Kevin Drum - October 2013

Here's Why Your Asthma Inhaler Costs So Damn Much

| Wed Oct. 16, 2013 11:58 AM EDT

Dr. Russell Saunders is pissed off:

As I’m sure comes as no surprise, I prescribe a lot of medications....One medication I prescribe with great frequency is albuterol, a bronchodilator. Asthma is a very common childhood illness, and one that primary care providers can often manage without consulting subspecialists.

....So I prescribe a lot of albuterol [inhalers]. Or rather, I would if they existed. Unfortunately, albuterol inhalers per se are not currently on the market. What my patients really get are prescriptions for Proventil or Ventolin or Proair. There are, at this time, precisely zero generic albuterol [inhalers] on the market.

The reason why there are none on the market and thus patients (or their insurance companies, if they are blessed with good coverage) are forced to pay for the name brands is contained in this horrifying and infuriating article about pharmaceutical pricing in the New York Times. If it does not make your blood boil, then I congratulate you for having a more even temperament than I.

I'm pretty sure that I don't have a more even temperament than Saunders, but I do have one advantage over him: I already knew what was going on with asthma inhalers even before Elisabeth Rosenthal's piece—the latest in her series about the high cost of American health care—appeared a few days ago.

Here's the short version of the story: as Saunders says, albuterol is a cheap medication because it went off patent long ago. Then, a few years ago, as part of the campaign to eliminate CFCs and save the ozone layer, CFC-based inhalers were set to be banned. Pharmaceutical companies took advantage of this to design new delivery systems and surround them with a thicket of patents. As a result, even though albuterol itself might be off patent, only name-brand asthma inhalers are available—and since there's now no generic competition the big pharmaceutical companies are free to jack up prices to their heart's content. And they have. After all, as Rosenthal points out, this isn't like acne medicine that you can do without if it costs too much. If you have asthma, you need an inhaler, period.

Is your blood boiling? Well, wait a bit. The story is actually even worse than this. You're probably thinking that what happened here is (a) overzealous environmentalists insisted on banning CFC inhalers even though they don't really have much impact on the ozone layer, and (b) pharmaceutical companies cleverly took advantage of this to suck some extra money out of asthma sufferers.

Well, the ozone layer was the initial cause of all this, so feel free to place some of the blame on environmentalists if you like. But as it turns out, scientists raised some early concerns about the inhaler ban because the replacement for CFCs was a powerful greenhouse gas. So they suggested that maybe it was better just to make an exception for asthma inhalers and let well enough alone. At that point, the pharmaceutical companies that had been eagerly waiting for the old inhalers to be banned went on the offensive. Nick Baumann picks up the story from there:

The pharma consortium transformed from primarily an R&D outfit searching for substitutes for CFC-based inhalers into a lobbying group intent on eliminating the old inhalers. It set up shop in the K Street offices of Drinker Biddle, a major DC law firm. Between 2005 and 2010, it spent $520,000 on lobbying. (It probably spent even more; as a trade group, it's not required to disclose all of its advocacy spending.) Meanwhile, IPAC lobbied for other countries to enact similar bans, arguing that CFC-based inhalers should be eliminated for environmental reasons and replaced with the new, HFC-based inhalers.

The lobbying paid off. In 2005, the Food and Drug Administration (FDA) approved an outright ban on many CFC-based inhalers starting in 2009. This June, the agency's ban on Aerobid, an inhaler used for acute asthma, took effect. Combivent, another popular treatment, will be phased out by the end of 2013.

In other words, pharmaceutical companies didn't just take advantage of this situation, they actively worked to create this situation. Given the minuscule impact of CFC-based inhalers on the ozone layer, it's likely that an exception could have been agreed to if pharmaceutical companies hadn't lobbied so hard to get rid of them. The result is lower-quality inhalers and fantastically higher profits for Big Pharma.

Rosenthal has a lot more detail in her piece about how the vagaries of patent law make this all even worse, and it's worth reading. But she misses the biggest story of all: none of this would matter if drug companies hadn't worked hard to make sure the old, cheap inhalers were banned. How's your blood doing now, Dr. Saunders?

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Word of the Day: Brinkmanship

| Wed Oct. 16, 2013 11:01 AM EDT

Yesterday my copy editor objected to my use of the word brinksmanship, recommending that I replace it with brinkmanship. I prefer the version with the S, but I usually take his advice unless I have a pretty good reason not to. Since my dictionary lists both variants as acceptable, I did what I usually do next: I powered up the Google Ngram Viewer to see which version is in more common use. Here's the result:

The version without an S is plainly the most common by a wide margin, so I went ahead and made the change. But I was intrigued that the word apparently first appears in 1955 and then shoots up the charts quickly, suggesting that it's a child of the nuclear age. Sure enough, dictionary.com confirms that this is when it first appeared, coined by Adlai Stevenson during the 1956 presidential campaign:

Associated with the policies advocated by John Foster Dulles (1888-1959), U.S. Secretary of State 1953-1959. The word springs from Dulles' philosophy as outlined in a magazine interview with Time-Life Washington bureau chief James Shepley early 1956:

"The ability to get to the verge without getting into the war is the necessary art. If you cannot master it, you inevitably get into war. If you try to run away from it, if you are scared to go to the brink, you are lost."

The quote was widely criticized by the Eisenhower Administration's opponents, and the first attested use of brinkmanship seems to have been in such a context, a few weeks after the magazine appeared, by Democratic presidential candidate Adlai Stevenson criticizing Dulles for "boasting of his brinkmanship, ... the art of bringing us to the edge of the nuclear abyss."

This is news to me, and since we've been playing budget brinkmanship for the past few months, I thought a brief refresher on the nuclear origins of the word might be in order.

Also (according to dictionary.com once again), the S in the alternate spelling is a "parasitic S." What the heck is that? Can any linguists help out here?

Senate Budget Deal Close to Finished

| Wed Oct. 16, 2013 10:07 AM EDT

After last night's collapse of John Boehner's 87th attempt to forge some kind of plan to end the budget/debt ceiling crisis, the Senate is back in the driver's seat. And oddly enough, today's Senate plan is identical to yesterday's Senate plan except for one thing: the sole provision that Democrats wanted has been jettisoned. So now the deal is that Republicans get a small bone in return for extending the CR and the debt limit a couple of months. Matt Yglesias figures this is bad news:

I think there's a very strong chance we just do this all over again in the New Year. The conference committee will be at loggerheads over the question of tax increases. Hard-core conservatives will remain unreconciled to the idea of abandoning the struggle. Mainstream conservatives will continue to be loath to split the party. And the reality will be that the strategy of sticking with the majority-of-the-majority principle until the 11th hour and then passing bills with mostly Democratic votes is securing policy concessions from Democrats. So why not do it all over again?

I don't really disagree, especially given the fact that apparently no one in the Senate can really think of a good reason that they'll be able to meet their self-imposed December 13 deadline to come up with a permanent budget deal. But there is one reason to hold out a tiny ray of hope: midterm elections. The closer we get, the more likely it is that Republicans will be punished if they shut down the government yet again. Right now, the Senate deal extends the debt ceiling through February, and if you tack on another four or five months of "extraordinary measures," it means the next debt ceiling crisis will start to heat up in July. Do Republicans really want to go through yet another hostage-taking scenario that close to Election Day? Or would they rather spend the summer telling horror stories about the rollout of Obamacare?

I'd say the latter. They may be insane, but they're not stupid. So that leaves only the CR, and the odds are good that Republicans will basically win the CR battle by keeping sequester levels of spending in place. They won't be able to win agreement on a bigger plan, but they'll probably win the sequester battle—which, let's face it, is a pretty big win. And with that, they'll declare victory and go home.

Then, after next year's election, maybe it will be grand bargain time again. Or maybe it will be yet more gridlock as we begin the death march toward the 2016 primaries. I really have no idea.

BY THE WAY: Remember all those people who have been chastising Wall Street for not taking the threat of a debt ceiling breach seriously enough? Well, guess what? The financial folks were assuming that Congress, yet again, would make a deal, but not until the very last second. And right now, it looks like they were exactly right. Maybe they're not so out of touch after all.

Seeing the Debt Ceiling Fight From the Other Side

| Tue Oct. 15, 2013 8:55 PM EDT

As the debt ceiling fight drags on, we're seeing more and more reporting about just what it is that motivates tea partiers to be so frenzied on the subjects of Obamacare, the national debt, and government spending in general. Roughly speaking, the conclusion of these pieces of ethnography is that tea partiers have an almost panicky belief in several things:

  • The growth of the welfare state is sapping the strength of the country as more and more people are allowed to live off the taxes of others.
  • Obamacare is the tipping point: if it's allowed to stand, the fight against welfare entitlements is lost.
  • Likewise, the United States has reached the breaking point on its national debt. If it's allowed to keep growing, the country is doomed.
  • Refusing to raise the debt ceiling may be tough medicine, but it needs to be done in order to rein in spending right now.

If you believe these things, then you wouldn't care about polls or charges of hostage taking or any of that. You'd feel like you were literally fighting a war for the future of your country, and anything is worth the cost. Shut down the government. Breach the debt ceiling. Do anything. Just make sure to stop the spending, rein in welfare programs, and stop Obamacare. The fate of the United States literally depends on it.

But there's more to it. A lot of tea partiers just flatly don't believe that breaching the debt ceiling is the big deal that liberals are making it out to be. Not only does spending need to be cut anyway, but it's not even that hard. This is how you get interviews like this one, from Brett LoGiurato of Business Insider. He's talking to David Biddle, a GOP state committeeman who lives in Rep. Ted Yoho's Florida district:

"There's a scare tactic out there that if we breach the debt ceiling and default, there's just no more money coming in, and that's just not the case," Biddle said. "There's money to be allocated different ways. And maybe you have to make some cuts somewhere that might not make everybody happy, but at some point, you have to say, enough is enough."

So what can we cut? Social Security? Medicare? Those are the big, long-term problems on our docket.

"No one's going to cut Social Security or Medicare. That's another scare tactic," Biddle said.

So what can we cut now?

"You can start with foreign aid. Cut that out. You can cut, you know, federal arts ..." Biddle said.

"There are a lot of grants," adds Bob Clemons, a director of finance for the local school board.

"Grants. There's a lot of grants," Biddle confirms.

There's a pause for about 10 seconds.

"It's a big problem," Clemons said.

"It is. It is," Biddle said.

Like a lot of people, Biddle simply doesn't accept that refusing to raise the debt ceiling is a big deal. He thinks there's plenty of spending that can be cut if we have to. He doesn't know what, and apparently he doesn't want to start talking about welfare in front of a reporter from New York, but he knows it's there. Given all that, what's wrong with using the debt ceiling as a hostage to force spending cuts or the end of Obamacare? It's just ordinary leverage, not a threat of financial Armageddon.

For more, read the whole piece. It's worth a few minutes of your time.

Just How Bad Is the Obamacare Website, Anyway?

| Tue Oct. 15, 2013 5:44 PM EDT

I've been corresponding with a friend about the problems with the federal Obamacare website, and I have to admit that I'm having second thoughts about my initial reaction. Back on October 2, it looked to me like the problems were serious, but nothing all that out of the ordinary for a big software project. My conclusion: "Before long, the sites will all be working pretty well, with only the usual background rumble of small problems. By this time next month, no one will even remember that the first week was kind of rocky or that anyone was initially panicked."

That might still be the case, and certainly one of the lessons of big software rollouts is that you always reach a point when you're finally convinced that you really are well and truly doomed—and that's often the point when things start to get better. Maybe that's where we are now. But the reporting we've seen recently about the nature of the Obamacare problems certainly suggests otherwise. The bugs seem deep and profound. So why has this turned out to be so much worse than I thought it would be?

My guess is that I didn't take schedule slippage into account. I've worked on several projects that seemed disastrous at the time, but part of the disaster was the very fact that everything was late. It simply took much longer to build the product than we thought, so we ended up shipping months after we'd originally planned. Even at that there were still plenty of bugs, but they were mostly tractable. Bad, but tractable.

With Obamacare, however, they weren't allowed to slip the schedule. They had to ship on October 1. Period. And so now I find myself thinking back to some of those difficult projects. What would have happened if instead of slipping the schedule, I had been forced to ship on the original release date? Answer: the software flatly wouldn't have worked. It wouldn't just have been bad, it would have been an existential catastrophe. And it would have taken many months to fix, not many weeks.

So perhaps that's where we are with the Obamacare site. I hope not, but it's sure starting to look that way. And if things really are this bad, I really, really hope there a Plan B. Beefed up phone banks. Paper and pencil. Something.

Alternatively, maybe the reporting on this stuff has now swung around to being too pessimistic. Maybe the biggest problems will get sorted out in the next few weeks and everything will be OK. Stay tuned.

POSTSCRIPT: And while I'm at it, I have to add my voice to all those who are sort of agog over the missed chance on this from Republicans. Under normal circumstances, this stuff would be front-page news, with the Obama administration hunkered down and taking hailstorms of flak from all directions. Instead, the shutdown has sucked all the oxygen out of the room and has even provided a built-in excuse for all the website problems. For a party that has dedicated nearly its entire existence to trashing Obamacare, Republicans sure have scored an own goal here.

New House Shutdown Proposal Is a Deliberate Attempt to "Sabotage" the Senate Deal

| Tue Oct. 15, 2013 1:04 PM EDT

Ramesh Ponnuru provides us with a brief summary of today's Republican budget proposal in the House that "changes the Senate plan in several ways that are designed to make it more palatable to Republicans." I'll provide an even briefer summary: it removes the one thing Democrats wanted and replaces it with four new items that Republicans want.

Ezra Klein writes that "on a policy level, there's really very little difference between this and the Senate deal." That's true. But there's a huge difference in principle: the Senate plan is a genuine deal, giving Democrats something they want and Republicans something they want. The House plan, as usual, is a laundry list of Republican demands that offers nothing in return except a short-term extension of the debt limit and a short-term CR. The wish list might be smaller than it used to be, but the House deal very plainly still uses the debt ceiling as a hostage for the passage of a set of Republican demands. Greg Sargent confirms that Democrats understand this perfectly well:

Dem Rep. Chris Van Hollen, a key ally of the Dem leadership and White House, told House Democrats at a private meeting today that a vote for the new House GOP plan is a vote for a deliberate Tea Party effort to sabotage the emerging Senate deal.

In an interview with me, Van Hollen strongly suggested it will get no Democratic votes, which could call into question the ability of Republicans to pass this plan through the House, as some conservatives are already balking at it because it raises the debt limit.

“This has no Democratic support,” Van Hollen told me. “It is a recipe for default. The Democratic leadership told the caucus that a vote for this is a vote for default and for keeping the government shut down. Democrats understood that this is exactly what this was.”

This is going nowhere. President Obama has set out one thing very clearly: he won't make concessions to Republicans as a direct quid pro quo for raising the debt ceiling. That's what the House deal does. If Democrats supported it, they know perfectly well that the result would be yet another list of demands next year when the short-term extensions run out. It's dead on arrival.

UPDATE: As it turns out, the Republican plan couldn't even get enough Republican votes in the House. So everything is back on the Senate's doorstep now.

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Obamacare's State Sites Are Doing Better Than the Federal Site

| Tue Oct. 15, 2013 12:40 PM EDT

With all the (increasingly) bad news we've been hearing about the Obamacare website, someone asked me yesterday if it was only the federal site that was a disaster or if the state sites were also in bad shape. As far as I know, the answer is that most of the state sites have some problems here and there, but are basically working OK and getting better. Today, in an interview at WonkBlog, Robert Laszewski, the president of Health Policy and Strategy Associates, confirms this:

How are the state exchanges functioning?

They’re not seeing anything like the federal problems. I should say that if you’ve seen one state you’ve seen one state. But to generalize, the vast majority of states really did a good job testing. Some of them didn’t open up with everything. Now, enrollment is not great, but that’s because every one of them had real glitches. And in the states, those actually were glitches — not a train wreck. So we still don’t have an accurate picture of how many people will sign up. I think if you look at some of the states that opened fairly smoothly, like Maryland or Connecticut or Kentucky, they all had problems but in two weeks we’ll have a better sense of how they’re running. Enrollments are smaller than they need to be right now but the federal publicity is hurting them. The guy in Maryland doesn’t know he’s not on a federal exchange.

I'm not trying to downplay the problems with the federal website, which are certainly starting to look even worse than we thought at first, but this is worth knowing. The exchange software isn't an impossible problem to solve, since apparently 14 states have managed to meet the deadline with nothing more than a rocky start.

In the meantime, I assume that telephones are still working and it's possible to sign up for Obamacare over the phone if you live in a state that's on the federal exchange and therefore has an unusable website.

Austerity Policies Have Probably Cut Economic Growth in Half This Year

| Tue Oct. 15, 2013 11:44 AM EDT

In the past, I've extrapolated from a variety of CBO reports to estimate the effect of austerity on the U.S. economy. Today, via Paul Krugman, I see that Macroecomic Advisors has produced a comprehensive estimate of the total effect of bad fiscal policies. Their conclusion: austerity policies since the start of 2011 have cut GDP growth by about 1 percentage point per year—and the bad news got even worse in the first two quarters of this year as the sequester kicked in. Add in additional economic contraction caused by the budget/debt ceiling crisis, and the total hit to growth in 2013 might clock in at about 1.5 percentage points.

In other words, the combined effect of past budget deals + sequester + fiscal cliff + debt ceiling crisis is probably a reduction of about half in our economic growth rate this year.

Let me repeat that: Republican austerity policies have probably cut economic growth in half this year and raised the unemployment rate by 1.4 percentage points. Heckuva job, guys.

We'll Probably Hit the Debt Ceiling Next Week, Not This Week

| Tue Oct. 15, 2013 10:19 AM EDT

Just a quick note about the debt ceiling battle that I think is getting a bit lost: although the Treasury Department hasn't officially modified its October 17 estimate of doomsday, it seems almost certain that it's no longer the most likely date that we run out of money to pay our bills. The government shutdown hasn't stopped a ton of spending, but it has stopped some spending, and the Bipartisan Policy Center's most recent analysis of cash flow suggests that money will run dry sometime between October 22 and November 1.

So if October 17 comes and goes and Armageddon hasn't arrived, don't be too surprised and don't listen to conservatives who claim that this means the whole thing has just been a big scam all along. We're still on track for doomsday, but most likely it will arrive next week, not this week.

The Debt Ceiling Explained in 10 Short Sentences

| Tue Oct. 15, 2013 5:00 AM EDT

For most of the past year, the Republican Party has been threatening to refuse to raise the federal debt limit unless Democrats give in to a broad and varying set of demands. To understand just how reckless this brinkmanship is, you have to understand just what the debt limit is and what it means to breach it. So here's an explanation in 10 short sentences:

1. On May 19, total US debt reached $16.7 trillion, the maximum currently allowed by law.

2. The Treasury Department has been playing various games since then to continue paying all our bills while still technically remaining under the debt limit, but within a few days they'll run out of tricks and the government will no longer be allowed to spend more money than it takes in.

3. These Treasury tricks are very much not business as usual, and the fact that we've been reduced to these kinds of shell games means that normal governance is already dangerously crippled.

4. The Congressional Budget Office estimates that in FY 2014 (which runs from October 2013 through September 2014), total federal income will be $3,042 billion and total spending will be $3,602 billion, a difference of $560 billion.

5. This is the amount of debt we need to issue to pay for everything in the budget, which means that if the debt limit isn't raised, we need to immediately cut spending by $560 billion, or $46 billion per month.

6. That's roughly the equivalent of wiping out the entire Defense Department; or wiping out two-thirds of Social Security; or wiping out all of Medicaid + all unemployment insurance + all food assistance + all veterans' benefits.

7. What's worse, because the government's computers are programmed to simply pay bills in the order they're received, it's not clear if the Treasury can specify which bills get paid and which don't.

8. This raises the additional risk that interest on treasury bonds might not get paid—something that would put US debt in default and could be disastrous in a global economy that depends on US bonds being rock solid.

9. So those are our choices if Congress fails to raise the debt limit: Either we suddenly stop paying for critical programs that people depend on, or we default on US treasury bonds—or both.

10. The former would immiserate millions of people and probably produce a second Great Recession, while the latter would likely devastate the global economy.

Not much of a choice, is it? That's why it's time for Republicans to stop playing games with the financial equivalent of nuclear weapons and agree to raise the debt limit.