My now defunct dotcom i-Beacon was buried deep in the Rx market research space (and, yes, the pun is deliberate). A new report from Cutting Edge Information suggests that we were onto something. (The report summary/ad piece is here, but if you want the whole thing you need the odd $5,000). An average of $26 million on market research is spent per drug over its life, with over 70% of that spent post-launch. Assuming that you can triple those numbers for a blockbuster of $1 billion, and again assume that most of that is spent in the first two years, a reasonable guestimate is that a new blockbuster has $30-40m spent on market research annually, which is roughly 30% of what is spent on consumer advertising for a similar drug and probably only 10-15% of what’s spent on marketing to doctors. All in all you can understand why the pharma business is so critical for market research companies. We used to estimate that that the whole market research and sales data market totalled $1.2 billion in the US compared to something like $8-12 billion spent on marketing and sales teams (of roughly a $100 billion market).
Well Steffie and David are back on the single payer war-path, with an article in August 13 JAMA. While most of us in the real world agree with Ian Morrison that single-payer is "culturally unavailable" to Americans, Woolhandler and Himmelstein have been arguing for it officially since 1989. The AMA continues to claim that it is in favor of universal coverage, but remembering back to 1994, they were among the first to help torpedo the Clinton plan — not that Hillarycare was single payer as Canadians, Brits or even Germans know it. However, I remember doing focus groups of doctors in the mid-1990s when you could not get them to shut up about MSAs as the solution to all their problems — ‘Just let the patients pay cash and we’ll be fine’. Both the doctors and the pharma companies are starting to reap what they ideolgoically sowed back then, because as we all know consumers think health care should be free. And, as the health care industry discovered after 1965 you’re better off having third parties paying. (More to come on this when I finally unload on Medicare drug coveage…)
For the first post, don’t expect a big essay despite that subject line. It came up because while I was away from the US for the first part of this year, yet another incarnation of NME or HCA — the two original for profit hospital chains of the 1970s that amalgamated into Columbia (now calling itself HCA again!) and Tenet — got caught with its hand in the cookie jar. You’ll remember NME getting bad press and worse in the 1980s for imposing unwanted inpatient stays on “psychiatric patients”. After that NME morphed into Tenet. Columbia of course said that “health care had never worked like this before” and they were right — to the extent of the upcoding and fraudulent billing going on in its hospitals in the mid 1990s. I remember one cover of Modern Healthcare in which Tenet’s strategy was encapsulated as “We’re not Columbia”. Apparently only slogan deep. Last week they settled with the state and feds in California due to massive amounts of upcoding and worse at Redding Medical Center. Several other settlements are pending.
The New York Times’ description (registration req’d) of the level of unnecessary surgery at the Redding Medical Center is quite shocking. But I do recall Alain Enthoven at Stanford telling me in 1991 that one third of carotid andarterectomies in California were found to be counter-indicated after chart review. Why were they done? Well everyone — surgeons, hospitals, supplier– made money by doing them. Given the imbalance in knowledge between a patient and a doctor, it’s not too surprising that a very aggressive surgeon can do way more than he or she should. Medicare is still basically a fee-for-service program with very little oversight, and so this type of thing is going to go on and on. And it has been going on for a while, as this partial list of whistlebower suits shows. Enthoven’s view was that everyone should be put into competing managed care plans which would act as patient (and payer) sponsors, and look after the money better than the government could. It didn’t happen that way, and the backlash against managed care’s ham-fisted attempts to do so ensured that most health plans gave up on trying to control what providers did. Medicare never really ever tried, as all its internal review cases were co-opted by providers. Its only weapons were inquisitions and indictments from the FBI and others well after the fact. Eventually Medicare will have to have more controls, but that will need reform as well as more money. I’ll talk more about this when I get to drug coverage later this week. Suffice it to say, don’t hold your breath.
Meanwhile, Uwe Reinhardt says in the NY Times article that (despite Wall Street’s desires) hospitals “can’t be a growth industry like some Internet company”. Well maybe not a “growth” sector, Uwe, but look at Yahoo’s stock price in 2000, Tenet’s this year, and tell me that you’re not getting some of that Internet fever coming back!
more on Medicare and drugs later this week….