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Month: August 2004

POLICY: Americans apparently prefer Canadian healthcare

Following my article about reimportation on Friday I’ve been having some email chats with some “Canada doubters” (for want of a better word). So I was most amused to get the latest Harris Poll on the topic. The poll isn’t up online yet, but here’s Humphrey Taylor’s take:

With one exception, more Americans feel very positively about their own country than about the other countries. They rate the U.S. Constitution and system of government much more highly than those of other countries. Americans also rate the quality of life, the present government, the economy and the environment in the U.S. more highly than those in other countries – or to be literally accurate, more Americans feel “very positive” about these things than they do about them in Canada or the major European countries. The one exception to their generally more positive views of things in this country is the U.S. health care system.

On five of the six criteria, majorities of adults feel very positively about the U.S., from the 77 percent who feel very positively about the U.S. Constitution and system of government and about the quality of life in the United States to the 51 percent who feel very positively about the environment in this country. Again there is one exception; only 34 percent of adults in America feel very positively about the U.S. health care system. The most striking finding, however, is that substantially more Americans feel very positively about the Canadian health care system (49%) than about the U.S. health care system (34%).

Now to poke a few holes in this (which Humphrey would agree with), it’s fair to say that American’s aren’t exactly too well educated about virtually anything that happens outside the 48 contiguous, and that doubles down when you think about European countries and healthcare systems. For instance, 45% said they felt positive about the quality of life in the UK as compared to only 31% for France and 25% for Spain. I guess good food, great wine and wonderful weather don’t count for much to Americans but while you don’t see too many Spaniards heading to the UK for vacation, there’s a lot of Brits going the other way!

Meanwhile, the WHO has always rated the French and German systems very highly, but only 16% and 12% of the American public do so, while 28% think well of that evil socialized medicine in the UK. Of course the key point of the whole survey is that only 34% of Americans feel very positively about their health care system, while 49% feel very good about Canada’s.

This is important for two reasons. First, it’s probably the only comparative question about health care that Americans can answer from some knowledge base. The word is indeed out that Canada at the least has cheaper drug prices, and the the word is probably getting out that everyone gets “free” coverage there. Second and more importantly, as is framed on the wall in the reception area of the Harris office, W.I. Thomas said, “If men define situations as real, they are real in their consequences.” And the consequence of this perception means more ructions in the American health policy debate, which is gathering speed at a rapid clip.

HEALTH PLANS: Profits up to $10 Billion in 2003, doubling 2002’s level

As if you didn’t know it, 2003 was a very good year for health plans. Weiss Ratings has published a table showing that several, including non-profits Kaiser & Group Health Cooperative of Puget Sound had excellent years. (Although Kaiser’s looked better than it actually was due to an accounting change) Overall HMOs posted profits of $10.2 Billion in 2003, nearly doubling their 2002 numbers. The dark days of 1998 look long gone.

Except that there remains this nasty thing called the underwriting cycle, and we are already seeing premium rates start to slowly fall (down to the 7-8% increase level). It’s a little early to be crying wolf just yet, but I still maintain that this is as good as it’s going to get for insurers, and that their stock prices are overvalued. Of course, whatever you think about them you can’t sell Kaiser or Group Health short!

HEALTH PLANS: Is Kaiser thriving? Probably!

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For the last several weeks Kaiser Permanente has been running a series of TV and print commercials called “Thrive“. They ads contain a bunch of pap series of suggestions about living a healthier lifestyle and how Kaiser Permanente wants its members to “thrive”. This is apparently a $40m campaign, but given that Kaiser has been losing some market share and has been having trouble combating the high-deductible health plans on offer from its rivals like Wellpoint, Blue Shield, Healthnet et al, it doesn’t sound like an outrageous amount to spend. Of course, like every other health plan Kaiser is trying to get younger, healthier people to sign up as members. And while the commercials may not make much sense (be honest, which ones on TV do?), they are at least related to healthcare in some way, unlike an early 1990s campaign in which Roger Greaves, then Healthnet’s CEO, was shown kayaking next to a pod of killer whales.

Up to now I’ve ignored this as I think these type of ads are mostly irrelevant to the real health care market. But as with any big organization, Kaiser has its detractors, and there’s been some fuss about the campaign in the Oakland Tribune. One Kasier detractor has written to several health care bloggers suggesting that we cover it. Well, after confirming that my correspondent really is an ex-Kaiser employee, I’ve taken the bait, although I’m not sure my correspondent will be too happy with my conclusions. (Full disclosure–Kaiser was a client of organizations that I worked for back before 1999. I never worked for them on a dedicated project and have had no financial connection with them since).

Kaiser has made some basic if not serious missteps, and in the “Thrive” campaign it has left its detractors a few open goals. For a start, despite the name of the campaign, the URL KaiserThrive was not reserved and unfortunately for Kaiser was taken by a very upset Kaiser patient/member. And it gets a little worse, particularly as several of the internal powerpoints describing Kaiser’s communications issues were left openly available on the Internet. Now, having looked at what’s in one document I can’t find anything that reflects too badly on Kaiser. It’s mostly a series of suggestions as to how to position the corporate message and relate to members better. And those problems are basically the same ones Kaiser’s always had.

For as long as I can remember Kaiser has had a good reputation with a high percentage of its members, and a reputation amongst better-off socio-economic groups as a plan OK for working-class people but not for people like “you and me”. While the some of this attitude is down to class snobbery, part of it is due to the inherent structure of the Kaiser system which restricts its members to Permanente doctors and Kaiser facilities.

There are some genuine criticisms of the way Kaiser does business. Wellpoint’s Len Schaeffer has long criticized Kaiser’s commitment to charity care and providing care for Medicaid patients. This quote is from a 1995 interview:

Q: How does Kaiser Permanente fit into the changing market picture in California?
A: Kaiser Permanente has done a marvelous job for its membership, the bulk of which resides in California. But, as a nonprofit HMO, I don’t think it has done much for other Californians. Kaiser does not enroll those who cannot pay its premiums. In fact, I argue that Kaiser has taken all of the medical revenues of its California membership-almost, five million people-out of the state’s pool of available health care monies, put it in its own private health insurance system, and therefore made the rest of the system bear the burden of caring for all of the people who are uninsured.

However, despite criticism that it doesn’t do enough for non-members, Kaiser has been at the forefront of some genuinely innovative medical programs for those who are its members, even if it might be financially better off without them. It was one for the first to introduce a comprehensive HIV care program and introduced comprehensive disease management programs back in the 1990s, some way ahead of most of its competitors. That of course means that Kaiser’s sicker members tend to stay with it, which really is the opposite of what a health plan’s CFO might want, and what some of its more financially successful rivals have actually done.

And despite some criticism of the technology behind its HealthConnect program (for one dissenting view see here) and its tendency to inadvertently kill off smaller software vendors by bureaucratic mind-shifts, Kaiser is the private organization in America with the biggest initiative in health IT. The commitment to improving care by implementing electronic health records is genuine and huge, and at least by its own account (as reported in Health-IT World) is going quite well.

So overall I still believe that Kaiser is on the side of the Angels. There are though several issues that need to be cleaned up. One is the slightly obvious one of taking care that internal documents stay internal. While I haven’t read anything that showed malfeasance or bad intent in those documents that were left unprotected, that level of attention to detail doesn’t demonstrate too much security competence. As Kaiser is going to be creating probably the largest interconnected medical database in the private sector, they are going to have to make sure that that data is secure, and understood to be secure. Already some commentators are suggesting that outsourcing some of the technology to India will compromise data privacy. My correspondent has a weblog devoted to these and other issues. A quick perusal of that weblog shows an unhappy ex-employee, who is mostly upset at the internal office politics s/he experienced at Kaiser. But that doesn’t mean that all the comments can be dismissed out of hand, especially as some documents linked to on the web are clearly not meant for public viewing. Scratch this type of thing and it gets even weirder. There is one baffling web site which suggests that there’s a pattern of criminal and violent behavior apparently attributal to rogue employees within Kaiser, but I think this seems to be descending into conspiracy theory.

I suspect the truth is all much more mundane. Kaiser is a big bureacractic organization with all the turf battles and complications that you’d expect. Add to the mix the fact that Kaiser, for all the efforts of the corporate office, is still a collection of regional insurers and of regional medical groups that all have their own politics and agendas. Nonetheless, it has consistently scored well on NCQA and other quality measures, and has shown more innovation than most providers of its size and almost every health plan in terms of patient care, disease management programs and its IT initiatives.

Despite its well-publicized problems, particularly its big losses in 1997-8, Kaiser has been a massive net positive in the Western US health care system. Its success in the 1980s and 1990s certainly ushered in managed care–and there would be those that argue that wasn’t such a good thing–but you can’t blame Kaiser for what were almost all the failings of other managed care plans. You can credit Kaiser for delivering more cost-effective and higher quality care on a mass scale than almost anyone else in America, and for making the investments to ensure that they’ll be able to do that in the future.

Sure there’ll be problems as the new system is rolled out. Sure a new advertising campaign — while arguably needed to promote the organization’s viability — is no panacea and perhaps the money could be better spent elsewhere. But nothing I’ve seen from the detractors so far persuades me to believe that, silly ad campaign or not, Kaiser needs to do anything else than keep on its current course.

POLICY: Krugman on why Canadian business likes single payer

Paul Krugman focused on health care in his regular op-ed on Friday in the NY Times. Krugman is what passes for a lefty in this country (i.e. he’s a moderate social democrat) but in this op-ed he points out that in single payer nations like Canada, it’s the business community that is keen to maintain the system because it costs less than a “market”-based system. As he says:

The U.S. system does have very high overhead: private insurers and H.M.O.’s spend much more on administrative expenses, as opposed to actual medical treatment, than public agencies at home or abroad.

Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes. Put it this way: in Canada, respectable business executives are ardent defenders of “socialized medicine.” Two years ago the Conference Board of Canada – a who’s who of the nation’s corporate elite – issued a report urging fellow Canadians to bear in mind not just the “symbolic value” of universal health care, but its “economic contribution to the competitiveness of Canadian businesses.”

Of course, Krugman is told by his economist friends that it’s unrealistic to expect single payer, but he leaves with a barb:

But let’s not ignore the growing evidence that our dysfunctional medical system is bad not just for our health, but for our economy.

Of course, there are plenty of their corporate compatriots on this side of the border who would love to push their obligations for their employee and retirees health care onto the taxpayer too.

PHARMA: Reimportation radio show, with late afternoon UPDATE

This morning I lost my cool somewhat and called into the local KQED Forum radio show, where they were discussing reimportation. One of the guests, Stephen Chang, a biotech CEO and head of a new group called Californians United for Research, Economic Development and Saving Lives (which I’d never heard of and that doesn’t seem to have a web site) was making my blood boil.

He claimed that he had patients in his group and that they opposed reimportation on safety grounds. I congratulated him on getting patient support for this canard as poll after poll shows 80% of seniors are massively opposed to the ban on reimportation. He then said that the FDA is non-political. Yet the FDA could very easily certify pharmacies in Canada or in the US that import drugs from Europe. The only thing stopping them is the absence of instruction from their political bosses, which might actually arrive soon anyway.

OK. Then after I spoke — and included the share of revenue of pharma companies given to sales and marketing (c. 30%), R&D (11%) and profits (c.18%) in my talk — Chang went on a long rant about the fact that R&D was really expensive and cost “hundreds of millions of dollars”. Actually the real number is tens of billions of dollars, but he never referred to the percentages of revenue pharma spends on what –it was just empty rhetoric. There was a similarly uninforming letter from the President of PhRMA in the LA Times last week. Chang’s opponent on the show, Jerry Flanagan, a lefty consumer advocate from the Foundation for Taxpayer and Consumer Rights, was overly kind to him. Jerry knew his stuff but hardly knew how to answer the bombast coming from Chang–I think he was looking for something more traditional to get his teeth into. He did though quote some GAO studies on how much current R&D amounts are overstated.

Big pharma was best represented on the show by a caller who said that he wanted pharma margins to stay high and that he thought foreigners should pay higher prices and Americans should pay lower prices. Well at least there’s the basis of a rational argument. He also pointed out that pharma stock prices have fallen in the last few years. True enough, but that’s because of the relative lack of success of all that R&D in producing replacement blockbusters for those going off patent–sorry, Schering!

This all drives me mad. I don’t mean to be critical of any one individual, but big pharma is in real trouble over this reimportation issue and has to get its PR into shape. Pharma innovation is responsible for curing many previously debilitating and fatal diseases and has reduced other health care costs. But no one, including Chang, even mentioned that on the show. (Note: not true, on relistening, I did!) So I’m not a basher of the industry but I do think it has to take a long hard look at itself, and the more I see of its current behavior the more self-destructive it seems to be–especially given the political vulnerabilities of the Republicans in Florida and Pennsylvania.

Somehow big pharma has to in the short-term get better PR out there — being at war with its main customers (the elderly) is no place to stay. Longer term, big pharma has to work out how to reorganize itself so that it’s spending less on marketing (but doing it more efficiently), spending the same or more on R&D and still maintaining decent margins. That’s a real challenge, and for the good of itself and the greater good too, it needs to get working on it.

UPDATE: The audio archive of the show is here. My dulcet tones appear about halfway in. You’ll notice that I was put off from my main point by something Stephen Chang said while I was on hold, and if you’re very attentive you’ll notice that I’m stalling while I try to remember what that main point was! (It was that pharmas could maintain margins by reducing marketing spending)

Meanwhile to add fuel to this fire, a group of pharmacists are suing the drug companies for overcharging them–while they claim they are losing business to pharmacies in Canada and Mexico.

PHARMA: Drug reps being kept out of clinics

It’s worth having a quick look at this USA Today article about the increasing trend of clinics and health systems keeping drug reps away from their doctors. For example:

The University of Wisconsin and their clinics in Madison also have developed a common disciplinary database. Drug representatives with three violations — for offenses such as giving out food or loitering outside doctors’ lounges — may lose their hospital access across the city for six months.

In my day “loitering with intent” meant something altogether different. But there’s still no question that physicians get most of their information about new drugs from their detail reps, and counter-detailing is still in its infancy. But for most of America, unlike those systems who are at risk for their drug budget, there is no incentive for physicians to keep out the drug reps. And samples are a key part of the reason why drug reps are in general welcome.

However, the back-up of detail reps queuing to get into the physicians’ office will have to be cleared up. Pharma is spending too much on its sales teams and with a combination of using technology for remote detailing, and better understanding of targeting of sales reps, expect the number of drug reps to be reduced over time. But bear in mind that the number of detail reps has quadrupled over the last 10 years, as everyone has fought to catch up with Pfizer. Don’t expect a repeat of that.

PHARMA: Vioxx study hits Merck stock price

Cox-2 inhibitors (Merck’s Vioxx and Pfizer’s Celebrex being the leading products) were introduced a few years back as being as effcective as older painkillers but without the stomach problems that affect about 30% of aspirin, ibuprofen or NSAID users. The most common ailment these drugs are targeted at is arthritis, but any long term low-grade pain is a candidate. Of course, they have been widely prescribed and used by people who either hadn’t been proved to have stomach problems on non-Cox-2 painkillers or are taking aspirin anyway. Additionally Celebrex has been alleged to actually not be as helpful for those with GI problems as it has been marketed to be. None of that news, almost all based on studies by PBM Express Scripts, seemed to affect the sales of Cox-2 inhibitors much, and it reamins a $6bn market.

But today a study from Kaiser Permante has a study out based on its own members data that suggests that Vioxx creates a three-fold risk of heart attacks compared to other NSAIDs and Celebrex. Merck’s stock price is down nearly 2% as a consequence, as presumably if this study gets come currency with physicians they might start switching patients to Celebrex or one of the newer Cox-2’s coming on the market later this year. If Merck is lucky those Cox-2s will include Arcoxia, Meck’s replacement for Vioxx which is undergoing FDA approval here, but is already on sale in Canada and Europe.

POLICY: Uninsurance–It’s 45 million now

It’s taken a long while but the Census bureau yesterday confirmed that in 2003 45 million Americans lacked health insurance. Of course that’s actually a wrong number, it’s a snapshot which actually means that 45 million lacked health insurance at any one time. Some 25 million are uninsured more or less permanently and some 70-75m go through some period of uninsurance in each year. Last year a study showed that 84m are uninsured for a period of 3 months or more in a 4 year period.

This is a real problem and the US Chamber of Commerce has the gall to say that there are real market based solutions to cure this:

The U.S. Chamber of Commerce said the solution to the health insurance problem already is in the pipeline: “Today’s news that the number of uninsured Americans totaled 45 million in 2003 is a tragedy in that real solutions already exist,” said Kate Sullivan Hare, the Chamber’s executive director of health policy, in a press release.“More can — and should be — done to make health coverage affordable for employers and workers,” Sullivan Hare said. The Chamber said the best way to make health coverage more available and affordable is to allow pooled-purchasing for small businesses – what President Bush recommends — along with “equitable tax treatment” for individuals who purchase their own health coverage; and tax credits targeted to people with modest incomes. The Chamber said it opposes efforts to add new mandates and expand employers’ liability for the health coverage they voluntarily provide to their workforce.

I’m not sure this needs to be dignified with a response, but let me just say that there is no such thing as voluntary universal insurance.

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