Donald Trump’s proposal to allow the federal Medicare program to negotiate prices with drug companies should be a wake-up call for the pharmaceutical industry.
Trump is leading in the polls for the Republican nomination and is even drawing the support of Tea Party conservatives who, just a year or two ago, never would have supported a candidate endorsing such strong government intervention into a private-sector industry.
Characteristically, Trump didn’t give a lot of detail about his plans. He claimed $300 billion in savings per year (about 10 times more than is realistic). But that doesn’t matter. If the leading GOP presidential candidate—a man who has proved masterful at reading the public mood and playing to it—has signed on to this idea, it proves that change has come.
I know that many veterans of the pharmaceutical industry think they have seen this horror movie before and know how it ends. There have been several past public furors over the price of prescription drugs, and each one gradually faded without major disruption for drugmakers. But this time feels different.
“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” —William Arthur Ward
Looking confidently past the skeletons of drowned state and federal healthcare experiments, America’s health insurance exchanges set sail in January 2014. Disregarding the rough seas ahead, healthcare reform pundits and legislators applauded the Affordable Care Act’s signature public expansion vehicle as an impenetrable solution for achieving affordable coverage and competition.
Less than two years later, the exchanges are taking on water.
In November, United Healthcare lowered earnings projections, a move driven primarily by its hesitancy to commit to enrolling new exchange members until risks are better understood. While other insurers were quick to reassure investors that the public exchange market remains a viable means for organic growth, a low-pressure system of doubt is already building over the nascent public exchanges.
Initial enrollment projections for 2016 are fewer than 10 million members—about half of the 20 million target estimated by the Congressional Budget Office. In their rush to expand coverage to the uninsured and under insured, many public officials and industry neophytes failed to consult with those who have firsthand experience with the difficulties of underwriting those who are obtaining insurance for the first time.
Enrollment projections for 2016 are fewer than 10 million members—about half the Congressional Budget Office target of 20 million.
The rush to participate in public exchanges has attracted inexperienced players seeking a piece of a $300 billion premium opportunity.
Investors want desperately to believe healthcare is ripe for transformational disruption.
“Universal Health Care”, “Single Payer”, “National Health Insurance”, “Socialized Medicine” are all semiotics symbolizing the subjugation of physician and of patient autonomy to government control for the sake of the common good. This is not sophistry. Max Weber was a Prussian political philosopher who laid the foundation for modern sociology with such books as The Theory of Social and Economic Organization (1920, English translation 1947) in which he proclaimed, “Bureaucratic administration means fundamentally the exercise of control on the basis of knowledge. This is the feature of it which makes it specifically rational.” (p. 339).
However, Weber knew that the goal of a rational bureaucracy was more often elusive than realized, if it is ever realized for long. As Karl Marx observed in a mid-19th C critique of Hegelian political philosophy, “The bureaucracy takes itself to be the ultimate purpose of the state.” That observation is mirrored in a televised speech delivered by Ronald Reagan on October 27, 1964, “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”
The upshot is that society has an inherent love-hate relationship with bureaucracy. As I discuss in Citizen Patient, till the end of the 20th Century American medicine contained and controlled its own bureaucracy and was willing to downplay such short-comings as inequities in the delivery and quality of care. Even the legislating of a Medicare bureaucracy had little impact on the medical hegemony; the legislation delegated clinical indications and fees to medicine’s own bureaucracy and much else that is costly to the marketplace. American medicine remained secure in its autonomy. Meanwhile, elsewhere, in nearly all similarly “advanced” countries, the will to tackle inequities in the distribution and quality of care and in cost-effectiveness had come to predominate by early in the 20th C. These countries sought a solution in the evolution of governmental bureaucracies. Several of these bureaucracies, these national health insurance schemes, remain examples of Weber’s rationality. Several of the national health insurance schemes, such as in the United Kingdom and France, are fraying.
Awash 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.
If 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.
“It is written: Man shall not live by bread alone.”
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.
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.
In 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.
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.