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Category: Matthew Holt

Matthew Holt is the founder and publisher of The Health Care Blog and still writes regularly for the site and hosts the #THCBGang and #HealthInTwoPoint00 video shows/podcasts. He was co-founder of the Health 2.0 Conference and now also does advisory work mostly for health tech startups at his consulting firm SMACK.health.

POLICY: Medicaid as the route to universal insurance?

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During the Dolphin Group webinar I was presenting on today, I was asked if Medicaid would become a communal buying pool that would solve the unisurance problem. I rather fliply dismissed the idea, and Scott Tiazkun, healthcare analyst, IDC Research mentioned that something like that was going on in Massachusetts. Now there have been local changes in how many people Medicaid covers — for instance Tennessee put almost all its uninsured into Medicaid in the mid 1990s and more recently threw most out, and Utah changed the way it paid for Medicaid and enrolled more people — but we’re nowhere near the Clinton plan of putting all of Medicaid, all the uninsured and most small business employees in big buying pools. So I felt fairly safe saying what I said, but I also wasn’t exactly working from the latest data in my head. (Remember this was a webinar about health plan web strategies!)

To be honest I knew that Medicaid had picked up its enrollment relative to private payers in recent years — particularly in the recent recession, and as I really hadn’t looked much at this recently, I spent a bit of time today digging. What I did know is that the restrictions on Medicaid eligibility were greatly slackened at the end of the first Bush Administration and (from memory) the numbers on Medicaid went from the mid-20 millions in 1989 to nearer 35 million in the mid 1990s (with most of the rise during to the 1990-2 recession). Then under the SCHIP (health insurance for children) program in the mid-to late 1990s, another several million kids were put into Medicaid. Now some 5 million of that 35 million were dual eligibles (poor seniors on Medicaid and Medicare) and were double counted, but nevertheless the number of Medicaid recipients has gone up quite a bit. USA today reported last week (chart lifted from their site) that the number went from 34 million in 1999 to 47 million this year.

Us_mcaid The reason they gave in a companion article was that because welfare had essentially been abolished back in 1996, states no longer gave Medicaid only to AFDC recipients, but now have the freedom to base eligibility on income. And although eligibility has toughened up and rolls have been cut somewhat in most places during the most recent recession, in general states are getting more relaxed about eligibility requirements and some states such as Minnesota and Massachusetts are actually trying to add to their rolls.

I went to look at my estimates for the IFTF/RWJ 1997 Ten Year Forecast and I then estimated mostly just on population growth that by 2006 some 35m would be on Medicaid (which equates to 40-42m if you count in the dual eligibles). So things have progressed faster than I thought. The Center for Health System Change reported that despite a rise in the number of Americans getting employment based-insurance in the boom times, that number fell from 67% of the under-65 population in 2001 to 63% in 2003, and that most of that decline was replaced by people moving into Medicaid, although the number of uninsured did rise slightly too. Clearly at the margin Medicaid is replacing employer-based insurance. But have the numbers within Medicaid really gone up quite so much?

Using some data from 1993 that CMS has available, it looks as though some 5 million children got into Medicaid (or separate but equal SCHIP programs) between 1998 and 2003, and this seems equivalent to the data that HSC used in its study. Kaiser Family Foundation (which is a wealth of information about Medicaid) in a January 2005 fact sheet said that in 2003 Medicaid covered 25 million children, 14 million adults (primarily low-income working parents), 5 million seniors and 8 million persons with disabilities. That gets us to a total of 53 million, or 48 million not counting the seniors (who are dual eligible). CMS said in 2004 using FY 2001 data that 46 million people received Medicaid services. But CMS says in another data sheet that in 2004 there are 42 million enrollees and 52 million beneficiaries. A beneficiary is someone who receives a (payment for a) service from Medicaid. Now we are getting somewhere near the nub of the issue, in that people go in and out of Medicaid often on a monthly basis.

My assumption is that the "snapshot" is the 42 million, which seems much lower than the 47 million that USA Today reports citing CMS data that I cannot find on their web site. So I suspect (but please if you know I’m wrong email me) that the USA Today number is the 42 million plus some 5 million dual eligibles (although KFF says that the number of dual eligibles is now 7 million in this recent factsheet). So overall counting Medicaid enrollement is very hard to do, as you are counting several moving targets, and it’s a question of definition.

But what Scott said this morning was that Massachusetts was looking at Medicaid as becoming a way to provide universal health insurance.1121593676_3333jpg And judging by this article in the Boston Globe, that’s what Mitt Romney, (who is the guy who made me wait 2 hours to get into the Ski Jumping at the 2002 Winter Olympics, and incidentally) the Governor of Massachusetts, is saying he’s aiming for. Enrollement went from under 700,000 in 1997 to nearly 1,000,000 in 2002, back down to nearer 900,000 in 2003 and is now moving back up near to 1,000,000.

However, this is all a long way from saying that Medicaid is going to be the cure for uninsurance. There are two main reasons why.

First, most of the people going into Medicaid are effectively leaving employer-based insurance rather than moving from being uninsured to having Medicaid. Of course there may be people moving from being uninsured into Medicaid as featured in the USA Today story, but overall their places in the ranks of the uninsured (which is itself an extremely fluid population) are being taken by an equivalent amount of people losing employer-based insurance. So the overall number of uninsured is not being changed by this increase in Medicaid enrollment, other than the uninsured number would be much higher than the current 45 million (snapshot), had it not happened.

The second reason is the relative makeup of Medicaid and the uninsured. KFF also has a great fact sheet on the unisured.  Only 20% or 9 million of the 45 million uninsured are children, leaving 36 million adults, of whom 80% are in some type of work, or have a family member working. Medicaid now only covers 14 million adults. That means that Medicaid would have to double enrollment overall and nearly quadruple it amongst low-income adults to get rid of the uninsured, and given that half of those uninsured adults are over 35 and thus somewhat expensive, that would cost plenty.

This is just not going to happen in the current fiscal and political environment. So even though getting some of the working poor onto Medicaid is a good thing, it’s disingenous to say that Medicaid is going to be the solution to the uninsurance problem.

What we should so with the Medicaid population is move it en masse into some type of universal insurance pool, with the uninsured, and a bunch of other people.  But no one in Congress with any clout is going to be touching that with a ten-foot pole, and while Bush has noticed that health care is an issue, we all know this his "solutions" aren’t.

POLICY: Why health care costs so much

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This one is the cross-post from Ezra’s blog yesterday.  I was going to do something different last night, but the wind was right and so I went paragliding instead! And it was great! I will have more on the FDA later today or tomorrow

Health Affairs (the essential peer reviewed health policy journal) has an article from the very well respected Center for Studying Health System Change (HSC) which announces that the decrease in the increase of health spending has stalled (here’s the slightly more digestible press release). No kidding, the press release starts off with this line. See if you can get the gobbledygook here:

“The reprieve from faster-growing health care costs stalled in 2004 as costs per privately insured American grew 8.2 percent”

The good news is that nominal GDP growth  (real growth plus inflation) was 5.2% in 2004, so health care costs (the 8.2%) were less than double that. So in the bizzaro world of American health care, it’s still something of a success when health care is expanding only are only a little under double the rate of the rest of the economy or less than three times the inflation rate. That’s why health care takes up 15% of the economy now when it was around 5% in 1970.

But the two key questions are a) do we have to spend so much more? and b) what are we getting for the money?

The short answer to a) is no, we don’t have to spend so much.  Most other countries spend between 6% and 10% of their GDPs on health care, and some, such as Canada and Japan in the 1990s, actually reduced the share of GDP they spent on health care.  The more complex answer to a) depends on what you think we ought to be spending our money on.  Back in the time of Vietnam and the Cold War the US spent nearly 10% of GDP on “defense”.  Now we spend money on frappuchinos and viewing pictures of Paris Hilton on-line. These are all political choices, and it’s clear that Americans view medical care as to some extent a luxury good that they are happy to spend money on. In her book Medicine and Culture the late Lynn Payer described the difference between the British stiff-upper lip, the French consternation about balance in the liver, and the American desire to operate on any patient who’d lie still for a moment, and she ascribed most of the difference in medical practice, and thus costs, to culture. More recently Uwe Reinhardt has shown that it’s not just culture but also prices — we pay our health care workers and supplier more than foreigners do and that’s a big factor in our overall larger costs.

The other factor that allows us to spend so much more is that there is neither a competent market mechanism that stops us spending too much, nor a central budget authority doing so. Market mechanisms work in one of two ways, either on average we just can’t consume more (i.e. pictures of Paris Hilton) or we can’t afford to all consume as much as we might possibly want (i.e. we can’t all afford Prada dog-caddying purses or whatever Paris carries her dog around in). In health care our ability to consume is essentially limitless, especially if we’re sick, and usually some other sucker is paying the tab. So we are dependent either on the producers of care to say “that’s enough” (which is the British stiff upper lip approach which results in what Americans call rationing and Brits call compassionate care for the sick and elderly), or on the sucker that’s paying the tab to cry “Uncle!”. Briefly (and this is a much more complex subject), because of our diffuse system of third party payment, none of the said suckers have either had the ability or the will to really reduce payment. And the producers here have always known that putting up their costs will result in someone ponying up. Even though as the prices go up more people get excluded out of the system on the margins, those who can stay in it will more than make up the financial difference. So costs go up, as we do more things with more technology at a higher price. And because not everyone is in the system, and there’s not one universal pot of money or line-item budget, or no effective consumer pricing mechanism (and there can’t be for reasons that I wont go into here), no one is there to cry “Uncle!”. Of course in other countries that’s usually the job of the other cabinet ministers who say things like, hey if you put all the taxes towards health care there’s nothing left for education, roads, invading Iraq or whatever. When Congress votes on a new healthcare bill no-one seems to care too much about that bottom line, as the Medicare Modernization Act cost fiasco proves. Note that this is not how Walmart governs relations with its suppliers.

The second question is harder to answer. In some ways it’s easy to say that we don’t do as well as other countries on several outcomes measures and that we’re not getting our money’s worth.  On the other hand several of the things that used to kill people are now relatively easily surmountable — at a cost.  And then there’s the paying for comfort issue.  It used to be that if you had real heart trouble, you needed to have your chest cracked and have a full CABG.  No fun.  Now getting a stent put in is a relatively painless procedure that they don’t even put you to sleep for. Does that lower the bar on the decision to do invasive cardiology? Indeed. Does it cost more for the payer per individual? Probably, as in the end many of those stent patients need a by-pass anyway. Does it cost the payers and society more overall? You betcha. And the parking lots outside the cardiologist suites are filled with physicians’ Porsches as are those outside the executive offices at J&J and BSC.

Is that a good or a bad thing?  Complex. In aggregate the cheapest thing is to let the heart (and therefore patient) go when it’s time, but we’re never going to do that. So should we restrict procedures to only those in real trouble, and only give them a CABG?  Fine if you say so, but let me ask you two questions. What do you define as real trouble?  And would you rather have a stent put in while you lie there listening to Lite jazz, or have your chest cracked?

And that uncertainty is what drives our system and drives that cost barometer up.

HEALTH PLANS: Kaiser will combine “systemness” with high-deductible plans, maybe.

There’s a pretty interesting interview with Kaiser Permanente CEO George Halvorson in the San Francisco Business Times. The tag line is that “Moving Kaiser beyond one-size-fits-all health coverage and ‘Dark Ages’ record-keeping, CEO George Halvorson reshapes a health-care giant for the 21st century”. Well, maybe.

Kaiser appears–at the third time of trying–to be making a real go with its HealthConnect electronic medical records system. My spies in S. Cal tell me that the implementation is going really well. However, given that the original system I was shown (based on the old Oceania system) was pretty spiffy back in 1997, I’m not certain that the whole organization needed to wait until 2005-6 to get it right. But no matter, they are clearly ahead of the rest of American mainstream health care in EMR adoption. And they are making the folks at Epic much richer. Plus, it goes without saying that Kaiser has got the integration of incentives and purpose that the rest of the system lacks in dealing with the long term chronically ill. If I was chronically ill, I’d like to be a Kaiser member.

However, Halvorson’s other concern is one that doesn’t really have an answer. He worries that younger healthier people in his catchment area will be attracted to high-deductible plans and HSAs–not an area that Kaiser as a full service HMO has much experience with.

Kaiser is scrambling to move into this new realm by creating benefits packages with added cost-sharing elements, such as high-deductible plans and HSAs, he said. Hiring experts in insurance systems and billing has been a big priority recently. It is also hiring large numbers of new managers and workers with experience in areas such as actuarial work, insurance underwriting and the like.

Kaiser is trying to roll out these types of plans, but of course they don’t fit easily with its historic pre-paid group practice mentality. It also doesn’t fit in with the mathematics of insurance. High-deductible plans work well for an organization that doesn’t have to deal with the consequences of splitting the risk pool. Kaiser is a risk pool. It’s been the pioneer of community  rating forever.

The article suggests that the high-deductible plans are so far a minor irrelevant part of Kaiser’s business. If they stay that way, it’s probably OK. If they become a big deal, well all the actuaries in the world won’t make their chronically ill population healthier, and that could lead to real problems.

POLICY: Florida solves Medicaid cost problem (well, not really)

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As you’d expect from the most efficient, transparent, clean-government minded state in the nation, Florida has figured out how to solve its Medicaid cost problem. It’s planning on privatizing Medicaid and making recipients buy in with a voucher into managed care plans. I said plenty about Medicaid in a post last week, so I won’t repeat it all. But three things struck me. First, according to the leader of Florida’s Democrats, the Medicaid budget is about to overtake the education budget. I know they have lots of old and poor people down there, but can that really be true? (I’d like to understand this explanatory page but unless I’m pretty dumb it contradicts itself in the notes below the table). In California where we rival Mississippi in propping up the table on per capita education spending, health spending is only a third of education spending. So is Florida really spending no money on educating its kids? The California state budget division is below, and it shows that we spend a lot less on health than on education.

(From California Budget Basics, by Stephen Levy).

Secondly, 70% of Medicaid dollars in most states go on the care of the poor, elderly and disabled, mostly on nursing home care. No managed care organization has a clue how to deal with those folks, so really we are talking about saving money (potentially) by going after only the other 30% of the dollars. Not really much likelihood of big savings there.

Finally, states are the FILOs of budget deficits (first in, last out). But if you believe the Bush rhetoric about how the economy is getting better (and assuming you are a governor named Bush you should do), shouldn’t this picture be getting better? And if it is, why does it need radical surgery now?

If you want to dive a little deeper into Medicaid, you might take a look at this McKinsey report on what’s wrong with Medicaid which gives some ideas for fixing it. While it’s not dumb as far as it goes, the report doesn’t unfortunately mention the actual ways Medicaid really needs to get fixed which are:a) rolling it into a universal health insurance system,b) creating a national long term care policy, andc) doing something about the scandalous state of the poor in America.

Jonathan Cohn summed it up well in an email in which he said that:

What I love is the constant dismay at the way Medicaid keeps eating up larger shares of state budgets, as if it didn’t have something to do with the fact that more and more people are becoming eligible as employer-sponsored insurance withers away.

QUALITY: Diabetes and the modern disease management girl

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So I spent the last couple of days at a disease management conference that focused on diabetes care.

There is general agreement that — at least 15 years since everyone has understood the problem — the health care system suffers from a lack of transparency, information systems, rational incentives, and care quality. Diabetes care is a microcosm of that. Type II Diabetes is a disease that’s primarily caused by years of poor living and poor care (obesity and metabolic syndrome being typical precursors). Once people get it less than 50% of them are correctly diagnosed, and after that the care of diabetics tends to be poor. Only around half get all the recommended tests and care that they need. And yet for a long time (since the DCCT trial back in the early 1990s) it’s been well known that regular monitoring of blood glucose levels can reduce the risks of further damage from diabetes. And those risks are nasty and expensive–blindness, limb amputations and heart disease. Getting diabetics to do all the things that they should do to reduce their dependence on glucose, and control their insulin levels is a great application of the education, monitoring and bullying that is modern disease management.

Disease management really started out as a front for drug company marketing so that they could pretend that they could work with PBMs and wrap services around their pills that would improve patient care. Of course they were also taken by the concept that disease management programs tend to suggest that sick people should take more drugs than they currently do. Of course some of those drugs might be generics….

But when you get beyond the high meaning rhetoric, disease management is complicated and confusing. Within the population with diabetes there are levels of illness, not to mention co-morbidities. Within disease management there are different ways of getting to patients (such as occasional mailers, phone calls, and constant monitoring via telemedicine). Once you get into the management of diabetics (or any other disease management program) it gets more complicated depending on who you are. Integrated systems want to control the costs of their sickest members; health plans typically want to sell value added services to their customers; and employers (and government) want to try to prevent the costs with their disease. But we live in a world where most diabetes disease management is developed for the less sick diabetic patient in a commercial population, while the greatest need — and potentially greatest savings — may be for a much sicker diabetic on Medicare or Medicaid.

But at a practical level, that all means that there is no clear focus on which patients to pursue. Should health plans be looking at their healthy commercial populations, or should they be ignoring them and going after the really sick people in their plans –who may be on their way into Medicare within a few years and give them no return? In the commercial world disease management services for diabetics cost something like $3 pmpm. Intervention using a telemedicine system (like the Health Buddy) can be around $50 pmpm. Obviously you need some pretty immediate savings if you are spending that much, and the VA at least seems to have decided that it is getting a return. But then again, Florida Medicaid in a rather biting criticism of Pfizer Health Solutions last year, felt that the returns from phone-based DM weren’t so great. But overall I came away from the conference no clearer on where on the financial graph the lines of the cost of intervention versus the value of the benefit intersect. And I’m not sure that anyone else really knew either.

What was interesting is how little was known about what the real ROI of different interventions on different types of people. One plan sent out postcards even though they believed them to be ineffectual because a drug company sponsored them. I mentioned to the people next to me that DM had gone full circle and was back to being drugcompany marketing. Even the phone calls may or may not be effective depending on their frequency and what was communicated in the call.

There’s an initiative in Tennessee, run by the Center for Evidence-Based Medicine at Vanderbilt in which the Blues are paying primary care docs to act as educational coaches for diabetics. This seems to be working (although it’s early days) and is having some good results, as are the folks at the VA with their nurse practitioner-led interventions and monitoring. But overall this is an industry that really doesn’t have its story straight as to what works consistently, and what’s worth paying for.

And of course while most payers don’t know if they can look forward to reaping the benefits of a costly intervention down the line, selling DM services will remain problematic. That’s why the Medicare CCIP demonstration projects about to take place are so important. The Medicare population is ground zero for DM especially for diabetics. Let’s hope that the CCIP experience tells us what DM can hope to achieve, and give us a level playing field on which to judge the value of the various interventions.

PHARMA: Herbert on the legal protection measure for big pharma

In a NY Times op-ed piece called A Gift for Drug Makers, Bob Herbert writes that:

Tucked like a gleaming diamond in proposed legislation to curb malpractice lawsuits is a provision that would give an unconscionable degree of protection to firms responsible for drugs or medical devices that turn out to be harmful. The provision would go beyond caps on certain damages. It would actually prohibit punitive damages in cases in which the drug or medical device had received Food and Drug Administration approval. We know the F.D.A. has failed time and again to ensure that unsafe drugs are kept off the market. To provide blanket legal protection against punitive damages in such cases is both unwarranted and dangerous.

In fact the former head legal counsel at FDA Daniel Troy already pushed this policy–changing years of precedent at the FDA–by making it take the drug-makers side in legal cases. As California Health line reported when he finally quit late last year:

During his tenure, Troy worked in support of Bush administration efforts to block liability lawsuits against medical device manufacturers and drug makers. Troy argued in legal briefs that only FDA has the authority to determine when and how pharmaceutical companies should issue product warnings and that state court decisions could undermine the agency’s authority over product labels. FDA claimed in briefs that suits against FDA-approved products would “sabotage the agency’s authority”; critics called the agency’s position a “back-door approach to tort reform.”

While no one who’s been awake in the last 4 years can pretend to be surprised about how much the Bush administration is determined to gift the pharma industry, one suspects that someone in the corridors of power up and down the New Jersey turnpike must be having some doubts. As one of the few “moderates” clinging to the lonely position that pharma is indeed responsible for most of the good innovations in the health care system, and that a rational, reasonable and profitable pharma business is possible without the need to push for the current excesses on pricing and marketing misbehavior, I’ve been suggesting that in its own longer term interests pharma should look to compromise. If instead big pharma believes that it can make itself completely immune to the American legal system by simply getting what looks increasingly like a bought-and-paid-for FDA to sign off on its behavior, then the backlash that will be coming big pharma’s way when its protectors at either end of Pennsylvania avenue get booted out will not be pretty. And at some point they will be booted out.

Even Wall Street is generally comfortable that one of the risks of investing in pharmas is that damages will have to be paid out if bad things happen. Investors in Merck know that there’s a payment coming down the line for Vioxx and the stock reflects that. It’s stretching credulity to believe that pharma really needs this protection when no one else in America gets it, and it may well be time for wiser heads in New Jersey to suggest to their brethren that they take their snouts out of the trough less they miss the farmer coming up behind them with the butcher’s knife.

 

PHARMA: Everything you ever wanted to know about Vioxx but were too afraid to ask

So it may be that the doyen of American drug companies when I entered the business may be falling into a death spiral. Merck’s withdrawal of Vioxx from the market combined with its major statin Zocor going off patent in 2006 may relegate it to the second tier of international pharmas, falling well behind Pfizer, GSK and the new Aventis/Sanofi. The new Aventis/Sanofi combo has its anti-smoking anti-fat pill Acomplia coming out in a couple of years, which may end up being the biggest selling Rx product of all time.

Merck’s Vioxx had certainly had its problems. Today’s New York Times article details the very recent history of Vioxx. As THCB noted back in August, a Kaiser study suggested that there were instances of heart attack and stroke among Vioxx patients, though not for Pfizer’s Celebrex. Once Merck’s own clinical study (which was trying to extend the indication to stomach polyps) showed the same thing, the company in consult with the FDA and no doubt its legal staff and investment bankers decided to take the enormous step and bite the bullet.

Not since the withdrawal of Baycol has there been such as tizzy in big pharma land, and Vioxx was not a 5th in class drug like Baycol. However, the Cox-2’s are a interesting case where a drug that has a benefit for some patients was probably being used too widely anyway. The Cox-2s are no more effective at reducing pain but were introduced and marketed as being better for those 30-40% of NSAID and ibuprofen users who had stomach pain. Express Scripts has shown in its studies that many if not most of those using Cox-2s were not suffering that stomach pain in advance and should have been on a cheaper drug first. Another Expresss Scripts study showed that over half of older Cox-2 patients were taking aspirin anyway, which meant that they were still probably getting the pain relief and also stomach problems of aspirin, probably negating the value of the Cox-2 in the first place–if the Cox-2’s even worked for those stomach problems in the first place (and there’s some evidence that Celebrex doesn’t). As a PBM, Express Scripts of course wants its customers to take OTC ibuprofen and an OTC PPI for their associated stomach problems. And of course there are plenty of alternatives beyond the aspiring/PPI combination. Even the NY Times Editorial page weighs in on overuse of Cox-2s. All this of course will make the already delayed FDA approval of Merck’s delayed replacement for Vioxx, Arcoxia, and Prexige from Novartis, much trickier.

Longer term this is all very grim for Merck. Below (purloined from the Times and IMS) is a list of 2003’s top Rx sellers (by $$) in the US. Note that Merck has only Zocor, Fosamax and Vioxx on the list. (The list says that it has Nexium too, but of course that’s Astra-Zeneca’s).

  1. Lipitor, $6.8 billion, cholesterol,Pfizer Inc
  2. Zocor, $4.4 billion, cholesterol, Merck & Co.
  3. Prevacid, $4.0 billion, heartburn, TAP Pharmaceutical Products Inc.
  4. Procrit, $3.3 billion, anemia, Johnson & Johnson
  5. Zyprexa, $3.2 billion, mental illness, Eli Lilly & Co.
  6. Epogen, $3.1 billion, anemia, Amgen Inc
  7. Nexium, $3.1 billion, heartburn, Merck & Co.
  8. Zoloft, $2.9 billion, depression, Pfizer Inc.
  9. Celebrex, $2.6 billion, arthritis, Pfizer Inc.
  10. Neurontin, $2.4 billion, epilepsy, Pfizer Inc.
  11. Advair Diskus, $2.3 billion, asthma,GlaxoSmithKline PLC
  12. Plavix, $2.2 billion, blood clots,Bristol-Myers Squibb Co.
  13. Norvasc, $2.2 billion, high blood pressure, Pfizer Inc.
  14. Effexor XR, $2.1 billion, depression, Wyeth
  15. Pravachol, $2.0 billion, cholesterol, Bristol-Myers Squibb Co.
  16. Risperdal, $2.0 billion, mental illness, Johnson & Johnson
  17. Oxycontin, $1.9 billion, pain, Perdue Pharma
  18. Fosamax, $1.8 billion, osteoporosis, Merck & Co.
  19. Protonix, $1.8 billion, gastrointestinal reflux disease, Wyeth
  20. Vioxx, $1.8 billion, arthritis, Merck & Co.

So soon they’ll only have Fosamax on the list. Forbes has a hard hitting article suggesting that both the CEO Gilmartin’s days are numbered and that Merck itself will become a takeover target. For a company that was the leading pharma company in the world in the early to mid-1990s, that would be a mighty fall.

Of course, if this can happen in as big a market in Cox-2s, can it be long before there’s more analysis of the biggest market of all, the statins, to see if any share Baycol and now Vioxx’s fate? There are already (as reported by Medpundit) some dissident physicians questioning their value.

POLICY: Seniors continue to oppose new Medicare law. With UPDATE

By MATTHEW HOLT

Harvard’s Bob Blendon (a colleague of mine from my IFTF and Harris days), has new polling research out sponsored by the Kaiser Family Foundation showing that two thirds of seniors view the Medicare Modernization Act unfavorably. Here’s the end implication:

Nearly three in ten seniors and people with disabilities on Medicare say the passage of the new law will have an effect on their vote for president, and an even higher share– nearly four in ten–say it will have an effect on their vote for Congress in November. More people say that the law will make them more likely to vote for John Kerry and the Democrats than for President George W. Bush and the Republicans.

And here are some more details, which should ensure a huge amount of ads highlighting the shortcomings of the law from the Democrats filling the airwaves of Florida and Pennsylvania.

Nearly three in ten people on Medicare (28%) say that the passage of the Medicare law will have an effect on their vote for president. More than four in ten of those who say the new law will affect their vote (44%, or 12% of people on Medicare overall) say it will make them more likely to vote for John Kerry, while 18% of this group (5% of people on Medicare overall) say it will make them more likely to vote for George Bush.

Nearly four in ten (38%) say the passage of the law will have an effect on their vote for Congress. About half of those who say the law will affect their vote (53%, or 20% of people on Medicare overall) say it will make them more likely to vote for a Democrat, while 21% of this group (8% of people on Medicare overall) say it will make them more likely to vote for a Republican. When it comes to handling Medicare prescription drug benefits, people on Medicare are nearly evenly divided on whether they trust John Kerry (39%) or President Bush (34%) more, while about one in ten (11%) say they trust neither or trust both equally. Not surprisingly, Republicans (76%) are more likely to say they trust President Bush more on the issue, while Democrats (67%) are more likely to say they trust John Kerry.

UPDATE: This survey has sure gotten alot of press, which must make Drew Altman and the crowd at Kaiser FF happy. It has two articles in the NY Times, plus it was a lead on NPR last night and might even have made the network news (I don’t tend to watch those but judging from the DTC drug ads many seniors do!) This NY Times article points out the obvious–the elderly are a vulnerable Republican voting block. They vote proportionally more than any other group, and they tend to vote on health care. Last time around white seniors voted 52 to 47 for Bush partly because he promised drug coverage (as did Gore) but partly because they were the group most appalled by blowjobs in the Oval Office. Remember Bush promising to restore “Honor and Decency” to the White House? Well I guess if that only means no blowjobs in the Oval Office then that’s Mission Accomplished. But when seniors have got something serious to vote about like the Iraq war and drug reimportation — both of which the elderly oppose–then “Honor and Decency” may not be enough to keep them happy.

PHARMA: Even The New York Times has noticed that pharma has PR problems

In an article picking up on the Harris data TCHB shared with its stellar, avid readers (that’s you BTW) last week, the NY Times this morning places Pfizer’s decision to give cheap drugs to the uninsured next to the polling data about pharma’s unpopularity next to several examples of egregious price rises. They also quote extensively Roy Vagelos, scientist CEO of Merck in its 80s and 90s heyday, as basically saying that the industry has blown it.

It’s well worth reading the article because it shows that the mainstreaming of the anti-pharma opinion will have a political impact on the industry, and by extension on the election. (Need I remind you again that the two states with the oldest populations are Florida and Pennsylvania, both extremely close at the moment).

However, the Times lumps several reasons together as to why pharma is so profitable in the US:

    The pharmaceutical industry earns nearly two-thirds of its profits in the United States since drug prices in the rest of the industrialized world are largely government controlled. Those profits rely almost entirely on laws that protect the industry from cheap imports, delay home-grown knockoffs, give away government medical discoveries, allow steep tax breaks for research expenditures and forbid government officials from demanding discounts while requiring them to buy certain drugs.

It is not the case that each of these "privileges" has equal weighting for the industry. The fact is that allowing personal imports would not have that big an impact on the overall market. Allowing Medicare to bargain as aggressively as say the VA (or worse, the Spanish or Australian governments) would bring what are called "price controls" by Americans talking about the EU or "discounts" by PBMs to a large section of the market.

That would certainly have a big impact on the industry’s margins. But the pharma industry can take note that, under a similar environment of strict price controls from Medicare and Medicaid, its colleagues on the inpatient, outpatient and ambulatory care side have seen their share of the overall economy grow dramatically in the past 40 years. So, if forced to, pharma companies could manage the potential change in their environment. As a potentially relevant example which also works under monopsony purchasing, the defense industry seems to struggle by OK.

Not that the industry would want to go there, and it will continue to do what it can to fight what is increasingly looking like a rearguard action. Of course in a rearguard action a strategic retreat can often work wonders. I stick by my guns and think that big pharma, looking out strictly for its own self-interest, should cave on the Canadian imports but try to continue to muddy the waters on discounts and price controls. After all 15 years of allegedly aggressive discount seeking by the PBMs hasn’t exactly reminded observers of the way Wal-mart treats its suppliers!

TECHNOLOGY: The state of play at America’s leading health systems

More musings from the Healthtech meeting. Given that this is a somewhat private meeting, and I’m an invited guest, I’m not going to name names, but suffice it to say that the health systems here include many of the largest (predominantly non-profit) regional hospital systems in the US.

So from my non-scientific surveillance, where are they and what are the challenges they are facing? In general the last few years have been about automating their laboratory, pharmacy and PACS (radiology) systems. At least in some hospitals, this has led to reducing costs in testing , and getting results back much faster (in 6 minutes in one case). This of course promotes quicker decisions which filters into lower ALOS and increases ROI. The rest of the effort in the last few years has been about creating the wired and wireless infrastructure that’s needed to support the next stage of their plans–in fact wireless is a major focus.

The new challenge is CPOE and bedside medication records. Now they are starting at varying rates to move to clinical documentation at the bedside and also at the nurses station. CPOE (i.e. getting the physician ordering, particularly medication ordering, in the loop) is the major push many of the systems are working on now. This somewhat tracks with various studies showing that CPOE use is pretty low (of course it’s existed at some hospitals such as Brigham & Womens and Intermountain for several years).

Some of these systems are creating big time process improvements (so long as the medical team is bought into the decision process). But by no means do the medical staff appear to be so compliant in all cases–in one case there was no improvement in several basic process measures. So putting the system in is only part of the battle, and the medical culture still seems to be the biggest hurdle.

One big system (which has introduced a lot of new technologies) is very rigorous about incubating a test-lab learning environment before any new technology is moved into different facilities. This is part of an extremely detailed planning process, which needs exceedingly high levels of buy-in from clinical and operational staff, and rigorous assessment at all levels of every roll out. In other words there’s no organic growth of IT use, its all carefully designed. Nor are new or innovative, but untried, technologies allowed into the system. Instead the IT group makes sure that any devices or applications they introduce does not distract them from their total focus with keeping the network up for Five Nines reliability (99.999% up time). So their priority is keeping the mission critical network up. Their system hasn’t gone done unscheduled in 2 years. Some time ago Paul Saffo at IFTF said that eventually computer downtime (like phone downtime) would start killing people. Plenty of these hospital CIOs seem to believe it. So as IT becomes more integral to other parts of the hospital (ie. lab/pharmacy first, nursing next, then physicians) many hospital systems are looking for incredibly (and justifiably) high levels of network/application uptime and reliability.

And don’t mistake that putting this all in is anything other than damn hard work. The words Six Sigma and Process Improvement were heard alot. All in all they are probably not having as much fun as we technology futurists have looking at all the new toys. But in terms of creating the environment for process-driven hospital-based care, at least some of the leading systems in America are making progress.

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