An analysis by The New York Times found that in the first full year of the Affordable Health Care Act there were historic increases in coverage for low-wage workers and those in other demographics previously less represented in the health care system. The article from The New York Times illustrates the findings with a series of charts and graphics showing the scope of changes. As noted, the expanded coverage has had a significant impact for many Americans. Read more…
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Cost Containment
Hearing Aid Prices Under Pressure From Consumer Electronics
Disruption is a common theme in business, including in health care. Disruptions displace incumbents and there are often losers. In this article, the focus is on the hearing aid industry, one where small electronic devices are typically priced in the thousands of dollars, despite their technology being less sophisticated and complex than the typical smart phone that does so much more, for so much less. Often such disparate prices are the result of a silo created by regulation – such that devices that amplify sound in a manner like hearing aids are euphemistically referenced as sound amplifiers for activities like bird watching. In the end, common sense and the desire of the market prevails, whether it is about online hearing aids or eyeglasses at a fraction of the price via current distribution channels, Uber vs. taxis, retail health clinics vs. hospital ERs, or online stores displacing main street.
Read the full New York Times article here.
The Upward Trend in Health Care Advertising
by Jen Jenkins
Around a decade ago health care advertising was not something likely to turn up on prime-time television or in elite magazines. Generally, hospitals and doctors considered the advertising of health care tacky and questionable from an ethical standpoint. Nowadays, however, this type of advertising is targeting patients with either good insurance or those who are able to afford the priciest drugs out-of-pocket. Patients are no longer seen as simply patients to hospitals and clinics, but rather as a customer base to which it is necessary to market what they are selling: drugs.
In 2014, the health care industry spent $14 billion on advertising, jumping 20 percent since 2011. In this same time frame, although magazine advertising saw a decline along with the publishing industry, television advertising rose 55 percent for hospitals and 30 percent for prescription drugs. Drug companies once focused on promoting products that could be prescribed to millions of people, such as pain killers. Now, the focus is on niche medicines that are much more expensive and prescribed to far fewer people.
According to Holly Campbell, a spokeswoman for the pharmaceutical manufacturers trade association, PhRMA, drug makers are “designing their advertising to provide scientifically accurate information to help patients better understand their health care and treatment options” and ultimately to help patients make better decisions. However, health economists and doctors alike are raising concerns about the advertising trend which they say increases prices and influences patients to seek out treatment that may be inappropriate or too expensive. Last year, the American Medical Association recommended a ban on this type of advertising due to concern over “the negative impact of commercially driven promotions.” The United States and New Zealand are the only countries that even allow drugs to be advertised to consumers in this way.
Research is showing that rather than helping consumers make better or more informed choices, advertising instead tends to drive patients to patented drugs and more expensive treatments. This New York Times article provides more information on this research and extensively compares different drugs that are heavily promoted along with their pricing. Federal regulations do not require advertisements to say how much medicines cost, how well they work or if there is a cheaper option available. Overall, that means that patients are not getting nearly as much beneficial information from these advertisements as they think. In fact, doctors say that most patients come in asking for medicines and treatments that are far more expensive than alternatives or that are not necessary in the first place.
Share with us what you think of this trend in advertising, we love to hear from you.
Deductibles: A Significant Component of Health Insurance
Until recently, health insurance deductibles have proven to be quite a catch 22. On one hand, Americans would rather not have to pay a deductible or co-payment before receiving healthcare; however, it’s simultaneously impossible to ignore that deductibles have helped to make health insurance more affordable and, for some Americans, possible to have at all. Bernie Sanders recently released his proposed health care plan featuring the promise that no American would have to pay a deductible again. Although light on the details, this part of the plan would mean removing something that has been working its way into the health care market since the early 1990s. Deductibles can be significant for some when an average out-of-pocket cost of around $1000 required before coverage kicks in. This is something that has been tolerated due to the standing argument that it makes health care more affordable overall. But is this actually the case? The truth behind the purpose of deductibles is something we do not often get to see up front. The fact that most Americans can’t afford steep deductibles has been one reason to reassess the system but the main question now appears to be: Are deductibles actually helping with health care spending, or deterring it?
In this article featured in the New York Times, Michael Chernew, a professor of health policy at Harvard, stated “If you make something free, people will spend a lot on it.” Recent research is now supporting this idea as studies have shown that more required out-of-pocket costs may be responsible for a downturn in health care spending altogether. Researchers are now beginning to agree that high deductible plans are not what they have been thought to be in the past. Multiple randomized experiments are showing that over time, people who pay more health care bills out of their own paychecks choose to use less health care, while people who have everything covered by insurance tend to utilize healthcare more because they have insurance available. Another important factor is that in comparing these two groups of people, those who were choosing to receive less health care were no less healthy than those taking advantage of using more. What could this mean about the future of health care deductibles? No one is sure at this point. According to some health economists, including Michael Chernew, it may require “smarter” albeit more complicated forms of health insurance. These plans would utilize economic incentives to reduce unnecessary health care spending without deterring necessary care for patients.
We are interested to hear what you think about the possible new direction of health care and the role that deductibles and co-pays have. If you have a moment to read the more in depth New York Times article on this subject please leave us your thoughts in the comment section.
The Shkreli Problem
by Jen Jenkins
Martin Shkreli dominated headlines last year as the villain of the pharmaceutical industry. We blogged on MCNTalk about the drug Daraprim, which his company, Turing Pharmaceuticals, purchased, subsequently raising the price per pill from $13.50 to $750. The Internet immediately labeled him the “Most Hated Man in America,” but despite all the criticism, Mr. Shkreli forged ahead and even defended his actions by saying, “I could have raised it higher and made more profits for our shareholders. Which is my primary duty. Again, no one wants to say it. No one’s proud of it. But this is a capitalist society, capitalist system and capitalist rules. My investors expect me to maximize profits.” Comments such as these are a very small glimpse into the reason why big pharma’s problem with price hikes can be called “the Shkreli problem.”
It has become commonplace for drug companies to raise the prices of old drugs by any percentage that they please. Although the percentage of these price bumps may not be as exaggerated as what Shkreli did with Daraprim, it still raises the question: why should they be able to raise prices of old drugs with no justification? This Forbes article shares some of Martin Shkreli’s background and discusses how he went from simply talking about inventing new drugs to dramatically raising the prices of existing ones, as well as some of his other disreputable deeds in between. One of the biggest differences between Shkreli’s acts and those of other pharmaceutical companies is the publicity. Everyone else avoids the press when exercising price hikes while Shkreli unabashedly promotes and defends what he is doing. Respectable drug companies have, for the most part, distanced themselves from this ludicrous display of behavior. Although they essentially all follow the same practices, they want it to be clear that their reasoning surely does not align with that of Shkreli.
The fact is, 80% of drugs in the United States are generic, thus our current system highly encourages drug companies to either focus on making money off of drugs that serve a smaller population of people or raise the prices on existing drugs. Another problematic side effect of this is that new drugs, research, and innovation are falling by the wayside. Martin Shkreli’s behavior is an exaggerated, albeit disturbing outlook on big pharma and decisions that are being made largely out of the public eye.
Tying Prices to Performance
by Jen Jenkins
For years, the government and private insurers have been attempting to make an important change in the reimbursement model under which doctors and hospitals operate. The fee-for-service system that is currently in place pays doctors and hospitals based on the sheer volume of tests that they perform and treatments that they ultimately prescribe.
It is quite baffling that a system like this was ever put into place because it by no means incorporates any incentive for ensuring the quality of patient treatment or overall outcomes. In fact, this system has led to a disconcerting trend of unnecessary testing and expendable costs. A change in the current model would mean rewards based on quality and better outcomes, not volume.
A similar shift in the reimbursement model may soon be evident in the drug and device manufacturing industry. Currently, the price of a drug or medical device is unrelated to its actual performance or quality of outcome for a particular patient. This has long been an unraveling problem (similar to that of doctor performance standards) wherein expensive drugs are not performing in the real world nearly as well as expected.
This issue also includes medical devices not working as anticipated; for example, a cardiac device that requires surgery to insert. Today you pay the price no matter what, but imagine being refunded completely if a drug or device did not work as your doctor promised. It’s slightly unfathomable based on the model we currently adhere to, but highly probable for the future of drug and medical device manufacturers.
In theory, this novel change sounds not only appealing but necessary. In reality, however, it becomes a bit complicated. What metric should be selected to measure performance and how will that metric be universally agreed upon? This is a question posed by a senior adviser from Analysis Group, a company that does consulting work for drug and device makers. Like with many other innovative implementations and changes in today’s society, new technology may need to play a role in this shift. However, drug companies want to be sure that patients are taking medications correctly and consistently while also adhering to other factors, such as specific diet or lifestyle changes, that are put into place by doctors. These components all play a role in the effectiveness of a drug. In response to this problem, technology company Qualcomm Life is currently working on a combination of software and sensors to monitor patients, a necessary part of making this change possible.
All obstacles currently in the way of making these changes a reality are seemingly practical ones and thus solvable. It is very likely that sooner than later we will see an inevitable change in which drug and device makers are sharing the risk where the outcome of the patient’s health is concerned.
Some examples of discussions and possible reasons for following the new model are highlighted in this Bloomberg Businessweek article.
Who Is Paying the Price for Drug Coupons?
by Angela Sams
Many of us have probably at some time or another been faced with an expensive prescription that we wish we didn’t have to pay for, instead wishing for some kind of coupon or discount to help foot the bill. According to a recent article in Bloomberg Business, some pharmaceutical companies are providing just that, spending approximately $7 billion to generate discounts and coupons for patients’ drug co-payments.
Why are some prescriptions so wildly expensive? The short answer is that insurance companies want the drugs to be so unaffordable that patients won’t use them. Much to the chagrin of insurers, pharmaceutical companies have responded by paying for patients’ prescription co-pays, handing the rest of the balance right back to insurers. This is not allowed everywhere, however. Because the cost of a patient’s co-pay directly influences whether or not they will pay for their prescription, co-pay coupons are banned in the Medicare program, cited as an illegal inducement.
Drug companies see the coupons—distributed online, in magazines, and in doctor’s offices—as helpful to consumers. Holly Campbell of the trade group Pharmaceutical Research and Manufacturers of America states that “co-pay offset programs can play an important role in maintaining access to needed medicines, especially for patients taking specialty medicines or with chronic conditions.” But providing these coupons helps the drug companies as well. Indeed, they “can earn a 4-to-1 to 6-to-1 return on investment on co-pay coupon programs.”
Insurance companies are resisting the coupons by nixing drugs from their plans, and creating a rewards program that would give cash to patients who don’t use the coupons. United Healthcare has been leading the way in the fight against the co-pay coupons, in part due to the fact that the discounts can keep patients from seeking drug alternatives that are equivalent to the more expensive option. A spokeswoman for United argues that when consumers choose a pricier drug because they have a coupon, this can have a huge impact on healthcare costs overall. The battle between insurers and drug-makers leaves consumers caught somewhere in the middle. And it leaves one to wonder, could the problem potentially be solved if drug prices were simply lowered?
Could you be Paying for Someone Else’s Prescription?
by Angela Sams
You get what you pay for, right? Not necessarily. Whether Americans realize it or not, they may in fact be paying $124 or more for the expensive prescriptions of a neighbor, a family member, or a complete stranger!
A recent op-ed article in the New York Times discusses a drug that “is a new class of cholesterol-lowering agents called PCSK9 inhibitors” as an example of a medicine that may result in higher insurance premiums for all of us. This new inhibitor, just approved by the FDA in July, is thought to reduce bad cholesterol (LDL) by up to 60 percent more than a placebo. And, though there is no solid proof that the drug (and others like it) can prevent heart attacks, strokes, and deaths caused by heart disease, researchers are still optimistic.
So what’s the problem with a drug that could potentially improve quality and length of life? The hefty price tag. The companies who create these drugs have disclosed that a prescription will cost more than $14,000 per year, per patient. Multiply this by the number of years that a patient must take that drug, and the number quickly becomes unfathomable. Those costs will then fall to insurers, and eventually trickle down to the rest of us. Policymakers and academics have a couple of proposals that could help save patients money, “such as separating out deductible limits for drugs from deductibles from other health benefits and limiting co-pays for these drugs to $100 to $250.” However, this won’t get rid of the fact that the drugs cost a certain price. That price must still be paid, even if it falls to the insurance company.
Here is where the idea of value comes into play. Are we really getting what we pay for? And how is one to determine the value of a particular medicine? Other items in our economy (think cars, phones, or TVs) are purchased by consumers, depending on whether or not that consumer thinks it’s a good “value.” In the case of medicine, value could potentially be determined by measuring the improved quality of life it gives to patients. Since we are all affected by the rising costs of these prescriptions, it is up to us as a society to determine the value of these medications, and how much they are worth, monetarily.
Dangerous Risks of Using Opioids to Treat Pain
by Angela Sams
Have you ever been prescribed a painkiller to help with surgery recovery or maybe for back pain that just won’t go away? Even if not, it is likely that you know someone who has been on a painkiller medication at some time or another. That likelihood rose steadily between 1999 and 2010, as doctors began turning to a “quick fix” that will treat their patients in an aggressive manner. But, as patients cooperatively swallow their prescribed pills, it is important to consider the downsides of opioids on an individual and societal level.
A recent opinion article in the New York Times indicates that while there has been a “steady increase in the mortality rate of middle-aged white Americans since 1999,” this is not the case in other age and ethnic groups, or even with people in the same age group who live in other countries. Consider this disturbing statistic: “In 2013 alone, opioids were involved in 37 percent of all fatal drug overdoses.” It is clear that opioid overdose is quickly becoming an epidemic, and a major shift in attitude is a key to the problem.
At one time, opioids were used mainly for pain caused by terminal illnesses or as a short-term fix for pain after surgery. However, during the 1990s, drug companies began marketing to doctors, encouraging them to “be proactive with pain and treat it aggressively.” Afraid of being seen as uncaring or reprimanded for not treating a patient’s pain to the best of their abilities, doctors fell for the marketing scheme and began prescribing powerful opioids such as OxyContin.
Though opioids may relieve pain and help a patient recover more comfortably, evidence suggests that they should only be used for short-term treatment, not long-term treatment of nonmalignant pain. There are also many downsides to taking such a medication. This type of painkiller is extremely addictive, may affect mental health, lead to unemployment, and cause poor health in general, to name a few risks. Ironically, using these drugs can also make a patient more sensitive to pain.
So what is the solution to this problem? Should people suffer in pain, rather than take the risks associated with opioid drugs? Actually, the answer may be as simple as taking an over-the-counter medication. In one study, researchers found that when Motrin and Tylenol were combined, they were actually more effective than opioids, not to mention safer. While opioids are still very readily available to patients who are in pain, small steps towards a solution have been taken. For example, the Food and Drug Administration issued a Risk Evaluation and Mitigation Strategy, ensuring that opioids now contain warning labels. The makers of these drugs must also give training and education that will help doctors prescribe them safely. Certainly, patient awareness is helpful, but only time will tell if physicians can turn this shift in attitude back around, and work towards other, safer solutions for pain management.
Transforming Big Medicine
by Jen Jenkins
When this fascinating article by surgeon and public-health researcher Atul Gawande made an appearance in the New Yorker, it posed a very interesting question: Does healthcare need a makeover similar to what casual-dining, big-chain restaurants have done? Gawande juxtaposes the medical and restaurant industries, using the Cheesecake Factory as an example. Although, for obvious reasons, the two industries are incredibly different, they both still seek a similar goal of delivering “a range of services to millions of people at a reasonable cost and with a consistent level of quality.”
The format of medicine delivery in America is changing. Instead of community-based hospitals, there are now large conglomerates formed between hospitals and clinics; physicians who were once self-employed or working in small private-practice settings are now predominantly joining said conglomerates. In Gawande’s comparison to the big-chain restaurant industry, health systems have turned into chains and physicians have become employees. Hospitals and medical groups used to pose mainly as landlords. Now, due to health-care reforms, they have taken a radical interest in how physicians conduct their business. Why? Clinical performance is becoming linked to financial rewards and can mean the difference between hospitals keeping or losing tens of millions of dollars. Unfortunately, this shift has not necessarily meant an improvement in the way healthcare is delivered on a mass scale.
“Good medicine cannot be reduced to a recipe”
In the article, Dr. Gawande does a spectacular job of bringing a typical Cheesecake Factory kitchen to life. You feel as if you are there as he describes the different roles, the precision, and the necessary steps to bring a food order from the menu, to plate, to table. Also fascinating is the forecasting models he describes. In order to have an almost psychic-worthy accuracy for purchasing groceries to avoid spoilage and food waste, chain restaurants have developed forecasting models using computer analytics. “Chain production requires control, and they’d figured out how to achieve it on a mass scale.” The medical industry, although it has taken on a similar format, has had a difficult time finding a way to obtain similar control and have it trickle down.
Dr. John Wright is among those attempting to inspire change. Following something very similar to this “Cheesecake Factory model” as Dr. Gawande calls it, Dr. Wright began researching what the best people in the industry are doing and how, then he standardized it. Now he is attempting to get the rest of the industry to follow suit. Unlike the Cheesecake Factory, there are certainly many more components that must be woven in and, when exercised, it is much more difficult to persuade clinicians to follow a standardized plan, whereas restaurant employees do it without question. To articulate this process, Dr. Gawande shares a story of his mother’s knee replacement and working with Dr. Wright’s team, who did exactly as what is described above; something called “systematic care.” The results were outstanding in the case of Dr. Gawande’s mother, all due to having someone (Dr. Wright) responsible for the total experience of care, including the costs and the results.
There will always be those who are skeptical of change, yet slow transformation seems almost unavoidable. Dr. Gawande believes that reinventing medical care could produce hundreds of innovations; most significantly, a way to put someone in charge of overseeing the healthcare process from start to finish and ensuring that it is “coherent, coordinated, and affordable.” The Cheesecake Factory model is a very interesting one and, according to Gawande, possibly the best prospect for change in medicine.
