Is An Unproven Medication Worth More Than the EPA or NASA?

For those who have not followed the FDA’s controversial decision of approving Aducanumab for the treatment of Alzheimer’s disease, the NEJM has two useful commentaries:

Key points -from 1st article:

  • “Biogen…has announced a list price of $56,000 –10 times the evidence-based benchmark recommended by the independent Institute for Clinical and Economic Review…if even 10% of U.S. patients with Alzheimer’s disease were prescribed aducanumab, drug spending for Medicare Part B would increase from $37 billion to $69 billion per year”
  • The authors note that Medicare Part B payments rely on average sales price (ASP) from private insurers rather than a direct negotiated price; thus, the higher the price for private plans (even if poorly covered), the higher the Medicare rate
  • Hospitals and physicians are incentivized at higher prices due to receiving a 4-6% reimbursement price over the acquisition price
  • “The $56,000 price for aducanumab is a rational manufacturer response to an irrational insurance system.”

Key points -from 2nd article:

  • By one estimate, the potential cost will exceed the budgets of agencies such as EPA or NASA
  • “In granting accelerated approval to aducanumab, the FDA concluded that the drug’s ability to reduce amyloid plaques was reasonably likely to translate into clinical benefits. But this claim is hotly contested and was not presented to the FDA’s advisory committee, which voted against recommending approval of the drug because of the lack of a demonstrated clinical benefit”
  • If Medicare refuses to cover medication, this would leave a burden to state budgets. “As a legal matter,…state Medicaid programs are required to cover nearly all FDA-approved drugs.”
  • “Congress could adopt new legislation specifying that state Medicaid programs need not cover aducanumab…Protecting state budgets shouldn’t require Medicare to cover an expensive drug with unproven clinical benefits.”

My take: This type of huge fiscal burden may provide the rationale for Medicare and Medicaid to reexamine whether/how they cover expensive FDA-approved medications.

Related blog posts:

Heroes, Villains and ‘Perverse’ Incentives. Story of Big Hospitals vs. Big Pharma

A recent article in Fortune (April/May 2021, pg 94, Big Hospitals vs. Big Pharma: Which industry is most to blame for soaring health care costs?) provides a lot of insight into the costly, complex U.S. healthcare system. Thanks to Stan Cohen for the article.

Key points:

  • U.S. spent 17.7% of GDP on healthcare expenditures in 2019, comparable OECD country averages were 10.7%
  • U.S. per capita costs were $10,966; next closest were Switzerland at $7732 and Germany at $6646
  • Despite are higher costs, U.S. has highest age-adjusted mortality rates (compared to these countries) and higher pregnancy-related deaths.
  • The U.S. has the highest rates of obesity among these countries; however, other countries smoke more and drink more
  • The biggest part of healthcare costs is from hospital care at 33%; medication costs account for ~10% but play a role in hospital costs.
  • The article makes the point that some high-priced medications, including the $2.1 million dollar Zolgensma, are worth it and others are overpriced
  • Recently both the hospitals and pharma have had good press with heroes like frontline healthcare workers and vaccine scientists. Recent villains include Martin Shkreli for excessive price hiking. However, most people are “just businesspeople responding rationally to the incentives they face.”
  • Medical costs for pharmaceuticals are complicated by an ‘insanely complex’ drug distribution system with hidden incentives and rebates. In many situations, “patients can’t get access to the better or more affordable drug because there’s some rebate happening behind the scenes”
  • In the U.S. “a majority of people are almost entirely separated from the market mechanism…Out-of-pocket spending is only 13% of total health care expenditures… most people have little incentive to shop carefully. Economically, the real consumer, the patient, is a bit player in this drama.”

My take: Improving the healthcare system is a great challenge. “It’s a lot harder than placing blame.”

Related blog posts:

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Changing Business of Medicine: Hospital Consolidation of Phycian Practices

As noted in yesterday’s post, in addition to private equity, hospitals have been consolidating medical practices. One incentive has been that hospitals can often charge a “facility fee.”

NPR explains this practice by highlighting a patient with a 10-fold increase in the cost of a steroid injection: Her Doctor’s Office Moved 1 Floor Up. Why Did Her Treatment Cost 10 Times More?

An excerpt: The increasingly controversial charge — basically a room rental fee — comes without warning, as hospitals are not required to inform patients of it ahead of time…

Hospitals say they charge the fee to cover their overhead for providing 24/7 care, when needed. Stamatis also noted the cost of additional regulatory requirements and services “that help drive quality improvement and assurance, but do increase costs.

But facility fees are one reason hospital prices are rising faster than physician prices, according to a 2019 research article in Health Affairs….The Centers for Medicare & Medicaid Services has attempted to curtail facility fees by introducing a site-neutral payment policy. The American Hospital Association sued over the move and plans to take the case to the Supreme Court.

My take: When hospitals own physician practices, there are often hidden costs. NPR recommends: “Ask outright if there will be a facility fee — and how much — even if there has not been one before. If it’s an elective procedure, you can search for a cheaper provider.”

Related blog posts:

Changing Business of Medicine: Private Equity

A recent commentary (JM Zhu et al. NEJM 2021; 384: 11: 981-983. Private Equity and Physician Medical Practices — Navigating a Changing Ecosystem) describes the restructuring of medical practices with a major decline in independent practices due to the growth of hospital-affiliated employees and private-equity investment in medical specialties.

Key points:

  • Between July 2016-January 2018, “hospitals and health systems acquired more than 8000 practices…Roughly 14,000 physicians left private practice”
  • Private-equity investment in medical practices has emerged as an alternative source of investment “that allows physicians to continue to hold equity and benefit financially from future transactions.”

Potential consequences of private-equity investment in medical practice:

  • Reduction in competition
  • Leverage market power with insurers & possible higher costs
  • Possible additional pressures on physicians to improve profits and reduction of physician autonomy
  • Possible improvements in value with operational improvements including sharing industry knowledge with smaller practices, adopting technology infrastructure, and helping practices assume risk with value-based payments
  • Possible prioritization of patients with better payer mix and lower complexity

My take: Mergers and acquisitions whether through hospitals or private equity make me worried that physicians will be squeezed between delivering profits and providing the best service for our patients.

Related audio interview with Dr. Jane Zhu on the growth of private equity investment in medical practices

“Socialism” is Already Here & Increasing in U.S. Health Care

The U.S. government now pays for nearly 50% of health care expenditures (Government Now Pays For Nearly 50 Percent Of Health Care Spending, An Increase Driven By Baby Boomers Shifting Into Medicare, Kaiser Health News, 2/21/19). Both in adults and children, the share of public sector spending is increasing. The biggest areas of costs include Medicare, Medicaid, CHIP and Veterans health care. The U.S. government also funds the HHS which includes the FDA, NIH, CDC, and AHRQ.

A recent commentary (JM Perrin et al. NEJM 2020; 383: 2595-2598. Medicaid and Child Health Equity) describes what is happening with Medicaid and the Children’s Health Insurance Program (CHIP).

Key points:

  • Over the past 20 years, the proportion of pediatric health care coverage provided by Medicaid and CHIP has been increasing. In 1997, these programs represented about 15% of health care coverage compared to ~35% in 2018. This corresponds to reductions in employer-provided coverage
  • Unlike private insurance, Medicaid is always available as it doesn’t have fixed enrollment periods
  • Medicaid disproportionately covers minority populations
  • State funding of Medicaid creates challenges. “States have routinely used strategies for limiting enrollment”
  • “Medicaid’s low physician payment rates, which average about two-thirds of rates paid by Medicare for the same services, depress physician participation…Lack of access to specialists poses additional problems in many communities”
  • The authors recommend the following:
    • Medicaid should be expanded to cover all children from birth through 21 years of age
    • The federal government should assume full financial responsibility
    • Medicaid payments should parallel national Medicare standards

Related blog posts:

Picking the Wrong Health Insurance Policy

NY Times: It’s Not Just You: Picking a Health Insurance Plan Is Really Hard

An excerpt:

Health insurance is a complicated financial product, and study after study has shown that people routinely pick bad plans, even choosing options that leave them worse off financially in every possible scenario…

 Many Americans don’t understand terms like “deductible” or “coinsurance” very well. And few are good at predicting what sort of health care needs they will have in the coming year…

A recent study in the Netherlands, which offers insurance to everyone through an Obamacare-like marketplace, found that only 5 percent of Dutch customers did a better job at choosing an ideal plan than they would have by choosing a plan at random… People with less education and income, who tend to be in worse health, were very likely to choose a plan that cost them more to cover their health care — a situation that might leave them skimping on needed medicine or procedures.

My take: This article is so true. When I choose health insurance, this is always a complicated task despite my familiarity and expertise. I would expect that computer-aided decision-making could be developed and be helpful.

Related blog posts:

Why We Are Not Making Progress with Probiotics

A recent commentary A Khoruts et al. Gastroenterol 2020; 159: 409-413. Full text: Probiotics: Promise, Evidence, and Hope

Despite the fact that the probiotic industry has ample money which is projected to reach $70 billion yearly, there is very little high quality research.

Key points:

  • Probiotics are regulated by the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC). The FDA, unlike the FTC, regulates products by category (eg, foods, drugs, dietary supplements, medical devices, and cosmetics)…Foods and dietary supplements, unlike drugs, do not require FDA premarket approval. By law, probiotic foods and dietary supplements must be safe. However, food manufacturers are permitted to make a self-determination of whether their product meets the “generally recognized as safe” (GRAS) designation, typically based on history of prior use”
  • Probiotic food and dietary supplement manufacturers do not have to specify on their product labels the strains they use in probiotic products or specify the number of live microbes of each strain that the product delivers through the end of its shelf life; and, although they are required to have validation of label claims, they are not required to submit it to the FDA
  • Dietary supplements can make structure/function claims, even though they cannot claim to treat any specific disease. These claims can sound very promising and consumers may be hard pressed to distinguish between a statement that a product “improves digestion,” a structure/function claim that is so vague that it is literally untestable
  • Rational selection of donor microbiota should be possible based on microbiome-based diagnostics, as well as in vitro technologies that interrogate the functional potential of complex microbial communities. There are parallel, intensive efforts to develop defined microbial communities. A common theme among these different approaches is deployment of complex assemblages of microorganisms rather than single strains. Such complex consortia are likely to have more consistent and predictable effects.
  • The emergence of microbial therapeutics requires development of a new branch of pharmacology. The challenges of formulation, pharmacokinetics, and pharmacodynamics are very distinct from those of small molecule therapeutics or protein biologics.

My take: “These next-generation probiotics will need to be tested for safety and efficacy in well-designed and properly powered clinical trials.”  Probably the only way that will happen is to empower regulatory agencies to insist that these products are treated like medications.  Given the fact that probiotics are so profitable now with little evidence of efficacy for most strains, I am not optimistic about any changes in the near future.

Related blog posts:

“We Knew the Coronavirus Was Coming, Yet We Failed”

NY Times: We Knew the Coronavirus Was Coming, Yet We Failed

“The vulnerabilities that Covid-19 has revealed were a predictable outgrowth of our market-based health care system.”

Here’s Why:

1. Ventilators. Operated as businesses, hospitals have zero incentive to stockpile.  A vast storeroom in the basement filled with ventilators that might be needed once in a generation or never?…They are unlikely to do so unless government requires them. We’ve long required ocean liners to have lifeboats and life preservers even though their operators hope to never hit an iceberg.

2. Testing has proved the persistent Achilles’ heel in the U.S. response…[Early on] With requirements for Food and Drug Administration approval expensive and cumbersome, developing a test was a business non-starter…In contrast, South Korea, with its national health system, engaged its private test manufacturers with a plan in January, promising them quick approval for a coronavirus test and the widespread use of it in nationally organized and financed testing.

3. Testing components and P.P.E.  …Conducting tests involves access to a number of components — kits, chemical reagents, swabs, personal protective equipment, sometimes custom cartridges for machines. Miss any one of those things and testing becomes impossible. It’s like trying to make bread with all the ingredients except yeast….Without a national system for such purchases in a crisis, we are essentially forcing hospitals and states to negotiate the price of water during a drought. (Alternatively, we could require all hospitals to have a 90-day supply of essential response items on hand, as Gov. Andrew Cuomo of New York has now done.)

4. Hospitals did not coordinate...In our market-based system, hospitals are primed to compete, not coordinate

5. The hospital rescue... [is needed] partly because they have delivered extraordinary treatment of Covid-19 (which doesn’t pay well) but also because they’ve had to cancel high-profit procedures like joint replacements and sophisticated scans to make room for this low-profit-margin illness…In a functioning health system, pandemic preparedness and response would be part of the expected job.

Whether regulated or run by the government, or motivated by new incentives, we need a system that responds more to illness and less to profits.

Related article: NY Times: How Health Insurers Can Be Heroes. Really.

“The industry is profiting from the pandemic. It needs to pay back by cutting premiums and co-payments, help private practices and finance more protection and care…A great paradox of this pandemic is that while Covid-19 is overwhelming the health care system, health care spending is down a whopping 18 percent. ”

Why Surprise Billing Still Exists

A piece of good news: —Doubletree Reveals Cookie Recipe

This blog does not receive any sponsorships.  That being said, my wife made a batch of these cookies and they are delicious!  My advice is to freeze half the batch and cook some later to avoid overconsumption.

A recent commentary (ECF Brown. NEJM 2020; 382: 1189-91) helps explain why surprise billing still exists despite bipartisan contempt.

Key points:

  • “An estimated 20% of U.S. emergency-department visits, 9% of inpatient admissions, and more than half of ambulance or air-ambulance transports involve an out-of-network provider.”
  • “Surprise medical billing…is more prevalent …in groups owned by certain private-equity investment companies.”
  • There are generally two approaches to solving the problem of surprise medical billing, either arbitration or using a payment benchmark, the former generally favors providers and the latter generally favors payers.
  • “Deep-pocketed private equity firms continue to oppose any legislation that cuts into their profits, as they increase their investments in physician practices…Nearly everyone else agrees that patients should be protected from surprise medical bills.”

My take (borrowed from the author): The outcome of the surprise medical billing issue “raises questions about both the role of private equity in health care and the ability of Congress to pass meaningful health care legislation.”

Related blog posts:

Blood Mountain Trail


The Problem with Health Share Plans

Health Share Plans seem appropriate for an April Fools day –if you thought you had health insurance, you may be in for an unpleasant surprise.  The problem with ‘health share’ plans is they often do not provide adequate cost/benefit coverage for those who rely on them.

NY Times: California Cracks Down on Alternative Health Plans

An excerpt:

[California] State insurance regulators accused a ministry offering an alternative to traditional insurance of misleading consumers….

The plans, which have become increasingly popular, rely on pooling members’ contributions to cover their medical expenses, but they are not required to meet standards for traditional insurance plans…

More than one million Americans have joined such groups, attracted by prices that are far lower than the cost of traditional insurance policies, which must meet strict requirements established by the federal health care law, like guaranteed coverage for pre-existing conditions…

State regulators are questioning some of the ministries’ aggressive marketing tactics, saying some consumers were misled or may not understand the lack of comprehensive coverage in the case of a serious illness or conditions that the ministries may not be willing to cover.

From The Onion