In a recent essay, VIVIO Health’s CEO Pramod John guides us through four sensible drug policy changes and supporting rationales that could make drug pricing much fairer. Reading through it, one is struck by the magnitude of the drug manufacturing industry’s influence over policy, profoundly benefiting that sector at the deep expense of American purchasers. As Mr. John points out, the U.S. has the world’s only unregulated market for drug pricing. We have created a safe harbor provision that allows and protects unnecessary intermediaries like pharmacy benefit managers. We have created mechanisms that use taxpayer dollars to fund drug discovery, but then funnel the financial benefit exclusively to commercial interests. And we have tolerated distorted definitions of value – defined in terms that most benefit the drug manufacturers – that now dominate our pricing discussions.
The power of this maneuvering is clear in statistics on health industry revenues and earnings. An Axios analysis of financial documents from 112 publicly traded health care companies during the 3rd quarter of 2018 showed global profits of $50 billion on revenues of $636 billion. Half of that profit was controlled by 10 companies, 9 of which were pharmaceutical firms. Drug companies collected 23% of the total revenues during that quarter, but retained an astounding 63% of the profits, meaning that the drug sector accounts for nearly two-thirds of the entire health care industry’s profitability. Said another way, the drug industry reaps twice the profits of the rest of the industry combined.
A challenge for health care purchasers is choosing vendors whose performance matches their cost and outcomes claims. A 2015 Mercer survey found that only 41 percent of worksite clinic sponsors think that they’re saving money. As Al Lewis and Tom Emerick have detailed, many wellness and disease management companies simply overstate their results. In many cases employers may not realize that they, not the vendor, take the risk for results.
One important answer is the Care Innovations Validation Institute, founded by Intel, that offers health care vendors and purchasers objective validation of vendors’ claims. The Institute stands behind its work with a money-back guarantee. In the Wild West of the health care marketplace, the Validation Institute is an invaluable resource for purchasers, allowing them to confidently proceed with vendors, knowing that their promises have been vetted by scientists.
The health care mainstream is investing in a variety of mechanisms to beat back America’s health care cost and quality crisis – ACOs, medical homes, data analytics, practice transformation, technology and app integration, patient engagement and decision support – but few have borne fruit. Hidden in our system, though, are companies with unique and successful approaches. For example:
There are companies that, by collaboratively working on different parts of drug spend, consistently reduce pharmacy cost by 30-50 percent. This can result in savings of 6-12 percent of an organizational purchaser’s total health care spend, a huge amount!
Another company uses a physical therapy-based approach to manage musculoskeletal disorders, and can intervene in about 80 percent of cases. Its work with more than 30,000 patients, including in Fortune 100 firms, shows that it gets wildly better health outcomes – pain reduction, improvements in range of motion and activities of daily living – in half the recovery time and with more than a 35 percent reduction in the cost of conventional orthopedic care. Recidivism events that occur over the long term drop by 50 percent. They’re so confident of their approach that they’ll guarantee improved outcomes with a 25 percent reduction in cost.
The Congressional committee that recently demanded Martin Shkreli’s appearance must have hoped to spotlight a smug jerk responsible for the outrageous prescription drug pricing that we’re all up against. Of course there are lots of Shkrelis running drug companies, but most are shrewder and less brash, and might not make for such good theater.
Rep. Elijah Cummings (D-MD), one of the Committee’s questioners, seemed to think that his witness could move healthcare forward by disclosing the machinery of the drug sector’s excesses. “The way I see it, you could go down in history as the poster boy for greedy drug company executives or you could change the system. Yeah, you.”
Excessive treatment and cost are at the core of the entire U.S. healthcare crisis. The fact that other societies and a few innovative firms here consistently deliver equal or better quality care at dramatically lower cost betrays the idea that conventional U.S. healthcare is necessarily superior or even appropriate.
Every part of healthcare is guilty, but the pharmaceutical sector is a case in point. An open record of lobbying spending and what pharma has obtained from Congress makes clear that its contributions have worked to that sector’s economic advantage and against the interests of American patients and purchasers.
America’s drug and biotech industries are no doubt alarmed by the national firestorm that erupted when Turing Pharmaceuticals raised the price 55 times of its 62 year old lifesaving drug, daraprim. They must worry that CEO Martin Shkreli’s tone-deaf reactions to the public’s scorn could precipitate close scrutiny of broader drug industry dynamics. The last thing pharma wants is a vigorous, in-depth national discussion of pricing, value, what we can afford and how other advanced countries handle drug spending. All this could kill the golden goose.
Seeking distance from the furor, PhRMA tweeted that “Turing Pharma does not represent the values of PhRMA’s member companies.” Then BIO, the biotech industry’s association, rescinded Turing’s membership and returned its dues, the equivalent of booting Turing out of the country club.
[Drug] companies are taking advantage of a mix of laws that force insurers to include essentially all expensive drugs in their policies, and a philosophy that demands that every new health care product be available to everyone, no matter how little it helps or how much it costs. Anything else and we’re talking death panels.Continue reading…
Stop what you're doing and take out a half-hour to watch this week's superb Bill Moyers' 3-part show, especially the extended interview with Wendell Potter, former CIGNA VP Corporate Communications, for a frank, insider's discussion of how major health plans have worked over the last decade.
Also be sure to watch Moyer's very brief final commentary, describing a dinner that was planned by the Washington Post to connect lobbyists with high-ranking officials working on the health care reform process. His conclusion: we won't get anywhere with health care or any other national problem until "the money-lenders are tossed out of the temple and we tear down the sign they've placed on government, the one that reads 'For Sale.'"
(Boston) Jane Sarasohn-Kahn and I were quickly comparing notes this morning. Our impression is that, compared to past meetings, this one seems more characterized by doers than observers.
This conference brings together a dizzying array of tools and experiences, which is testament to the organizers’ encyclopedic handle on the vast diversity of activity in this sector. Josh Seidman, Indu Subaiya and Matthew Holt have done yeomans’ jobs in putting these impressive presentations together.
Mingling, I’ve spoken to person after person actively involved in mostly consumer-oriented ventures, leveraging science and user-generated information to facilitate a more favorable patient experience. There are some real steps forward, like the demo that Mayo and Microsoft showed, that takes information entered into Health Vault and applies the rules that Mayo has developed through many years of experience. Or the work that groups like Up-To-Date and HealthWise are doing, that continually, organically update descriptive information throughout medicine and health care.
The uber-fabulous (and expensive) TED conference – 4 days, $6,000 and sold out a year in advance – a collection of some of the world's most thoughtful, innovative and high achieving individuals, has just finished, and many of the talks are free to watch. They cover a breathtaking array of topics.
Take 20 minutes each morning and get your mind into gear with one if these. I just watched Bill Gates' excellent presentation about the issues associated with tackling malaria and with creating great teachers.
“The requested data does not serve any (freedom-of-information-related) public interest in disclosure. Accordingly, we need not balance the nonexistent public interest against every physician's substantial privacy interest in the Medicare payments he receives.”
But in a strongly worded dissent, Judge Judith Rogers, the third member of the ruling panel, found that the request by the consumer group, Consumer Checkbook, represented “a commanding and important public interest in disclosure of the data.”
Well, here we are at the beginning of 2009. On TV we’ve learned that the unlimited spending and brilliant, if socially pathological, heroics of Dr. Gregory House, unfailingly saves his patients from unknowable complexity and the abyss of death.
Meanwhile, the rest of health care, aided largely by really excellent lobbying, continues to be buoyed, defying the relentlessly corrosive gravitational pull of waste, corruption, and a tanking economy.
Still, health care’s troops are beginning to feel, in Tom Lehrer’s words, like a Christian Scientist with an appendicitis. Things definitely are not going well, and this longstanding run of great good fortune could be on the downswing. Is it possible that exorbitant pricing and massive waste are NOT entitlements!
Which brings us to the far-ranging insights, jabs, diatribes, rants and enthusiasms of this edition of Health Wonk Review, which features analysis and exegesis as entertainment.