care and the right of doctors to be given the opportunity to rehabilitate themselves. He says each case is assessed individually and there are no offences that automatically lead to a doctor being struck off the register. "There are doctors who have been struck off a long time ago who periodically apply for restoration who are denied. "But historically the system has been based on the idea that people are able to redeem their character. And there are no black and white rules about what constitutes good character."

However, some argue that while doctors may have the right to a second chance, the public has a right to know if their doctor has a criminal record, or restrictions placed on their registration. Merilyn Walton, an associate professor of ethical practice at the University of Sydney's school of medicine, says patients should be notified if their doctor has been disciplined by a medical board. "Doctors should be required to put a notice in their waiting room saying they are supposed to be supervised," she says. "If I was a patient of that doctor, I would want to know."

Flynn believes all the details of a doctor's registration should be easily assessable to the public. However, Australia does not have a national medical register. Rather, each state has its own slightly different system of assessing and registering medical staff. In April 2004 all the state health ministers announced that a nationally consistent medical registration system, called the Australian Index of Medical Practitioners, would be introduced. The ministers agreed the new model should provide greater public access to medical register information, including an online index of medical practitioners. Two years later the states still operate independently and there's been little progress in improving public access to medical board information. Currently only the medical boards in Queensland, South Australia and the ACT have websites that provide detailed information about doctors' registration.

Walton says most medical boards have failed to inform patients about the medical registration process. "The big challenge for medical boards is to improve the level of transparency of their processes so the community understands how and why they make decisions. The public need to be engaged in the discussion about what standards they want."

The failings of the state-by-state system were highlighted in March this year, when it was revealed that the Hunter New England Area Health Service in NSW waited almost 18 months before investigating an overseas-trained doctor banned elsewhere in the state for misdiagnosing 208 patients in 2004. Farid Zaer, a pathologist trained in India and the US, was banned by the Illawarra Area Health Service in April 2004 after a review of 6300 patient records found he had failed to correctly analyse tests for many diseases, including cancer. In late 2004 it notified the Hunter New England Area Health Service, where the doctor had worked between 1999 and 2001, that it was investigating him. The Hunter service did not begin to review the records of 7300 patients diagnosed by Zaer until March this year.

The doctor has since moved to Queensland, where he is registered to practise unsupervised as a GP and as a pathologist under strict supervision. The case again prompted calls for the establishment of an Australian index of medical practitioners that would record whether doctors have been disciplined by any of the state medical boards, or had any restrictions placed on their practice.

Walton believes the mutual recognition process allows doctors of questionable character or ability to move interstate and continue to practise. "We have mutual recognition, but it caters to the lowest common denominator," she says. "So if one state is weak around disciplinary matters, then that person can be registered in other states based on a weak disciplinary structure. There is also a lack of exchange between regulatory boards and the community. I can't believe we don't have a national registration system yet."

In July, the Council of Australian Governments meeting announced medical boards would be abolished and replaced with a single national registration scheme covering nine health professional groups. For the plan to proceed, each state and territory would have to introduce legislation. The proposal overrides the Australian Medical Council's plan to revamp the existing medical board registration system. The AMC had wanted to give every doctor an identifying number that would allow their details to be accessed through a national register.

Flynn says she is unclear about the details of the proposed specialist registers and what impact they would have on the AMC's plan. Whatever plan is eventually implemented, she is adamant that it must give patients better access to doctors' details. "The public has a right to know if there are conditions on a doctor's registration or if there have been serious disciplinary or criminal offences proven against the doctor," Flynn says. "It's long overdue."

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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