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POLICY: Private health in the UK muddies the American waters.

I commented in response to a post in DB ‘s Medical Rants about a piece written by the libertarians at the Adam Smith Institute about private health care in the UK. (Don’t worry–they’re nice gentle British libertarians with no guns!). I too got an email requesting a look, so here goes. Their piece seems to be pretty accurate and I had the following comments that are already over at DB’s. So quoting myself:

    There’s a little cheating going on here. Most of what the author is talking about is what’s called long term care in the US. That is funded by a mix of public (Medicaid) and private (mostly cash) sources here, but provided almost entirely by private sector facilities (including for-profit ones). That’s similar to the UK other than the money comes more from the state. In the UK, private provision of standard health services is used mostly as a safety valve so that middle and upper income people can get around the queue for NHS surgery. That’s been around forever, as allowing specialists to see private patients was part of the deal cut in 1945 by which they agreed to support the introduction of the NHS. NHS surgeons in specialties like orthopedics or gynecology can (quite legally) double or triple their incomes doing private work on the side.

    But in the US context this is all misleading. Not even the most radical single-payer advocate believes that the government should provide all health care, they just think that it should pay for it. What this post ignores is that the every country apart from the US provides some kind of universal system of payment for care, usually delivered in a mixed public/private system. In virtually all of those countries you can "trade-up" with your own money to get better amenities or jump the queue in the public system.

As I wrote directly to Alex Singleton at the Adam Smith Institute, the cheating I’m referring to is at the American end–what they from their UK perspective think of as "private" is private sector provision of services that are often paid for by the government. The government here pays for over 50% of care in its role as insurer to seniors, the poor, the military, veterans and its employees.  So what they think is surprising in the UK is exactly what’s happening here in the US in most of the things that they write about in that post (such as government funding for a significant chunk of private long term care via Medicaid). 

Americans tend to be told by the more mendacious among us that universal health insurance (which of necessity requires some kind of government regulation of the insurance system) equals government-based provision of care.  This argument is made with frequent reference to "useless" American government agencies with low social status (like the California DMV) and rather less mention of the pretty effective ones with higher social status (like the US Marines or the NYFD). In fact the UK is pretty unusual even in Europe in having so much government provision of care facilities and services in the acute setting (I think only the Swedish have more), but government provision of care is by no means unknown in the US–once you add up the VA system, county hospitals, and the DOD there’s a big chunk of government provision going on here too. However, overall who owns care facilities or who provides care is mostly irrelevant.  What is important is the financing situation that determines what care is provided to whom.  In most of the UK’s NHS and in Canada there’s a group/community-based decision made on who gets what care in which area (e.g. we’ve got money to do 50 hip replacements this year and we’ll do the 50 neediest).  In the US that decision is almost totally dependent on the type and level of insurance that is attached to the individual patient, so in my hip example you may get 70 done but 30 of them may be medically "unnecessary" and 15 of the neediest may not get done as the patient couldn’t afford them.  (Ignore for the moment that there are other factors at work too such as race and education impacting access to care in every system). So my overall contention with the Adam Smith Institute’s piece is that they should be focusing on how private insurance markets work in health care rather than looking at who owns what beds.

What’s rather more interesting is that Smith himself back in 1776 thought a great deal about what constituted a competitive free market–although current American conservatives have totally forgotten what little they ever knew about that. The great Northwestern professor Edward FX Hughes gives a talk based on Smith’s principles of perfect competition and how they struggle to work in health care. American health care (not to mention defense, agriculture, energy and several other industries) is in fact predominantly full of the mercantilist behavior and government-protected and subsidized oligopolies that Smith was trying to undermine in his modest treatise called The Wealth of Nations.

PHARMA: Pfizer Begins Limits on Sales to Canada

Pfizer is a client of Harris, who I told you last week confirmed my suspicions that seniors in the US were demonizing the pharma industry. Well having said it would act Pfizer is now ignoring Harris’ warnings and is putting limits on sales to Canada. The NYT says that

    Pfizer told Canadian distributors in a letter that they must seek approval to sell its drugs to new customers. The distributors will also be asked to note the pharmacies whose purchases exceeded certain limits.

In other words they’re going to cut off those 47 pharmacies in Manitoba shipping over the border. But you do of course understand that this is all being done for reasons of safety! If seniors somehow don’t understand that this is all about pharma’s concern with their safety, perhaps Congress might hear about it?

PHARMA: Canadians concerned about tail wagging dog

I had a fascinating conversion with Katherine Binns, my old colleague at Harris Interactive yesterday. I’ll relay much more about it anon, but Harris surveys every player in health care in depth often. One thing that is clear from their current research is that the pharma industry’s reputation has taken a beating from their opposition to imports from Canada. So the current state of the Medicare bill which allows imports only if the FDA approves them–passed by PhRMA influenced house that knows full well that the FDA wont approve them–may not last. In fact huge majorities of seniors are still very angry at the drug companies.  And when seniors get mad, especially when most of them will have to wait 26 months for the Medicare drug program to kick in, Congress tends to listen.

However, the New York Times reported the other day that the online pharmacy business in Canada is under pressure at home as well as from the US.  While Springfield, Mass, and the states of Illinois, Minnesota and others are thinking of formally going with a Canadian import program in defiance of the law, the Canadians have problems.  The first is that big Pharma is restricting the access to product to those online pharmacies.  The second is that the government in Canada, which so far is still elected by Canadians, is concerned that the whole business of re-exporting drugs to the US may end up both causing shortages of pharmacists serving Canadians and in the longer run may make it hard for Canada to keep buying its drugs at the prices it’s been getting.

QUALITY: Why doesn’t evidence-based medicine happen in practice? Now with UPDATE

I’m involved in a whole scad of research at the moment about why American medical care isn’t working as well as it could.  Obviously there are many many factors involved, but one of them is the general problem that, in the spirit of the Defense secretary, the "things we know we know, we don’t know" how to do in practice.  Or as it was said much more clearly to me 7 years ago by John Mattison, IT guru at Kaiser, "we know what to do, but we don’t know how to do it". The subject of course is how to implement best medical practices, otherwise know as evidence-based medicine.

Well I’ve come across two very interesting articles from the UK, where as I pointed out the other day, the government actually cares enough about improving the health care system that it’s spending money to make it better and encouraging things like best practice dissemination. But even there implementing evidence-based medicine is very hard.

Why so?  Well the BMJ had a study in 2001 where they actually got several GPs to open up and talk about cases in which they had knowingly done the "wrong" things; in other words not followed the guidelines, in this case how to deal with patients with severe hypertension. 

Of course, it’s not as simple as you might think.  The GPs tended to believe that they had to deal with the whole patient, while the specialists (consultant in Brit speak) only had to deal with their cardiology issues.  It took a combination of patience and conning to get patients to try something different, and even after using these skills patients frequently didn’t want to know about the "best" treatment:

    Implementation was influenced by the relationships that doctors developed with their patients. "Even if the evidence was extremely good," one general practitioner said, "most of us would only ever interpret it in the context of the patient." Perceived patient characteristics could have a positive or negative effect on implementation. "Of course, if they’re the sort who always want the specialist, then you follow their [the specialist’s] advice." Another explained, " I think you have to judge how people feel about it. I try to get patients to reveal to me where they lie in the game . . . from I want it mate to I don’t want to know nothing about it doc . . . I make tremendous judgments."

However, there is also the all too human side of interpreting evidence in terms of what the individual has experienced. Several comments were of the type that suggested that personal experience outweighed the data:

    Accidents, mishaps, or spectacular clinical successes have a direct influence on subsequent practice. Commenting again on anticoagulation in atrial fibrillation, a participant exclaimed, "I’m back on it." This doctor had previously been uneasy about anticoagulating patients in atrial fibrillation but had recently seen one of his patients who was not given warfarin have a cerebrovascular event……..One doctor summed up this view. thus: "We are influenced at least as much, if not more, by the experiences of individual patients as we are by the evidence."

Meanwhile, despite the fact that health administrators have been pushing the use of guidelines and those GPs thought that specialists were using them, guidelines are not uniformly followed by consultants either. A different study which surveyed several hundred doctors and health officials on their use of guidelines found that:

    There was little variation in the belief that the evidence-based guidance was of "good quality", but respondents from the health authorities (87%) were significantly more likely than either hospital consultants (52%) or GPs (57%) to perceive that any of the specified evidence-based guidance had influenced a change of practice.

My conclusion is that no evidence-based guideline will be perfectly applied. Some don’t take into account the human situation of the patient. Meanwhile physicians will find it very hard to do something that their experience tells them is wrong–no matter what the data says.

But of course in the US this is more or less moot, as we don’t have the data.

UPDATE: Over at DB’s Medical Rants, Robert Centor has an excellent post about this post and links to some of his earlier posts and other articles about this issue. He makes some glaringly obvious but all too often overlooked points about how technology/innovation gets adopted and has a very nice version of the classic "S" curve, as applied to medical adoption.  He’s also been working directly in the field for several years so I defer to him if he says I’ve "partially" nailed it–better than hitting my thumb, I suppose! Robert’s point is that plenty of work is being done in the US on evidence-based medicine, and that it is changing practice patterns. He therefore quibbles with me when I say that we "don’t have the data".  My response is that the "data" we have is the numerous studies that he and others have been involved in about what is the best way to treat condition X, Y or Z. In other words we have the "we know what to do" part–it’s the "how to do it" part that’s missing

I, of course, know that evidence based medicine is studied intensely in the US, as is health technology assessment, health services research and regional health planning.  Unfortunately like those other worthy disciplines (and I have a degree in one of them!) its study stays mostly in academia and makes precious little impact in general patterns of medical practice. The "data" we do not have and the data that I was (obtusely) referring to earlier in this post was the data directly gathered about how physicians actually practice from their records. It’s the lack of accessible electronic records which stops us accurately understanding (and then managing) how practice works in real life/real time.  Several medical directors of leading medical groups have been telling me for years that they don’t have an accurate picture of what their MDs are doing because they can only get statistical glimpses of their practice patterns at the end of each month.  Of course the vast majority of physicians do not practice in groups that have this kind of collegial monitoring and end up having their performance assessed only by adversarial health plans, trial lawyers, the occasional academic study, or most likely not at all. Given that you cannot assess performance when the data is locked up in paper charts, I believe I’m justified in saying that on balance we "don’t have the data". 

Of course if you look at the statistical glimpses that Wennberg and his colleagues at Dartmouth have extracted mostly from Medicare claims data, the wide regional variations in practice show that evidence-based medicine can not logically be being applied nationwide. Otherwise you wouldn’t find three times the amount of surgery going on for the same condition in Denver than you see in Salt Lake City.  Part of the reason behind the UK’s investment in electronic records is the desire to get at the information source that is the everyday recording of clinical activity. If it’s achieved that huge data set will be used to both monitor medical care and assess what is the best evidence-based practice from huge data sets, rather than from chart abstracted studies done later.  And eventually the one (practice) will be monitored against the other (evidence based guidelines)–something not all doctors will welcome.

In the US the lack of electronic records prevents this, and as I’ve explained in this post, we don’t seem to be in too much of a hurry to change that situation. And even if we did, then all the problems of actually changing practice patterns that Robert and I have been discussing still have to be overcome.

INDUSTRY: First Healthsouth sentence is a juicy one

OK. I give in and I’m talking about Healthsouth again. An assistant controller, Emery Harris, gets 5 months at Club Fed and has to pay back $100K in the first sentence of the HealthSouth scandal.  Extrapolating up, my guess is that Scrushy will get 12 years.  Meanwhile Scrushy has yet more of his own troubles even before he gets to court, where he plans to challenge the constitutionality of Sarbanes-Oxley.

But the best bit is Harris’ excuse for maintaining his silence.  He noticed that "HealthSouth was buying guns, grenades and spy equipment" and this made him too afraid to go to the authorities. This reminds me of the Monty Python sketch about the Piranha brothers gangsters.  One extortion victim (Michael Palin) was asked why after being threatened with a nuclear war-head why he didn’t go to the police.  He said "Well I noticed that the lad with the thermo-nuclear device was in fact the Chief Constable for the area!"

BLOGS: Health care blogs in the press

Several health care bloggers including me were recently interviewed by the San Antonio News-Express about health care blogging. They were a little upset not to find a Matt Drudge among us, but not as upset as I was not to be included in the story!  How am I ever going to be as famous as Don Johnson at the Businessword, Robert Centor at DB’s Medical Rants or the amazing Sydney Smith at Medpundit?  I guess I never will (sigh); but at least I know Sydney’s real name now!

TECHNOLOGY: HIMSS’ view of what’s hidden in the Medicare bill & the UK really starts up

There’s quite a bit of tech push buried in the Medicare bill, but it’s mostly demonstration projects.  Go take a look at the summary by HIMSS and wonder what could be done if just some of the money used to bribe the AMA, the AARP, employers, the health plans and the PBMs into supporting the bill had been directed to info tech where it could do some good.

Then take a look at what just happened in the UK where contracts for the National Health Information infrastructure were awarded nationally and in some regions yesterday.  Consider the numbers, BT gets $2.8 billion to build a record infrastructure and to wire London, Accenture gets $1.9 billion to do the north-east, Cerner already got $64 million to build a booking system, and there are another 3 more regional contracts worth another $5 billion to be awarded. In American terms you need to multiply those awards by 6 for population and at least 1.5 for relative GDP (or 3 times for relative health spending!), so that’s the equivalent of the US awarding $100 billion of IT contracts (over 10 years).  Currently the US as a whole spends roughly $20 billion a year on health care IT.  So the equivalent program here would be a 50% annual increase in spending.

Then wonder whether the free market or socialized medicine is going to be making full use of information technology in health care first.

PHARMA: $1.7bn R&D for a new drug? Surely you jest, Bainies?

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In an study in the news yesterday Bain, the big management consulting firm, said that the cost of bringing a drug to market was $1.7bn.  I’ve heard the $7-800m number many times before and scoffed but this one made me do some basic math.  The CMS (a newly pharma-friendly organization) put out a report this year that suggested that R&D for pharma would be $30 billion (see chart on page 13), although the same report suggested that R&D spending was 13% of revenues of branded drugs revenues of $130bn. So that actually indicates that the number was $17bn.  But let’s go with the $30 billion number and assume that it’s constant over a ten year period (which it hasn’t been).  When I last looked at this about 2 years ago there were about 500 drugs with over $10m sales in the US, and who knows how many more worldwide. In the US according to this list of the top 200 prescribed drugs some 80 odd (or 40%) were generic. So assuming that to be true for the top 500 drugs, means that there are 300 branded drugs.  Assume further that in a 10 year period there’s turnover of 80% of the branded drugs (and it’s probably faster than that), the back of the envelope calculation is that some 500 drugs of any reasonable size come onto the market every decade. Yet at its most generous assessment, R&D spending is only $300bn in decade–leading me to guesstimate that the cost of R&D per product is, at the outside, in the $5-600m range, not more than 3 times that.

Now Bain is playing both sides of this.  It’s acting on behalf of its pharma clients to keep their line about the costs of R&D in the press, but it’s also interested in frightening them into serious restructuring to combat their lack of revenue from new blockbusters and to get them to spend consulting dollars on the development of new business models.  But if you thought these numbers had me perplexed, my anonymous pharma veteran who is an occasional contributer to THCB is foaming at the mouth about it:

    What the hell; let’s do a study to show that it actually costs $2 Billion to bring each new drug to market.  Stick in all fixed costs  (maintenance, landscaping, inspections, property taxes, perquisites for senior management, depreciation, anything else we can think of.)  Yes, let’s show that Big Pharma is in a real pickle and they should get a federal bailout.  Highest return on equity of any industry? On sales?  Guys like Ray Gilmartin sitting around with $90 Million in unexercised options and Hank McKinnell getting $40 Million a year?  Nah, none of that matters.  Blame the foreigners (Old Europe, the Canucks, everyone else) for not allowing unconscionable profits the way we do.  Blame the retirees for not adequately planning for themselves, blame baby boomers for being too short sighted.  Hell, if none of that sticks, then just grease the politicians and make sure we get a bunch in there who can do business on a bought-and-paid-for basis.  It’s just like the advocates and opinion leaders we’re always buying off, only this will be easier because there’s no goddamned competitor with enough hash to pay them to go the other way.

And then he calms down, somewhat

    Oops, sorry, that was my Texas alter ego that got out of the cage.  I just stuffed him back in there, together with some crony capitalists, militarists, jingoists and religious fundamentalists.

    But his hyperbole does have a point.  I recently completed a study for a Big Pharma client who gave me the actual dollar costs to develop two, recently launched products.  Take the smaller of the two spurious figures (i.e., $800 Million), divide it by 20 and you’ll be in touch with reality.  Looking at the range of drug development costs, these products were on the low side because they’re in a category where Phase III trials enroll between several hundred and 3,000 patients.  If you go to something such as hypertension where trials often enroll upwards of 15,000 patients, costs will be higher but still within the $200 million range and not the billion dollar level.  Only by throwing in the kitchen sink and dividing all R&D costs by the number of new products do the whores at Tufts get to $800 billion.  The other whores at Bain throw in the toilet and shower as well by including costs for marketing, sales, bribery and what not.

Now the pharma veteran’s alter ego has flown off the handle somewhat, and he may not be including the costs of failed drugs in his calculations (although there aren’t that many highly expensive failures). But let’s remember what this is all about.  It’s about convincing the WTO and the US trade negotiators that price setting by foreign governments is a restraint on trade, and that far from Canadian prices coming here, ours should go to Canada, and Europe and Japan, etc!

This is not a joke.  Said the man from Merck (Ian Spatz, VP for public policy), "This is all going on in this larger context of growing unrest in the United States that other countries are not paying their share of the cost of pharmaceutical research."  And PhRMA is starting with Australia. The poor Aussies, who sent soldiers to Iraq over the objections of the vast majority of their citizens in order to get a free trade deal that would enable their agricultural goods to get onto US dinner tables, did not see this one coming! But if big PhRMA manages to convince us all that those costs are real, why wouldn’t they at least try to take them to the rest of the world? You may have thought that "growing unrest" over drug pricing here was all about American seniors taking the bus to Canada to buy drugs cheap. PhRMA thinks instead that we’re all upset about subsidizing the Canadians, and if we’re not we should be! After all the best defense is a good, pre-emptive, offense!

TECHNOLOGY: Mass. docs say one thing do another

A recent Mass medical society survey shows that doctors view computers as a necessity for their office work but are not using them much in their clinical care. Slightly more concerningly, despite the fact that overwhelming percentages think that they should be using computers for electronic prescribing (85%), recording of patient summaries (89%) and the collection of treatment records (83%) less than half have plans to do so. You’ll have noted that despite ePrescibing being compulsory in the House version of the recent Medicare bill, that unfunded mandate didn’t survive the AMA’s intervention in the conference committee.  So the question remains, who is going to pay for this computerization? Hint: in every other country where physicians actually use computing in their practice (UK, Sweden, New Zealand, even Canada), it’s been the government that coughed up.