The Hidden Dangers of Drug Shortages • America’s Real Immigration Crisis

To avoid the next drug-safety debacle, raise Medicare price caps

The outbreak of fungal meningitis has exposed more than one dangerous weakness in the U.S. drug supply network. Inadequate oversight of large-scale compounding pharmacies might be the most glaring; it was such a facility that produced the moldy steroid injections that have caused, at last count, 24 deaths and 317 illnesses.

Yet the outbreak also calls attention to the growing problem of drug shortages. From 2005 to 2011 the number of drug shortages in the U.S. rose from 61 to 251, according to the Food and Drug Administration. Until federal regulators can bolster the supply chain without compromising quality, we can’t be assured of reliable access to safe medicines.

Methylprednisolone, the drug that has caused the meningitis outbreak, was not technically in short supply. A brand-name form made by Pfizer is on the market. The cheaper generic kind ran out, however, because the two companies that make it, Teva Pharmaceuticals Industries and Sandoz, stopped doing so, at least temporarily. Some hospitals and clinics may have turned to compounding pharmacies for the drug to keep their costs down.

To get a sense of what might have happened, consider the forces that cause drug shortages. In most cases the medicines in tight supply are, like the steroid involved in the meningitis outbreak, older generic injectables, typically administered by a nurse, doctor, or other health professional. They also include antibiotics and cancer and nutrition drugs.

In an ordinary market, when one company’s production lines shut down, competitors step in to meet demand. The generic injectable drug business is different in that it is greatly influenced by the practices of Medicare, the largest U.S. purchaser of health care. As a Bloomberg Government study points out, Medicare rules from 2005 prevent reimbursement to providers for injectables and other drugs health-care workers administer from rising more than 6 percent above the average sales price, effectively limiting what drugmakers can charge. The cap has reduced suppliers’ incentive to expand capacity when shortages happen.

A federal law signed by President Barack Obama in July requires drug companies to notify the FDA six months in advance of anticipated problems that might lead them to shut down production of a drug. Still more helpful would be a change in the Medicare price controls — to either raise the cap above 6 percent or, as Ezekiel Emanuel, a former adviser to the Obama administration on health-care policy, recommends, at least do so when a shortage develops.

Strict adherence to Medicare’s price caps on injectable drugs may be penny-wise and pound-foolish. And it stands in the way of ensuring Americans’ constant access to safe drugs of every kind.

The U.S.’s inability to ease quotas on skilled immigrants is bipartisan lunacy

Immigration policy has barely surfaced in the U.S. general election. The larger picture remains contentious — and unavoidably so. How to deal with 12 million illegal immigrants, most of them productive and otherwise law-abiding residents of long standing? How to make the border more secure and how much weight to give that imperfectly attainable goal?

Yet on one critical component of policy — the treatment of highly skilled workers — a strong consensus exists that a more liberal regime is crucial for U.S. economic prospects. President Obama and Republican challenger Mitt Romney agree. Almost everyone who has given the matter a moment of intelligent thought agrees. Yet nothing happens.

It would be hard to exaggerate the lunacy of U.S. rules on skilled immigration. We know of no other advanced economy that skews its policies so severely against the workers in greatest demand. Most countries see themselves as competing to attract that kind of immigrant, recognizing that human capital is an important driver of economic success.

The U.S. compounds the idiocy of its cramped skilled-immigrant quotas with impressive thoroughness. For instance, by law it allocates applications among countries according to a half-baked notion of diversity, rather than according to its own economic needs. Many emigrants from India excel in engineering and other technical skills. Yet India’s quota, small in relation to its pool of outstanding applicants, artificially restricts their numbers.

The U.S. attracts the best students from all over the world to its universities and then deports them soon after they have received degrees. If an immigrant is lucky enough to obtain an H-1B visa — the prized document sought by most foreign graduates arriving to work for a U.S. employer — it can take years (if at all) to win permanent residency.

Cold political calculations by both parties have been holding back the reforms both sides claim to want. House Republicans arranged a floor vote last month on a measure that would have offered more residency visas to immigrants with advanced science, technology, engineering, and math degrees, but set it up to fail by reducing the number of visas overall (which Democrats oppose).

For their part, Democrats think it best to hold the skilled-immigration rules hostage until they can get a more comprehensive agreement (which Republicans tend to resist). We applaud the objective, because we too favor comprehensive reform of the system. But it is time to abandon politically motivated yet economically harmful strategies.

Making progress where the basis for agreement is slender or nonexistent is hard enough, as Washington has proved. Failing to make progress where agreement exists — on a policy issue of surpassing importance — is unforgivable.

To read Jonathan Alter on why Romney isn’t a moderate and Jonathan Weil on mandated audits, go to: Bloomberg.com/view

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