EXAMPLES1.Please read the article below. Using economic theory.docx

EXAMPLES
1.Please read the article below. Using economic
theorydiscuss the implications for the vaccine market, should
the Supreme Court allow the vaccine manufacturers to be sued
outside of ‘vaccine court’.
Supreme Court Considers Vaccine Injury Case
By Emily P. Walker, Washington
Correspondent, MedPageToday
Published: October 12, 2010
WASHINGTON -- The U.S. Supreme Court heard arguments
today in a case seeking to sue vaccine maker Wyeth outside the
special forum established to assure continued availability of
vaccines.
Congress created the so-called "vaccine court" in 1986 to
address safety claims in an attempt to ease the threat of lawsuits
in state courts against pharmaceutical companies lest they pull
out of what they claim is an unprofitable vaccine marketplace
completely.
The case under consideration was brought by the parents of
Hannah Bruesewitz, now 18, and charges that she developed a
seizure disorder after receiving her third dose of the diphtheria-
tetanus-pertussis (DTP) vaccine when she was six months old.
She has suffered developmental problems ever since, and will

likely require medical attention for the rest of her life, her
parents say.
The dose of the vaccine in question, TRI-IMMUNOL, came
from a lot that generated 65 reports of adverse reactions,
including 39 emergency room visits, six hospitalizations, and
two deaths, according to documents from the U.S. appeals court
that heard the case last year.
The Bruesewitz suit argues that the vaccine had a flawed
design, contained toxins that caused their daughter's seizures,
and that Wyeth could have manufactured a safer vaccine but
chose not to. The flawed-design concept, the family alleges,
takes the case out of the jurisdiction of the vaccine court, which
was set up to compensate injuries from unavoidable side effects.
The vaccine court turned down the Bruesewitz claim and the
family then sought to bring a case in state court.
Although the current case does not involve autism, the outcome
could have important implications for the hundreds of lawsuits
filed against vaccine makers by people who allege the shots
caused their children to develop autism. Numerous courts have
ruled in the past year that there is no link between common
childhood vaccines and autism.
A number of groups, including the American Association for
Justice and the National Vaccine Information Center, have filed
briefs on behalf of the Bruesewitz family, arguing that Congress
intended to allow lawsuits hinging on vaccine defects.

Meanwhile, the Solicitor General of the United States, the
Chamber of Commerce, and several medical groups including
the American Academy of Pediatrics have filed briefs stating
that the 1986 law meant to block the Bruesewitz type of vaccine
lawsuit.
Several lower courts have ruled that the law creating the
vaccine court preempts design-defect claims.
2.
Please read the article below. Using economic theory discuss
the implications of tax deduction provision for self-employed
on the bottom line of small firms.
Smart Answers October 12, 2010, 9:44AM EST
Health-Care Tax Relief for the Self-Employed
This year a new law will let solo business owners fully deduct
health insurance premiums for the first time. Here's how it
works
By Karen E. Klein
I heard that I can deduct my health insurance costs because I
run my own business. Is this part of the health-care reform bill?
How does it work?
—P.J., Pasadena, Calif.
If you are self-employed and your business is a sole
proprietorship, single-member LLC, or sole-owner S-corp, you

can indeed deduct your health insurance expenses for 2010. This
one-year provision is not a part of the health-care reform bill
that passed in March, however. It was included in the Small
Business Jobs and Credit Act that President Barack Obama
signed into law just last month.
"In this economic climate, any kind of bottom line tax savings
is helpful," says Kristie Arslan, executive director of the
National Association for the Self-Employed, a Washington-
based lobbying group. "This is one of the few small business
provisions that's been passed where business owners will
actually see lower taxes on Apr. 15, 2011."
Her organization has championed the deduction for more than
eight years and unsuccessfully tried to get it included in the
health-care reform law.
The new provision corrects what Arslan calls a fundamental
unfairness: Self-employed individuals cannot deduct the full
cost of health insurance premiums as a business expense on
their payroll taxes, as other business entities can do.
Although the new law authorizes the deduction only for
2010,Arslan says it's "a foot in the door" for self-employed
individuals, who pay both the employer and employee portions
of the payroll tax—a self-employment tax totaling 15.3 percent.
Employees typically pay half that amount (7.65 percent) and
their employers cover the other half as part of their payroll
taxes. The new deduction exempts solo business owners from
paying self-employment tax on the portion of their income that
they spend on health premiums. "This is a step in the right
direction. We're hoping to extend it and make it
permanent," Arslan says.
Make sure to ask your tax preparer about taking the deduction
when you file your tax returns next year. In order to take

advantage of it, you must buy your own insurance (rather than
relying on a spouse's coverage or being uninsured) and you
must pay self-employment tax on business income (rather than
declaring a business loss). The deduction phases out above a
$106,800 annual income limit. The provision is specifically
geared for those who file a 1040 Schedule C business income
tax form or a Schedule E earned income tax form, Arslan says.
Another important caveat: The new deduction does not apply to
health insurance coverage that you may provide for any
employees you have. There is a small business health-care tax
credit, part of the health-care reform legislation, that you may
be able to claim for that expense. More information on that tax
credit is available at the IRS website.
Karen E. Klein is a Los Angeles-based writer who covers
entrepreneurship and small-business issues.
©2010 Bloomberg L.P. All Rights Reserved.
3.
Please read the article below. Using economic theory discuss
the implication of excessive expenditure in medical care that
denies availability of resources to investments in public health,
education, public safety, safety-net, and community
development programs andtherefore on life-expectancy in the
U.S.
U.S. Still Lags in Life Expectancy
By Joyce Frieden, News Editor, MedPage Today
Published: October 07, 2010

Americans' 15-year survival rates in comparison to those of
other countries has been declining despite increases in health
spending, researchers have found.
"Even as relative health care spending has increased in the
United States, the nation has fallen behind 12 comparison
countries with respect to 15-year survival for men and women
ages 45 and 65 during the past three decades," according to
Peter A. Muennig, MD, MPH, and Sherry A. Glied, PhD, both
of the Mailman School of Public Health at Columbia University
in New York City.
"The findings undercut critics who might argue that the U.S.
healthcare system is not in need of major changes," they wrote
in the November 2010 issue of Health Affairs.
In 1950, the U.S. was fifth among the leading industrialized
nations with respect to female life expectancy at birth, the
authors noted. But the most recent numbers put the country at
46th in the world. And, for male and female life expectancy
combined, the U.S. is ranked 49th.
Meanwhile, per-capita health spending increased at nearly twice
the rate in other wealthy nations between 1970 and 2002. The
U.S. now spends far more on health than any other country as a
percentage of its gross domestic product.
To explore the issue further, the investigators examined health
costs and 15-year survival from 1975 to 2005. They focused on
45- and 65-year-old men and women, and measured costs as

healthcare spending per capita. They also examined relative
changes in smoking and obesity over time.
They used international data on obesity and health system costs
from the Organization for Economic Cooperation and
Development. They also looked at data for U.S. non-Hispanic
whites from the CDC and at International Mortality and
Smoking Statistics data to examine smoking statistics.
In 1975, the United States was in last place with respect to 15-
year survival at age 45 for people of both sexes. However, it
ranked high for those at age 65. At that time, per-capita U.S.
health care costs were above the mean for other nations but
were comparable to those in some of the nations studied.
Between 1975 and 2005, survival probabilities and health costs
increased for all groups in all nations.
However, by 2005, "not only were 15-year survival rates for 45-
year-old U.S. white women lower than in all comparison
countries, but they had not even surpassed 1975 15-year
survival rates for Swiss, Swedish, Dutch, or Japanese women,"
the investigators wrote.
In addition, 65-year-old U.S. white women in particular also
showed large relative declines in 15-year survival.
One possible explanation for the U.S.'s poor showing is its
population diversity, the researchers noted. "According to this
argument, lower health status or lower survival gains for ethnic

or racial minorities would tend to depress overall health
outcomes for Americans relative to the residents of other
countries."
But that does not appear to be the case. For instance, relative
gains in survival for non-Hispanic whites in the U.S. between
1995 and 2005 were the lowest among nations in each age
category, while men and women in Austria and Australia
experienced some of the largest gains.
"Contrary to the diversity hypothesis, including the experience
of diverse groups in the U.S. data improves the comparative
performance of the United States, since the superior survival
gains of other Americans relative to non-Hispanic whites boosts
the overall performance of the United States relative to that of
other countries," the authors wrote.
In terms of smoking, the current smoking rate in the U.S. is
generally lower than in the 12 comparison nations. In 2006, the
U.S. smoking rate was 15% for women and 19% for men,
whilethe comparison-country smoking rates ranged from a low
of 14% for Japanese women to a high of 41.3% for Japanese
men.
As for obesity, the U.S. population is much heavier, on average,
than the populations of other countries; however, "there is
nothing new about this pattern: In 1975, U.S. obesity rates were
also much higher than those in other countries," the authors
noted.
Other causes of death, such as homicides and traffic accidents,

aren't borne out as possible causes either, they continued.
Rather, Glied and Muennig suggested, rising U.S. health
spending may be the reason.
"First, as health spending rises, so, too, does the number of
people with inadequate health insurance," the authors wrote.
"Higher spending could be reducing survival by decreasing the
number of insured people."
In addition, rising health spending may be decreasing public
funding on more important life-saving programs, and
"investments in public health, education, public safety, safety-
net, and community development programs may be more
efficient at increasing survival than further investments in
medical care."
Finally, unregulated fee-for-service reimbursement and an
emphasis on specialty care may contribute to high U.S. health
spending because it leads to unneeded procedures and
fragmented care.
"Unneeded procedures may be associated with secondary
complications. Fragmentation of care leads to poor
communication between providers, sometimes conflicting
instructions for patients, and higher rates of medical errors. For
example, two separate physicians are probably more likely than
a single primary care provider to prescribe two incompatible
drugs to a single patient."

However, how much this affects population health is uncertain,
the authors admitted.
"We speculate that the nature of our health care system --
specifically, its reliance on unregulated fee-for-service and
specialty care -- may explain both the increased spending and
the relative deterioration in survival that we observed. If so,
meaningful reform may not only save money over the long term,
it may also save lives."
The study was funded by a grant from the Commonwealth Fund.
Glied is currently on leave from the Department of Health and
Human Services (HHS); the study was written prior to her
appointment at HHS and does not reflect the official views
ofHHS. No other information on conflicts of interest was
provided.
Multiple Choice & #1QuestionAnswerProblem #11Drake
Company2Statement of Cash Flows3For the Year Ended
December 31, 201445678910Number Incorrect0
&A
#2 & 3Problem #2Problem #3Redding CompanyDelvin
CorporationCash BudgetCost of Goods Manufactured
ScheduleFor the Year Ended December 31, 2014Delvin
CorporationCost of Goods Sold calculation
&A
#4 to 6Problem #4Problem #6MakeBuyRetainReplaceRetain or
Replace Answer =>Make or Buy Answer =>Problem
#5AnswerPart 1Part 2unitsPart 3units
&A
#7 & 8Problem #7Problem

#8DateAccountsDebitCreditDateAccountsDebitCredit
#9 - Essay123
Final Exam
ACCT 221 – Principles of Accounting II
Fall 2013
Multiple Choice (2 pts each)
1. Cody Industries owns 35% of Macarthy Company. For the
current year, Macarthy reports net income of
$250,000 and declares and pays a $60,000 cash dividend. Which
of the following correctly presents the
journal entries to record Cody’s equity in Macarthy’s net
income and the receipt of dividends from
Macarthy?
a. Dec 31 Stock Investments 87,500
Revenue from Stock Investments 87,500
Dec 31 Cash 21,000
Stock Investments 21,000
b. Dec 31 Stock Investments 87,500
Dec 31 Cash 60,000
c. Dec 31 Stock Investments 66,500
d. Dec 31 Revenue from Stock Investments 87,500
Dec 31 Stock Investments 21,000
Cash 21,000

2. If stock is issued for a noncash asset, the asset should be
recorded on the books of the corporation at
a. fair value.
b. cost.
c. zero.
d. a nominal amount.
3. Saira, Inc. has the following income statement (in millions):
SAIRA, INC.
Income Statement
For the Year Ended December 31, 2014
SAIRA, INC.
Income Statement
Net Sales $300
Cost of Goods Sold 180
Gross Profit 120
Operating Expenses 45
Net Income $75
Using vertical analysis, what percentage is assigned to Net
Income?
a. 62.5%
b. 40%

c. 25%
d. None of these answer choices are correct.
Due Date: Sunday, Oct 6 @ 11 p.m. ET submit via WebTycho
Assignment Folder
1
4. If a company anticipates that other sales will be affected by
the acceptance of a special order, then
a. lost sales should be considered in the incremental analysis.
b. lost sales should not be considered in the incremental
analysis.
c. the order should not be accepted.
d. the order will only be accepted if the plant is below capacity.
5. A company's planned activity level for next year is expected
to be 200,000 machine hours. At this level of
activity, the company budgeted the following manufacturing
overhead costs:
A flexible budget prepared at the 190,000 machine hours level
of activity would show total
manufacturing overhead costs of
a. $570,000
b. $760,000
c. $600,000
d. $770,000
6. A department adds raw materials to a process at the
beginning of the process and incurs conversion
costs uniformly throughout the process. For the month of
January, there were no units in the beginning
work in process inventory; 90,000 units were started into

production in January; and there were 20,000
units that were 40% complete in the ending work in process
inventory at the end of January. What were
the equivalent units of production for materials for the month of
January?
a. 98,000 equivalent units.
b. 82,000 equivalent units.
c. 90,000 equivalent units.
d. 70,000 equivalent units.
7. On January 1, 2014, Meeks Corporation issued $5,000,000,
10-year, 4% bonds at 102. Interest is
payable semiannually on January 1 and July 1. The journal entry
to record this transaction on January 1,
2014 is
a. Cash 5,000,000
Bonds Payable 5,000,000
b. Cash 5,100,000
c. Cash 5,000,000
Premium on Bonds Payable 100,000
d. Cash 5,100,000
Premium on Bonds Payable 100,000
Assignment Folder
2
VariableVariable

Indirect materials 240,000
Indirect labor 320,000
Factory supplies 40,000
FixedFixed
Depreciation 100,000
Taxes 20,000
Supervision 80,000
8. The following information is taken from the production
budget for the first quarter:
Beginning inventory in units 1,800
Sales budgeted for the quarter 678,000
Capacity in units of production facility 708,000
How many finished goods units should be produced during the
quarter if the company desires 4,800
units available to start the next quarter?
a. 675,000
b. 681,000
c. 711,000
d. 682,800
9. The standard number of hours that should have been worked
for the output attained is 6,000 direct labor
hours and the actual number of direct labor hours worked was
6,300. If the direct labor price variance
was $3,150 favorable, and the standard rate of pay was $9 per

direct labor hour, what was the actual
rate of pay for direct labor?
a. $8.50 per direct labor hour
b. $7.50 per direct labor hour
c. $9.50 per direct labor hour
d. $9.00 per direct labor hour
10. Madaas Company manufactures customized desks. The
following pertains to Job No. 987:
Direct materials used $11,450
Direct labor hours worked 360
Direct labor rate per hour $15.00
Machine hours used 300
Applied factory overhead rate per machine hour $22.00
What is the total manufacturing cost for Job No. 987?
a. $21,650
b. $23,450
c. $24,950
d. $26,750
Assignment Folder
3
1. The comparative balance sheets for Drake Company appear
below:
Additional information
1. New plant assets costing $100,000 were purchased with cash.
2. Investments were purchased with cash.

3. Old plant assets costing $25,000 and with a book value of
$13,000 were sold for $10,000 cash.
4. Bonds with a face value of $40,000 were converted into
$40,000 par value of common stock.
5. Common stock was issued for cash.
6. A cash dividend of $15,000 was declared and paid during the
year.
Required
Prepare a statement of cash flows for the year using the indirect
method.
Assignment Folder
4
Drake, Inc.
Comparative Balance Sheets
December 31
Drake, Inc.
December 31
Drake, Inc.
December 31
Assets 2014 2013
Cash 41,000 35,000

Accounts Receivable 75,000 53,000
Inventories 120,000 132,000
Prepaid Expenses 19,000 25,000
Investments 100,000 75,000
Plant assets 325,000 250,000
Accumulated Depreciation (65,000) (60,000)
Total Assets 615,000 510,000
Liabilities & Equity
Accounts Payable 93,000 75,000
Accrued Expenses 29,000 24,000
Bonds Payable 120,000 160,000
Common Stock 275,000 170,000
Retained Earnings 98,000 81,000
Total Liabilities & Equity 615,000 510,000
Drake, Inc.
Income Statement
Drake, Inc.
Income Statement

Drake, Inc.
Income Statement
Sales 450,000
Cost of Goods Sold 300,000
Gross Margin 150,000
Less:
Operating Expenses 60,000
Depreciation Expense 17,000
Income Taxes 20,000
Interest Expense 18,000
Loss on sale of plant assets 3,000 118,000
Net Income 32,000
2. Redding Company has budgeted sales revenues as follows:
June July August
Credit sales 135,000 145,000 90,000
Cash sales 90,000 255,000 195,000

Total sales 225,000 400,000 285,000
Past experience indicates that 60% of the credit sales will be
collected in the month of sale and the
remaining 40% will be collected in the following month.
Purchases of inventory are all on credit and 50%
is paid in the month of purchase and 50% in the month
following purchase. Budgeted inventory
purchases are:
Other cash disbursements budgeted: (a) selling and
administrative expenses of $48,000 each month, (b)
dividends of $105,000 will be paid in July, and (c) purchase of
equipment in August for $30,000 cash.
The company wishes to maintain a minimum cash balance of
$50,000 at the end of each month.
Instructions
Prepare a cash budget for the months of July and August.
Assignment Folder
5
June 300,000
July 250,000
August 105,000
3. Delvin Corporation incurred the following costs while

manufacturing its product.
Materials used in product 130,000 Advertising expense 49,000
Depreciation on plant 65,000 Property taxes on plant 16,000
Property taxes on administrative building 7,700 Delivery
expense 20,000
Labor costs of assembly-line workers 112,000 Sales
commissions 31,000
Factory supplies used 24,000 Salaries paid to sales clerks
58,000
Work-in-process inventory was $23,000 at January 1 and
$15,800 at December 31. Finished goods
inventory was $67,000 at January 1 and $52,600 at December
31.
Instructions
Prepare a cost of goods manufactured schedule and determine
the amount of cost of goods sold.
4. Winston Company manufactured 5,000 units of a component
part that is used in its product and
incurred the following costs:
Direct materials 35,000
Direct labor 25,000
Variable manufacturing overhead 20,000
Fixed manufacturing overhead 18,000

98,000
Another company has offered to sell the same component to the
company for $17.50 per unit. The fixed
manufacturing overhead consists mainly of depreciation on
equipment used to manufacture the part and
would not be reduced if the component part was purchased from
the outside firm. If the component part
is purchased from the outside firm, Winston Company has the
opportunity to use the factory equipment
to produce another product that is estimated to have a
contribution margin of $19,000
Instructions
Prepare an incremental analysis for this make or buy decision.
Should the component be made or
purchased?
Assignment Folder
6
5. The income statement for Hyland Company for 2014 appears
below:
Hyland Company
Income Statement
Hyland Company
Income Statement

Sales revenue (40,000 units) 1,000,000
Variable expenses 700,000
Contribution margin 300,000
Fixed expenses 345,000
Net income (loss) (45,000)
Instructions
Answer the following independent questions and show
computations to support your answers:
1. What was the company’s break-even point in sales dollars in
2014?
2. How many additional units would the company have to sell in
2015 (compared to 2014) in order to
earn net income of $45,000?
3. If the company is able to reduce variable costs by $4.50 per
unit in 2015 and other costs and unit
revenues remain unchanged, how many units will the company
have to sell in order to earn a net
income of $45,000?
6. Mountain Lumber Corporation uses a machine that removes
the bark from cut timber. The machine is
unreliable, resulting in significant downtime and wasted labor
costs. Management is considering
replacing the machine with a more efficient one that will
minimize downtime and excessive labor costs.
Data are presented below for the two machines:

Old Machine New Machine
Original purchase cost 325,000 405,000
Accumulated depreciation 230,000 0
Estimated life 4 years 4 years
It is estimated that the new machine will produce annual cost
savings of $107,000. The old machine can
be sold to a scrap dealer for $12,000. Both machines will have a
salvage value of zero if operated for the
remainder of their useful lives.
Instructions
Determine whether the company should purchase the new
machine and show your computations to
support your answer.
Assignment Folder
7
7. Prytania Corporation is authorized to issue 1,000,000 shares
of $5 par value common stock. During
2014, its first year of operation, the company has the following
stock transactions.
Jan 1 Paid the state $5,000 for incorporation fees.
Jan 15 Issued 500,000 shares of stock at $6 per share.
Jan 30 Attorneys for the company accepted 500 shares of
common stock as payment for legal services

rendered in helping the company incorporate. The legal services
are estimated to have a value of
$7,000.
July 2 Purchased 15,000 shares of common stock for the
treasury at $9 per share.
Sept 5 Sold 11,000 shares of the treasury stock at $11 per share.
Oct 30 Declared a $0.15 per share cash dividend payable to
common shareholders on December 15.
Dec 15 Paid cash dividend to common shareholders.
Instructions
Journalize the transactions for Prytania Corporation
8. Chetola Corporation has 120,000 shares of $5 par value
common stock outstanding. It declared a 15%
stock dividend on June 1 when the market price per share was
$13. The shares were issued on June 30.
Instructions
Prepare the necessary entries for the date of declaration and
date of payment of the stock dividend.
9. Zeller Company requires its marketing managers to submit
estimated cost-volume-profit data on all
requests for new products, or expansions of a product line.
Jean Lamb is a new manager. Her calculations show a fixed cost
for a new project at $100,000 and a
variable cost of $5. Since the selling price is only $15 for the
proposed product, 10,000 would need to
be sold to break even. That is approximately twice the volume
estimate for the first year. She shares her
dismay with Anne Smythe, another manager.
Anne strongly advises her to revise her estimates. She points

out that several of the costs that had been
classified as fixed costs could be considered variable, since they
are step costs and mixed costs. When
the data has been revised classifying those costs as variable
costs, the project appears viable.
Required
1. Who are the stakeholders in this decision?
2. Is it ethical for Jean to revise the costs? Explain.
3. What should Jean do?
Assignment Folder
8
Please answer ANY TWO questions below. Emphasis should be
on building economic model(s) that captures the central point of
each question with short paragraphs explaining the assumptions
you have made to construct the model(s).
1.Clearly and without reservation identify the good or service
that is at the heart of the question. Failure to do so may cause
problems such as drifting into other markets and products that
are not at the center of the article.
2.Establish the initial market condition in terms demand and
supply curves and initial equilibrium prices and quantity
exchanged in the market. Remember that there should be
separate market model for each good/service considered.
Vertical axis is prices and not cost. Cost is built into the supply
curve. What market observes is price and not cost of
production.
3.Make certain that you incorporate Elasticities of demand and
supply in the initial model if applicable. If consumers are price

insensitive at initial state, them demand curve is more steep
than otherwise. If production of the product is complicated and
expanding output by suppliers (producers) is costly, then supply
curve is steeper than otherwise. For example, supply curve of
neurosurgery is considerably steeper than supply of primary
care provided by a nurse practitioner. If you do not see any
reason to make assumptions about demand and/or
supply Elasticities, then use a generic 45 degree curve(s).
4.Work into the model dynamic of the issue… that is how
consumer demand or producer supply curve changes due to
some exogenous forces. For example, increase in consumer taste
or need for a good/service will shift the demand for the product
and may become even less price sensitive (steeper). Adverse
supply shocks such as problems with production, lack of inputs,
backfired technology or management decisions all can shift the
supply curve to the left and even make it more steep reflecting
higher cost of production.
5.Identify the conclusions reached after dynamic of the issue is
incorporated into the model
6.Label your model clearly and carefully.
7.You may hand draw the model(s).
8.Finally, AVOID restating or rephrasing the content of the
article as a way of analyzing the issue. You should take the real
world scenario discussed in the article and use the economic
tools, concepts, theories and models to unravel the content.
Questions
1.In the article below, once again, allegations of improper link
between the pharmaceutical industry and the FDA/NIH that
result in favorable outcomes for the industry has been raised.
Using economic theory discuss the implications of such

practices on public health.
FDA and Pharma: Emails Raise Pay-for-Play Concerns
Published: Oct 7, 2013
By John Fauber, Reporter, Milwaukee Journal
Sentinel/MedPage Today
For more than a decade representatives of some of the nation's
leading pharmaceutical companies paid entry fees running into
the tens of thousands of dollars to attend invitation only
conferences with FDA and NIH officials, according to a trove of
emails provided to the Milwaukee Journal
Sentinel/MedPageToday.
The Email Trail
The emails, most of which track correspondence among
founders of an organization called IMMPACT, academics, NIH
researchers, and FDA officials, raise serious questions about the
way in which federal regulators interact with the pharmaceutical
companies they regulate.
Entry to these meetings was secured by annual fees that ranged
as high as $35,000. The drug companies that paid those fees
were guaranteed the right to send a representative to the annual
meetings of the organization known as IMMPACT, meetings
that were also attended by officials from the FDA and other
federal agencies..
The IMMPACT web site, states that the organization's goal is to
improve the design of clinical trials conducted to develop new
pain treatments.
But the emails raise concerns about a possible pay-for-play
arrangement in which drug companies were able to buy access
to invitation-only meetings where they could meet with FDA
officials and possibly influence FDApolicy regarding approval

and regulation of analgesics, said Michael Carome, MD,
director of the health research group of the watchdog group,
Public Citizen.
"The whole picture is a troubling one and it warrants an
independent investigation," said Carome, who has seen the
emails.
Powerful Strategy or Shortcut to Disaster?
As an example of an initiative that sprung from
the IMMPACTmeetings, Carome singled out the FDA's new
"enriched enrollment" guidance for conducting pivotal trials of
drugs. Enriched enrollment allows drug companies to weed
outnonresponders or subjects who have adverse reactions to the
drug from enrollment in clinical trials.
Experts say that approach makes it much more likely a drug will
prove effective and possibly win FDA approval. It's also
cheaper for drug companies to conduct such trials.
However, the approach has drawn criticism because it
essentially stacks the deck in favor of the drug. More
importantly, experts say, drugs tested that way are not likely to
reflect what will happen when a drug gets on the market and is
prescribed for large numbers of people.
"It's in fact cheating," said Patrick McGrath, PhD, a pediatric
pain expert at the Dalhousie University in Halifax, Nova Scotia.
On its web site, the FDA says that enriched enrollment is
potentially powerful strategy for the pharmaceutical industry
because when used appropriately it can result in smaller studies,
shortened drug development time and lower development costs.
"While enrichment won't save a drug that doesn't work, it will
help find one that will," Bob Temple, MD, the agency's deputy
director for clinical science, wrote in a piece posted on the

FDA's web site last December.
Behind Closed Doors
The emails represent another example of how drug company
money has influenced the practice of American medicine, a
concern that has been raised in ongoing investigative reports in
the Journal Sentinel/MedPage Today over the last 4 years.
Several of those stories revealed how companies that make
opioid analgesics funded various nonprofit organizations that
advocated for expanded use of opioids, particularly in treating
chronic pain.
That increased use of opioids over more than a decade has been
linked to an epidemic of overdose deaths and addiction.
Last year, the U.S. Senate Committee on Finance, citing reports
in the Journal Sentinel/MedPage Today, opened an investigation
into those financial relationships.
The IMMPACT emails, which run for 409 pages, were obtained
through a public records request by Craig Mayton, a Columbus,
Ohio attorney who has made claims against drug companies in
cases where people have died of opioid overdoses. The emails
were provided to Mayton by the University of Washington
where, Dennis Turk, PhD, one of the founders of the
organization, works as a professor of anesthesiology and pain
medicine.
Mayton gave the emails to the Journal Sentinel/MedPage Today.
In an email response to questions about the emails, FDA
spokesman Steven Immergut, said the agency was aware of
concerns raised about the agency's involvement in
theIMMPACT organization and "we take these concerns very
seriously. We are unaware of any improprieties..."

In an interview, Douglas Throckmorton, MD, the FDA's deputy
director for regulatory programs, said FDA officials who
attended the organization's meetings were listening to scientists,
not setting policy.
"Pay-for-play is just not the way the FDA operates,"
Throckmorton said. "That's not part of the culture of the FDA."
He said that while enriched enrollment may have been discussed
at the organization's meetings, the FDA's decision to endorse of
the concept did not come entirely from the meetings.
The emails paint a picture of another way in which drug
companies can exert influence on the practice of medicine.
In a 2003 email, Raymond Dionne, an official with the National
Institutes of Health, raised a concern about the closed,
invitation-only nature of the organization's meetings and
suggested open meeting on the NIH campus.
"The major advantage of having the meeting on the NIH campus
would be the ability to open the meeting to all interested parties
and avoid the stigma that this initiative is a 'pay
to play'process," Dionne wrote.
A day later, Dionne wrote in an email that IMMPACT was
inviting criticism that is it "paid for by a few large
pharmaceutical firms who are assumed to be influencing the
outcomes."
Brown Bagging It
In another email about 2 weeks later, Dionne
tells IMMPACTthat he and other federal officials "if they play
by the book" should not accept dinners for meetings at the Four
Seasons Hotel.

"I may even bring a brown bag," Dionne says.
In response, Robert Dworkin, PhD, the other co-founder
ofIMMPACT, told Dionne that, if he wished, the organization
would order "inexpensive sandwiches for lunch for the
government folks."
"The rest of us undoubtedly will feel guilty, but we will
probably resist the temptation to have tuna fish in respect for
your plight," added Dworkin, a professor at the
University ofRochester Medical Center.
Renate Myles, a spokeswoman for NIH, said that because of the
federal government shut down she could not provide a response
for this story.
Many of the academics invited to the organization's meetings
were offered payments of about $3,000 to attend. In a 2002
letter from Turk, the University of Washington professor who is
a co-founder ofIMMPACT, a $3,000 honorarium was offered to
Robert Rappaport, MD, who heads the FDA division that
regulates analgesics, to attend an IMMPACT meeting in
Annapolis, Md., The FDA said the payment was not accepted.
In an interview Turk, acknowledged that, dating back to 2002,
drug companies paid between $20,000 and $35,000 each to be
able to send one representative to the 16 meetings held by the
group.
Nearly all the meetings were held over 2 days at high-end hotels
in the Washington, D.C. area., Turk said.
Between 25 and 50 people, including regulators, academic
researchers and drug company representatives attended each
event.

"There was no attempt to do anything more than answer some
questions," Turk said.
After the meetings, consensus papers that listed drug company
officials, federal health officials and academics as the co-
authors were published in various medical journals.
Dworkin, said no more than than one person from any one drug
company was allowed to attend the meetings and it was
encouraged that companies send researchers, not marketing
people.
Dworkin acknowledged that the emails might raise ethical
concerns.
"Yes, some of the emails that Dennis and I sent back and forth
... looked problematic on the surface, but the fact of the matter
is it was a model that worked that no one complained about,"
saidDworkin, a professor and pain expert at the University of
Rochester Medical Center.
The organization's website lists 11 drug company sponsors,
including several that make narcotic painkillers.
In an email, James Heins, a spokesman for Purdue Pharma, the
company that makes the narcotic painkiller, OxyContin, said the
pharmaceutical industry has been an important participant in the
organization's program.
"Our experience conducting clinical trials is valuable to
academia and the FDA, especially in improving clinical trial
design for analgesics," Heins said.
In an email, Greg Panico, a spokesman for the Janssen Research
& Development, said it funded the organization to help improve

clinical trials involving pain drugs. Janssen's, parent, Johnson &
Johnson, is listed as a corporate sponsor on the organization's
web site.
"Our company believes in working collaboratively in public-
private efforts to pursue scientific innovation," Panico said
2.In the article below, out-of-pocket spending for millions of
currently uninsured citizens will decrease while the overall
expenditure for the same group will increase as they
purchasemedical insurance. Using economic theory (models)
show the impact of reduction in out-of-pocket spending on 1.
Medical care services market and 2. Public health.
Washington-Watch
Out-of-Pocket Costs Projected to Fall Under ACA
By David Pittman, Washington Correspondent, MedPage Today
WASHINGTON -- Most Americans flocking
to HealthCare.govthis week to sign up for health coverage under
the Affordable Care Act (ACA) will see their out-of-pocket
costs fall with expanded insurance options, an analysis found.
"Decreases in out-of-pocket spending will be largest for those
who would otherwise be uninsured," a study from the RAND
Corporation found. "In some cases, these reductions will be
dramatic."
However, total health spending -- which includes out-of-pocket
costs and spending on health insurance premiums -- will
increase for many newly insured people, except those who will
be covered by Medicaid.
In the report, "Effects of the Affordable Care Act on Consumer

Health Care Spending and Risk of Catastrophic Health Costs,"
RAND researchers sought to understand how the 2010 health
law would impact consumer spending by using
amicrosimulation model for newly insured consumers and those
who change their source of coverage.
Out-of-Pocket Costs Predicted to Drop ...
The lowest-income individuals receiving coverage in
the ACA'sindividual market -- those making between 100% and
138% of the federal poverty level -- are expected to see their
out-of-pocket costs drop from about $1,446 in 2016 without
the ACAto $506 with the law. The 11.4 million people making
between 138% and 400% of poverty will have their out-of-
pocket costs drop from about $1,969 to $1,224.
Those making above 400% of poverty will see their out-of-
pocket spending fall from an estimated $5,368 to $1,227,
according to the report. "We note that this group has
particularly high out-of-pocket costs without the ACA because
many of these individuals are denied coverage on the individual
market without guaranteed issue due to their health status," the
authors stated.
Low-income uninsured people who are living in states that don't
expand their Medicaid programs -- Texas and Florida, for
example -- and who are ineligible for federal assistance will
spend an average of $1,831 out-of-pocket, compared to $28 if
they were covered by Medicaid.
However, people who gain coverage in an expanded Medicaid
program are predicted to have their annual out-of-pocket
medical costs fall from $1,463 to $34. In states that elect to
expand, the ACA has the federal government pay most or all
coverage for those making up to 138% of poverty.
"Because the consumers in this group will pay no premiums, the

decreases in out-of-pocket spending for those transitioning from
uninsured status to Medicaid will be identical to the decreases
in overall health care spending," the RAND study stated.
... But Total Health Spending Expected to Increase
However, total health spending will increase for most
groupsunder the ACA.
Consumers who become newly insured on the individual market
and make too much money to qualify for the ACA's subsidies
are expected to pay more ($7,202) in 2016 compared to if the
law wasn't in place ($5,368), according to the report.
"This increase is explained largely by the fact that newly
insured consumers are paying premiums for the first time -- and
for those with incomes above 400 percent of the [federal
poverty level], these premiums are not subsidized by the
government -- and thus their total spending on healthcare will
increase even though their out-of-pocket spending will go
down," the report stated.
The ACA's exchanges or marketplaces that have launched this
week, catching much attention and crashing from heavy traffic,
are open to those without affordable health options, but the
premium tax credits are only available for those making
between 100% and 400% of poverty.
Of the 16.5 million who would be uninsured without the ACA,
the RAND study expects 3.3 million people nationwide to make
too much to receive the subsidies.
Consumers with incomes below 138% of poverty will spend a
total of $2,005 in 2016, an increase of $559. Those making
between 138% and 400% of poverty will spend $3,536, an
increase of $1,567.

"Our results show that despite decreases in out-of-pocket
spending for those who transition from being uninsured to
having coverage in the individual market, total consumer health
care spending will increase for this group because these people,
who previously opted not to or were ineligible to buy insurance,
will be paying premiums for the first time," the study showed.
Finally, RAND estimated that by 2016, 11.5 million people will
have gained coverage from Medicaid. Those newly covered
people will see their risk of spending at least 10% of their
income on medical costs drop from 45% to 5%.
3.In the article below, reminders and communication has been
identified as methods by which primary care providers may
reduce patient no-shows. Using economic model(s) show the
impacting of reducing no-shows on the market for medical care.
Reminders, Clarity Help Cut Office No-Shows
By Chris Kaiser
Interventions focused on forgetfulness and miscommunication
might help decrease missed primary care appointments,
researchers suggested.
Two-thirds of those who missed an appointment said it was
either because they had forgotten (35%) or there was a
miscommunication (31.5%), according to Emma Kaplan-Lewis,
MD, a resident primary care physician, and Sanja Percac-Lima,
MD, a primary care physician, both at Massachusetts General
Hospital (MGH) Chelsea HealthCare Center.
Patients who missed appointments were more likely to be
younger than those who showed up; those ages 18-40 made up
about 38% of those who showed up, but comprised more than
half (54%) of the no-shows, researchers reported in the latest

edition of the Journal of Primary Care & Community Health. On
the other hand, patients between 40-64, and patients 65 and
over, were more likely to honor their scheduled appointments
compared with those under 40 (both P<0.001).
The no-shows also were more likely to be Hispanic (P<0.001),
black (P=0.0423), and have Medicaid, self-insurance, or no
known insurance (P<0.001).
Other reasons for missing an appointment, in order of greatest
percentage to least (starting at 5.1%), were:
•Too sick
•Late
•Other obligation
•Away
•Work
•Hospitalized
•Transportation issues
•Health insurance
Interestingly, only three patients reported insurance as a barrier
to making scheduled appointments. Kaplan-Lewis and Percac-
Lima suggested that positive note may be because of the health
insurance mandate in Massachusetts.
Also, the seven patients who claimed hospitalization prevented
them from making their appointment was"notable"
because MGH Chelsea has an electronic system that notifies

schedulers and primary care physicians when someone is
hospitalized. Researchers suggested that the patients have been
at nonaffiliated facilities, and that a solution could entail having
a better system of coordination among Boston area hospitals.
There was no difference in gender between those who came to
their appointments and those who did not, nor was there a
difference related to primary language spoken.
Other studies have found language to be a barrier to keeping
appointments, but MGH Chelsea has 16 interpreters/outreach
workers on site covering 13 languages, researchers pointed out.
For the study, Kaplan-Lewis and Percac-Lima retrospectively
reviewed records at a community health center serving a
predominantly Latino, immigrant, and low-income population.
They identified adults who did not show to primary care
appointments from March 23, 2012 to September 4, 2012.
Of 5,604 appointments, 16.5% were no-shows. A total of 37%
of them were interviewed for this study.
Forgetfulness has been noted in previous studies as a
predominant reason for missing appointments with primary care
clinics.
A study by Richard D. Neal, MB, ChB, and colleagues in the
United Kingdom, for example, found thatover 40% of those who
missed an appointment had simply forgotten. However, 25%
said they tried very hard to cancel the appointment.
Similar to the current study, Neal and colleagues found that
younger patients were more likely to miss appointments.
Missed primary care appointments lead to poor disease control

and later presentation to care. What strategies do you employ to
help patients keep their appointments? -- Sanjay Gupta, MD
This study was supported by a Harvard Medical School Center
for Primary Care Academic Innovations Collaborative Grant.
The authors declared no potential conflicts of interest with
respect to the study.
4.In the article below the number of diagnostic codes will jump
from 1700 to 150,000. Using economic theory (models) discuss
the implications on physician services.
Docs Urged to Start Prepping Now for ICD-10
By David Pittman, Washington Correspondent, MedPage Today
WASHINGTON -- Come the first week of October next year,
the number of codes to document, say, an angioplasty will go
from one to 854. The number of pressure ulcer codes will jump
from nine to 125. Asthma will need to be classified as "mild,"
"mild intermittent," "mild persistent," "moderate persistent," or
"severe."
Yes, this week brought the opening of the Affordable Care Act's
health insurance exchanges, but Oct. 1, 2014 will usher in
another revolution for physician offices: the International
Classification of Diseases, version 10 -- ICD-10.
And the date is one that the Centers for Medicare and Medicaid
Services has stood firm on after granting a 1-year delay.
The much-dreaded update to the coding system that determines
how much physicians will be paid increases the number
of procedure and diagnostic codes from roughly 17,000 to
nearly 150,000 and requires much greater detail on location of

ailments, cause and type, and complications or manifestations
compared with ICD-9.
While ICD-9 codes are three to five numbers long, ICD-10
codes are up to seven digits long and include numbers and
letters.
And reimbursement will depend on getting them all right.
Several health information technology experts advise physician
offices to start testing systems and workflow practices now -- if
they haven't already -- to prepare for the transition.
Deepak Sadagopan, general manager of clinical solutions at the
Bellevue, Wash., health IT companyEdifecs, said providers
should expect multiple disruptions to offices, involving
reimbursement, contracts with payers, and worker productivity.
"There are multiple impacts that could potentially ripple
through the organization," Sadagopan said on a webinar
Tuesday. "Some of these impacts are going to be with your
organizations for some time."
A computer-assisted coding system may help smooth workflow,
he said. But Sadagopan said providers also must improve the
specificity of documentation in order to meet ICD-10's
increased billing demands.
Nearly two-thirds of clinical documentation doesn't contain
enough information for coders to use for billing under ICD-10,
according to a survey from AAPC, a medical coding society
based in Salt Lake City, Utah.
AAPC gives a number of tips for physicians:
•

Review contracts with health plans and see what additional
information they need or what will be changing
•
Test systems and procedures before October 2014 to make sure
your office is ready to go
•
Budget for the costs of the change
•
Train and educate clinicians and other staff members on the
changes they need to make
•
Update forms, documentation, and internal processes
CMS has produced a number of tip sheets, handbooks, and other
content to aid providers on the transition. The agency also hosts
periodic teleconferences and sends updates via email.
Checklists and tip sheets also vary by small, medium, and large
practices and hospitals.
Along with links to its resources, the agency suggests that
practices:
•
Have a transition plan in place and make sure it documents the
steps being followed and the dates that milestones will be
achieved to comply with ICD-10 requirements

•
Include vendor tasks in the plan and time line, and make sure to
communicate with your practice management system and/or
electronic health record (EHR) vendors regularly about ICD-10
•
Establish an emergency fund to cover unexpected costs and
possible reimbursement delays
CMS recommends providers not focus on the more than 100,000
codes in ICD-10, but home in on thehandful that are most
applicable to their practice and specialty.
Doctors note that ICD-10 comes with a wave of other health IT
transformations, including "meaningful use" mandates
for EHRs and e-prescribing.
Physician advocates, including the American Medical
Association and the Medical Group Management Association
(MGMA), have pushed for greater flexibility in the program,
given the many IT mandates coming.
MGMA has specifically has urged CMS to conduct "end-to-end
testing" between the agency and physician practices, a move
CMS has declined to take.
5.Please view the video (link below). What economic theory
discussed is relevant in understanding the central theme of the
lecture. Discuss with graph(s).
http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_c
hoice.html

EXAMPLES1.Please read the article below. Using economic theory.docx

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