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Category: Economics

Will the Pharmaceutical Industry Learn From Past Mistakes?

Soeren MattkeAwash in negative headlines, public condemnation and government scrutiny, the pharmaceutical industry faces a public relations problem that, left untreated, could bring new regulations or sanctions either from governments or the courts. At the same time, though, the recent scandals over price gouging could offer an opportunity for responsible, research-based companies to distance themselves from the profiteers.

The industry has come under fire at a time of unprecedented innovation. As a physician who trained in the 1990s, I am in awe of the recent breakthroughs. Immuno-oncology drugs like Keytruda (pembrolizumab) and Opdivo (nivolumab) offer hope for patients with previously untreatable cancers. Entresto (sacubitril/valsartan) – the first novel treatment in over a decade for congestive heart failure, a condition deadlier than most cancers – was approved this year. There is a cure for many forms of Hepatitis C with Sovaldi (sofosbuvir) and vaccines for dengue fever and maybe even malaria may become available soon. More patients in developing countries than expected have access to antiretroviral drugs for HIV/AIDS and companies are devoting resources to achieving the same for the new scourge of noncommunicable diseases.

At the same time, some in the industry have been seeking to tackle the image problems. Overeager sales representatives are being reined in. Financial ties to physicians and clinical trial data are being disclosed. The main industry bodies in the United States, PhRMA and BIO, disowned Turing Pharmaceuticals, the company behind the notorious 5,000 percent price increase for Daraprim, a critical drug for certain infections in immunocompromised patients.

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Should Companies Invest In a Chief Health Officer?

flying cadeuciiWhile employer-sponsored wellness, health promotion and disease prevention programs have been linked to “human capital,” talent recruitment and retention, improvements in employee morale, reductions in absenteeism, reductions in presenteeism and bending the curve of claims expense, should shareholders care?

After all, according to President Obama’s latest State of the Union Address, corporate America’s pursuit of profits have resulted in greater automation, less competition, loss of worker leverage and “less loyalty to their communities.” According to that narrative, employees are just another commodity on the road to total shareholder return.

Well, according to an expanding body of peer-reviewed scientific literature, shareholders should care.

The latest example of why is this publication by Ray Fabius and colleagues that appeared in the January issue of the Journal of Occupational and Environmental Medicine.

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Toyota-ism vs Taylor-ism

flying cadeuciiIf you’re new to the idea of “Lean,” I invite you to download and read chapter 1 of my book Lean Hospitals.

Hat tip to Suresh for pointing me toward this article that was just published January 14th in the New England Journal of Medicine: “Medical Taylorism

NEJM is the same journal that published Dr. Don Berwick’s article about Kaizen and Dr. Deming in 1989, how those concepts would be helpful in healthcare. Dr. Berwick realizes, as he talks about in that article, that not all factories are the same. Some are managed better than others. Employees are treated better in the “Lean” factories. Berwick was right to point out that medicine can learn from other industries… but that doesn’t turn the hospital into an assembly line.

In the article posted this week, Pamela Hartzband, M.D., and Jerome Groopman, M.D. (the later the author of the popular book How Doctors Think), rant about all sorts of things… some of which have nothing to do with Lean.

“Advocates lecture clinicians about Toyota’s “Lean” practices, arguing that patient care should follow standardized systems like those deployed in manufacturing automobiles. Colleagues have told us, for example, that managers with stopwatches have been placed in their clinics and emergency departments to measure the duration of patient visits. Their aim is to determine the optimal time for patient-doctor interactions so that they can be standardized.”

This is wrong headed and insulting toward Toyota. I’m pretty sure Toyota would not alienate physicians or other healthcare professionals this way.

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The Dismal Science Behind Financial Incentives For Docs

flying cadeucii“It is written: Man shall not live by bread alone.”
Luke 4:4

No matter what you think of the source of that quote, the idea that there may be limits to “aligning incentives” has some merit. In healthcare settings, physicians seem to be  supportive of being fairly compensated for their work, but also seem to be quite skeptical about the use of “carrot and stick” style economic rewards to influence clinical practice.

Case in point is this interesting paper describing the results of a randomized clinical trial that used blood cholesterol-level control to assess the relative merits of a) rewarding just the patients vs. b) rewarding just the doctors vs. c) rewarding both patients and doctors vs. d) usual practice, or a control group.

The study took place in three marquee institutions, involving 340 primary care physicians who were already taking care of 1503 adult patients with 1) elevated cholesterol levels who 2) either had coronary artery disease or were at high risk for coronary artery disease.

About half of the patients were already on cholesterol-lowering pills.

The purpose of the study was to determine if real money could be used to increase the rate and level of prescribing a statin drug aimed at achieving levels of cholesterol control that were consistent with national guidelines.

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What Would a Health Care Mutual Look Like?

For a few years I’ve been fantasizing about what a healthcare insurance/ delivery mutual would look like.  I’ve yet to see one but I like the idea a lot.

Here’s the idea behind a mutual:  A mutual structure means that the company is owned by its clients or policyholders.  Since a mutual’s customers are also its owners, they get to share in any surpluses though they are mostly reinvested in the business.

Wikipedia has a nice writeup on the fundamentals of mutuals:

A mutual exists with the purpose of raising funds from its membership or customers (collectively called its members), which can then be used to provide common services to all members of the organization or society. A mutual is therefore owned by, and run for the benefit of, its members – it has no external shareholders to pay in the form of dividends, and as such does not usually seek to maximize and make large profits or capital gains. Mutuals exist for the members to benefit from the services they provide and often do not pay income tax.

Mutual structures are most common in the banking (credit unions) and insurance industries.   The main advantage to mutuals, as compared to public or privately held businesses is that they avoid the “principal-agent” problem (where the company’s desire to serve itself and the customer are at odds).

In a mutual, customer and owner are one.

Mutuals have been around for a few hundred years:  “friendly societies” have been active in the UK and the US for a couple hundred years.  Friendly Societies… were the original form of social network, where a group of people contributed to a mutual fund, to then receive benefits at a time of need.

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What Zeke Missed on an Annual Physical

flying cadeuciiIn January, Ezekiel Emanuel – one of the country’s foremost health experts – threw a presumptive grenade into the national discourse: the annual physical is worthless. As we watched the initial burst of reactionary fervor following hisNew York Times opinion piece, we weren’t quite sure what to think.

Then we realized why: in our training and burgeoning careers in primary care, neither of us has ever scheduled an “annual physical” for a patient. To us, the notion of such a visit – for scheduled, non-urgent care, and one not specifically for chronic disease management – is already dated. Given current trends in American health care delivery and professional training, we argue it is one that may well soon be obsolete.

But does that obsolescence change the value of that time – whether 15 minutes or 60 – with a patient, on a regular interval? Our perspective from medicine’s emerging front line offers a resounding no.

The most obvious argument for regular primary care visits is preventive care. Dr. Emanuel bases much of his argument on the validity (or lack thereof) of annual physicals. Drawing off that same evidence base, the U.S. Preventive Services Task Force sets recommendations for evidence-based screening in various populations. Even the young and healthy benefit from cervical cancer screening, initiated at 21 years of age and continued every three years provided negative results until the age of 30 (when the recommendations change slightly). Patients with higher risk earn further screenings, based on whether they smoke, their weight, their age and their family history.

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Satisfaction Scores: How I Almost Made a Hotel Manager Lose His Job

Recently, I was asked to fill a questionnaire during check-out at a hotel in India. I was very pleased with my stay so I agreed to providing feedback. It is worth pointing out that if I was only mildly satisfied I would not have agreed. If I was disappointed with my stay I would have filled the form more enthusiastically.

When I offer feedback I am in one of two extreme emotions: I either love the service or, more commonly, loathe it. There is no time to talk about the average. And I have given up on Comcast.

The form had about twenty questions asking how satisfied I was with various components of their hospitality. I had to choose between one and ten, the higher number for greater satisfaction. I decided to set a record for the fastest completion of the questionnaire. I quickly chose ‘9’ and ‘10’. To appear objective I gave a ‘7’ to a service, randomly. Seven meant “above average”. Nine and ten meant “outstanding” – that is satisfaction cannot be measurably higher.

In the section which asked “how can we do better?” I said “put some more trees.” I didn’t really think the hotel premise needed more trees, but I was on a roll of objectivity. I had to say something.

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The Facebook Model for Socialized Health Care

Screen Shot 2015-02-26 at 5.06.17 PMAs government involvement in U.S. health care deepens—through the Affordable Care Act, Meaningful Use, and the continued revisions and expansions of Medicaid and Medicare—the politically electric watchword is “socialism.”

Online, of course, social media is not a latent communist threat, but rather the most popular destination for internet users around the world.

People, whether out of fear for being left behind, or simply tickled by the ease with which they can publicize their lives, have been sharing every element of their public (and very often, their private) lives with ever-increasing zeal. Pictures, videos, by-the-minute commentary and updates, idle musings, blogs—the means by which people broadcast themselves are as numerous and diverse as sites on the web itself.

Even as the public decries government spying programs and panics at the news of the latest massive data-breach, the daily traffic to sites like Facebook and Twitter—especially through mobile devices—not only stays high, but continues to grow. These sites are designed around users volunteering personal information, from work and education information, to preferences in music, movies, politics, and even romantic partners.

So why not health data?

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Where Does the ACA Go From Here?

Craig GarthwaiteBarring a Republican landslide in 2016, it looks like the Affordable Care Act (ACA) is here to stay.  By and large, we think that is a good thing.  While there are many things in the ACA that we would like to see changed, the law has provided needed coverage for millions of Americans that found themselves (for a variety of reasons) shut out of the health insurance market.

That being said, since its passage the ACA has evolved and the rule makers in CMS continue to tinker around the edges.  We are especially encouraged by CMS’ willingness to relax some of the restrictions on insurance design, but remain concerned about some of the rules governing employers and the definition of what is “insurance.”  In the next few blogs we will examine some of the best, and worst, of the ongoing ACA saga.

We start with one of CMS’s best moves—encouraging reference pricing.  The term reference pricing was first used in conjunction with European central government pricing of pharmaceuticals.  Germany and other countries place drugs into therapeutic categories (such as statins or antipsychotics) and announce a “reference price” which insurers (either public or, in Germany, quasi-public) that insurers will reimburse for the drug.  Patients may purchase more expensive drugs, but they were financially responsible for all costs above the references price.  Research shows that reference pricing helps reduce drug spending both by encouraging price reductions (towards the reference price) and reducing purchases of higher priced drugs within a reference category.  Other research has found suggestive evidence of similar results for reference pricing for medical services.

While the ACA does little to govern pricing in the pharma market, the concept of reference pricing can and should be extended other medical products and services.  In particular, insurers can establish reference prices for bundled episodes of illness such as joint replacement surgery.  Under the original ACA rules set forth by CMS, insurers were free to establish a fixed price for bundled episodes.  They could even require enrollees to pay the full difference between the provider’s price and the reference price.  But there was a catch. It wasn’t clear if any spending above the reference price would count to the enrollees by enrollees out of pocket limits (currently $6,600 for individual plans and $13,200 for family plans).  Obviously, allowing the out of pocket limit to bind on reference pricing would limit the effectiveness of this cost control measure.

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