It astonishes me that current and future Medicare beneficiaries are raising concerns about future legislation: in the absence of reform, these programs will fail!

The Medicare Part A program (the hospital insurance program) runs out of money in just a few years. There is no statutory authority to fund this program without new legislation: it is entirely unclear how the program functions once the trust fund is exhausted.

The Medicare Part B program (outpatient and physician services, primarily) is not going to run out of money (it is funded via beneficiary premiums and federal tax revenues). But, written into statute are draconian cuts to physician reimbursements. If allowed to occur, many physicians will opt out of the program, leading to dramatically reduced access. Thus, the program will begin failing our Medicare beneficiaries unless there is legislative change.

Only the Medicare Part D program (the prescription drug benefit) faces no immediate challenge.

Medicare is at great risk in the absence of reform. It is beyond the scope of this posting to offer real solutions, but clearly we need to communicate with the public about how the reform effort will make Medicare more secure, not less.

It is an insult to the American people to insinuate that the current health-care system only needs a few tweaks to rein in escalating costs. I favor free market capitalism, but it has not worked with health care. Private, for-profit insurance companies have not found a way to affect change to meet the growing demands for health care in the nation. They have not been able to create an inclusive system for all Americans and they have had the time and means to do it. We have not seen any innovation on their part that warrants their burgeoning profits.

Medicare and Medicaid have been waylaid by out-of-control prescription costs and a doughnut hole that has become a black hole. Only talk of reform that threatened to substantially impact the bottom line motivated the drug industry to react to the health-care crises.

The only way to reduce costs in the current system is through sweeping reform. The kind of reform that comes from eliminating the middleman and increasing buying power. Do we really need private for profit insurance companies as a conduit to health care for Americans? Wouldn't citizens as a unit be able to negotiate better pricing from drug companies? Perhaps it seems reasonable to consider a one-payer public health plan as a more effective way to cut costs over the current system.

The long term economic challenges we face cannot be completely fixed without also addressing health-care costs that could threaten to undermine the financial soundness of the nation for years to come.

As our nation's leaders tackle complex health legislation, they would do well to consider three areas of investment that both save dollars and make sense:

First, we must increase efforts to manage and prevent the chronic diseases that currently claim up to 75 cents of every health-care dollar spent in the United States. Improvements in prevention and early detection could reduce costs of chronic disease by $1.1 trillion in 2023: $905 billion from gains in productivity and $218 billion from avoided treatment expenditures.

Second, an investment in health information technology would assist doctors in curbing patients' failure to take their medicines as prescribed -- a major public health issue estimated to cost the U.S. economy $100 billion a year. The failure to take a medicine as prescribed can lead to unnecessary disease progression, disease complications, reduced functional abilities, a lower quality of life and even premature death.

Third, health legislation must recognize the role of prescription medicines in helping people lead healthier lives and preventing more serious future health problems that would create an even greater financial burden on patients and their families. Studies show that newer medicines reduce hospital and other non-drug costs. For each additional dollar spent on newer pharmaceuticals, more than $6 is saved in total health-care spending. And more than four of those dollars come from savings in spending on hospital stays.

A focus on disease prevention and management, improved technologies and innovative medicines will improve health outcomes and lessen existing health system strains on our economy. One estimate found that reducing cancer death rates by 10 percent alone would be worth roughly $4.4 trillion in economic value to current and future generations.

Saving money on health care is a timely and necessary priority. Yet budget forecasts and cost projections must not obscure the fact that good health is priceless.

A recent series of Washington Post headlines announced an agreement crafted by Senate and administration officials with the pharmaceutical manufacturers. As reported, the voluntary agreement would lower the cost of prescription drugs to low and middle income Medicare recipients. Eligible individuals would receive a hefty discount on drug purchases that fall into the dreaded "doughnut hole" thereby reducing their out of pocket costs. What's not to like?

The only thing really publicly known about this deal is that the industry will provide a 50 percent discount for drugs sold in the the coverage gap or, "doughnut hole." There are two ways to protect people in this predicament. One is to lower the cost of drugs in the doughnut hole. The other is to keep people from reaching it in the first place. About half the people who wind up in the doughnut hole get there because they have been prescribed expensive brand name drugs rather than less expensive generic drugs that are just as effective. Integrated systems like Kaiser Permanente and Group Health Cooperative prescribe generic drugs much more frequently than the rest of the medical community and their patients reach the doughnut hole about half as often as other Part D beneficiaries.

The others who reach the doughnut hole don't really have a choice. Either the drugs they are taking have no generic alternatives, or they are using very expensive medications such as the newer "biologics." Don't get me wrong; these new generations of drugs are an important and powerful therapy for patients. However, virtually every Medicare beneficiary taking biologics will reach the coverage gap and be forced to pay for medication out of their own pocket. It's very important for these beneficiaries that these discounts apply to these very expensive drugs as well, and we should look carefully at the details of the agreement to be certain this is the case. That's an important detail to know.

This is a good start to the vexing problem of out-of-control drug costs. It will help some of the Medicare beneficiaries who face a series of heart-rending choices based on the cost of their drugs when they hit the doughnut hole. Which medication do I fill? Can I skip a month?

However, while this may very well provide an important benefit for vulnerable seniors, it is unlikely to lower Medicare costs. And the savings from those discounts do not accrue to help fund health reform. It will also be important to see what else the industry has agreed to that will contribute to lower health system costs and help to make expanding coverage under health reform more affordable.

The announcement that drugmakers will offer 50 percent discounts to Medicare beneficiaries who fall into the Medicare Part D doughnut hole is excellent news for seniors. Drugmakers will help to bridge the gap in coverage that forces roughly 15 percent of seniors stop buying medications when their annual prescription drug bill reaches $2700.

But this is, as President Obama said, "a first step." Pharma is going to have to do more.

Look at it this way: this year, prescription drug sales in the U.S. will total $252 billion. http://www.marketresearchbulletin.com/?p=47 (Pundits often say that spending on drugs accounts for just 10 percent of the $1.6 trillion we, as a nation, lay out for health care. But that figure includes only the medication that you and I buy retail, at the pharmacy. Add in the drugs that are administered in hospitals, and in doctors' offices and Pharma's slice of the pie is much larger.)

Meanwhile, if sales continue to rise--and drug-makers continue to hike prices -- spending on drugs is expected to double between 2014 and 2018. By 2019, Pharma hopes to rake in over $500 billion in U.S. sales.

In that context, giving up $80 billion over ten years is not a huge sacrifice. Pretend that the $80 billion is spread out evenly, $8 billion a year. This means that in 2019, instead of showing revenues of $500 billion, the industry would have to make do with $492 billion.

But unless the GDP doubles, we cannot afford to spend $492 billion on drugs in 2019. Why does Pharma charge U.S. patients sky-high prices? Because it can. No one is pushing back. In other countries governments negotiate to protect dying patients from being gouged.

Meanwhile, Pharma is spending twice as much on marketing and advertising as it does on research. Perhaps it should re-think that spending -- and pricing. Either that, or prepare to negotiate. Together, Medicare and a public sector insurer should be able to make drugs as affordable as they are in France.

As a practicing primary care physician (internal medicine), I think it is great that the pharmaceutical industry is addressing the cost of health-care reform in our country. Previous efforts to address the pharmaceutical needs of seniors (via the Medicare prescription drug benefit) fell woefully short of what was needed. Personally, I'd like to see the cost of medications become a non-issue for seniors and all patients. No one should have to chose between eating, paying an electric bill or mortgage and taking their medications at the effective dosage. Everyone knows that taking a little bit of one's medication is like "being a little pregnant:" either you are or you aren't; either you do or you don't!

The naysayers that clamor about whether the pharmaceutical companies, AARP, Republicans or Democrats could have done something more along this vein back in 2006 versus now are clearly not thinking about the team effort it is going to take to get significant health-care reform now in 2009. What was not done in 2006 or in years past to bring us to this point is not what is important here. What is important now is that we need all sectors of our great nation to come together to move health-care reform forward.

From 2001-2002, I was fortunate to spend a year in Washington, D.C., as a legislative fellow, primarily helping out on the Democratic Caucus Medicare Prescription drug legislation (which failed to garner sufficient votes on the floor of the Senate). One of the frustrating outcomes of that year was the eventual (one year later) passage of a benefit with a rather large "doughnut hole." During the 2002 floor debate, one Senator likened the (then current Republican, or "tripartisan") benefit to a bagel with a very small hole. But that belied the fact that there was essentially no meaningful financial assistance for a large chunk of prescription drug spending, among those with relatively high prescription drug costs, representing a significant minority of the beneficiaries. From a clinical standpoint, this ran counter to good practice, discouraging compliance with necessary prescription drugs and potentially foiling their long-term benefits.

Seeing this "doughnut hole" disappear or even shrink is surely a good thing. However, it is not clear that the nominal financial sacrifice ($80 billion over ten years?) is what it seems. For the pharmaceutical industry, the compromise on pricing likely yields a larger marginal profit than the alternative. If this means that there are no more "sacrifices" to be made from the pioneer drug industry, I fear that real, cost-containing reform will be more difficult to achieve than popularly acknowledged. We will not find physicians, hospitals, nor medical device manufacturers (among other groups) ready to make the necessary sacrifices if the pharmaceutical industry can obtain a market expansion in the guise of cost-savings.

It's deja vu all over again: the prescription drug industry's "give back" feels very much like the tactic adopted in the the Clinton reform era when drug prices moderated. Then, the not-so-invisible hand of the market motivated the industry to lower the rate of price increases as the threat of price controls loomed.

Now, the motivational threat is the repeal of the "non-interference" clause in the Medicare Part D law. A repeal would allow the federal government to negotiate prices with drug companies the way other nations do in other parts of the world. For now, negotiations occur only in the private sector.

Discounting and give-backs may be a practical short-term tactic, but the real challenge is how life science companies will bring value to patients and clinicians -- and how to price based on true value.

The widely publicized pledge by the Pharmaceutical Research and Manufacturers of America (PhRMA) is welcome news--but only as a beginning, not an end.

The proposed $80 billion in savings over 10 years is not enormous when put into perspective. According to a Health Affairs journal article that breaks down 2007 U.S. health-care expenditures, this country spends $230 billion annually for prescription drugs, with 20 percent paid by Medicare. The annual growth of these costs has averaged 6 percent, with even higher increases for Medicare. As baby boomers age, these drug expenditures will climb. It's a sure bet -- and PhRMA knows it.

American taxpayers and employers must pick up this growing tab. Unlike other countries, our government does not use its purchasing power to reduce Medicare pharmacy prices. My Detroit patients can cross the bridge into Canada and enjoy a substantial discount for most medications. This is because our friends to the north negotiate "hard-ball" with drug companies. This is the outcome that PhRMA fears will happen in the U.S.

The pharmaceutical companies have contributed mightily to improving health around the world and deserve our thanks. They have also been rewarded with large profits, the majority of which are earned in the U.S. Like all sound businesses, they have recognized the opportunity and seized it. This has been good for their shareholders--but not so good for U.S health-care costs.

While PhRMA's latest offering sounds attractive, it is a placebo for a more fundamental and politically tough issue. Americans need the pharmaceutical industry--but they do not need prescription drugs priced more expensively than anywhere else in the world.

The big question is whether our government will use its considerable purchasing power to cure this problem--or be satisfied with a sugar pill.

My first thought when reading this week's inaugural question was: impossible to answer! Too many moving parts. Too many stakeholders to bring aboard. Too many problems to fix, most of which are so deeply intertwined that attempting to fix them one at a time would result in too many missed opportunities.

Thus, after my own three day "analysis paralysis," I conclude that there cannot be a "first." We need a multi-tiered, simultaneous and thoughtful approach to reform.

First, one must remember that government is not stepping into this area because of paternalism or a lack of other priorities. Our federal, state and local governments are already deeply involved in the delivery, financing and regulation of health care. We already spend more from public sources alone (i.e., tax dollars) on a per capita basis than any other country, including public and private contributions. Ensuring that this spending (which is more than $1.2 trillion dollars annually) is productive (improving health, not just paying for low-value or no-value health-care) is a responsibility of our elected officials. On that basis alone, one should argue for payment reform from our largest federal program--Medicare.

Second, public goods will be under-provided in the market unless a public entity steps in. In this case, information about comparative effectiveness is quite clearly a public good. And while the stimulus bill has provided for initial financing of such research, it needs a sustainable financing stream and an infrastructure.

In order to pass and not just debate such legislation, we need broad stakeholder support. This must include physicians, facilities (acute and non-acute), health plans, pioneer and generic drug companies, biotechnology and medical device firms, important supporting personnel (including physician associates, nurses, and other health-care professionals), supporting technologies, the many providers of logistical support and the patient advocacy community (which understandably is concerned about wholesale change). Each has something to gain from any effort at extending health insurance to the 50 million who are uninsured; each must be engaged and committed to "bending the curve" so that future costs will be sustainable.

Our approach to reform must embrace our national priorities: eliminating the problem of the uninsured; making our spending sustainable for employees, employers, and the government (taxpayers); and a willingness to make mid-course corrections if and when we find that aspects of the plan are not perfect.