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PHARMA/PHYSICIANS: Changing the Identity of Medical Oncology Under Medicare, by Gregory D. Pawelski

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Here’s the first in a series of articles I have in the queue about the oncology market. The first is from Greg Pawelski:

Under the new Medicare Prescription Bill (MMA) medical oncologists will be reimbursed for providing evaluation and management services, making referrals for diagnostic testing, radiation therapy, surgery and other procedures as necessary, and offer any other support needed to reduce patient morbidity and extend patient survival.

The fact that medical oncologists received no reimbursement for providing oral-dose therapy to patients had been the principal barrier to the availability of oral-dose protocol. The advent of oral agents ultimately means that medical oncology will need to change its identity, prior to the chemotherapy drug concession. Because oral-dose drugs hold the promise of being more selective, harming fewer normal cells, reducing side-effects and work to improve the quality of life for people with cancer, they will rightfully gain their appropriate share of the marketplace, again.

The new Medicare Bill offers patients benefits they did not have before, mainly some coverage for oral chemotherapy drugs. Since April of 2004, $200 million was available so that some Medicare cancer patients would have transitional coverage for these drugs, until the bill goes into full effect in 2006. Although some benefit was realized, more might have been achieved if the American Society of Clinical Oncology and other groups had lobbied as much for the oral chemotherapy drug issue as they did for office-practice expense reimbursement. They fought long and hard to retain the Chemotherapy Drug Concession.

Increasingly, oral-dose anti-cancer drugs are found to treat cancer effectively and seen as a necessary part of a patient’s cancer care. A number of these breakthrough cancer drugs came on to the market that are only in oral form and previously not reimbursed under Medicare. Patients were being forced to compromise their cancer care due to Medicare not covering many of these life-saving therapies.

The new legislation started the process of providing access to a full range of the latest cancer-related prescription drugs at manageable costs to enhance the quality and standard of treatment for cancer. Medicare recipients were being relagated to treating their diseases with older, more toxic infusional chemotherapy agents at a time when new and more promising cancer drugs were reaching the market.

Compared to infusional therapy, oral-dose anti-cancer drugs can make receiving cancer treatment more convenient for patients by allowing flexibility in taking medication without disrupting work or other activities. They can often result in less time (or no time) spent in office-based oncology practices because of the absence of intravenous administration and its related side-effects.

Targeted cancer therapies will give doctors a better way to tailor cancer treatment. There are a multiple of different cancer drug regimens, all of which have approximately the same probability of working. Treatments may be individualized based on the unique set of molecular targets produced by the patient’s tumor, and these important treatment advances will require individualizing treatment based on testing the individual properties of each patient’s cancer.

What was needed, was to remove the profit incentive from the choice of cancer treatments, which were financial incentives for infusion therapy over oral therapy or non-chemotherapy, and financial incentives for choosing some drugs over others. Patients should receive what is best for them and not what is best for their oncologists.

The new system is clearly an improvement from the standpoint of cancer patients, taxpayers, and advocates of basing drug selection on individual tumor biology, rather than on a least common denominator approach which invites “conflict-of-interest medical decision-making.” I think it is time to set aside empiric one-size-fits-all treatment in favor of recognizing that many forms of cancer represent heterogenous diseases, where the tumors of different patients have different responses to chemotherapy. It requires individualized treatment based on testing the individual properties of each patient’s cancer.

POLITICS: Election winners and losers

I wrote most of this yesterday, but Blogger was giving a lot of trouble, hence I only got to publish my cynical “help wanted” ad.

But given that we have Bush in for four more years and at least two of a very strongly Republican house and Senate, what does this mean for the health care system? We will obviously not be discussing how an obstructionist Congress shot down Kerry’s health care plan. I don’t think that we are going to see any serious expansion of Medicaid to cover the working poor, and the defeat of Prop 72 in California augurs poorly for any expansion of employment based insurance. Overall this means that uninsurance will continue to rise–although public programs will continue to grow somewhat (as they have over the past three years). So we can expect a continued growth in uninsurance and presumably a continued (but probably moderating) rise in costs. There might be some consensus around Frist’s proposal to aid in reinsurance for companies and create AHPs, but these both strike me as tinkering around the edges.

Meanwhile there are some big winners from this election. The gamble taken by big pharma to carry out a scorched earth policy towards the Democrats has paid off–although I suspect the midday exit polls had some in the executive suites choking on their three martini lunches. Plan B–the need to deal with price controls and re-working of the Medicare Modernization Act–will not be needed, although reimportation still has some supporters on the Republican side of the aisle. As my, politically poles-apart but pharma-savvy, contributors The Veteran and Atlas have agreed, the pharma companies need to use some of this breathing room to cut back on their marketing spend, and make their sales machines more cost-effective. But the lack of a strong pipeline for many companies in the industry, and the not-so-minor-for-some issue of lawsuits over drug safety, are still the most important challenges for this industry.

The stock market reacted correctly to the election for the health plans and PBMs, which will continue to consolidate on the gains they have in the built-in increases they’ll see in payments to get them to recruit seniors into managed care plans and the new drug benefit respectively. Pacificare’s stock rally is being matched by Caremark.

Again in the longer term, these gains cannot last forever. The underwriting cycle will eventually come back to bite health insurers, and at some point the government/taxpayer will be unwilling to continue to expend scarce resources on the somwhat dubious ideology of paying more to make Medicare private. But for now the direction is clear and the sailing bright.

And although in my mind I got there first, that bunch of impersonators at the New York Times also reports on the topic in this article called Insurers and Drug Makers See Gain in Bush Victory.

Hospitals and doctors will keep the gains they made in the MMA, but it’s hard to see many more extraordinary gains. The only arena in which there may be a substantive change is in the reintroduction of malpractice legislation. However, given that the White House has to get funding for Iraq, an energy bill and some type of Social Security reform, not to mention the odd Supreme Court justice nomination, through the Senate, it doesn’t seem likely that malpractice is an issue that they’ll go to the mat on if the Democrats object.

And a peripheral issue to most health care players, but an important national one is that the Supreme Court will likely take a severe slant rightwards in the next few years. Sandra Day O’Connor is the swing voter keeping Roe v Wade on the books, and she’s likely to retire, as is Rehnquist. So the abortion situation is likely to change, and if one of the two most liberal justices (82 year old Stevens or 69 year old Ginsburg) were to die in the next few years, then we might be looking at a 6-3 conservative majority for years to come. Perhaps abortion clinics on the Canadian border are the new business opportunity.

BLOGS: Blogger bloggered & quick Wanted ad

Yet again Blogger seems to be down. I’ll leave you cynics with this thought and be back with my conclusions on the impact of the elction tomorrow.

Wanted: 58 million people to support the elimination of human rights, promote torture, plunge their children into monstrous debt, and aid in the elimination of civil liberties at home and international law abroad. An opposition to the principles of the Enlightenment and rational thought is useful. Adherence to obscure interpretation of vague texts written 1900 years ago, selected a couple of centuries later by a brutal dictator who wanted his subjects to worship him as God, is also helpful. Apply at the polling booth on Nov 2.

POLITICS: Wake me up in 4 years

I’m reminded of the scene in Citizen Kane, when Kane loses the election at the last minute and his editors pick between the two headlines. One reads “Victory” and the other says “Fraud at Polls!”. The lefty blogs got very excited about some early exit polling data, and the stock market did too. Now the market will be roaring up, while there’s as much conspiracy theory as you like on the left about what happened between the exit polls and the poll results, and how exactly Florida boosted its turnout by over 29%, had more registrations in poorer and African-American precincts and still went further into the Bush camp. And Ohio, still run by Diebold? I must admit to being pretty baffled. Apparently tons of new voters got riled up about the evils of the Administration, registered to vote and then went in and voted in record numbers….for Bush.

But given that the outcome is set, and that the Senate got much more conservative (with at least two real wingnuts added), the die is more or less cast for the next four years.

For the health care system, this prods us towards the “no change leading to big disaster/crisis/reform” scenario that I’ve hinted at in the past. All indicators are starting to flash orange, and no legislative solutions will come out in the next four years, although they may take another run at malpractice. I think that the 2008-2012 health care crisis election is now a likelihood, depending on the timing of the next recession.

In the meanwhile, there’ll be plenty to write about; just not how Kerry’s plan was shot down in flames by a do-nothing Congress.

I’m off to a corner to cry quietly….

PHARMA: Merck knew more than it let on about Vioxx

A group of emails from within Merck show that the scientists were questioning the data and the marketing people were telling the sales reps to obfuscate. This is really ugly stuff. Taken on its own the views from the scientists aren’t too bad, as they state the actual truth — that good drugs have side effects. But the trial lawyers will not care about that and Merck’s stock is down another 10% today. And you can just imagine the courtroom scene where the plaintiff’s attorney reads management’s instructions to the sales reps to “dodge” questions from doctors about the safety record of Vioxx versus its competitors.

Merck’s long-term is looking bleaker and bleaker. Even though Arcoxia, its new Cox-2 may make it through the FDA — it got a go slow but positive letter last week — the combination of the settlement for Vioxx and the fractured trust with doctors and patients really spells the end of Merck’s reign as the most trusted of the “scientific” pharmaceutical companies that it enjoyed when Vagelos was the CEO. Expect some other pharma to come after Merck within a few months, but perhaps after it’s got a little cheaper.

POLITICS: After today, it may be over

The rumors I hear are that no-one will concede tonight and that the whole thing will go to appeal in Ohio, Florida and who knows where else. Four years ago a done-nothing Governor, who’s only promise was to govern from the middle and not get a blow-job in the Oval Office, “won” election by getting fewer votes than the other guy. Love him or hate him, it’s hard to imagine that after governing the way he has, with the contention that his Administration has created at home and abroad that the numbers for Bush in advance of the next election look exactly the same as they did on election night 2002.

But that apparently is the way it is. God Bless America.

POLITICS: It’s a dead heat

If anyone tells you they know who’s going to win the election, they’re lying. I reported that Harris said it was a dead heat a few weeks back, and not much has happened to change that view. You all know who you want to win. I know who I want, and I’ll report back on Wednesday on what we know, if we know the final answer then.

UPDATE: Apparently, this is not true and there is a certain outome. ESPN reports that for the last 16 elections since they moved from Boston in 1933 when the Washington Redskins win their last home game before the election, the incumbent’s party wins. When they lose, the incumbent’s party loses. Well on Sunday, the ‘Skins lost. Sorry, Bush!

POLICY/POLITICS: Prop 72, sorry couldn’t stop myself!

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So I tried to not say any more about Prop 72 and the analysis from the Harvard economist Anna Sinaiko that poo-poohed my theory about labor costs versus profits. But as I never heard back from her, I might as well print what I wrote here after she said this in reply to my earlier letter:

Let me begin with Matthew Holt’s letter, in which he questions: Can we finance health insurance by tapping into (“all-time high”) corporate profits? It has long been recognized in labor and health economics that firms regard the cost to employ a worker as the sum of cash wages and fringe benefits, and offset higher costs of health insurance with lower wages. While in the short term this may be difficult, over the long term, wage reductions are likely to be a consequence of an employer mandate such as SB 2.

Here’s what I wrote to her in reply, as yet not hearing back from her.

By claiming that economics tells us something — in this case “firms regard the cost to employ a worker as the sum of cash wages and fringe benefits, and offset higher costs of health insurance with lower wages” — you appear to mean “economic theory” tells us something. You appear to be saying that the theory says that overall gross labor costs are necessarily static and any change in one part of labor costs will be compensated within those labor costs, either by lower wages or lower employment. Those of us who think of economics as a pretty imperfect science would be interested to know how you reconcile the UK experience with the introduction of a minimum wage with your economic theory? Wages/labor costs there went up and unemployment stayed the same (in fact dipped).

Assuming that no miracles occurred, and that the total amount of revenue in those firms stayed constant, something else MUST have gone down. Unless Adam Smith has changed his text since I went to college “Economic theory” says that there are only four elements in the cost of production: Land, labor, capital, and “enterprise”. You have effectively said that a change in the cost of one of these is self-regulating and that the others cannot change. That is patent rubbish, as the “cost” (or share of revenue) of all 4 elements changes constantly in any market. Or maybe you have created a new “economic theory”. If that’s not what you are saying you need to restate your argument, and answer my criticism properly.

And you never answered my final question. If this all washes out within labor costs and they stay constant, why are corporations (who care only about the “enterprise” or profit part of the equation) so dead set against SB1? I’ll answer it for you. They are not economists and they–like labor unions–live in the real world where these types of battles over distribution of revenue happen all the time because there actually IS something at stake.

And so after that non-reply here comes the real proof. Today’s NY Times has an article about WalMart and how it basically offers fewer health benefits than its competitors and as an aside many more of its employees wind up on public assistance of various sorts for their health care needs. Walmart is more profitable than its nearest competitor Costco because of that, and Wall Street notices:

Wal-Mart says that 23 percent of its employees are not eligible for coverage, but that it covers 58 percent of those who are. That compares with an insured rate of 96 percent of eligible full-time or part-time employees of Costco Wholesale, the discount retailer that is Wal-Mart’s closest competitor nationwide. Costco employees – most of whom are not represented by a union – become eligible for health insurance after three months working full time, or six months part time. At Wal-Mart, which has no union employees, many who work full time must wait six months to become eligible. Part-time workers are not eligible for at least two years. Because of turnover, some employees never work long enough to become eligible.

If there is any place where Wal-Mart’s labor costs find support, it is Wall Street, where Costco has taken a drubbing from analysts who say its labor costs are too high. Costco’s pretax profit margin is only 2.7 percent of revenue, less than half Wal-Mart’s margin of 5.5 percent.

But I guess Sinaiko’s economic theory doesn’t cover Bentonville AK and Wall Street or Sacramento and Athens medicaid payments, so she must be right, and labor costs have no impact on profit margins.

INTERNATIONAL: US primary care looks poor in comparison to other nations

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Not two weeks ago Bush yet again trotted his dad’s old line about the American health care system being the best in the world. A little earlier this fall Robert Centor at DB’s Medical Rants said that primary care in the US “trumped that in the UK”. I posted my objections to both Bush and to Dr Bob on TCHB before, but I didn’t have a lot of proof in terms of hard data.

Well I do now.

Health Affairs has published the latest Commonwealth Fund report, (survey research was conducted by my ex-colleague Kinga Zapert and her group at Harris Interactive), on primary care in 5 English speaking countries. Here’s the Press Release and here’s the whole article. Essentially on every measure, apart from peventative screening, on an absolute basis American primary care performed as badly as anywhere else and usually worse than everyone else. And of course it costs a whole lot more, both absolutely and in terms of out of pocket costs.

For example only 37% of Americans had a more than 5-year relationship with their primary care doctor, and 20% had no primary care doctor. Everywhere else more than 50% have a five year-plus relationship.

Here’s a look at timely access to care:

The majority of adults in New Zealand and Australia said that they received appointments the same day the last time they were sick and needed medical attention. In contrast, only one-third or less of Canadian or U.S. adults reported such rapid access. Canadian and U.S. adults also reported long waits, with 20-25 percent waiting at least six days to get an appointment when sick, a waiting time rare in Australia or New Zealand.

Telephone help lines provide a potential source for primary care access after hours. In the United Kingdom, NHS Direct operates a twenty-four-hour telephone nurse advice and information service. When respondents were asked about any use of such assistance in the past two years, help lines were used most frequently in Canada and the United Kingdom, followed by the United States.

And then again costs really impact use of care, especially for the poor:

U.S. adults were the most likely to say that they did not see a doctor when sick, did not get recommended tests or follow-up care, or went without prescription medications because of costs in the past year. New Zealand rates of not seeing a doctor rivaled U.S. rates and were significantly higher than rates in the other three countries. The United Kingdom and Canada stand out for having negligible cost-related access problems. Australia stands midway between the country extremes. Lower-income adults’ access to care was particularly sensitive to costs, with problems again the most acute in the United States.

And American primary care looks pretty bad regarding test results and patient communication — a result I suspect of poor care coordination here:

8-15 percent of patients said that they were given incorrect test results or had experienced delays in being notified about abnormal results. Test error rates were highest in Canada, New Zealand, and the United States…..The study reveals missed opportunities to identify patients’ preferences or concerns, to communicate well, or to engage patients in care decisions. On each of these measures, U.S. adults were significantly less likely to score their doctors highly and the most likely among the five countries to report concerns.

The US did better than other nations on some preventative screening measures like pap smears and checking for high blood pressure, which the study attributes to the pressure brought on providers via the NCQA’s HEDIS measures. But otherwise there’s a really clear question. What are we getting for all the extra money that we’re spending? In fact the authors come straight out with it in the discussion phase when they write:

Across multiple dimensions of care, the United States stands out for its relatively poor performance. With the exception of preventive measures, the U.S. primary care system ranked either last or significantly lower than the leaders on almost all dimensions of patient-centered care: access, coordination, and physician-patient experiences. These findings stand in stark contrast to U.S. spending rates that outstrip those of the rest of the world. The performance in other countries indicates that it is possible to do better. However, moving to a higher-performing health care system is likely to require system redesign and innovative policies.

It’s of course no secret where the extra money goes in the US system, where we lead the league in excessive care of the virtually dead, or as THCB contributor Dave Moskowitz said yesterday “For 70% of healthcare dollars to be spent in the last 12 month’s of a patient’s life means that it is spent on surgery and ICU care that is futile but expensive”. And of course the recent Dartmouth studies showed that the variation in ICU and end of life care and costs both between states and between leading hospitals in different parts of the US varies by a factor of 3! Not to mention Uwe Reinhardt’s point that we pay higher prices for the same amount of medical services delivered here.

In other words, buyers here(and by that I mean the big employers and the Federal government) have got to start changing the way they regulate the system and how they pay for care. It makes no sense for us to continually defend the way we’ve been doing things when the indicators are that everyone else can essentially do better spending less money. And saying it can’t be done, or Bush denying that there is anything wrong, reminds me of American auto execs in the 1970s poo-poohing the threat from Toyata. The alternative, of course is more of the same and the rest of the economy picking up the tab, at considerable social cost.

Meanwhile, the foreigners are trying to get further ahead. Here’s a webcast from Kiasernetwork of the study’s lead author Cathy Schoen ripping the US system, and a somewhat smug–and every right to be–UK health minister explaining how the government there is working to add improvements to the system (and no that doesn’t mean introducing more cost-sharing, which seems to be our only idea here).

Finally, the study also used the three part Harris question that you’ve seen me reference before. The question asks people to put their views on the whole system into three buckets which are in favor of a) minor tinkering, b) fundamental reform, and c) complete rebuilding. Most people end up in the middle bucket, of course, but the number of Americans looking for complete rebuilding is way higher than anyone else’s, and is now back up to 33%. In fact another Blendon study conducted more recently found that it was at 36%. Immediately before the 1992 election that number was at 42%. My forecast is that as cost shifting continues and as the uninsured rate rises, that number will climb here back to near the 40% mark, and a big debate will ensue.

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