April 17, 2007

Money in Medicine

Posted by Eric at 12:32 am | Category: Ethics, Medicine

There is a really great post and discussion on Marginal Revolution on a book, Money Driven Medicine (by Maggie Mahar) about the source of the spiraling costs in American health care that don’t seem to improve patient health at all. The best part is the comments, I think. There are some good commenters, and then the author comes to respond to some of their questions.

I really like this part of a comment from Yancey Ward:

Our problem is that we treat medical advances differently than we treat other technological advances…

In the early 80’s, the first personal computers cost over $10,000 a piece. Such computers were only purchased by people with the means to do so, and no one really questioned this inequality- for almost all new goods and services, it is only the upper income cohort that can afford to purchase them. This was true for personal computers in 1981 as it was true for automobiles in the early 20th century….In addition, one will surely find examples of luxury goods and services that never really spread down through the lower income cohorts because they were ultimately found to have no benefit or use-in other words, they were found to have no larger potential market.

However, when it comes to medical goods and services, especially goods and services that claim to be life-saving/prolonging, the inevitable inequality I wrote of above assaults our sense of fairness. We demand that such goods and services be available to all regardless of the cost and the efficacy. All other new goods and services first prove their worth to the small cohort that can afford the luxury of trying them out, but this is not the case with medical care- we consider it unfair that the wealthy can afford new cancer treatments of questionable worth- thus the process of real-world testing of efficacy is short-circuited. (Emphasis mine)

We seem to have the perverted thought that good health should have no price, and that all patients deserve the latest and greatest, when simply prescribing last year’s remedies (or even the old soap and water) would be significantly cheaper and create real improvement in the patient’s life, with only a tiny extra benefit from using the newest drug instead.

There’s also a good comment from “happyjuggler0″:

When Pharma comes out with a new drug treating something that was previously untreatable, it is meaningless to say that costs for that treatment have shot up, since there was no treatment for it before. Eventually, rather quickly I might add all things considered, this drug will go off patent and become dirt cheap. each year more and more drugs go off patent, and thus in reality drug costs are going down radically, not increasing.

From Maggie Mahar:

In the mid-ninties insurers were fairly successful at containing costs (if not improving care) for a few years–but the backlash was so great that they began losing customers. As a result, at the end of the nineties insurers decided to just cover whatever consumers asked for–and pass the cost along in the form of higher premiums. This explains why premiums have risen 87% in the past six years.
….
Why can’t consumers themselves push back–and demand lower prices and higher quality (as they do when shopping for other goods and services)? It’s not because they are, as Nathan puts it “you know, too lazy to actually talk to their doctor.” It’s because, first of all, they are sick….Secondly, even if they are not elderly, in pain or frigthened, the subject that they need to master is dauntingly complicated.
….
Moreover, the consumer is not in a position to push down prices because when you are dying of cancer (or congestive heart failure, etc.) you are not bargain-hunting. You become a “price-taker”–you will pay whatever price is necessary to end the pain, prolong life, be able to get up out of bed and function, etc.

Even if you are paying out of your own pocket you will do whatever is necessary to come up with the money–which is why medical bills are the leading cause of personal bankruptcy in this country.

One thing I don’t see, though, is why Maggie Mahar is lenient on insurance companies for being profit-driven, while blaming pharma companies on being profit-driven (in her comment, at least; I plan to read the book soon). She says, “After all, a for-profit corporation’s first reponsibility, by law, is to its shareholders–not to its customers,” but is far more reticent to give that excuse to drug companies: “Arguably, a for-profit manufactuer that promotes its product as widely as possible is only doing its job. (Though one would like to think “caveat emptor” shouldn’t have to apply when it comes to products that could mean the difference between life and death for the customer.)” Partly, it’s because it’s easy in this society to demonize pharmaceutical companies. It’s even possibly the fashion, right now. They do sometimes do unscrupulous things. But they don’t always, and there are plenty of people in their ranks that work hard at a very difficult task.

She also says,

For years, drug-makers and device-makers have fought tooth and nail against “head to head” comparisons that would test the effectiveness and safety of a new product against the older, less expensive product that it hopes to replace. And what’s amazing is that drug-makers and device-makers have won this battle: In order to earn FDA approval for a new product, the manufacturer only has to show that the benefits of his product outweighs the risks WHEN COMPARED TO A PLACEBO.

I really don’t see what’s wrong with comparing to placebos. The FDA is just supposed to be a gatekeeper screening for safety and efficacy. Why does everything have to be an improvement over what exists already? Knock-offs are good for consumers, too, because they increase competition and lower prices. How cheap would painkillers be if there was only one kind? Maybe cheap, maybe not, but because of competition, I can walk to a CVS and buy a 200 tablet bottle of ibuprofen (”Advil”) for $7.

Now, just because pharma makes the knock-off doesn’t mean doctors have to prescribe it. Of course, they need to know the data in order to decide what to prescribe. What is needed is an organization of researchers and doctors to do more head-to-head comparisons that would actually determine the efficacy of new drugs and determine standards of care, because doctors are really the gatekeepers of health care. I’m sure this already happens, to a certain extent, but it needs to happen more. Patients can’t negotiate the system, insurers are unwilling to, and do you really want pharma to stop producing drugs? Doctors are the ones prescribing and advising; that’s part of their job, so something should exist to help them. Now, if pharma and drug companies have been preventing head-to-head comparisons from happening at all, then fine, hound them for it. But I don’t think they are, since I’ve seen plenty of them appear in the wild.

Read the whole thread, if you have time; it’s very good, and Maggie Mahar makes some very good points, not all of which I agree with.

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4 Responses to “Money in Medicine”

  1. Apollo Says:
    April 17th, 2007 at 8:48 am

    I’ll hopefully respond in more depth later, but just a few comments on some of your points.

    We seem to have the perverted thought that good health should have no price, and that all patients deserve the latest and greatest, when simply prescribing last year’s remedies (or even the old soap and water) would be significantly cheaper and create real improvement in the patient’s life, with only a tiny extra benefit from using the newest drug instead.

    I agree - new technology and new treatments aren’t always better. I was telling Ben that the clinical aspect of my medical education is placing an enormous emphasis on improved patient interviews and physical examinations (with high sensitivity and specificity), so that in most cases, lab tests and imaging studies are confirmatory, not exploratory. (This applies more to new complaints rather than managing chronic care, though, since for chronic care you want to monitor conditions with exact numbers, such as with Complete Blood Counts (CBC) or lipid profiles, so that you can chart improvement or worsening conditions). I’m not sure about the emphasis on the physical exam, but I do know that other medical schools are placing great emphasis on improved history-taking. A brief physical examination from my PCP yesterday cost $25. A lipid profile would cost $45. A chest x-ray, I think about $200+. I think it’s easier for salaried doctors (which I think all doctors should be), particularly academic ones, to order less tests because of less financial incentive. Furthermore, a very comprehensive physical examination, done by a good physician, may only take about 2-4 minutes.

    One thing I don’t see, though, is why Maggie Mahar is lenient on insurance companies for being profit-driven, while blaming pharma companies on being profit-driven (in her comment, at least; I plan to read the book soon).

    Yeah, I was confused about that too. I don’t know why *anyone* is lenient on insurance companies. I’ll never forget the time that one company tried to deny payment for chemotherapy for one of my stepmom’s pediatric cancer patients. I mean, honestly, given the bad side effects of chemotherapy, who would elect to have chemotherapy when it wasn’t absolutely necessary?

    I really don’t see what’s wrong with comparing to placebos. The FDA is just supposed to be a gatekeeper screening for safety and efficacy. Why does everything have to be an improvement over what exists already? Knock-offs are good for consumers, too, because they increase competition and lower prices. How cheap would painkillers be if there was only one kind? Maybe cheap, maybe not, but because of competition, I can walk to a CVS and buy a 200 tablet bottle of ibuprofen (”Advil”) for $7.

    Now, just because pharma makes the knock-off doesn’t mean doctors have to prescribe it. Of course, they need to know the data in order to decide what to prescribe. What is needed is an organization of researchers and doctors to do more head-to-head comparisons that would actually determine the efficacy of new drugs and determine standards of care, because doctors are really the gatekeepers of health care.

    I couldn’t agree more. Something that can rapidly and cost-efficiently generate these studies would be amazingly useful and informative. I personally think that physicians (collaborating with others) should actively take on their roles as patient-advocates to help reduce unnecessary costs of care: researchers and doctors doing efficacy/drug comparison testing, lawyers and doctors screening malpractice law suits for valid claims before they go to court, etc.

  2. Maggie Mahar Says:
    April 17th, 2007 at 4:07 pm

    Hi-
    Thanks very much for your interest in the book.
    Let me try to answer a couple of questions.
    First, in the book I’m just as tough on for-profit insurers as I am on for-profit drug-makers, device-makers and hosptials. I didn’t mean to sound “lenient” re the insurers.
    When I say that for-profits insurers (and drug-makers and device-makers are doing what they “should” be doing by putting their shareholders first, I am simply quoting U.S. law governing corporations–and Milton Friendman who says that corporations shouldn’t worry about anything else (social responsbility, etc.) In other words the “should” is a little ironic–though it the law under our system. Corporations are supposed to do everything they can do to make the highest profit possible–short of directly lying to the consumer. They can over-charge if they like–it’s up to the consumer to “beware.” (”Caveat Emptor”)

    I’m personaly not happy with this aspect of U.S. law–or our definition of what a corporation “should” do but it happens to be the style of capitalism that we have in the U.S.–and that most Americans seem to support.
    But since we expect corporations to put their shareholders first this is all the more reason that government needs to regulate health care corporatoins–much the way, years ago, we decided to regulate the ultilites that provide electricy and gas.

    Like electricy and gas, healthcare is a necessity. We don’t let utilities raise prices whenver they want to–as much as they want to–because some people would wind up shivering in the dark.
    We also need to regulate how much insurers, drug-maker and device-makers raise their prices.

    2) Regarding the FDA only requiring that drugs are compared to placebos. First, knock-offs don’t lower drug prices. A lot has been written in medical jouranls like “Health Affairs” about how the price of medical technologies, unlike other technologies, do not fall with time and competition.

    This is because when it comes to healthcare, the consumer can’t say “I’ll wait until the price ccomes down” or “I’ll wait until someone comes out with a cheaper model” the way he might when shopping for a flat-screen TV.

    75% of our health care dollars are spent in cases where the patient is suffering from a severe chronic illness like cancer or congestive heart failure.
    He can’t wait. And he’s not bargain-hunting.

    Finally, most people believe that, in healthcare, the newest, most expensive product must be the best. Often that’s not true, but that’s what they believe–in part because, “after all, the FDA approved it.” They don’t realize that it was only tested against a placebo.

    Finally, once the FDA approves something, there is huge pressure for both Medicare and private insurers to cover it–whatever the cost, and whether or not it is better than, or less risky than, the older drug it is trying to replace.

    This is how Vioxx came to be covered by nearly ever insurer –even though it was not better for most patients,was significantly riskiers, and wasfar more expensive . . ..

    Of course, as Apollo points out, this didn’t mean that individiual doctors had to prescribe Vioxx. And in fact, doctors at the Mayo Clinic, the VA and Kaiser Permanente looked at the medical evidence and decided not to prescribe Vioxx for most patients. (They prescribed it only for those patients who were vulnerable to gastro-intestinal bleeding if they took the older less expensived painkiller.)

    But while organizations like the VA and the Mayo Clinic were able to take a stand, it can be hard for an individual doc to stand to a patient who says “But I saw it on TV . . But my brother in law’s doctor gave it to him . . But I have a right . .

  3. Eric Says:
    April 18th, 2007 at 12:57 am

    Thank you for clarifying your position. I didn’t think that you were letting insurers go so easily. :-P

    I don’t have that much of a problem with American capitalism, though I do think people could use a good dose of empathy sometimes. I have strong feelings about private independence and limiting government intervention, because the government tends to make everything about short-term gains while sacrificing the long-term well-being of the people (as a young person still in college, this matters a lot to me). I’m against price controls except in the case of clear externalities, because they distort the market and cause suppliers to exit (who tend to be wealthier, and better able to afford to leave the market and do something else), causing — in the long run — more shortage than there was before. As an example, if one capped people’s hourly wages, clearly some people would stop working as hard (suppliers exiting the market). In the same way, if one capped prices on drugs, some companies would exit the market. This might be a sacrifice worth taking for the benefit of the price cut, but I’m not so sure it is. Anyway, I’m skeptical of governments setting prices.

    I do not, however, like the political concentration of power that many corporations get, which reduces market forces by allowing for cartels and monopolies. Sure, in the long run these will disappear, but the people who suffer waiting for these broken markets to heal are the poor, and so I believe the government must intervene in these cases.

    As for your second point, I’m sorry, but you’ll have to excuse my skepticism about medical prices not falling with time and competition. Just because patients are under time pressure doesn’t mean they aren’t under budget constraints; after all, people only have a finite amount of money, and medicine (especially the newest medicines) are quite expensive. When there is more competition, if the treatments are mostly equivalent, then more people will buy the cheaper one, because they can afford to buy it for longer, especially for expensive, chronic illnesses like cancer, immunotherapy, and so on. And as patents expire, generics, which are exactly and completely equivalent, create perfect competition, and then prices really do fall. Just look at any of the over-the-counter drugs to see why, or look at Wall Street’s reactions to patents expiring. I’d need a more specific citation to articles that put a more thorough argument out to convince me.

    The one thing I do agree with in terms of pointing towards a market-failure in this respect is information asymmetry. Patients don’t know that generics are completely identical to the brand-name. Patients don’t know when certain medicines or devices are completely equivalent to another. Patients don’t know that price doesn’t correlate with efficacy. Patients are uninformed customers; that’s true of all markets, but especially in something as complicated as medicine. That’s why I advocate doctors taking control to make something happen. Or even a private company that researches and publishes reports (one could make a tidy profit out of it, I’m sure). Something must be done, I agree, and your comments are quite insightful, but I do think that the government will botch things as it almost always does. I much prefer a group of professionals who know what they’re doing handling this sort of thing.

  4. Apollo Says:
    April 18th, 2007 at 9:15 pm

    I do not, however, like the political concentration of power that many corporations get, which reduces market forces by allowing for cartels and monopolies. Sure, in the long run these will disappear, but the people who suffer waiting for these broken markets to heal are the poor, and so I believe the government must intervene in these cases.

    Isn’t it moderately increased government regulation (in response to egregious misconduct) that reins in these cartels/monopolies? I’m not sure if that’s what you’re implying or if you’re suggesting that something else makes them go away.

    As for your second point, I’m sorry, but you’ll have to excuse my skepticism about medical prices not falling with time and competition. Just because patients are under time pressure doesn’t mean they aren’t under budget constraints; after all, people only have a finite amount of money, and medicine (especially the newest medicines) are quite expensive.

    I think I partly agree with you, Eric, and I also partly agree with Maggie. While theoretically time and competition drive down prices, pharmaceutical companies and biotechnology companies try to do everything in their power to prevent this from happening. I don’t think that there should necessarily be any single, broad, sweeping measures taken to address this issue, but I do think that small changes should be made to insure that treatments and technologies are made more affordable.

    Furthermore, Maggie makes a good point that patients often go bankrupt because of end-of-life and chronic care expenses. Sometimes this isn’t expected: the patients think that their insurance will cover these expensive treatments, but many insurance companies hold out from reimbursing them until the patients are dead (or they just flat out refuse to pay for those treatments). I’m not sure if you’ve seen any of the commercials on TV about low-cost life insurance: one of the main motivators and selling points for getting these life insurance plans is to pay for the costs of medical bills left behind once the patients are buried. In the end, if the patient doesn’t pay, the hospital and the doctors are forced to absorb the costs since they are the initial buyers, sending them into the red. This is why so many private practice doctors refuse or limit the number of Medicare/Medicaid patients they allow into their offices.

    This is why I would really like to see physicians and hospitals playing hardball with pharma and biotech companies to reduce costs, since I don’t think patients are in a good position to do so. In order to do this, though, there need to be better information systems available for comparing efficacy, prices, etc.

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