A succsess story for rationing

At the Intersection of Health, Health Care and Policy

Cite this article as:
Rudolf Klein and Heidrun Sturm
Viagra: A Success Story For Rationing?
Health Affairs, 21, no.6 (2002):177-181

doi: 10.1377/hlthaff.21.6.177

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M a r k e t Wat c h

M a r k e t Watc h
Viagra: A Success Story For Rationing?
A possible blueprint for coverage of other new, much-promoted drugs.
by Rudolf Klein and Heidrun Sturm

ABSTRACT: The 1998 launch of Viagra prompted widespread fears about the budgetary
consequences for insurers and governments, all the more so since Viagra was only the first
of a new wave of so-called lifestyle drugs. The fears have turned out to be greatly exagger-
ated. This paper analyzes the rationing strategies adopted in four countries (United States,
Britain, Germany, and Sweden), relates them to the characteristics of different types of
health care systems, and identifies the conditions necessary for successful cost contain-
ment. The case of Viagra, it concludes, holds out two general lessons: first, allow excep-
tions to total bans on reimbursement; second, involve the medical profession in the deci-
sion-making process.

T
h e l au n c h o f v i ag r a in 1998, with These worries were all the more acute be-
a fanfare of publicity orchestrated by cause Viagra was, if not the first, certainly the
its maker Pfizer, prompted both con- highest-profile example of a new generation of
sternation and perplexity among policy- drugs—so-called lifestyle drugs—that raised
makers worldwide. Here was a new drug for these kinds of issues. If consumers could de-
the treatment of erectile dysfunction (ED), fine their own medical necessity—for, say,
which threatened the budgets of health care drugs to reduce their weight—then, it was ar-
systems and insurers. Initial estimates of the gued, the floodgates of drug spending would
likely cost of making Viagra’s cost reimburs- open, with dire consequences for the finances
able tended to be alarmingly and, in retro- of insurers and health care systems if they
spect, excessively high. In part, this reflected chose to reimburse such prescriptions. Viagra
uncertainty about the prevalence of the con- thus posed a more general challenge and
dition: Estimates of the number of males suf- opened up a wider debate. If the distinction
fering from ED in the United States ranged between drugs prescribed by doctors to deal
from twenty million to thirty million, de- with medical necessities and those demanded
pending on the definition.1 More fundamen- by consumers to enhance their lifestyles was
tally, it was difficult to draw a clear line be- often blurred—since the same drugs could
tween prescribing Viagra to treat a defined serve either purpose—then how could their
medical condition or to enhance normal sex- use be controlled or rationed?2 And how, in any
ual performance, a difficulty compounded by case, should medical necessity be defined, and by
the fact that ED is a self-reported condition whom?
and that the notion of normal sexual perfor- These questions cut across health care sys-
mance is itself ambiguous. tems. The case of Viagra therefore offers an op-

Rudolf Klein is visiting professor at the London School of Hygiene and the London School of Economics. Heidrun
Sturm is a health care researcher at the Department of Clinical Pharmacology of the University of Groningen, the
Netherlands.

H E A L T H A F F A I R S ~ Vo l u m e 2 1 , N u m b e r 6 177
©2002 Project HOPE–The People-to-People Health Foundation, Inc.
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H ealth Tr a c k i n g

portunity to compare how various countries treatment of ED is only one consideration—
reacted to the same specific, concrete chal- and not the most important one—when con-
lenge: whether or not to make Viagra a reim- sidering the economics of making it a reim-
bursable drug by including it in the standard bursable drug. Much more important are the
benefit package. In what follows, we analyze assumptions made about the likely increase in
the policy responses—that is, rationing strate- the demand for treatment of ED that is likely
gies—adopted in a variety of countries, draw- to follow such a decision. For policymakers ev-
ing on the material publicly available either in erywhere the crucial consideration was how
print or on the Web, supplemented by some best to avoid an upsurge in the total volume of
telephone interviews. Our aim in this is, first, demand. Fourth, although in theory Viagra is a
to draw out a taxonomy of rationing strategies prescription-only drug, in practice it can be
and, second, to relate those strategies to the obtained quite easily over the Web.6 Whatever
characteristics of national health care systems. reimbursement policies are adopted, it is
Accordingly, we have been selective rather therefore in effect an over-the-counter (or,
than comprehensive in our choice of countries; strictly speaking, over-the-Web) drug, largely
we chose them to provide a sufficiently wide outside the control of the medical profession.
range of policy responses and types of health
care systems. In all cases, we report on the im- Typology Of National Rationing
mediate reaction to the introduction of Viagra Strategies
and subsequent adaptations. This field is still In this section we set out the various strate-
evolving, however, so some of our information gies for rationing Viagra adopted in the coun-
may have been overtaken by events since the tries we studied. However, before doing so, we
completion of this study at the end of 2001. need to put the specific case of Viagra into the
n Background. Before turning to the pol- wider context of health care rationing more
icy responses, however, it is worth noting generally, to see whether it conforms to a stan-
some of the relevant background information dard pattern or has any special features.7
about Viagra available to decisionmakers. n Forms of rationing. Rationing—deci-
First, it is an effective form of treatment for ED. sions to deliver less than the optimum amount
Soon after the launch of the drug, twenty-one of effective health care as a result of setting pri-
randomized controlled trials concluded that orities among competing demands on the sys-
about 75–80 percent of men show a statisti- tem—pervades across all health care systems,
cally significant improvement after taking regardless of spending levels. It takes many
Viagra.3 This eliminated the option of arguing forms, of which the explicit denial of a service
that Viagra is an ineffective drug. Second, al- is the most dramatic but not necessarily the
though ED is associated with a variety of dis- most important. Other forms of rationing are
eases (and consequential surgical or pharma- exclusion (sections of the population not cov-
ceutical interventions), the most important ered), dilution (fewer tests ordered, fewer
correlation is with age. So the condition is not nurses on the ward), deterrence (making access
one that is self-inflicted—that is, the result of to care difficult), and delay (waiting lists). But
personal behavior. It cannot therefore be not only do the forms of rationing differ. So, too,
blamed on the patient. Third, the evidence does the decision-making mode involved.
suggests that Viagra is cost-effective when Thus, decisions can be either made cen-
compared with other forms of treatment for trally or diffused among the professional ser-
ED.4 Attempts to push the analysis further and vice deliverers. Similarly, they can be made ei-
calculate costs per quality-adjusted life year ther explicitly (setting out the criteria for
(QALY) gained run into methodological prob- allocating resources to individual patients) or
lems, and any results must be treated with cau- implicitly (fixing global budgets that force
tion.5 In any case, the relative cost-effective- choice between competing demands on re-
ness or cost-utility of using Viagra for the sources at the point of delivery). Generally

178 November/ December 2002
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M a r k e t Wat c h

speaking, diffused and implicit rationing by there are overlaps between countries and
professionals has been the dominant mode modes, if only at the edges. However, they pro-
cross-nationally, a strategy that diffuses not vide a useful analytic framework for analyzing
only responsibility but also blame. Presenting policy responses across nations.
decisions about whom to treat and in what n Diffusion by inaction. As so often in
way as reflecting professional judgments and comparative health policy studies, the United
scientific evidence, rather than budgetary lim- States emerges as an outlier, unique unto itself.
itations, is clearly in the interests of politicians A nonsystem made a nondecision about
and insurance managers. It also may be a ratio- Viagra. Absent a national decision, even U.S.
nal approach, given uncertainty about which federal programs adopted divergent positions.
medical intervention works for whom.8 The Department of Veterans Affairs (VA) re-
Various attempts have fused to add Viagra to its
been made to devise limited formulary on the grounds
“Access to
menus of entitlements with that the costs of providing
explicit exclusions; Oregon’s reimbursable Viagra the drug would add 20
Medicaid waiver is the best- prescriptions for percent to its pharmaceu-
known example. But these American men depends tical budget (although the
have invariably run into trou- on where they live and ban was not complete; an
ble.9 Not only has there been with whom they are escape clause allowed doc-
menu creep (a combination of tors to argue for its pre-
insured.”
consumer pressure and pro- scription as exceptions).10
fessional ingenuity in reclas- In contrast, the Medicaid
sifying conditions has meant that the menu of program automatically included Viagra for the
services tends to be elastic), but also attempts treatment of ED following its approval by the
to exclude specific interventions immediately Food and Drug Administration (FDA), as re-
raise the objection that almost every procedure quired by legislation, although the agency
or drug can be medically necessary for some- feared clinical and financial abuse.11 Of course,
one. Even cosmetic surgery, a standard item in the financial implications of this were rela-
most exclusion lists, may be crucial for some- tively modest compared with those faced by
one contemplating a future career as a ballet the VA health system, given that only about 10
dancer, for example. So explicit exclusion poli- percent of Medicaid beneficiaries are adult
cies quickly develop holes as exceptions are al- males. In any case, the decision was variously
lowed, as the case of Viagra illustrates. implemented by the states. Some resisted out-
In many respects, the case of Viagra follows right (among them, New York, Wisconsin, and
the standard rationing pattern. When the Nevada).12 Others followed the recommenda-
drug was first launched worldwide, the over- tions of the Centers for Medicare and
whelming, although not entirely unanimous, Medicaid Services (CMS) designed to mini-
response of decisionmakers was to exclude it mize misuse and rationed the amount pre-
from the reimbursable health care menu. Sub- scribed: from four pills per month (for exam-
sequently, however, policies have been modi- ple, in Alabama and Florida) to ten (in Utah).13
fied to accommodate arguments of medical ne- Health insurers and plans showed a simi-
cessity. Total bans in practice turned out to be larly mixed picture. A very few plans included
leaking colanders. However, it was mainly at Viagra in their formulary from the start; one
this stage that differences in rationing modes such was Tufts, which put it in its highest
emerged between countries. For the sake of copayment category.14 The great majority re-
simplicity, we present these differences as four sisted. “Simply put, having sexual relations is
models derived from the experience of specific not a medical necessity,” one Aetna official ar-
countries. These, we must stress, are very gued to the New York Department of Insur-
much “ideal-type models”; that is, in practice ance. However, under the challenge of both

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court rulings and state regulators, many of the or multiple sclerosis) and when ED causes de-
insurers were forced to abandon or modify the pression and psychosocial problems. In one
blanket exclusion of Viagra.15 Overall, then, the case, the court sought to draw a distinction—
consequence is that access to reimbursable central to the debate about lifestyle drugs—
Viagra prescriptions for American men—the between using Viagra to enhance potency and
conditions under which it is prescribed, the prescribing it for the restitution of normal
number of pills deemed appropriate, and the bodily function. Only in the latter case, the
level of copayments—depends on where they court determined, should Viagra be reimburs-
live and with whom they are insured. In this able (although normal may not be simple to
respect, of course, Viagra does not represent so define). “Intact erectile function is part of the
much a deviant case as an illustration of the image of a healthy man, including the elderly,”
U.S. health care condition. the Hanover Social Court ruled.18
n Juridification. Although Germany’s These individual, case-by-case decisions
health care system could not be more different have not been generalized into any kind of ap-
from that of the United States, there is one plicable guidelines. Rationing in Germany
shared characteristic: The courts have played a continues to take the form of scattergun jurid-
major role in shaping decisions. Germany’s sys- ical decisions. Indeed, muddling through is in
tem is based on social insurance—that is, a the interests of the insurers; if the Federal So-
network of sickness funds—and it has a cial Court were to generalize the generosity of
corporatist style of governance. Within the the lower courts, the result would be much
broad framework set by the federal govern- more expenditure. For the time being, the
ment, policy decisions are negotiated by the original ruling of the Bundesausschuss there-
representatives of the medical profession and fore determines the policy of insurers—that is,
the sickness funds—the Bundesausschuss der no reimbursement, absent a specific court de-
Ärzte und Krankenkassen. It was this body cision. For the longer term, it is worth noting
that decided that Viagra should not be in- that sickness funds and physicians share a
cluded in the standard package of reimburs- common interest in limiting demands on their
able drugs. However, the decision was ap- collective drug budgets: If individual physi-
pealed. The Federal Social Court decided that cians are overly generous in prescribing Viagra
the Bundesausschuss did not have the consti- or any other lifestyle drugs, they not only limit
tutional right to issue an unconditional ban on the resources available to their colleagues but
any drug.16 This left matters in limbo, and the can be held personally responsible for the cost.
court has yet to give a more detailed ruling Whether this shared interest in self-restraint
about the specific issues raised by the case of will survive if the government implements its
Viagra and other “lifestyle” drugs. At first ea- decision to remove the cap on the drug budget
ger to secure such a ruling, the insurers have is another matter.
stopped pressing for a decision, fearing that n Centralization–politicization. In con-
the Federal Social Court would take its cue trast to both the United States and Germany,
from the lower courts, which have consistently policy in Britain for rationing Viagra in the Na-
ruled in favor of patients appealing against re- tional Health Service (NHS) was centrally de-
fusals to reimburse Viagra.17 termined by government ministers. Given the
In a series of cases, the lower courts have highly centralized nature of the NHS, this
decided in favor of reimbursing the cost of might at first appear to be a highly predictable
Viagra prescriptions wholly or partially. outcome—an illustration of path dependency.
Among successful arguments have been that In fact, this would be a misleading conclusion.
patients should be reimbursed when ED is the The paradox of the NHS is that rationing has
consequence of medical intervention or condi- always been implicit. Traditionally, ministers
tion (for example, a bladder cancer operation, have set budgets but have allowed the medical
dialysis and kidney transplantation, diabetes, profession to translate financial constraints

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M a r k e t Wat c h

into clinical decisions—a highly effective ling demands. The creation of Primary Care
blame-diffusion strategy.19 The oddity of the Trusts, with responsibility for purchasing
decision about Viagra was thus that it repre- health care for given populations, has given
sented not so much the logic of the NHS as a them responsibility for controlling their own
new departure. (capped) drug budgets.
It was a reluctant departure. The first in- n Bureaucratization. Sweden is an inter-
stinct of ministers was to depoliticize the issue esting, because exceptional, case of a policy re-
by asking for expert advice.20 But the Govern- versal. Although in many respects a first
ment’s Standing Medical Advisory Committee cousin to Britain’s NHS—inasmuch as it is
refused to oblige. It concluded that there was funded through taxes—Sweden’s health care
no medical reason for refusing to make Viagra system is a far more decentralized one. County
available by prescription in the NHS—“in councils are responsible for running health
common with many treatments available un- care services and, since January 1998, for phar-
der the NHS this improves quality of life, but maceutical budgets. However, decisions about
does not save or prolong it”—but that it was drugs remain firmly national. As in Britain,
for ministers to make the final decision in light policy is driven by the assumption that the
of the “availability of resources.” The decision same package of health care services should be
of the secretary of state for health was that available regardless of where people live. The
since “impotence is in itself neither life threat- result has been tension between the budget
ening, nor does it cause physical pain,” and holders (the county councils) and the central
since Viagra threatened to increase the cost of decisionmakers. At the time of Viagra’s launch
treating impotence tenfold, general practitio- on the market, the rule was that any pharma-
ners (GPs) would be restricted in their ability ceutical product accepted as a prescription
to issue NHS prescriptions for Viagra. Avail- drug in Sweden automatically had to be in-
ability would be limited to groups of men cluded in the drug benefit package. Accord-
whose disabilities were linked to specific ingly, Viagra was included.
medical conditions: for example, those treated However, conscious of the financial impli-
for prostate cancer or kidney failure and those cations of automatically endorsing all new
suffering from Parkinson’s disease and multi- products and under pressure from the county
ple sclerosis (MS). The official ration, further- councils, the Swedish government subse-
more, was to be one tablet a week. Exceptional quently appointed a commission of inquiry. Its
cases not falling into the official categories report, published in 2000, recommended that
would be referred to hospital specialists. drugs be divided into two categories.23 The
The logic of this decision was far from self- first, involving treatment for disease and in-
evident, as the leader of Britain’s GPs was jury, would continue to be part of the standard
quick to point out: Its only justification ap- package. The second, which included not only
peared to be that it promised to constrain de- Viagra but also drugs for the treatment of obe-
mand and spending.21 Also, in apparently lim- sity, smoking cessation, and hair loss, would be
iting the NHS’s treatment responsibilities to available only in exceptional circumstances.
dealing with conditions that either threatened Detailed criteria were to be defined by a gov-
life or caused physical pain, the secretary of ernmental committee, whose report was over-
state appeared to be expounding a new re- due at the time of this writing, to replace pres-
strictive, unsustainable doctrine. However, ent procedures.
subsequent correspondence in the British Medi- At present, decisions are made case by case
cal Journal suggested general support among by the Ministry of Health, in consultation with
doctors for rationing Viagra: “Nobody needs the Medical Products Agency (MPA), the
an erection at public expense” was the heading Läkemedelsverket, which is the regulatory
of one letter.22 Furthermore, British GPs have a agency for medical products. In effect, there is
shared interest with government in control- bureaucratic rationing. Applications have to

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be made by the individual patients concerned, matter. It is far from clear that the expertise of
with support from their doctors. In making the agencies such as NICE carries legitimacy in
determinations, the criterion appears to be dif- determining this much larger question.
ferent from that used in Britain (and other
countries). The emphasis is on the conse- Do The Characteristics Of Health
quences of ED, not the cause or associated Care Systems Matter?
morbidities. Treatment is sanctioned in those Can policymakers choose à la carte from
exceptional cases where ED aggravates an ex- the menu of rationing strategies outlined in
isting condition. In practice, this means psy- the previous section? Or are their options con-
chiatric conditions. The system appears to tingent on the characteristics of specific health
have been effective in containing demand and care systems? In the case of the four countries
expenditure. By the end of 2001 there had been so far considered, different systems are
roughly 3,000 applications, of which fewer matched with different rationing strategies.
than 10 percent had been approved.24 Given But if we are to draw any general conclusions
the low success rate, it is perhaps not surpris- from this finding, we have to test it by asking
ing that the number of applications has been whether similar systems yield similar rationing
diminishing over time. A further deterrent may strategies.
well be the lack of privacy: Under the Swedish The United States and Britain are, in their
system of open government, applications are contrasting ways, unique systems. No other
in the public domain. country is as chaotic as the former or as cen-
n Rationing by expertise. There is an tralized as the latter. But Sweden and Ger-
emergent fifth model of rationing, relevant to many exemplify larger classes of systems. Swe-
the introduction of lifestyle drugs more gener- den is an example of the “Nordic model” of
ally, that overlaps with those already discussed health care: universal, tax-funded, but decen-
but is worth noting. This is rationing by exper- tralized. Germany is an example of a social
tise. Since 1999 Britain has had the National insurance–based system—with a plurality of
Institute for Clinical Evidence (NICE), an insurers and providers and with a corporatist
agency charged with reviewing the evidence style of governance. In both there is a group of
about new health technologies and producing similar countries. Accordingly, we compare
guidelines about their use in the NHS. Had the rationing strategies of other countries
NICE been in existence in 1998, ministers within each group. In this exercise we adopt a
would no doubt have referred the case of “black swan” approach.26 If it turns out that
Viagra to it with a profound sense of relief. each group is consistent in adopting the same
And, as noted above in the case of Sweden, bu- strategies, then there is a strong case for as-
reaucratic rationing is seen as a temporary ex- suming that system characteristics influence
pedient until effective guidelines can be de- (and perhaps determine) rationing strategies.
vised. In both instances, the hope is that If there is a deviant case (or black swan)
rationing decisions can be depoliticized by in- within a group, however, any relationship
voking the expertise of a neutral, authoritative must be more complicated.
agency or committee. The experience of NICE n The Nordic model. Here Sweden
so far suggests that this may be an overly opti- started as a deviant case when it automatically
mistic view.25 Many of NICE’s decisions have included Viagra in the standard benefit pack-
proved controversial, and some have been age but has since moved closer to practice in
modified following lobbying by the pharma- other Scandinavian countries. Finland has a
ceutical industry or consumer groups repre- three-tier system of refunding drug costs, with
senting patients with specific diseases. Al- varying criteria and copayments.27 In the top
though it is relatively easy to determine which category, refunds are automatic. In the bottom
interventions are effective, deciding on priori- category, “significant and expensive” drugs are
ties within constrained budgets is a different reimbursed only if there are “sufficient thera-

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M a r k e t Wat c h

peutic indications.” Decisions about the classi- those of Austria and the Netherlands. Many
fication of new drugs are made by the Council other countries have health care systems based
of State, which also sets out the conditions un- on the social insurance principle (France, for
der which prescriptions may be eligible for a example), but only Austria and the Nether-
refund. Viagra, like certain drugs to treat MS lands share Germany’s corporatist model of
and obesity, falls into the bottom category. It governance. The similarities in the style of
can be reimbursed only if ED is caused by “se- health care governance between Germany and
rious disease,” such as total prostatectomy or Austria are particularly striking.29 It is the in-
vertebral trauma. Unlike in Sweden, psycho- surers (Versicherungsträger), not the govern-
logical indications are not included. Patients ment, in both countries that determine the
have to apply for reimbursement to the Social basket of reimbursable drugs. And in the case
Insurance Institution, with of Viagra, the medical su-
the support of their doctor. In perintendents of the Aus-
“Successful rationing is
Denmark, similarly, Viagra is trian insurers decided that
not automatical ly reim- the international norm, treatment for ED would be
bursed.28 Decisions are made thus making nonsense limited to defined condi-
one at a time by the Danish of apocalyptic tions—again, a familiar
Medicines Agency. Once speculations that list, including spinal cord
again, the criteria favor ED Viagra would cause lesions, pelvic surgery, and
consequent on or associated so forth. However, in con-
financial havoc.”
with medical interventions. trast to Germany, the
Norway, too, controls the re- courts have not inter-
imbursement of Viagra strictly, a policy intro- vened. This may be because of a difference in
duced to avoid the cost explosion that took political culture, or, more plausibly, because
place in Sweden before its change of policy. Pa- the Austrian insurers were more flexible than
tients have to apply for reimbursement to a na- their German counterparts were. Instead of
tional insurance scheme, where officials then imposing a total ban on Viagra reimburse-
decide on the individual cases based on ment, they allowed some exceptions from the
agreed-upon criteria. start, thus making their policies more accept-
In the case of the Nordic countries, there is able and a legal challenge less likely. So Austria
therefore no “black swan.” However, some is the most “pure” example of corporatist ra-
swans have gray feathers. While there may be tioning—that is, government delegating the
convergence on the bureaucratic model of ra- task to insurers and providers.
tioning Viagra, there are variations in both cri- The Netherlands, however, provides a black
teria and procedures. Moreover, it cannot nec- swan. Here the minister of health decided to
essarily be concluded that convergence exclude Viagra from the standard package.30
reflects only the shared characteristics of the Following the standard Dutch practice of car-
health care systems. Two other, more general rying out medical and economic evaluations,
explanations could account for this phenome- the insurers’ College voor Zorgverzekeringen
non. The first is policy learning. The Scandina- had recommended that Viagra should be reim-
vian countries may have learned from each bursed for the usual medical conditions and in
other’s experience (a point that applies strictly limited doses.31 However, the minister
strongly to Sweden and Norway). The second of health, Else Borst, overruled the recommen-
is that convergence may have nothing to do dation. As in Britain, this was a political deci-
with the characteristics of the health care sys- sion—not, as in Germany and Austria, the
tems but may reflect a shared Nordic political product of a corporatist-style consensus-
and institutional culture. engineering exercise involving insurers and
n Corporatist social insurance. Here we the medical profession. So, in this group, there
have only two cases to compare with Germany, appears to be a deviant case. However, it may

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be a deviant case not because it is a black swan tinction between medically necessary and life-
but because it should never have been put into style interventions is, as has been forcefully
this group in the first place. The Netherlands argued, largely arbitrary.33 If the aim of medi-
has always presented difficulties to political cine is to improve the quality of life—to allow
taxonomists, and its labeling as a corporatist men and women to function to their maxi-
state is not universally accepted.32 mum potential—then it is not self-evident
Overall, then, the relationship between sys- that improving sexual performance is any dif-
tems’ characteristics and modes of rationing ferent from improving the ability to carry out
remains an open question. Some policy deci- the activities of daily living. And in the latter
sions are indeed preempted by systems charac- case, it is accepted that medicine will inter-
teristics: A central government decision of the vene, often expensively, as in the repair or re-
kind found in Britain and the Netherlands is placement of joints. If, further, psychological
unimaginable in the United States. But beyond distress is put on a par with physical pain—as
that, our evidence shows that the relationship in practice it is—then the dividing line be-
between system characteristics and rationing tween medically necessary and lifestyle inter-
strategies is not direct—and that if there is a ventions becomes further blurred. For exam-
relationship at all, it is a complex one, medi- ple, should psychotherapy be put into the
ated by other factors. lifestyle category? The problem is compounded
when we consider drugs or procedures that en-
Implications For The Future hance people’s ability to conform to the social
n International norm. So far our analysis norms of their society, ranging from having chil-
has concentrated on analyzing differences in dren (in vitro fertilization) or not having them
both the rationing strategies adopted and the (contraception) to having bodies of an accept-
characteristics of health care systems. But this able shape and appearance (cosmetic surgery,
is to risk overlooking something far more im- treatment for obesity). In short, the lifestyle cat-
portant: that all of the health care systems ana- egory turns out to be an overelastic hold-all. It
lyzed have succeeded, in their various ways, in covers a heterogeneous lot of drugs and inter-
rigorously rationing the availability of Viagra ventions whose inclusion in the standard bene-
as part of the standard package of reimburs- fit package can be argued on grounds of pro-
able or free health care. Contrary to what moting normal physical, psychological, or social
might have been expected from the general ex- functioning and for which notions of what is
perience of rationing reviewed above, govern- normal may well be contestable, vary over time,
ments or insurers have decided explicitly ei- and differ between countries.
ther to exclude Viagra from the basic benefit There is, however, one common element
package or to make its availability contingent amid all this heterogeneity: that necessity is
on specific medical conditions. This conclu- defined not by the doctor but by the consumer,
sion would hold if our analysis were extended not according to technical medical criteria but
to cover other advanced, postindustrial coun- in light of social and cultural norms. Needs are
tries, such as Italy and Switzerland. Successful equated with demands. A working, non-
rationing is the international norm, thus mak- pejorative definition of lifestyle drugs or inter-
ing nonsense of apocalyptic speculations that ventions might therefore be those for which
Viagra would cause financial havoc. the patient rather than the doctor not only di-
n Arbitrary distinctions? Is Viagra a one- agnoses the condition but can also demand a
off case of successful rationing, or does it point specific remedy. It is in this respect that Viagra
to more general conclusions? How far is Viagra can be seen as representative of a wider class.
representative of the wider class of lifestyle To return to the starting point of this paper,
drugs and interventions? In answering these the reason why the launch of Viagra prompted
questions, the difficulty is that the whole con- so much alarm among policymakers was pre-
cept of lifestyle drugs is problematic. The dis- cisely that need appeared to be determined

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M a r k e t Wat c h

subjectively, bypassing the filter of medical ne- sick indeed.”34
cessity. The spectre of moral hazard haunted n Ease of purchase. The case of Viagra
policymakers ever y where: How could has another feature that, while not unique to
abuse—and the consequent cost explosion— it, serves to distinguish it. As already noted, it
be prevented if a drug for a self-reported con- can be bought relatively easily and cheaply on
dition were made reimbursable? To the degree the open market despite being classified as a
that other drugs or interventions raise the prescription drug. If exit into the market is rel-
same question, and however different they atively cheap, if over-the-Web drugs are avail-
may be in other respects, the story of Viagra able, then it is unlikely that much voice will be
has general relevance. raised in protest against rationing by price or
n Little public sympathy. We can con- that there will be serious worries about equity.
cede straight away that in Perhaps the public percep-
some respects the case of tion is that willingness to
“Rationing is an
Viagra is indeed special, if pay is a good measure of
only because there remain instance where the subjectively defined need.
considerable inhibitions and leaky bucket may be And, as far as equity is con-
prejudices about treatments preferable to a cerned, in the case of
involving sexual performance water-tight one.” Viagra it can be argued that
and potency. Sufferers from money has always bought
ED are unlikely to take to the ways of boosting sexual
streets carrying protest banners. Impotence is performance, from call girls to rhinoceros
more likely to be suffered in private than pa- horns. No new inequity is therefore involved.
raded in public. Further, there is no concen- n A policy blueprint. To the extent that
trated constituency to campaign for a more other new drugs or interventions (whether or
generous policy. In contrast to homogeneous, not labeled “lifestyle”) share some or all of
organized pressure groups acting for patients these characteristics, so policy outcomes are
with conditions such as MS, those suffering likely to mirror the story of Viagra. If the pa-
from ED are a scattered, heterogeneous lot tient group involved is heterogeneous and un-
without any organizational base. This limits organized, if there is little public sympathy for
the scope for a campaign designed to apply po- the specific condition involved, if demands can
litical pressure on governments and insurers. be met in the market place, then policymakers
Moreover, any such campaign would be un- should be able to adopt rigorously restrictive
likely to enlist much public sympathy. Argu- policies without much difficulty. The con-
ments about rationing Viagra prompt more verse, of course, also follows: If there is an orga-
jokes than indignation. Insofar as ED is corre- nized constituency, if public sympathy can be
lated with age, it is often seen as somehow evoked, and if heavy expense is involved, then
“natural” and inevitable. Private grief in such policymakers are likely to encounter strong re-
cases is not seen as calling for collective ac- sistance when trying to restrict reimburse-
tion—an argument that, however, is not ap- ment for new drugs or interventions (whether
plied to other degenerative conditions of old or not labeled “lifestyle”). However, our analy-
age for which treatment is automatically in- sis also suggests two more general conclu-
cluded in the basic package of health care ben- sions, less contingent on the specific character
efits everywhere. Overall, there is a wide- of the innovation in question.
spread view that treatment of ED should rank First, a common thread runs through the
low in any system of priorities. As a leading rationing strategies of different countries: All
British political commentator put it: “A nation of the systems in our sample have allowed ex-
which spends taxpayers’ money on better ceptions from a general ban on refunding, al-
erections, while leaving old ladies to soil them- though some have done so only after regula-
selves and starve in under-staffed wards, is tory or judicial rulings (as in Germany).

by guest


W
Furthermore, the exceptions tend to follow a h i l e v i ag r a d o e s h av e spe-
common pattern: Except in Sweden, reim- cific features that have made its
bursement of Viagra is contingent on previous rationing socially acceptable and
medical conditions or interventions. If there is politically feasible, the case history suggests
any ethical logic in this, it appears to be a com- that the same set of rationing strategies can
pensatory one: Somehow the men in this be used successfully as other new, much-
group are perceived to deserve special treat- promoted drugs come onto the market. Two
ment as victims of unmerited, disproportion- conditions seem necessary. First, rationing is
ate misfortune. However, the real logic is an instance where the leaky bucket may be
surely economic and political. On the one preferable to a water-tight one: Factoring in
hand, the criteria represent a sorting mecha- exceptions, based on some reasonably objec-
nism that is both reasonably objective and fi- tive criteria, helps to make rationing strategy
nancially restrictive, distinguishing between acceptable. Second, the acquiescence of the
need that can be defined by the medical pro- medical profession is essential, and including
fession and by patients’ demands. The formula the profession in the design of rationing strat-
provides a tool for the exclusion of pure life- egies is one way of achieving this. If these con-
style drugs—that is, those where the patient ditions are met, the new generation of drugs
both diagnoses the condition and can demand are unlikely to break the bank.
a specific remedy. On the other hand, the strat-
egy leaves scope for medical discretion by leav- This study was funded by the Milbank Memorial Fund.
ing some judgments to doctors. It is therefore The dividends of the support given were long in coming,
more respectful of medical autonomy than an and the authors’ thanks go to Dan Fox for his patience.
outright ban would be. While an outright ban
challenges the medical profession to devise NOTES
ways of gaming the system, allowing excep- 1. A.E. Benet and A. Melman, “The Epidemiology of
tions invites the cooperation of the profession, Erectile Dysfunction,” Urology Clinics of North
particularly if doctors have been involved in America (November 1995): 699–709.
devising the criteria. 2. A. Keith, “The Economics of Viagra,” Health Affairs
Second, the rationing strategies adopted (Mar/Apr 2000): 147–157.
have, by and large, obtained at least the passive 3. A. Burls et al., “Sildenafil,” Report no. 12 (Depart-
support of the medical profession. There have ment of Public Health and Epidemiology, Uni-
versity of Birmingham, September 1998).
been criticisms of the criteria adopted but no
4. E.A. Stolk et al., “Cost Utility Analysis of
sustained campaign of opposition. Further, Sildenaf il Compared with Papaverine-
doctors working in health care systems with Phentolamine Injections,” British Medical Journal
capped budgets, as in Britain and Germany as (29 April 2000): 1168–1173.
well as in some U.S. managed care plans, have 5. N. Freemantle, “Valuing the Effects of Sildenafil
an interest in restraining demand. To the ex- in Erectile Dysfunction” (Editorial), British Medi-
tent that such capped budgets become the cal Journal (29 April 2000): 1156–1157.
norm, so governments may find the medical 6. A Lycos search for “Penispill” on 12 June 1998
produced seven Web sites on how to get pre-
profession a powerful ally in resisting any kind
scriptions or how to order Viagra via phone or on
of open-ended commitment to lifestyle drugs the Internet.
as they come onto the market. Indeed, such 7. R. Klein, S. Redmayne, and P. Day, Managing Scar-
drugs can be seen as representing as much of a city (Buckingham: Open University Press, 1996).
threat to the medical profession as to budgets, 8. D. Mechanic, “Muddling through Elegantly:
to the extent that they undermine physicians’ Finding the Proper Balance in Rationing,” Health
monopoly of judgment about what is medically Affairs (Sep/Oct 1997): 83–92.
necessary—and, more generally, raise doubts as 9. On Oregon, see J. Oberlander, T. Marmor, and L.
to what that hallowed phrase actually means. Jacobs, “Rationing Medical Care: Rhetoric and
Reality in the Oregon Health Plan,” Canadian Med-
ical Association Journal (29 May 2000): 1583–1587.

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M a r k e t Wat c h

For another example, see D. Chinitz et al., “Is- Medical Journal (24 February 2001): 489–491. For a
rael’s Basic Basket of Health Services: The Impor- neutral survey of NICE’s work, see J. Raftery,
tance of Being Explicitly Implicit,” in The Global “NICE: Faster Access to Modern Treatments?
Challenge of Health Care Rationing, ed. A. Coulter and Analysis of Guidance on Health Technologies,”
C. Ham (Buckingham: Open University Press, British Medical Journal (1 December 2001):
2000), 44–52. 1300–1303.
10. Department of Veterans Affairs, “VA Reaches De- 26. K. Popper, The Logic of Scientific Discovery (London:
cision on Viagra,” Press Release (in Mealey’s Impo- Hutchinson, 1959). However many white swans
tency Drug Watch, 23 July 1998). we count, Popper argues, we cannot with cer-
11. Centers for Medicare and Medicaid Services, tainty say that all swans are white. But if we see
Drug Policy: Medicaid Coverage of Viagra, www.hcfa. one black swan, we can confidently say that “not
gov/medicaid/drpolicy.htm (5 January 2000). all swans are white.”
12. “Managed Care Monitor—Viagra: Two HMOs, 27. Rajaniemi Rajaniemi, Institute for Social Insur-
Two States Say ‘No’ to Coverage,” American Health ance, SII, Helsinki, personal communication, 31
Line (6 July 1998). March 2002.
13. “USA Today: States Draw Line for Viagra” 28. For Denmark, Karen Kolenda, Department of
Mealey’s Impotency Drug Watch (20 August 1998). Drug Economics, Danish Medicines Agency, per-
sonal communication, 1 February 2002. For Nor-
14. Tufts Health Plan, “Pharmacy Information,”
way, John Anderson, Health Ministry, Oslo, per-
w w w.t u f t s - h e a l t h p l a n .c o m / m e m b e r s /
sonal communication, 4 February 2002.
pharmacy-3tier.html (19 October 1999).
29. Anna Buscics, Hauptverband der Sozial-
15. “Viagra Coverage,” Mealey’s Insurance Law Weekly (1
versicherungsträger, personal communication,
March 1999).
29 November 2001.
16. “BSG-Urteil zur erektilen Dysfunktion,”
30. E.A. Stolk, W.B.F. Brouwer, and J.J.V.
Deutsches Ärzteblatt, 15 October 1999, C-1895.
Busschbach, “Vergoeding van Viagra stuit op
17. “Erneut Novellierung der Arzneimittel- waarden en normen” [Reimbursement of Viagra
richtlinien?” (Revised supplemental medical di- is based on values and norms], Medisch Contact (28
rective), Ärztezeitung, 9 November 2001). April 2000): 626–629.
18. Court decision Az: S2 KR 485/99. 31. College voor Zorgverzekeringen (CvZ) Doc. no.
19. H.J. Aaron and W.B. Schwartz, The Painful Prescrip- CUH00378 (23 March 2000), Beordeling
tion (Washington: Brookings Institution, 1984). wachtkamermiddel Sildenafil (Original letter
20. S. Dewar, “Viagra,” in Health Care UK, 1999/2000, from the CvZ to the minister of health).
ed. J. Appleby and A. Harrison (London: King’s 32. G.H. Okma, Studies on Dutch Health Politics, Policies,
Fund, 1999), 139–151. and Law (Utrecht: Medical Faculty of the Univer-
21. J. Chisholm, “Viagra: A Botched Test Case for Ra- sity of Utrecht, 1997).
tioning,” British Medical Journal (30 January 1999): 33. See Keith, “The Economics of Viagra.” Keith is
273–274. former director of economic policy analysis at
22. “Rationing of Sildenafil” (Letters), British Medical Pfizer.
Journal (12 June 1999): 1620–1621. 34. A. Marr, “Viagra: A Hard Choice,” Observer, 24
23. Staten offentlich utredening (SOU) 2000:86, del January 1999.
3 (2000) (Report of Swedish Investigation Com-
mittee); and Vanja Gavellin, Socialdeparte-
mentet, personal communication, 3 December
2001.
24. Lotta Eriksson, Socialdepartementet, and Jane
Ahlquist-Rastat, Läkemedelsverket/MPA, per-
sonal communication, 3 December 2001; and
Läkemedelsverket, “Aktuellt/Observanda,” 6 De-
cember 2001, www.mpa.se/observanda/obs01/
dispens_hokostnadsskydd.shtml (6 August
2002).
25. For a searing attack on NICE, see R. Smith, “The
Failings of NICE,” British Medical Journal (2 De-
cember 2000): 1363–1364. For the reply by the
chairman of NICE and comments from a variety
of sources, see the letters column of the British

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