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POLICY: Individual insurance market . . . . . still sucks

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There’s a new CMWF study on the individual insurance market. I won’t belabor the point as I’ve done many times before. Less than 7% of Americans are in it, and just because I’m one of them is no real reason to point out that it’s a market that doesn’t work for anyone who needs it, and is somewhere between 30-50% more expensive than the group market.

The study makes those points and more.

The individual market currently is quite small, covering approximately 17 million nonelderly Americans, or about 6.7 percent of the population. This market historically has not worked well for many people seeking coverage, in particular for those who need coverage the most. Policies frequently have been unavailable to people with existing health conditions; premiums have been expensive and usually have risen faster than group insurance rates; and benefits have generally been far more limited than those in group policies.

And yet the current national policy is to drive everyone into it.

PHARMA/POLICY: Deja vu all over again at FDA. But so blatant and so soon! by Blunter

Blunter is back with more concerns about whether the FDA Is whitewashing away its problems. Chuck Grassley this morning probably agrees with him, considering that he yesterday accused the FDA of interfering with Canada Health’s decision over withdrawing Adderall for political purposes. Here’s Blunter with a review of some of the details of the Leavitt confirmation that didn’t make it into the mainstream press:

In an earlier post on your site I characterized the Institute of Medicine study of drug safety issues as just a familiar CYA tactic, full of sound and fury but signifying nothing. You will recall the IOM study was quickly arranged by the FDA Topside in response to its whistleblowers, and widespread disgust just about everywhere. To quote a passage from that post:

FDA seeks an analysis and report by the National Academy of Science or other prestigious group as a "CYA" tactic. There are lots of similar reports lying around comatose from past misadventures. However, the tactic permits FDA and other Administration folks to say it is inappropriate to discuss specifics of the latest debacle(s) before receipt of the blue ribbon report. Hence, we have FDA on autopilot until the dust and fervor clears and a new executive crew gets in that can say that "it wasn’t on our watch."

Less than a month has passed. Lo and behold,the newly-minted HHS Sec Leavitt must have read the blog. In a written response to a Senate Finance Committee question about moving on FDA safety reform now–and I am not making this up–Leavitt "stressed his desire to wait until the Institute of Medicine completes a review of drug safety regulation in the U.S. before proposing any major overhaul". Trade press reports say that Leavitt "repeatedly cited his desire to wait for the outcome of IoM review" in response to as series of questions from [Senator] Grassley [Chmn of the Senate Finance Cmte] about alternative models for drug regulation. (Ed’s note–I have the confirming transcript but it’s not easily available on the web).

Is it any wonder that the White House is reported to be continuing its search for a new FDA Commissioner? Let’s hope that look is outside the confines of physicians and scientists and considers seasoned managers, perhaps with an MBA or a record of success in other large, technical enterprises. The new head needs to delve into management as well as legal reforms to rectify the incompetence of the present "team" and not merely deflect the heat from the current topsiders and their shortcomings.

POLITICS: Do you remember Social Security on the campaign trail?

No you probably don’t.  And this is why.

While Social Security reform/privitization/dismantlement has become the biggest policy issue of the 2nd term, now that the word is out and people understand what the Administration’s goal is, the impact is hitting the President’s poll numbers hard.:

"Adults were evenly divided on Bush’s job performance in January, but now 54 percent disapprove and 45 percent approve. The number who think the country is headed down the wrong track increased from 51 percent to 58 percent in the past month."

Of course the real conspiracy theorists amongst us might have felt that they knew messing with social security was always going to be very tough, but that raising the issue, particularly with the vast shortfall it would leave in the budget, would allow or even force Congress to be more active in cutting other areas.

Or it might be just that there are enough honest conservatives left who cannot countenace a Medicare bill that busts the budget so badly. It’s a pity that there don’t seem to be enough as perturbed about the huge and unmentioned scandal of war profiteering, even as Bush asks for another $80bn a year for Iraq’s reconstruction–an amount that could eliminate uninsurance here at home.

POLICY: Harris finds that the nation’s health leaders are mostly out of ideas

Harris Interactive is out with a survey of the people attending a recent health care conference in DC which was attended by a who’s who of health care notables. Unsurprisingly, there don’t seem to be too many new ideas.

Forty percent of respondents believe a combination of IT, practice guidelines and patient safety measures is both an effective and desirable way of containing health care costs. Furthermore, 27 percent named disease management programs as the second most effective way to better manage costs.

When asked about the most significant opportunities that their organization can pursue during the next two years, the results again underscore the growing importance of IT in health care:

  • Forty-eight percent (48%) name greater emphasis on data-driven clinical care (including evidence-based medicine and advanced care management programs).
  • Thirty-one percent (31%) cite the development of portable, shared electronic health records.
  • Twenty-nine percent (29%) identify increasing prevalence of pay-for-performance initiatives.

With regard to the adoption of electronic medical records (EMRs), more than two-thirds (68%) of those respondents who work for hospitals, physician practices or health insurers say their organization has increased or accelerated their investments in clinical IT and EMRs and an additional 15 percent plan to make new investments soon. However, only one-third of them say they are working with other local health organizations on these initiatives.

Conversely, 38 percent say slow adoption of IT poses the most serious threat to the health care industry, closely followed by rising medical costs (37%) and the increasing number of uninsured/or under-insured (34%).

Interestingly, support for universal health insurance is relatively strong, with 49 percent of respondents in favor and 37percent opposed. However, 94 percent say such coverage is either highly unlikely or somewhat unlikely to happen during the next five years.

So we can all sing Kum-Ba-Ya over health information technology while appreciating that the problems of getting this stuff communicated between organizations are barely understood, let alone overcome. And that the disease management programs that the core of "data-driven care" are also in their infancy.

Oh and there seems to be no hope for the uninsured, and less than half of the crowd even cares.

PHARMA: More guidance from the top of big pharma

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I was more than a little cynical about a speech from Fred Hassan of Schering a while back in which he suggested that everyone should put more money into their retirement accounts so that he could have more money in his. One would have thought that, with their stock prices tumbling, many of their products being pulled from the market and the public’s trust in their products and performance in dissarray, the CEOs of big pharma would be looking for a conciliatory approach. Instead here’s Eli Lilly CEO Sidney Taurel’s world view:

The nation’s health care system is ‘unhealthy to the core’ and soon will move from being chronically to critically ill if no changes are made. The principles of competition…… have become deformed in the health care field……Patients don’t see the true costs of health care because the government, their employers or insurance companies appear to be paying for them. Costs also are higher than they should be, Taurel believes, because the system is overregulated. "The free market hasn’t failed in the U.S.," Taurel will say. "It’s never been given a chance to work."

At least we agree on that last point. Basically Taurel says that he wants an unregulated system in which the consumer pays for everything out of pocket, and no doctor (or perhaps pharma company) is liable for anything they ever do. Funny that he didn’t seem to mention doing away with patent protection, but perhaps that’s not regulation in Indiana. Nor did he mention the teeny fact about how much money his company is going to make now that Medicare will be paying out for their products. Perhaps they just don’t know how their companies make money, although given the amount of money they spend on lobbying and corrupting PBMs and health plans, I suspect they do. Then it starts getting really funny.

Not every proposal would help the drug industry — at least not in the short term, Taurel says. Drug companies will feel as much pressure as the rest of the health care industry to cut costs. But Taurel says drug companies are better prepared to compete in that environment because they’re already feeling consumer pressure over drug prices and are trying to respond.

By putting up drug prices 5-10% since the election. That is a response, I suppose. But then comes the clincher:

"I’d much rather take my chances in a true, transparent, free-market system ruled by consumer choice than in a command and control system, driven by the winds of politics," Taurel says.

Now I’m rolling on the floor laughing my ass off. Pharma has made all its money in the last decade because of the increase in mostly private third party payment. Consumer payments went from being over 50% of all pharma spending in 1990 to less 32% in 2000. And pharma will make all its money in the next decade because of the increase in government third party payment. Payment that come courtesy of the Medicare Modernization Act that they bought and paid for! If you want to talk about the vagaries of politics consider that the director of the OMB and now new governor of Indiana is Mitch Daniels. What did he do before he went to DC? He worked for Tuarel at Lilly! The winds of politics are fine if you control the wind tunnel!

While I’m sitting here with my mouth gaping about the entire concept of this level of self-serving propaganda, The Industry Veteran has a rational explanation for the whole thing:

I suspect the Big Pharma CEOs are using some fairly simple mass communication principles beneath all their health care "reform" speeches. First, these braying donkeys command a forum. It’s amazing that the public immediately recognizes the mental vacuum accompanying the only other groups that attract such immediate media attention: Hollywood celebrities and professional athletes. CEOs of the top 500 companies maintain even greater access and control, but the public ignores their baldfaced self-interest and typical lack of expertise on subjects where they are venting blatant prejudices. At least there is the fascination of a novelty act in watching a bimbo starlet speak about wildlife conservation or dispossessed farmers. Our response to that phenomenon resembles watching a dog walk on its hind legs or turn the pages of a book with its left paw; we don’t expect it to be done well, as Samuel Johnson said, but feel a sense of patronizing amusement that it’s done at all. No such amusement accompanies a CEO’s pronouncements on public policy issues. As public spectacle it relies more on arousing latent, mass sadism, similar to the process of selecting a subject from the crowd for ritual slaying. At any rate, these thugs speak out on policy issues because they can and because they feel they can influence the outcome in their favor.

Secondly, the Taurels, Hassans, McKinnells, Garniers and McKillops have started to broadcast their plutocratic preferences more widely within the last few years because they are slipstreaming behind George Bush’s strategy of promoting the Big Lie. Not many years ago a person would have been considered delusional after publicly announcing that individuals can more effectively provide insurance safety nets for their retirements than the Social Security system. Custodians of public safety would really have called for the thorazine and restraints if the same person also proclaimed that unconscionable tax breaks for the wealthy make the entire country more productive. When Barry Goldwater made similar assertions in 1964, a number of psychiatrists questioned his emotional competence to serve as president. In past years good burghers might have even stormed the White House/Frankenstein laboratory with flaming pickets if its self-same occupant also started a preemptive war using entirely phony reasons. Alas George W. Bush faced neither angry mobs nor a padded room. Instead thoughtful imbeciles pondered whether the Almighty transmitted His unseen wisdom to the W more or less accurately than a contradictory message He sent to Pat Robertson. So in a society that now constitutes Stanley Milgram‘s laboratory writ large, by virtue of its blind obedience to authority, Big Pharma’s capi di regime figure they might as well trot out their avuncular acts. Why settle for one sucker a minute when a simplified message, repeated frequently in the mass media, can create millions?
As a third reason for this pathetic roadshow, the Big Pharma CEOs would not agree with your assumption that the public despises them. Improbable as it may seem, their batallions of sycophants and courtiers successfully insulate them from reality. As a result of such fantasyworld thinking, J.P. Garnier demanded that GlaxoSmithKline’s board double his salary despite the company’s abject failure at drug development under his leadership. Similarly, AstraZeneca’s Tom McKillop asserted his demand for one million pounds added yearly compensation, despite failures such as Exanta, Crestor and Iressa that substantially lowered share prices. I could continue at monograph length along such lines. Suffice it to say that Pharma’s CEOs do not accept public perceptions of their villainy. They actually think of themselves as benevolent, pragmatic, shrewd businessmen who are wrongly villified by a sensationalist press and political opportunists that seek scapegoats for an over-regulated, unworkable system. To change public perceptions, they have adopted Big Tobacco’s PR strategy. In 2004 Astrazeneca actually hired as its VP for US public affairs a fellow who spent his previous 12 years working for Philip Morris, now called The Altria Group. Under his direction their PR posture has been one of swift, hardball responses and preemptive attacks upon critics such as Public Citizen and Marcia Angell. In the UK, meanwhile, Astrazeneca arranged for The Scotsman to run a puff piece on Tom McKillop that makes him appear more a combination of Albert Schweitzer and Johnny Carson than the Celtic barbarian he is.
So there you have it. The heads of Big Pharma have the forum, they want to push the Big Lie, they actually think they’re nice guys, and they’ll use every dirty trick to shove that idea down our throats and make us believe it.

It all reminds me a little of when Nicolae Ceausescu was dictator of Rumania and his thugs would arrange cheering crowds and full shops on the streets when he drove around Bucharest. One day he flew back from a foreign trip early and they didn’t know he was coming. He was amazed to see lines of pissed-off people queueing outside empty shops. Of course, it didn’t stop him from ending up against the wall with an over-abundance of volunteers for his firing squad.

HEALTH PLANS: Calling the top to HMO stocks, again

Not wanting to sound like a broken record, but it’s been more than a year now since I’ve thought health plan stocks (and I include the PBMs in this category) were well over-extended. Luckily I haven’t had my money where my mouth has been as they’ve kept on going up, not the least of which has been Pacificare’s unbelieveable 80% increase since the election. For the past five years health plans have benefitted mightly from the rise in health care costs. While they have been able to pass on the increase in their costs to their customers such as employers and governments, they have also been able to use more sophisticated techniques to assess the risks in their insured populations to make much more profit per member. Some plans such as Aetna have used this to great effect in turning around seemingly losing businesses, while others like Pacificare have benefitted from the current political ideology that is going to try to shift more of the Medicare population into the private sector.

But at some point the gravy train must end.

Meanwhile PBM stocks have also rallied as they have been able to continue to sell their services to employers, even while some of their customers such as the new watchdog group RxCollaborative are clearly unsure of what value the PBMs bring in reducing their Rx costs. Of course PBMs will also benefit from adminstering the new Medicare Part D. While these insurers will continue to be a powerful force in the business of health care, it may be that their fast growth in earnings in the last few years will take a pause. That means buyers of their stock at these levels might have second thoughts.

In evidence let’s introduce the action in Pacificare’s stock today. It beat its nubmers according to the Street, although not according to some other sources. But in any event its profits have nearly doubled over the last year.

I’m not quite brave enough to go short, but The Street, which is often thouguth of as being a mouthpiece for Wall Street Bears is clearly signalling its thoughts. Meanwhile Pacificare’s stock didn’t react too well to the earnings news.

The giant health insurer, best known for its Medicare coverage, posted fourth-quarter earnings Thursday that handily beat Wall Street expectations. But the stock, which has rocketed nearly 80% since President Bush’s re-election, tumbled 1.8% to $61.78 after the report.

TECHNOLOGY: The EMR installation, a medical blogger case study

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While I spend far too much time on THCB arguing with Sydney Smith at Medpundit, her blog remains fascinating. At the moment she’s putting in a EMR into her small office practice. Now she’s not the first physician blogger to use an EMR — Enoch uses Epic at the Palo Alto Medical Foundation and Jacob is an early adopter. But those two are atypical nerds (sorry guys!). Given that she’s more or less typical of the majority of the physicians in the country, in that she’s a heavy Internet user in her personal life but hasn’t used a computer too much in her day to day practice workflow, Syd’s experiences are very important, and you should all follow them.

Thus far she’s finding that using the computer is making her slower than she was and that her staff are having some trouble adjusting to the new workflow patterns. This is a pretty typical experience from what I know about EMR installations at larger clinics. But in a larger clinic these dislocation costs don’t directly affect the physician’s income, whereas in a solo practice either the doctor has to work longer hours (and pay staff for staying longer) or see fewer patients. So they’re one huge reason why solo and small practice docs haven’t put in EMRs.

It will be very interesting to see Sydney’s results as the system she uses becomes more familiar to her and her staff, but there are already some positive results for some of her patients that I’d venture to suggest are improving the care they are receiving overall. And today there’s a study in JAMA which shows that information is likely to be missing from one primary care visit in seven, but that it’s much less likely to be missing if the clinic in question has a full EMR.

Syd is to be commended for both taking this leap and keeping us informed about it — warts and all.

PBMs: Caremark article questions the role of the PBM

I’m not a great believer in the effectiveness of PBMs to hold down drug prices. My evidence is that since PBMs have become important drug prices and the share of health spent on them have gone through the roof. Of course, no one can prove that they wouldn’t have gone higher without PBMs in the picture. But in the middle of this rather fun hatchet job on Caremark from Melissa David at The Street.com there’s this great stat she’s dug up:

The companies claim to save their clients large sums of money by using their bulk purchasing power to negotiate deep discounts from drug manufacturers. But a growing crowd of industry critics, pointing to the rocketing cost of prescription drugs, have voiced their doubts. They believe the PBMs are unfairly keeping much of the savings for themselves. Indeed, a recent survey by Hewitt Associates showed that only 53% of employers believe that PBMs lower prescription drug costs — and that nearly one-quarter believe the PBMs raise the costs instead.

So 25% of their customers think that PBMs do the exact opposite of what they say they do. And don’t forget that next year the taxpayer (i.e. us) becomes their biggest customer.

Meanwhile the NY Times reports on a new initiative where 30 big employers who use Medco have bullied the PBM into letting them monitor the inner workings of its deals with its suppliers. Presumably the members of the "RxCollaborative" are not as happy as they might be about how they’ve been treated so far.

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