Wednesday, April 23, 2014
Today’s Managing Health Care Costs Number
is $64.1 billion
Pharmaceutical merger and acquisition announcements over the last few days have been jaw-dropping.
Novartis is buying the oncology division of Glaxo Smith Kline ($16 billion), which is in turn purchasing Novartis’ vaccine division ($7.1 billion). The two drug giants will combine their over the counter divisions. Novartis will also sell its veterinary division to Eli Lilly $5.4 billion). Pfizer bid $100 billion for Astra Zeneca – which refused the offer. Pershing Capital and Canadian drug giant Valeant are bidding $46 billion for Allergan, the maker of Botox.
The New York Times reviewed other big acquisitions in the pharma industry over the past few months – including the acquisition by Sun of Ranbaxy ($4b) , Questcor ($5.6billion) and Cadence ($1.3 billion) by Mallinckrodt, and Celesio($8.3b) by McKesson. The Times reports that there have been $64.1 billion in health care deals so far this young year, most of them in pharma.
The CEO of Novartis is quoted as saying that this consolidation helps his company get to “fighting shape” to succeed in the environment with huge pressures to lower prices.
My takeaways from all of these deals and proposed deals:
1) Investors see huge future profit in the pharma industry, and are willing to invest big bucks.
2) High prices rule.
a. Questcor, for instance, has one blockbuster drug, ACTH gel, which is really an old drug purchased for $100,000. Back then a vial cost $50; now it costs $28,000. And now the company sold for over $5 billion!
b. Mallinckrodt, which purchased Questcor, has rights to the brand name Pamelor, which was first approved in 1964 and has been available as generic nortryptiline for over 20 years. I was surprised to see in the Medical Letter that this drug is now priced at $1399 per month -- 100 times the generic price!
3) The swapping of divisions will give Novartis more leverage in the oncology market, and will give Glaxo Smith Kline more leverage in the vaccine business. We should expect to see increasing prices in both areas as a result of these transactions. I’m not expecting large synergies and lower prices from greater efficiency.
Tuesday, April 22, 2014
Today’s Managing Health Care Costs
Number is 2%
I wrote last week about innumeracy and our overconfidence in the benefits of screening tests.
http://archinte.jamanetwork.com/article.aspx?articleID=1861033JAMA Internal Medicine published a small study performed at Harvard and Boston University med schools. Medical students, interns, residents, and attendings were asked:
“If a test to detect a disease whose prevalence is 1/1000 has a false positive rate of 5%, what is the chance that a person found to have a positive result actually has the disease, assuming you know nothing about the person’s symptoms or signs?”
The results are above, and they show that physicians are as subject to mistakes when they look at statistics, much like our patients (and our policymakers). This helps explain why we order unindicated tests, and then misinterpret them
Prior probability matters! If the pre-test probability of a positive result is 1 in a thousand, and a test has a 95% specificity (5% false positive rate) and 100% sensitivity (doesn’t miss a single true positive). This means in 1000 patients there will be a single true positive, and 50 false positives.
The implications of this are large. Physicians should not overestimate the importance of unexpected findings. More importantly, physicians should simply not order tests where the pretest probability is so low that the likelihood of a false positive overwhelms the likelihood the patient really suffers from the diagnosis.
JAMA Internal Medicine also published online research on the adverse mental health outcomes of false positive mammography results (which over 60% of women might have, with annual mammography). The authors demonstrated increased short term but not longer term anxiety, and suggest that the impact was small. An editorialist pointed to a “recent meta-analysis suggested the presence of persistent distress for up to 3 years”. From the editorial:
The study findings regarding more specific test-related concerns, however, do not seem trivial. The proportion of women reporting at least moderate anxiety was 50.6% in those with a false-positive mammogram compared with only 15.7% of women with a negative mammogram. If moderate or greater anxiety is considered a meaningful harm, this is an absolute risk increase of 34.9%, yielding a number needed to harm of 2.9. In addition, more women with false-positive mammograms (35.2% vs 15.4%) reported at least moderate discomfort associated with additional care after their mammogram. As expected, the proportions of women with false-positive mammograms who required additional imaging (66.2% vs 4.5% for women with negative mammograms) or any biopsy (14.6% vs 1.1%) were also substantially higher. The understandable aversion toward a false-positive result was further supported by the fact that most women (81.6%) would choose a more uncomfortable mammographic technique that had fewer false positives and would travel up to 4 hours for such a test.
7pm - updated with graphic
Friday, April 18, 2014
Today’s Managing Health Care Costs
Number is 1
Here’s a radiologist’s letter to the editor in the Boston Globe from Wednesday:
Mammograms have stood, and aced, test of time
RECENTLY, MUCH has been written, both pro and con, about routine screening mammography in women over 40 and its role in cancer detection and survival (“Doctors may oversell benefits of mammograms,” April 2). When it comes to all cancers there are two truths with no disagreement: First, the earlier a cancer is found, the greater the likelihood for cure. Second, the standard method to evaluate treatment success or failure is the five-year survival rate.
In 1975, when I started performing screening mammograms, and before mammography came into wide use, the five-year survival rate for breast cancer had been stuck at 35 percent. This means that for every 100 women diagnosed with breast cancer, only 35 were alive at the end of five years.
Mammography is capable of finding breast cancer when it is about the size of a grain of rice. Before mammography, palpation was the only way to find breast cancer. A breast lump had to be at least 1 centimeter before it could be felt. A 2 to 3 mm cancer had to grow by a factor of 4 before the diagnosis was made.
By 2005, the five-year survival rate for breast cancer had risen to 90 percent, and only a fraction of this remarkable increase in survival can be attributed to drug therapy and treatment changes.
Screening mammography works, and, statistically, results in 55 more women alive at the end of five years than in the pre-screening years.
I rest my case.
DR. DONALD A. TAYLOR Upton
This drives me crazy. Five year survival rates are terribly misleading, because “lead time bias” rules. If two patient each die of the same type of cancer with similar lethality on the same day in 2020 – but one had a cancer diagnosed through screening in 2010 and the other in 2017, the first survived more than five years with her cancer. But the earlier diagnosis didn’t save a minute of her life – and might have led to more years of therapy that diminished quality of life. And that’s saying nothing of the many women who might have required followup tests to rule out cancer, or who were “overdiagnosed” and treated for cancers or precancers that would not have caused them harm.
Further, there is strong evidence in the medical literature that a substantial portion of improved real (not just apparent) survival rates from breast cancer are from advances in chemotherapy and hormonal therapy. The rate of women dying of breast cancer, though, has not changed a whole lot in the era of mammography. We are diagnosing many more early stage cancers, but we should only celebrate this if it genuinely increases women’s survival chances.
The figure shows the numbers of 50-year-old women in the United States expected to be alive, to die from breast cancer, or to die from other causes if they are invited to undergo regular mammography every 2 years over a 10-year period, as compared with women who do not undergo mammography. Source
The New England Journal published a perspective article from Switzerland regarding mammography yesterday. An ethicist and an epidemiologist who participated in a recent panel to make recommendations about screening for breast cancer point out that it was “nonobvious…that the benefits of screening mammography outweighed the harms.” Among the panel’s conclusions:
1. It is not recommended that systematic mammography screening programs be introduced.
2. A time limit is to be set on existing systematic mammography screening programs
I especially like the graphic that the authors presented (above), which shows the subjective sense (from surveys) of likelihood that mammography will save lives compared to the literature-based likelihood. Mammography might save one life per thousand people screened – although it appears to have little if any impact on overall population mortality. I’m hoping a picture is worth a lot of verbage – and might be one way to combat our innumeracy.
Here's a graphic from Esserman, JAMA 2009 showing results of epidemiologic mammographic screening in the US
|Note that detection of regional and metastatic disease has not decreased - we're finding an enormous amount of localized cancer. Over decades, this should lead to a lower rate of detection of invasive disease. Source|
Thursday, April 17, 2014
Today’s Managing Health Care Costs
Number is 68%
Today’s New England Journal has a heartening report showing dramatic decreases in serious complications from diabetes over the last two decades. The press coverage has been swooning.
From 1990 to 2010, heart attacks were down (68%), strokes were down (53%) amputations were down (51%), End stage renal disease was down (28%). It’s striking that the only one of these complications that decreased in the nondiabetic population was heart attacks. This is likely through a combination of less adult smoking, better diet, statin medications, and improved heart disease treatment.
Diabetic care has changed dramatically over these two decades. We now fully appreciate the benefit of “tight control,” and diabetics routinely check their blood sugars multiple times a day. More use insulin pumps that can improve blood sugar regulation. There are 4 new categories of antidiabetes drugs, each of which can lower haemoglobin AIc, and some of which actually cause weight loss rather than weight gain. Insulins made from animal protein and generic insulins have disappeared. The statin drugs lower cholesterol and also decrease inflammation which diminishes large blood vessel disease. The cost of diabetic drug treatment has skyrocketed. Diabetics remain at vastly higher risk for these complications than nondiabetics (relative risk 4 for heart attacks, 3 for strokes, 19 for amputations, and 14 for end stage renal disease.)
This is great news, and good indication that a combination of public health measures (smoking cessation and focus on exercise and nutrition) and pharmaceutical therapies has made a real difference in quality of life for those with diabetes. All is not happy, though. The authors note that the increasing prevalence of diabetes and the aging of the population “suggest that the total burden, or absolute number of cases of complications, will probably continue to increase in the coming decades.”
Wednesday, April 16, 2014
Today’s Managing Health Care Costs
Number is 5.6%
We’ve all been pretty excited about the decrease in medical inflation – even if we can’t say we understand the reason why. This moderating trend is why the CBO has lowered the projected cost of the Affordable Care Act. Lower health care cost trends should free up government billions for worthwhile projects like infrastructure and education, and should finally push employers to increase real take home wages.
The decrease in medical trend coincided with the Great Recession – and the debate has been vigorous and partisan about whether the change is structural, at least in part due to the ACA, or whether it is purely macroeconomic, in which case a return to prosperity will lead to a return to high medical inflation rates.
Yesterday’s IMS report showing an increase in utilization throws some cold water on the celebration of the end of runaway medical costs. Office visits were up by 2.7% (driven by a 4.9% increase in specialist visits); hospital services were up by 13 million (2.6%) driven by a whopping 10.5% increase in scheduled inpatient services, and prescription use went up 1.6%
IMS began as a data company in the prescription drug space, and their data is most robust for prescriptions. There were 36 new drugs on the market in 2013 . 24 were orphan drugs, and specialty and oncology drugs represented 60% of the new drug spending. Patient out of pocket costs for the 2.3% of prescriptions with patient charges of over $70 represented 30% of the total out-of-pocket cost – with an average per prescription cost to patients of $145. ACA full coverage of oral contraceptives decreased out of pocket spending by $483 million. (A side note - this likely decreased overall medical costs.) About 10% of prescriptions written were not filled
Sarah Kliff, now of Vox, has a review of various sources showing increasing utilization and cost, including CVS Caremark and the Altarum Institute. The Bureau of Economic Indicators shows that health care costs increased by 5.6% (annualized) in the last quarter of 2013 – the highest inflation rate since 2004, and CMS has estimated that health care costs will go up 6.1% in 2014, largely due to increased coverage.
David Cutler is optimistic, and says that the prolonged decrease in medical cost inflation will mean that rates will not return to their previous heights. I suspect that we’ll need continued structural changes in health care to keep the rate of inflation down. We have certainly not conquered this problem.
Selected pharma-related screenshots from the IMS report below:
|Note the difference between increased costs and per capita costs. Important to note distinction as we cut the number of uninsured in half over the coming years|
|LOE is loss of patent protection. Even costs of new expensive drugs are not overcoming the pharma companies' income loss from generics, which are up to 86% of prescriptions.|
|BUT in chronic disease medications, brand pharmas HAVE put in place price increases that overwhelm the generic savings|
|New cholesterol recommendations cut push up #2 here|
Tuesday, April 15, 2014
Today’s Managing Health Care Costs
Number is $105 billion
The Congressional Budget Office released its revised estimates of the cost of the Affordable Care Act – and there are two pieces of excellent news. The first is that the total cost to the taxpayers is estimated at $5 billion less for 2014 compared to just two months ago, leading to a savings of $104 billion over the next decade. The second is that the ACA is expected to cover a million more Americans (even with this reduced price.)
Why are there such lower cost estimates? The overall rate of health care inflation has moderated substantially – and premiums for exchange health plans have come in lower than expected, decreasing the cost of federal subsidies.
Interestingly, even the increase in federal savings from the excise tax on high cost health plans is NOT from increased estimate of federal excise tax collected. It’s from expected lower employer health insurance costs that are projected to lead to more employee compensation in the form of income (which is taxed) rather than benefits (which are not taxed).
There are many false arguments that have been marshaled against the ACA, including “death panels” and “government takeover of health care.” Opponents have also labeled Obamacare as “job killing.” The CBO report helps us understand that if we can lower the rate of inflation within health care this health insurance expansion can be affordable, and can even free up more income for workers. This is especially nice to see on the eve of tax day.