So after all the fuss about Canada possibly changing political horses, the election result shows that the Liberal Party got much more of the vote (37%) than the conservatives (29%). Due to the way Canada’s parliamentary system works (and because of the gains by the Quebec nationalists), PM Martin will have to form a coalition government. But the impact on the health care system will likely be neglible, as both sides more or less want to keep it as it is and both have promised to spend more money on it.
Above the Fold
PHARMA: Hands – cookie jar – once more a connection
If you missed this over the weekend, the New York Times reports on yet another example of very dubious marketing practices by certain pharma manufacturers. This time the charges are that Schering (more or less) paid doctors to prescribe drugs. Anyone watching the health care system for any length of time is used to this. It’s rare that it’s this overt, although it was when Caremark was paying for infusion referrals back in the early 1990s, but sweetening the route to ensuring the right drug ends up written on the prescription pad has always been a big part of pharma’s marketing approach. While there are some limits that since the late 1990s are supposed to be placed on what the local marketing teams can do, the pressure remains on to make the physicians happy, whether it be via Dine and Dashes, free goodies, consulting agreements, or simply having a rep show up that the doctor will enjoy meeting (and I’m not spelling that out for you!).
The NYT suggests that this will only get worse as more and more of the pharma dollar gets spent by the government, and hence more and more of this bad behavior will be punished by Federal fines. As it’s been an accepted cost of doing business by the pharmas for a long time, and as the government really hasn’t got the option of giving them the "death penalty" (i.e. banning them from the Federal marketplace), expect this cycle–bad behavior, then punishment, then official reform, then more local level bad behavior, more punishment, more reform, new bad behaviors, etc–to continue.
By the way, if (as reported in the article) anyone out there wants to send me a consulting agreement accompanied by a large check with a blank schedule of works to be performed at some unspecified time in the future, they will find that I have few fewer ethical qualms in accepting it than the anonymous physician interviewed by the NY Times!
INDUSTRY: JSK on transparency in health care
Just a quick one for today. Go read Jane Sarasohn Kahn’s article on "transparency" in her iHealthbeat column. Then consider if the recent Supreme Court decision not allowing health plans to be sued by their members increases or decreases their incentives to be "transparent".
PHARMA: Big pharma’s reputation continues to sink, and managed care stays low
Thank God for the tobacco and oil companies for without them the health care industry’s reputation would be bottom of the heap. Harris Interactive is out with its latest scores on reputations and the pharma industry continues its fall from having 79% of the public thinking they’re doing a good job for consumers to 44%. Managed care companies fell to 30% from 51% in 1997. Only the oil, tobacco and health insurers rate worse than pharma.
So the tale of managed care’s woes is well understood–once they were well known they were despised, and probably will be better off trying to get themselves known as health insurers (which is sort of what they are anyway). The pharma case is a little more curious. Americans love medical technology and the pharma industry has delivered great new technology in spades. And although the pricing of drugs is well known to be out of control, not that many people have to bear those high prices directly.
My suspicion is that this means that the Democratic rhetoric about the Medicare bill and the stonewalling on the reimportation issue are really getting through to the public. It’s been in the past 18 months that the pharma industry’s reputation has really gone into freefall.
Ernst and Young (hattip to Don at BusinessWord) seem to think that the pharma companies really need to fight their corner on reimportation and pricing. They seem to be doing so via the Administration in their negotiations with the Australians at least. (Thanks to the Industry Veteran for that link). I disagree. Imports are and will remain a small part of the market. The pharma industry can afford a drop in revenues and pricing and keep pretty decent margins(hint to CFOs: there’s a ton of fat in sales and marketing to be taken out), and this short-term thinking increases the likelihood of price controls and greater government intervention in the future.
Sidebar: The Aussies went to Iraq despite the opposition of 90% of their population because they were promised a free-trade deal to get their agricultural products into the US. They continue to be horrified that free-trade according to the US means that the Australian government has to give up its role as monopsony for drugs in that country! Meanwhile, what did Bushco offer the UK government go to war in Iraq with it? Guesses on a postcard to me please, as I have no clue and my British friends are now being fingerprinted at US immigration.
PBMs: Medco layoffs
A while back Medco lost the FEBHP contract to Caremark. Now TheStreet.com reports that Medco is laying off some 7% of its workforce. And its stock has started to rally somewhat on the news.
THCB readers will know that I’ve never really understood what value PBMs add in the chain. It appears that with the announcement that 50 big employers are starting their own buying group, others share that view.
HEALTH PLANS: Jones the Policy Wonk on the Supremes decision in favor of HMOs
On Monday the Supreme Court handed down a decision that may at first glance appear more relevant to the bad old days of managed care. In a decision authored by Clarence Thomas, who’s never seen an old irrelevant law he didn’t like, the Supreme Court sided with health plans and limited the ability of two Texans to sue their health plans in cases when the medical decision to change a course of care was, at the very least, highly suggested by the plans’ representatives rather than the patients’ physicians. Now it is ridiculous that a 1974 law passed about pension benefits with no thought given to health care at all has become a huge part of the current debate on health care. However, given that most plans have backed off from the kind of intensive care management that this decision was about, you might think that bar the political shouting this decision is mostly irrelevant for the future of how health plans behave. Jones the Policy Wonk would disagree, suggesting that we’re going to see a much meaner version of health insurance in the future. (I have shades of John Grisham’s The Rainmaker in my head). The Wonk writes:
- If I remember my Health Law class correctly, this is a ruling with enormous policy implications–it means that insurance companies will adopt a policy of: “Deny first, ask questions later.”
This ruling says that whenever an HMO denies care, the denial falls under federal jurisdiction of the ERISA statute and not state jurisdiction, regardless of whatever laws the state has passed regulating HMOs. This is very boring. But under ERISA, judges can’t award damages; the courts can only award litigants the value of the benefit denied. This is a huge deal.
For the consumer, it means an insurer can deny your medical treatment without any fear of the consequences. For example, my family’s got a history of breast cancer and my doc says I need a mammogram. My insurer refuses to cover mammograms because they’ve got a strict policy of not covering mammograms for women under 50. I don’t get the mammogram, I get breast cancer, it’s discovered very late and they have to lop off my breasts. And I’m the world’s pre-eminent lingerie model, and I lose my job and I’m impoverished and eating dirt in the street.
My company’s liability? Under state law, they have to worry about the effects of their actions–if I can prove their breach of contract in not providing me the mammogram, they have to compensate me for the loss of my career, the pain and suffering I endured from chemotherapy and surgery, the family weddings and holidays I missed, the medical costs they didn’t cover, the dirt I had to eat, etc. But under ERISA, if they’re found guilty of breach of contract, they are liable only for the $100 value of the mammogram that they denied me.
Clearly, that’s a ludicrous example. I mean, I’m a lingerie model, I’d pay for the mammogram, right? But what if I were a janitor denied chemotherapy? Or a secretary with a rare, highly curable but very expensive disease. If you’re an insurer, wouldn’t it make sense to just let me die and take your chances with a jury? After all, worst case scenario is that you would pay out as a penalty what you would have spent anyway to treat me. And as an added bonus, I’m dead, so you don’t have to worry about paying for any other diseases I might get or any therapy I might need after I survive this treatment.
Today’s ruling is a little more complex than the papers are indicating. For example, it doesn’t apply to people buying insurance on their own, so it doesn’t apply to everyone (it just applies to most people, who get their insurance from large self-insured companies). But clearly, today’s ruling creates yet another perverse incentive in our health care system. Insurance companies are now actively incentivized to deny medical treatment because there’s no downside to denying care. In addition, they’ve got an incentive to lie to their customers, promising benefits to get people to enroll that they have no intention of ever delivering. Because there’s no penalty for not keeping their promises.
You can’t really blame the Supremes for this–it’s a proper interpretation of the law as written. And Congress should definitely amend ERISA. But this is what you get when you make medical care an employment benefit. It’s patently ludicrous to pretend that medical care is a pure economic good, like cash in a pension plan, and it says volumes about our understanding of health care that we could ever write a law saying so.
POLICY: Perpetual war hits military families hard
It’s well worth looking at this commentary from Kaiser Family Foundation’s Drew Altman, and preeminent health care policy expert Bob Blendon at Harvard. They recently surveyed military families about the costs of the extended tours of duty being forced upon our troops in Iraq. While most readers of THCB will have their minds made up one way or another about the war long before now, any casual walker down a mainstreet in any large American city can tell that we haven’t done a good job looking after our veterans. Altman and Blendon suggest that this lack of attention is also visited on the families of soldiers on deployment, in both health, social and financial terms.
The emotional toll that soldiers and their families pay when they are overseas for extended periods can also be high. Fifty-six percent of spouses of extended-duty soldiers are living day-to-day with the fear that their husband or wife will be injured or killed overseas. When asked about the families in their spouse’s unit, half report that marital problems are very common; 40 percent cite depression as a very common problem; 27 percent report alcohol or drug abuse problems in the unit; and 16 percent say domestic violence is very common.
The financial impact is also severe.
The financial stress of extended deployment can be severe for military families. Fully three in 10 report that in the past year, they and their family have had trouble paying bills. For more than one in five, their current financial situation is such that they have to get food stamps or Women, Infants, and Children program aid from the government. (Even 6 percent of families of officers say they receive food stamps or WIC.) Clearly more financial support is needed for the families of soldiers risking their lives for their country for an extended period of time.
Interesting that two of America’s larger employers of those who have lower educational status–the Army and Walmart–both have plenty of employees’ dependents on welfare. But given the poor follow-up social and health care given to Vietnam Veterans and the issues with Gulf War syndrome, the concept of "supporting our troops" needs to become more than just a jingoistic slogan. Or the result will be more pressure on the healthcare system in years to come.
TECHNOLOGY: ePrescribing facing tough going
I’m on the road this week so things might be a little backed up here at THCB. So please excuse the unusual publishing schedule, but as always you get what you pay for!
Today I wanted to point you at Manhattan Research’s Mark Bard’s article in HealthCare Informatics on the Economics of ePrescribing. Manhattan’s numbers from their physician tracking study are actually showing some stagnation in the numbers using ePrescribing tools. This jibes with a rumor I heard about the Mass Blue Cross and Tufts rollout of ePrescribing using Zix Corp’s Pocketscript. Apparently getting any physician who wasn’t already one of the hundred or so in the pilot program to use it has proved very hard, and instead of the 3,000 targeted for use late last year fewer than 200 are using it so far. However, Bard remains confident:
- It is clear that electronic prescribing will happen. The only question is how long it will take to reach critical mass, the point at which the next wave of users takes a fraction of the time it took to get the first wave.
But he also points out how the economic incentives to use ePrescribing aren’t lining up::
- One area that remains a challenge when it comes to the future of e-prescribing is aligning economic interests across the healthcare delivery system. For example, there remains a real need to dissect the entire value chain of traditional prescribing and truly understand where digitizing the process saves money, saves time, or improves quality of care. Understanding who benefits, when they benefit, and to what extent they benefit is critical to understanding who should invest and to what level. For example, if the end-user physician receives little to no economic value from digitizing the prescription order entry, why should she pay for this benefit?
In other words, if the savings is at the pharmacy and the drug company benefits from more utilization, why should the providers pay for the technology? The answer is that so far they haven’t.
HEALTH PLANS: More tittle-tattle about WellPoint
Just to add onto all the fuss about Wellpoint’s merger with Anthem, California’s biggest newspaper The LA Times has a none too glowing analysis of the motives behind the merger. The point it hints at but doesn’t really follow through explaining is that both Wellpoint and Anthem have both kept their expansions to buying up other for-profit Blue Cross plans. As there’s usually only one Blues plan per state the newly merged company will be bigger nationally but not regionally. The region (or enlarged metro area) is of course where the power plays between plans and providers work themselves out. So in that sense the LA Times article is right, in that there’s no compelling economic rationale for the merger, other than to create a national company that can have the scale of a United or an Aetna. In some ways we are moving back to the big 5 insurers that were the "national" players in the 1980s, only that instead of Aetna, Travelers, Met, Cigna and the one I forgot (oh, yeah; Prudential), it’s United, Humana, Anthem/Wellpoint, and Aetna (albeit an Aetna that’s gone through many changes).
However, because health care contracts are regional, a national presence still isn’t that important in health care. So the lack of rationale for the merger also means there’s no national rationale for the FTC or anyone else to stop it. My sense is that once some of the more egregious pay-outs are scaled back, it will still go ahead. Wall Street seems to agree in that Wellpoint’s stock is still nearly 30% higher than it was when the merger was announced back in October last year .
PHARMA: Statin redux as FDA issues new advisory for Crestor
(Hat-tip to Sydney at Medpundit for this one). The FDA late last week issued a new advisory for Crestor, Astra-Zeneca’s blockbuster statin. THCB readers not suffering from medium term memory loss might remember a series of articles from various interested contributors late last year that were started mostly by the British medical journal The Lancet. That journal was highly critical of Astra-Zeneca’s stance in getting the drug through the FDA. I’m not enough of a pharmacy expert to interpret the FDA’s latest advisory, but the key section says:
FDA has received reports of rhabdomyolysis in association with Crestor, as it has with other drugs in the statin class. In ongoing fashion, we are evaluating these reports of adverse muscle effects with regard to clinical severity and apparent relationship to the drug. FDA is comparing the frequency of reporting of muscle injury with Crestor to that with other statins, given differences in prescribing rates for the different drugs. Pending the evaluation of the recent Crestor safety experience, FDA is not proposing to change the US labeling for Crestor, but does want to re-emphasize to physicians to the importance of carefully following the recommendations in the current product label. Analysis of accumulating safety data in the U.S. and worldwide will be considered in any future labeling changes for Crestor, and to make recommendations on risk management plans for Crestor.
Crestor’s removal from the market is still an extremely unlikely wildcard, and those who suggested shorting AZ’s stock last year have seen it stay in a tight $45-50 range since the Crestor launch. I’ll try to raise more information about the statin market, but given that in 2003 Lipitor and Zocor had $16 billion in sales between them, you understand that developments like this in the statin market are very serious business. But like everything else these days you can bet on it in an online idea futures market.
Meanwhile, if you were concerned that high cholesterol may not be a sufficiently nebulous condition to demand all this attention, don’t worry. Metabolic syndrome has been pushed by the pharma press for a year or so now and it makes its first appearance (at least first one that I’ve noticed) in a mainstream business publication (Forbes)today. The article is appropriately enough called Inventing a New Heart Disease.
