100% FREE MEDICINE IS A BAD HEALTH POLICY

PAMI stopped granting 100% free coverage for medicines. From now on, only the lowest-income affiliates and those who apply for an exception will have free medicines. The rest will have to finance part of the cost of the medicines they consume. The change generated a broad and energetic rejection, arguing that a very vulnerable segment of the population (the elderly) is being seriously harmed. 

Prices play two fundamental roles in the functioning of the economy: they encourage production and induce responsible consumption, avoiding overconsumption. The case of electricity is very exemplary. When the government decided to impose a low price for electricity, electric companies were discouraged from producing and distributing electricity and families were encouraged to increase consumption, which resulted in repeated blackouts. 

In the case of medicines: Does free distribution promote overconsumption? No data is available to give a conclusive answer, but one way to provide evidence is to compare the expenditure on medicines of people with and without coverage. According to the National Household Expenditure Survey 2017 – 2018 of INDEC corresponding to the entire population, the following relationship is observed:

• Urban households allocate 2.7% of their expenditures to the purchase of medicines.
• Families without coverage allocate 1.7% of their budget.
• Families with coverage allocate 3.0% of their budget to the purchase of medicines.

These data show that families with coverage spend much more on medicines than families without coverage. Given that families with coverage pay between 50% and 60% of the price of the drug (the social security system pays the remaining 50% – 40%), total spending on drugs by families with coverage would be equivalent to 6% of the budget. Although families without coverage may be underconsuming, the more than 3 times difference with families with coverage is highly suggestive that the latter may be overconsuming drugs. In other words, the indiscriminate distribution of free drugs may be generating an exaggerated consumption of medicines.

Drug overconsumption is as harmful to health, if not more than underconsumption. The reason lies in a concept called iatrogenesis, which is the unwanted negative side effect caused by a legitimate and endorsed medical treatment. That is, even when the drug is well prescribed it has unwanted negative side effects. These negative effects are powered when both the physician and the patient are induced to wasteful consumption. This is the reason why a good health policy is based on ensuring responsible drug prescription and avoiding free access. The only exception is to provide free access for patients who do not have the financial means to pay for a prescribed drug with strict control.

A simple rule is that low-priced drugs should be 100% paid out-of-pocket, medium-priced drugs should be paid 60% out-of-pocket and 40% by coverage, and high-priced and chronic drugs should be 100% paid by coverage. This combination does not induce overconsumption and reduces the risks of underconsumption. For low-income patients, a higher percentage of coverage can be supplemented to reduce out-of-pocket spending. In this sense, the rule adopted by PAMI is not good. It maintains 100% free of charge for low-income retirees (leaving the door open to over-consumption by the retiree and third parties related to the retiree) and very bureaucratic procedures for retirees who exceed that income threshold.

The free and indiscriminate distribution of medicines is a bad policy. It generates exaggerated rents for drugs manufacturing and distribution companies and harms retirees. Both because of the risks derived from overconsumption and because what is overspent on drugs is underpaid in doctors’ fees.