The 1962 Drug Amendments

As described in detail in the Chapter 3, these Amendments were the direct result of the Kefauver Hearings with the result, not Kefauver’s target, of requiring proof of efficacy for approving any new Drug. This had the effect again of increasing both the power and workload of the FDA.

While the concept of the Amendments can hardly be argued against - everyone wants her medicine to work! The new law was responsible for the putative, but vigorously argued, “Drug lag”. Peltzman (150) analyzed the economic effects of the “62 Amendments” and found evidence of four kinds of downsides. First, there was the number of new chemical entities reaching the market that was cut in half but was not combined with a concomitant decline in Drug problems from inefficacious Drugs. Second, the amount of new data required for clinical and other studies necessary for approval doubled the cost of developing and bringing of a new Drug to market. Third, the marketplace now dictated focusing on R&D for Drugs, with a high likelihood of success eventuating in higher profits, which in turn would lead to higher Drug Prices. Fourth (quoting another economist), the new law may result in “more risk of adverse reactions and less safety”. The background detail for Peltzman’s conclusion is provided in the reference.

The Orphan Drug Act

This 1983 Legislation was passed after years of deliberation to incentiv- ize research on Drugs with limited market potential, i.e., to treat conditions which affect a comparatively small part of the population.

Incentives provided to the Drug company under the Orphan Drug Act were these:

  • 1. Exclusive marketing rights for 7 years, after approval of the Drug, and this applies whether or not the Drug is patented.
  • 2. Tax credits for clinical testing.
  • 3. Grants and contracts to support orphan Drug research.
  • 4. Flexibility and assistance in the regulating processes. This includes authorization to physicians to administer the Drug prior to approval to patients even if they are not involved in clinical trials - a “compassionate” IND.

Medicare Catastrophic Coverage Act (1988) and Repeal of Same (1989)

In 1988, Congress enacted the Medicare Catastrophic Coverage Act to provide protection for catastrophic medical costs and to add a limited long-term care benefit. Because President Reagan refused to consider a tax increase to pay for this benefit, and the laws then in effect required any new program to not increase the deficit (called PAYGO), Congress required the beneficiaries, particularly those with high incomes, to pay for the benefit.

The beneficiaries, including the low-income beneficiaries who would receive the Drug benefit without added premiums, rebelled, and Congress repealed the benefit in 1989- It was yet another of those curious meander- ings to which Congress is sometimes prey. And, it costs money to pass a Bill and then legally to change one’s mind.

Rovner (286) describes the effect of the debacle as a result of “politics not substance”.

The real story of the rise and fall of the Medicare Catastrophic Coverage Act sends several ominous messages about the state of Congress and our political system, but the power of the senior citizens’ lobby is not one of them. Those who lived through this nightmare instead learned a lot more about the power of direct mail, the ease of manipulating the public with information that is simply wrong, the resistance recipients of federal entitlement programs feel toward change, and the lack of knowledge Americans have about programs that so directly affect their lives.


Finally in 2003, President Bush signed the Medicare Prescription Drug Improvement, and Modernization Act (MMA). Unlike the Medicare Catastrophic Coverage Act of 1988 and the Health Security Plan of 1993, there was virtually no strong political opposition to the MMA, except initially from the AARP. This new Medicare Part D would be financed in the same manner as Part B, namely, with 75% of its financing coming from the federal general tax fund and 25% from premiums paid by senior citizens. As mentioned earlier in this chapter, seniors were unhappy with what they perceived to be the lack of generosity in the benefit structure of the MMA but were reassured when the AARP vowed to fight for more generous benefits in the future. The pharmaceutical industry continued to voice its fears about eventual Price controls in the Medicare Program. Their fears were justified.

"Hillary Care" and "Obamacare"

In 1984, President Bill Clinton proposed a new program of “affordable” (sound familiar?) Health Care for all. The First Lady was appointed to head a Task Force on National Health Care Reform. Criticism began at once. There had been no “Hearings”, and secrecy was charged. To make matters worse, polls found that nearly 50% felt there were people better qualified than Hillary to head the Task Force. The proposed Legislation was declared dead in September 1994.

In contrast to Clinton, President Barack Obama left the details of his proposed Legislation to Speaker Pelosi and Senator Harry Reid. The President was not involved publicly in the details - “You can keep your plans. You can keep your doctor” - and, as noted, Speaker Pelosi hadn’t read it either, but as of this writing, it is still Law and calls for its repeal seem to be replaced by suggestions for modification.

Narcotics and Other Drugs of Abuse

While this topic is certainly fascinating and especially timely, it is definitely BTSB. Starting with the Harrison Narcotic Act of 1914, there has been a myriad of legislative, investigative, and regulative attempts to deal with this multifaceted problem. The opioid crisis is a clear and present danger and the Chinese Opium Wars of so long ago tell of the age of the problems. New Drugs, the products of legitimate R&D, have found their way into the abuse category. Marijuana is going through some sort of evolutionary process of acceptance, but the votes are by no means all in on that subject.

State Laws

Each of the States has its own Pharmacy Laws. The variations are many. Licensure laws for medicine, Pharmacy, and other professions are uniform in their ubiquity but characterized by their diversity. We visit these issues in Chapter 5.

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