Treachery or Sound Business Decision: Health Care Tax Inversions

Posted on April 6, 2016 by gutsandgrowth

An insightful commentary (HJ Warraich, KA Schulman NEJM 2016; 374: 1005-7) provide some insight into “corporate inversion” or “tax inversion” and how they apply specifically to pharmaceutical companies. This article was prompted by Pfizer’s plans to merge with Ireland-based Allergan which would create the largest pharmaceutical company in the world, worth ~$160 billion.

Inversions allow U.S. companies to lower their tax rate from as high as 35% (most never pay the full rate) to as low as Ireland’s corporate rate of 7.7%. While this seems like a sound idea, there are reasons why U.S. tax payers should be outraged:
These firms “generate substantial revenue from purchases made by Medicare, Medicaid, and the Veterans Health Administration. These programs are supported by revenue from federal taxes — precisely the taxes companies are trying to avoid by inverting.”
In fact, Medicare “parts B and D, received 76% and 80%, respectively of their funding from federal tax revenues in 2015.”
These companies charge U.S. consumers much more than anywhere else in the world for their products. For Pfizer, for example, in 2013, two of its leading drugs (Enbrel and Celebrex) were twice as expensive in the U.S. as in the U.K.
The U.S. government has pursued policies to protect these “domestic” industries in numerous trade agreements to secure intellectual-property rights.
The National Institutes of Health has provided funding that supports the development of new pharmaceuticals.

What should be done?

Policies to discourage inversion should be pursued.
This could mean that Medicare and Medicaid should be given a free hand to negotiate drug prices with inverted companies or to require additional reviews to qualify their products.
The FDA could withhold priority review from companies who have undergone inversion.
The IRS could be allowed to levy exit taxes on inverting companies.

My take: Pharmaceutical companies want to extract billions of dollars of benefits from the U.S. taxpayers and charge U.S. consumers higher costs than anywhere else. Avoiding paying U.S. taxes is not business as usual and should be met with consequences.

Gibbs Gardens, Ball Ground

Patient Assistance for Lab Testing

Posted on April 4, 2016 by gutsandgrowth

Since 2015, “a partnership of several leading consumer health organizations announced the launch of Patient Assistance for Lab Services (PALS).” (Gastroenterol & Endoscopy News, March 2016, pg 54). PALS offers access to more than 85 lab tests, most costing only $5 and all of the tests at a fraction of the cost of pricing at competing labs. (See request-a-test for competing costs: requestatest.com)

PALS website: Patient Assistance for Lab Services

Some examples of costs:

$5 tests: (There is a $15 shipping fee as well which covers all testing)

Hepatic Function Panel
CBC/d
Complete Metabolic Panel (CMP)
Hemoglobin A1C
Cholesterol
TSH w reflex to T4

Some tests are more expensive but still heavily discounted:

Hepatitis C RNA PCR Quantitative $100

The process of filling out the paperwork & having signed by a physician along with getting the testing complete will likely take a few weeks; so this testing right now is not useful for urgent testing.

My take: Due to cost constraints, some patients are not receiving lab monitoring as frequently as recommended. This discounted testing could be a useful for option in this scenario.

Key words:

Patient assistance
Cheap
Inexpensive
Lab test
Bloodwork
No insurance

Gibbs Gardens

Do deductibles work to improve smart spending on health care?

Posted on February 23, 2016 by gutsandgrowth

According to a recent NY Times article –the answer is no.

The problem:

With high deductible plans, people reduce both high-value and low-value care
Many people cannot afford very valuable care due to their deductibles

Link: The Big Problem With High Health Care Deductibles

Here’s an excerpt:

Some health economists say the solution to the problem may be smarter but more complicated forms of health insurance that provide patients with important care free, but charge them for treatments with fewer proven benefits. Mr. Chernew, for one, argues that ordinary deductibles are too “blunt” an instrument, but smarter insurance plans could harness economic incentives to reduce wasteful health spending without discouraging needed care. If such plans held down costs as well as deductibles, they could keep insurance affordable without as many risks. The theory behind such plans is compelling, but given how bad people are at shopping for health care, more empirical evidence is needed to know how well it works in practice.

“The Solution to Drug Prices”

Posted on September 14, 2015 by gutsandgrowth

Worth a read: “The Solution to Drug Prices” by Eziel Emanuel

An excerpt:

WE’RE paying too much for prescription drugs….Despite representing about 1 percent of prescriptions in 2014, these types of high-cost drugs accounted for some 32 percent of all spending on pharmaceuticals….

Almost all developed countries… making drugs available at fixed prices …Drug companies would immediately raise two objections: the high risks associated with drug development and, related, the high cost of research and development. But both of these arguments are fatuous…

Also, as outrageous as they are, prices are not the real issue. Value is. What really frustrates people are expensive drugs that do not provide a cure. For instance, Opdivo adds an average of 3.2 months of life to lung cancer patients and costs $150,000 per year for treatment…

Everyone, including drug company executives, believes that high prices cannot continue. Indeed, that is one reason that companies are trying to maximize profits while they can. We must come up with a comprehensive solution now.

“Negative Externality,” Splitting Checks, and Feeding Psychology

Posted on August 10, 2015 by gutsandgrowth

If you have a great psychology book that you recommend, please let me know. As frequent readers of this blog know, I am fascinated with psychology experiments.

In a recent blog from fivethirtyeight.com, the author tackles the question of whether people eat more when they know they are splitting a dinner check. Does it Make Sense to Split The Check at a Restaurant?

Here’s an excerpt:

In 2004, a study in The Economic Journal, a publication of the Royal Economic Society, …the researchers told four groups of diners (always three men and three women) to split the bill equally among them. They told another four groups to pay for what they had ordered. Lastly, they told two lucky groups that they would get their meals for free…

Those who were getting a free meal spent the most … Those who were splitting the bill spent less, and those who were paying individually spent the least…

Any time you make a decision that affects someone else without considering how it might affect that person, whether positively or negatively, you create an externality — it’s basically a fancy way of saying “indirect effect.” There are positive externalities (e.g. when you decide to get a flu shot, other people benefit) and negative externalities (e.g. when you decide to fart, other people suffer).

The unscrupulous diner’s dilemma reveals how negative externalities — and even the mere threat of negative externalities — affect our behavior. Participants in the bill-splitting experiment expected the others to order more, so they tried to maximize what they could get out of the situation by ordering more themselves.

Bottomline: It is fascinating to me how something as simple as splitting a bill may encourage someone to order a lot more.

Related blog posts:

How the Trans-Pacific Partnership Could Affect Health Outcomes

Posted on August 9, 2015 by gutsandgrowth

Generally, trade agreements are not something I scrutinize and typically have little to do with the medical field. Recently, I was surprised to learn that the Trans-Pacific Partnership (TPP) has language in its intellectual property chapter that could impact the lives of millions (A Kapczynski. NEJM 2015; 373: 201-3). The background for this story is that pharmaceutical companies want to have patent protection for their medications for as long as possible. This has a substantial impact on pricing. “For example, patents increase the annual cost of antiretroviral therapy from around $100 per person to $10,000 per person.”

Some countries, like India, have undermined patent protections. “India allows patents on new drugs but not on new uses of old drugs or new forms of known drugs that do not increase therapeutic efficacy.” Other countries have been following India’s lead. Even in the U.S., there are efforts to decrease data exclusivity, which prevents regulatory agencies like the FDA from registering a generic version of a drug.

“President Barack Obama’s fiscal year 2016 budget proposes rolling back the data exclusivity period for biologic drugs in the United States to 7 years from 12 years, yielding a projected savings of more than $4 billion over the next decade. In the TPP negotiations, however, the United States is proposing a 12-year term of exclusivity.”

Other potential concerns include both the elimination of a provision to use “competitive market-derived prices” and the potential for promoting foreign companies to sue TPP countries for millions of dollars in damages due to loss of profits.

Currently there are escalating drug prices, both with innovative new medications and well-established treatments. Even lifesaving cures are being rationed in the United States. While the TPP has not been finalized, there are provisions that could limit the United States from regulating “critical aspects of health policy for years to come.”

Related blog posts:

Cascade Canyon, Grand Tetons

Understanding the Problem Physicians Have With Retail Clinics

Posted on August 3, 2015 by gutsandgrowth

Two articles highlight the upside and downside of retail clinics.

Iglehart JK. NEJM 2015; 301-3
Chang JE et al. NEJM 2015; 382-8

Currently, there are ~1900 retail clinics with four main ‘players:’ CVS, Walgreens, Kroger, and Target. However, Target has recently made a deal with CVS and Walmart is expanding into retail clinics as well. Almost all of these clinics accept private insurance and medicare; growing numbers accept medicaid too.

Retail clinics offer a limited scope of care and typically are staffed by midlevel providers (nurse practitioners or physician assistants). In contrast, urgent cares offer more complex services and typically are staffed by physicians.

Upside:

For consumers, the key advantages of retail clinics: lower costs with transparent pricing, convenience due to extended hours and locations, and often short wait times.

Downside:

Potential disruption in longitudinal care (“medical home”)

What about quality?

“Research has not found that retail clinics deliver poor quality care, overprescribe antibiotics, or adversely impact delivery of preventive care.”

Do Retail Clinics Enhance Access?

Yes but these clinics are disproportionately located in areas with relatively high income. Nevertheless, “approximately 61% of retail-clinic visits and 37% of urgent care visits involve patients without a primary care provider.”

Patient navigation:

“One study …showed that patients did properly self-triage, with more than 88% of retail-clinic episodes resolved in one visit. Another study showed that 2.3% of retail-clinic patients were triaged to an emergency department or physician’s office.”

Why Would Physicians Oppose These Retail Clinics?

While primary care organizations have raised concerns about quality and continuity of care, a basic economic issue is likely at work as well. “The current reimbursement system renders simple acute health problems high-margin work that can offset losses from treating more complex problems.“

Bottomline: Retail clinics are filling a need for many patients in terms of cost and convenience for simple acute problems.

Related blog post: AAP -Behind the Scenes (Part 1)

Leek’s Marina, Grand Tetons

Dollars for Doctors

Posted on July 8, 2015 by gutsandgrowth

A recent NPR report, Industry Payments To Doctors Are Ingrained, Federal Data Show, provides a link detailing payments by drug and device companies to U.S. doctors and teaching hospitals. Doctors may be paid for promotional speaking, consulting, travel expenses, and meals.

If you want to see how much is reported for each doctor, check out the ProPublica Dollars for Doctors database.

Here’s a screenshot:

The article notes that the a close relationship between doctors and pharmaceutical companies is important. “Collaboration between physicians and biopharmaceutical professionals is critical to improving the health and quality of life of patients.”

Take-home point: Some financial relationships between doctors and pharmaceutical companies lead to important improvements in drug (or device) development; other relationships may alter prescribing habits without apparent patient benefit. Will this information empower patients to ask why their physicians has close ties to the pharmaceutical industry?

Related blog post:

Marketing to Doctors -Informative Satire | gutsandgrowth

Point of Care -Mobile, Anywhere, Cheap EKGs

Posted on July 7, 2015 by gutsandgrowth

Note: This blog and author do not have any financial disclosures or receive any support from any companies.

Using a smartphone app, AliveCor has developed the technology to obtain a limited EKG (ECG) for a minimal cost; after an initial investment of $74.99, this technology can function similar to a standard EKG machine but only provides one lead (V1).

From the AliveCor website (thanks to Larry Saripkin for showing me this):

The FDA-cleared AliveCor Mobile ECG wirelessly communicates with the free AliveECG app, available in the U.S. App Store and Google Play Store. ECGs are stored in the app and on secure, encrypted servers that can be viewed anytime, anywhere. ECGs can also be printed or e-mailed directly from your smartphone or tablet, and you can grant access to your physician.

Do I have to attach the Mobile ECG to my smartphone or tablet? That is our recommendation, however, you may use the Mobile ECG within 12 inches of your smartphone or tablet if you’d like….

Simply rest it on your fingers or chest to record an ECG in just 30 seconds. Know right away when your ECG is normal and if atrial fibrillation is detected.

Potential Uses:

Detect atrial fibrillation
Correlate symptoms like palpitations and shortness of breath
Accurately assess heart rate
?Assess for QT interval -this could be particularly useful to pediatric gastroenterologists

While many of the uses may be self-evident, the website offers ECG review by a U.S. board-certified Cardiologist, with an average turnaround time of 24 hours. The current price of this service is $12.

Bottomline: This is another example of how new technology improves clinical information and at the same time should be less expensive and more timely.

Related blog posts:

Disclaimer: These blog posts are for educational purposes only. Specific dosing of medications/diets (along with potential adverse effects) and use of new technology should be confirmed by prescribing physician/nutritionist. This content is not a substitute for medical advice, diagnosis or treatment provided by a qualified healthcare provider. Always seek the advice of your physician or other qualified health provider with any questions you may have regarding a condition.

Sign at Children’s Healthcare of Atlanta

Critique of the 21st Century Cures Act

Posted on July 5, 2015 by gutsandgrowth

The most compelling article (Avorn J, Kesselheim AS. NEJM 2015; 372: 2473-5) in a recent edition of the NEJM delved into the 21st Century Cures Act which was recently introduced in the U.S. House of Representatives; it was approved 51 to 0 in committee but continues to be debated.

One of the underlying premises of the bill is accelerate approval for new products. Key features:

Increase in National Institutes of Health (NIH) of about 3% per year for 3 years. And, additional $2 billion per year for 5 years to create an “NIH Innovation Fund”
Instructs FDA to consider nontraditional study designs for clinical trials. This is aimed at shorter, smaller and less expensive studies. This could allow FDA to rely on “observational studies” and “clinical experience.”
The bill encourages the FDA to rely more on surrogate end points
The bill would allow informed consent to be bypassed if the “proposed testing poses no more than minimal risk.”

Critiques for each point, point by point:

1. The funding increases largely counterbalance stagnating funds at the NIH secondary to sequestration and budget cuts.

2. The premise that the FDA is inefficient is not accurate.

“A third of new drugs are currently approved on the basis of a single pivotal trial” with a median of 760 patients.
Most drugs are approved based on studies with a duration of 6 months or less, even medications taken for a lifetime.
Evaluation of nearly all new drug applications is completed within 6 to 10 months.

3. Surrogate markers often overestimate the potential benefit of medications. The FDA “already uses surrogate end points in about half of new drug approvals.” Specific examples:

Bevacizumab has been shown to delay tumor progression in breast cancer “but was shown not to benefit patients.
Rosiglitazone “lowered glycated hemoglobin levels in patients with diabetes even as it increased their risk of myocardial infarction.”
One new tuberculosis drug improved bacterial counts in the sputum but “the treatment group had a death rate four times that in the comparison group.”

4. Informed consent has been “sacrosanct, with exceptions made only when consent is impossible or contrary to a patient’s best interests.” With this new proposal, “it is not clear who gets to determine whether a given trial of a new drug poses “minimal risk.”

Bottomline (from authors): The 21st Century Cures Act’s call for increased NIH funding may prove to be its most useful component. But political forces…could lead to the approval of drugs and devices that are less safe or effective than existing criteria would permit.”

Audio interview with Jerry Avorn: nej.md/1TPy6Ta

Some pictures from yesterday’s Peachtree Road Race:

Coveted T-shirt -2015 Edition

Rainy Day for a 10K

Largest 10K in the World

gutsandgrowth

Pediatric Gastroenterology

Category Archives: Health Economics