Monday, July 30, 2012

Addictionist Perspective: Narcotic Market Solutions

A complete discussion is insufficient without clear solutions (please see and for the foundational assumptions for this post).  After considering narcotic issues as a problem of medication pricing, several solutions emerge. 

First, legislation is needed to allow the return of unused narcotics to approved health care and law enforcement facilities.  This would be akin to states recycling aluminum cans using the recycling machines at grocery stores and recycling centers.  Without making a legal way to return narcotics, the only current disposal methods are flushing medicines down the toilet, throwing them in the garbage or selling them on the street; none of these options are appealing.

Next, narcotic packaging needs to change from dispensing pills in bottles to dispensing individually packaged blister packs for several very specific reasons.  First, simple blister packing can help prevent overdosing ( by reducing impulsive behavior.  There are obvious ways around this, but with patients with impulse control problems, it is an effective aid to assist self-control.  Second, this packaging could contain lot numbers for the pills and a printed, standardized return price.  This would solve problems during the return process such as medication legitimacy (via lot number, tamper free packaging, etc.), having a universal return price for each medication type (clearly printed on the blister pack; it could be cross referenced with the lot number), and accountability (tracking where medicines are traveling via check out at the pharmacy point of pick up and check in at point of return).  Third, machines similar to can recycling machines would be needed for scanning the packaging, identifying how many blister-packed pills are present, and dispensing the cash for the pills returned.  This would automate the return process, reduce pharmacist time spend on returns, and lock the narcotics in a machine similar to an ATM for safe disposal with armored vehicles.

As a more controversial step, insurers need to substantially step out of the role of paying for short-acting narcotics.  As long as the subsidization of narcotics continues, there will be rampant mispricing.  Short-acting narcotics should be non-covered medications with the exceptions of an objective diagnosis of cancer, a recent diagnosis of an inpatient surgical procedure and hospitalization, or a certification of hospice care.  If insurance stopped paying for short-acting narcotics, then a truly efficient payment and return process can be constructed and implemented. 
Finally, a return price must be set on the narcotics truly reflective of the medicine’s value.  As a concrete example, if one went to the dentist, had a tooth pulled, and received 30 pills of Vicodin for post-operative pain, the price needs to be set high enough to incentivize the return of the medication.  So if the cost of the 30 pills of Vicodin was $150 and only 5 were used, a $5 return policy would mean a return value of 25 pills would be $125 dollars.  That sum would definitely incentivize most people to return their unused pills.  If the previous steps were set up, an obvious choice emerges:  which is more palatable, returning your pills to the pharmacy for a clean, legal and hassle-free $125 or selling them on the street with the risk of physical harm, felony charges, and jail time for a possible but not guaranteed $125?  If costs of narcotics rise, physician practices will change too (fewer pills would be prescribed once the economics change).

What would be the net result of these changes?  There would be decreased subsidization of narcotics, clear return policies that are safe and effective for patients, barriers preventing impulsive use of medication, and greater transparency in monitoring prescription drug mobility in the country.  Hopefully, these thoughts will not fall on unengaged minds.  Change is needed. 
Have better plans?  Please share them.

Tuesday, March 27, 2012

Narcotic Subsidization: Deadly Price Illusions

In the current U.S. health care system, the government and insurance companies subsidize the black market for narcotics (for more on this, please read:  By setting prices for narcotic pills far below the market rate between individuals, they subsidize the street narcotic industry and set up a false price paradigm that affects the price perceptions in medicine.  This pricing malady is incorporated into insurance prior authorization (PA) algorithms and consistently distorts clinical care delivered to patients.

In an effort to reduce costs, government payers and insurers use a process of PAs to control the behavior of patients and physicians.  It is basically behavior change mediated by discouragement (a form of hassle-based rationing).  If the barriers and criteria to meet the PA are too high, physicians and patients get discouraged and often decide to pursue a pathway with less resistance.  The problem is that many PAs incorporate subsidized narcotic price information which makes the use of narcotics seem like the most cost-effective option.   Vicodin is preferred by insurance companies, and they will use a PA to limit the use of medications that seem to be more expensive.
An example of this distorted PA process can be found when comparing Vicodin to Celebrex (an effective anti-inflammatory medication).  Which is cheaper?  It depends on what prices are used: the market rate or the subsidized rate.  Vicodin’s street price is $600 for 120 pills on the street.  The cash price for a month’s supply of Celebrex 200mg daily on is $143.00 (  That makes Vicodin more expensive (4x more expensive!) than brand anti-inflammatory medication when using its nonsubsidized price.  Which medicine gets the hassle of a PA?  Why Celebrex of course!

Suboxone (a partial opioid agonist used for opioid addiction treatment) costs $426 per month for 60 films at (  Again, Suboxone is cheaper than 120 tablets of Vicodin ($600) once the subsidy is stripped away.  Cash MRI prices in Michigan are as low as $400 making Vicodin more expensive than MRI’s.   Physical therapy visits are also cheaper than Vicodin therapy.   Actually, most things in outpatient medicine are cheaper than Vicodin.  So why do so many useful medications and therapies have PAs while Vicodin gets easily paid without any hassle?  In classic “garbage in, garbage out” fashion, if subsidized price data for Vicodin is used, it will always appear cheaper than other options even though it is actually more expensive.

These structural price defects in clinical care pathways create the unintended consequence of pushing patients and physicians down the dangerous pathway of using narcotics more frequently than needed.  With more narcotic prescriptions come higher amounts of black market narcotics, more overdoses, and more cost to the health care system as addiction disorders rise.  In 2009, 31,758 patients died in the US due to unintentional poisoning (CDC:  How many more people will have to die before the subsidization of narcotics ends?

What can be done to stop the flooding of our streets with prescription narcotics?  The next post on this subject will focus on concrete solutions.  The first step:  stop the massive subsidization of narcotics.

Tuesday, February 28, 2012

Addictionist Perspective: Prescription Drug Economics 101

The national drug problem in the United States perplexes many people.   Reports of media stars with drug problems highlight the societal pervasiveness of addiction.  ER visits for narcotic abuse and overdoses continue their rise; the Center for Disease Control (CDC) publishes chilling reports on the escalation of drug overdoses (  Within a stone’s throw, a person in the U.S. can obtain prescription narcotics anywhere in the country.  Why is this?

If the economics are examined, the answer starts to unfold.  Money as defined by Wikipedia is:

“any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context” (

Because of the deep supply chain of narcotics, high demand from end users, and abundant liquidity of the black market for prescription drugs, Vicodin, Xanax, and Oxycontin and other controlled substances have become a form of money.  These tablets are portable, divisible, store value, and are used to buy, sell, and trade goods.

It is amazing to see the economics of controlled substances described in real dollars.  It takes only pennies to manufacture opiate medications like Vicodin.  On the street, Vicodin can go from $3.50 to $5.00 per pill.  In essence, Vicodin is a $5 bill.  On the street, Oxycontin is often priced for around $1 per milligram making a single tablet of Oxycontin 80mg around $80 to $100 in value.  So a script written for 120 tablets of Vicodin is authorizing someone to obtain 120 individual $5 bills or around $600 dollars.  Prescribing 60 tablets of Oxycontin 80mg is like handing someone $4,800 in a 2 inch bottle!  Prescriptions of 60 tablets of Oxycontin enable one to enter the middle class.  Medications are diverted into the black market for more than one reason, but the economic reason is easy to see when tablets are converted into dollars.

Think about the spread between the cost of obtaining narcotics and the price one could sell them for in the black market.  A $10 copay for 120 Vicodin equals around 60x levered return ($600/$10).  A $40 dollar copay for Oxycontin equals a 120x levered return ($4,800/$40).  Hedge fund managers can only dream of making these types of spreads so reliably. 

 In summary, narcotic medications are a form of money.  The quicker this is realized by policy makers, insurers and physicians, the faster solutions can be formulated.  Until narcotics are appropriately priced in the prescription market, the entire pricing system of medicine is distorted.

 In the next post, the rabbit hole gets deeper. 

Tuesday, February 14, 2012

Perceived Cost Bias: A Mental Menace

One of the most interesting perception phenomena I have encountered in clinical medicine is a person’s perception of medical costs.  Interactions with acute care hospitals seem to be the driving force in the formation of high cost perceptions.  In short, the amazingly high bills create sticker shock.  The natural human tendency is to generalize the hospital cost experience and apply that cost perception to all facets of medicine.   No doubt, there are lab tests and medications that are incredibly expensive, but are all parts of medicine equally expensive? What about medical care that occurs outside of the hospital?

What is the cost of a cholesterol panel?  Do you know?  What is your best guess?  Write it down. 

When I ask, I usually hear guesses ranging from the $50’s to the $400’s. What is your guess?  Seriously, write it down.

If you shop for the price of a cholesterol panel from the websites listed on HealthScepter, you can find a price for as low as $25.00 from (  If you guessed significantly higher than $25.00, then you can see how the perceived cost bias has changed your thinking. 

This perception problem is more than just an interesting academic exercise.  Many people do not seek follow up testing needed to control chronic conditions due to the perception that the price will be so high that they cannot afford it.
So here is my challenge for you.  If you need some lab tests, use HealthScepter to check the prices of the labs you need.  If you have skipped a necessary test because you think the cost will be too high, check to see the direct cash price.  Delaying care can be serious.  So start comparing prices.  It is time to Rule Your Healthcare®. 

(Disclosure:  HealthScepter does not currently receive any revenue from