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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)

• 1

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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