Friday, July 31, 2015
Today’s Managing Health Care Costs Number is 16%
I’m used to seeing time-lapse maps of the United States that show that society is crumbling and that our health is just getting worse and worse. For instance, these CDC maps are in many presentations (mine too!) – they show obesity getting relentlessly worse.
That’s why yesterday’s JAMA has set of time lapse maps that warms my heart. It’s no surprise that Medicare costs less per person in 2013 than it did in 2009. The average age of a beneficiary went down a tad (as us boomers age into Medicare), and the Affordable Care Act meant that hospitals got much lower rate increases than expected.
It’s a shocker that mortality dropped from 5.3 to 4.85% (a 16% drop), and the number of hospitalizations of Medicare beneficiaries dropped by over 23%. Even inflation-adjusted end of life care costs dropped dramatically from a peak in 2009.
Total inflation-adjusted Medicare costs per beneficiary dropped almost 15%, from $3290 to $2801.
There’s no clear answer as to why things are getting so much better. Each successive year there are relatively fewer smokers aging into Medicare, and improvements in air quality lead to longer lives and fewer hospitalizations for those with lung disease. A combination of improved quality improvement processes at hospitals, technology and pharmaceutical improvements, and even pay for performance could all share some credit.
In the meantime, let’s bask in this great news!
(I’m riding the Pan Mass Challenge, a 192 mile bike ride to raise money for cancer research, this weekend, and will be on vacation next week – so posts will likely be sparse. Here’s a link to post from 2013 and 2014 with some musings on charity athletic events.)
Wednesday, July 29, 2015
Today’s Managing Health Care Costs Number is $14,600
There’s considerable angst among employers and Pharmacy Benefit Managers about the new PCSK9 agents – injectable biologic medicines that drive LDL (bad) cholesterols down to incredibly low (healthy) levels, even in those with genetic abnormalities that bespeak early heart attacks.
The worry is that these new drugs will cost over $14,000 a year. Statins – drugs like generic atorvastatin (Lipitor is the brand name) generally cost about $50 a year – so this is a steep price hike if the drugs are widely used.
Gina Kolata has an article in yesterday’s New York Times which shows the importance of context in pharmaceutical price setting. The article focuses on two patients who suffer from familial hypercholesterolemia – one of whom gets apharesis (a lot like dialysis) once a month because his LDL level is so high. Even with the massive inconvenience of this treatment, his risk for premature cardiovascular disease remains incredibly high. The cost of the apharesis is $8000 a month. Suddenly, $14,000 a year and the use of a tiny needle twice a month seems like a great deal!
This is the way the pharmaceutical industry would like to have us view the price of these new medications. There are currently 600 people in the US on apharesis for high LDLs – and perhaps as many as a million with the disease who are currently not appropriately treated. The approval for this new set of medications is likely to focus on those with familial hypercholesterolemia –and this isn’t a small market. (A million people at $14K each is $14 billion a year in revenue – even if only a third pay for this the drug class would still be a blockbuster) .
But the public policy worry is that the use of these medications could be far more widespread. Current recommendations would have about 40% of American adults on a cholesterol lowering medication. If 10% of those with risk of heart attack of 7.5% or more in the next ten years were prescribed PCSK9 inhibitor drugs, that would be a whopping additional 10 million users.
I have heard about a new class of drugs that will bankrupt the system for years- and the drugs whose prices astonished us a few years ago often seem spretty routine now. (For instance, I remember when a local health plan set up a special pooled risk fund to pay for mevacor (Lovastatin), the first statin, which was selling for the astonishing price of over $1 a pill.) I generally dismiss worries that the system will fall apart – the reasons why PCSK9 medications will not be widely used among those without familial hypercholesterolemia include:
· Current prevalence of drug plans with high cost sharing, so that patients will be reluctant
· Medications require an injection, which is a higher barrier than a pill
· PBMs will institute prior authorization –and make it a hassle to obtain these medications for those at lower risk
· The medications are new – and they are biologics – so it’s possible that there will be additional complications identified when they are used outside of clinical studies.
Still – identifying and pricing drug for one (rare and expensive) condition and then seeing it used for much more common (and less expensive) conditions is a common approach to maximize pharmaceutical company returns. This is done with antibiotics, antipsychotic drugs, and sometimes even drugs for orphan diseases. Once the price is set high, enlarging the market is unlikely to lead to lower prices, but it will lead to lower value for each prescription filled.
Drugs like the PCSK9 inhibitors offer a substantial clinical advance for a small group of people, but represent a further challenge to health care affordability for us all.
Monday, July 27, 2015
Today’s Managing Health Care Costs Number is 50
Paul Krugman posted two charts in his blog over the weekend.
The first shows that Medicare has historically been much better at controlling costs than private insurance. This is a reboot of a famous chart by Tom Bodenheimer entitled “The Not So Sad History of Medicare Cost Containment in One Chart”, which itself was a response to a chart from Drew Altman despairing of how to ever control health care costs, called “The Sad History of Cost Containment in One Chart”. I’ll attach these other two charts at the bottom of this post.
It’s no surprise that Medicare can control costs better than private insurers.
1. Medicare has enormous volume – it is the plurality payer for almost every physician (except for pediatricians and obstetricians), and Medicare essentially can make a market with its coverage and reimbursement decisions.
2. Medicare can unilaterally declare prices, and need not negotiate with providers. Providers can opt out of Medicare, but for most physicians that’s simply not a viable option based on volume.
3. Medicare fraud rules are severe – up to lifetime bans from participation as well as civil and criminal penalties. That’s not to say that there is not a lot of Medicare fraud – but rather to say that smart practitioners see more of a downside to “game” Medicare bills than to be creative in billing private insurers.
4. Medicare spends nothing (nothing!) on marketing. There’s no competition, so marketing is unnecessary.
5. The high costs of taking care of the elderly mean that administrative costs are low as a percentage of the total budget.
6. Medicare takes care of those who are older, and at the upper edge of age, we are appropriately reluctant to exert every last bit of new technology. We feel less willing to show any restraint
Medicare’s ability to control prices is the reason why the CBO ranked a “public option” as cost saving (with 5-7% lower premiums) as Congress was debating the Affordable Care Act. Many worried at the tiem that a public option with the negotiating powers of Medicare would destabilize the commercial insurance marketplace. That’s probably true.
Krugman’s second graphic shows that the recent slowdown in medical inflation, which was especially prominent in Medicare due to provisions of the Affordable Care Act which lowered hospital price increases, means that there is no entitlement crisis at all. Medicare and Social Security will stabilize at about 6% of the GDP, even as our population ages and medical care continues to improve.
Happy birthday Medicare!
Altman, Health Affairs 2002, The sad history of health care cost containment as told in one chart.
Bodenheimer, Health Affairs 2002 The Not-So-Sad History Of Medicare Cost Containment As Told In One Chart
Thursday, July 23, 2015
Today’s Managing Health Care Costs Number is $120,000
Today is a pharmaceutical lobbyist’s nightmare. The Mayo Clinic Proceedings released an article “In Support of a Patient Driven Initiative and Petition to Lower the High Price of Cancer Drugs” signed by 118 prominent oncologists, which highlighted the ever-increasing costs of new cancer medications. The New York Times, the Wall Street Journal, and Washington Post both piled on with front page coverage.
Statistics from the Mayo article:
· Cancer drug prices increased by $8500 a year for the last fifteen years
· The cost for each additional life year increased from $54,000 (1995) to $207,000 (2013)
· The average cost for a new cancer drug is $120,000 per year
· Cost sharing is often 20-30%, meaning that the out-of-pocket cost of a cancer drug can often be more than median household take home pay
The oncologists who authored the Mayo article suggest these steps:
Create a post-FDA drug approval agency to suggest fair prices
The point of maximum leverage is probably before approval, so it would be better for the approval agency to consider “value.” It’s not clear how valuable it would be to “suggest” a “fair” price
Allow Medicare to negotiate drug prices
The Veterans Administration is able to get substantial discounts by negotiating independently. The fragmented pharmacy benefit management industry is less likely obtain substantial discounts. However, the recent hyperinflation is not for “commodity” drugs where Medicare could threaten to take a drug “off formulary,” but for specialty drugs where there is often no reasonable alternative.
It’s also paradoxically harder for the biggest purchaser around to get very low prices, because manufacturers can offer small purchasers “marginal pricing” for incremental business, whereas they cannot be profitable if they offer to sell to their biggest customer for below their fully allocated costs.
Allow the Patient Centered Outcomes Research Institute to consider price and value in drug evaluations
It would be best to allow the FDA to do this –and to consider price when approving new medications. That still wouldn’t address the issue of runup of prices after initial approval.
Allow cross-border importation of drugs for personal use
The authors note that oral cancer drugs are often half the price in Canada. Cross border importation is always popular – but it creates friction (someone has to cross the border), and pharmaceutical companies are likely to throttle supplies in Canada if this increases.
Pass legislation to prohibit brand name drug companies from paying generic companies to delay launches of competing products
No complaints about this one. Pay for delay is anticompetitive, and we should use all available tools to prevent anticompetitive behavior
Reform the patent system
Prevent evergreening, where pharmaceutical companies are able to maintain brand exclusivity long beyond the initial patent.
Consider price when formulating guidelines
This is a groundbreaking suggestion – as we’ve historically been reluctant to consider price when formulating guidelines. Physician adherence to guidelines is not exceptionally high, but this could act together with patient price sensitivity to drive pharmaceutical companies to choose lower price points.
The New York Times article pointed to efforts in multiple states to pass legislation mandating that drug companies “justify their prices.” None of this legislation has moved forward, and that’s no surprise. An accounting exercise alone isn’t going to solve our drug cost problem. Manufacturers don’t price their goods based on production or research costs – they base their products on how valuable they are to the purchasers.
An Executive Vice President of PhARMA told the NY Times: “Some drugs, for instance, can save money for the health system over all by keeping people out of the hospital.” That’s simply not true. Drugs are priced based on their value, and if a drug prevented a $20,000 hospital stay, it would likely be priced to account for that. See here for a reference about how even though the Hepatitis C drugs prevent liver transplants, they don’t save the system money. A drug that in total saved the system money would cost negative dollars per Quality Adjusted Life Year. There aren’t many such products- childhood immunizations and oral contraceptives are the only ones that come to my mind.
Many industry sources cite the Tufts Center for the Study of Drug Development calculation that each new drug costs $2.6 billion to bring to market, even though that number includes a huge charge for “opportunity cost” assuming the pharmaceutical company could otherwise obtain an 8% return. See here for a deconstruction of an earlier Tufts Center calculation of drug development cost.
The Washington Post notes that 7 states limit out of pocket payments – but this misses the point. Firstly, state regulations don’t apply to employer sponsored self-funded health insurance plans which cover 60% of employed Americans. Secondly, the problem is the total price – not just the out-of-pocket cost. Ironically, capping the out-of-pocket costs can lead to higher prices, when the pharmaceutical companies no longer fear patient price sensitivity.
It’s great that the oncologists, many of who themselves receive (or received) pharmaceutical sponsorship, have raised this issue, and made it a part of the public policy discussion. Patent reform and restricting anticompetitive behavior could help. I suspect that shaming drug companies through disclosure requirements isn’t going to make the difference, and the US is one of the few developed countries that doesn’t exert government price control over the pharmaceutical market.
Monday, July 20, 2015
Today’s Managing Health Care Costs Number is 8.6 million
NPR covered a BMJ opinion piece last week that asserted that women should be able to self-prescribe antibiotics when they have urinary tract infections. Some in the medical community oppose self-prescription. They worry it will cause
- Overuse of antibiotics, with attendant resistance and yeast and other infections
- Use of the wrong antibiotics, since this will decrease the frequency of urine cultures
- Misuse of antibiotics, which could include not understanding that antibiotics generally decrease the effectiveness of the birth control pill, and have other drug-drug side effects
- Overall increase in the cost of health care.
But that’s just ridiculous. Young women know when they have urinary tract infections, and providers treating women with the pain of a urinary tract infection don’t wait for the results of the culture anyway. Antibiotics prescribed by pharmacists in a 24 hour CVS or Walgreens could be accompanied by any appropriate warning –and this certainly would not increase the cost of care compared to visits to physician offices, urgent care centers, or even emergency departments. Further, physicians very often prescribe the wrong antibiotics for UTIs, and we could restrict self-prescription to those few medications which are most safe and appropriate for self-treatment.
From NEJM in 2012:
Urinary tract infection is the most common bacterial infection encountered in the ambulatory care setting in the United States, accounting for 8.6 million visits (84% by women) in 2007. The self-reported annual incidence of urinary tract infection in women is 12%, and by the age of 32 years, half of all women report having had at least 1 urinary tract infection.
I see women in an urgent care center affiliated with a multispecialty group practice that has extended hours (through 8pm weeknights, and on both Saturdays and Sundays). Despite this excellent access, I frequently see women who have delayed getting treatment. Many of them have kidney infections, which are far more dangerous than simple bladder infections – and require longer courses of therapy.
I also was previously in a practice which offered a mobile app for women with suspected UTIs. Women answered a handful of questions; their answers were reviewed by a physician assistant or a nurse practitioner. If the diagnosis seemed correct and there were no signs of complications, their prescription was electronically transmitted to a pharmacy. Patient satisfaction was high, and if people had recurrent UTIs or worrisome answers to the questions, they were given rapid access appointments.
The treatment of UTIs is algorithmic and clearly dictated by evidence. These are low value office visits, and when we empower women to treat themselves we will lower costs, raise quality, and improve patient experience. Imagine the improved access we could offer when we eliminate many of these 8.6 million low value visits. This is a clear “triple aim” play.
Sunday, July 19, 2015
Today’s Managing Health Care Costs Number is 65%
OK – it’s not much about managing health care costs – but I swam my fourth Charles River swim earlier today.
When I arrived in Boston in 1977, there was debate about whether it was even sensible to invest in improving the esplanade along the Charles River. The river literally stank. Shopping carts and tires floated lazily by, and people joked that if you fell in you’d need to get immunized.
The biggest problem with the Charles wasn't trash – it was sewage. Just about every city and town along the river discharged raw sewage into the river, and the problem was exceptionally bad during rain storms when leaky storm sewers mixed rainwater with sewage, overwhelming treatment facilities.
Today was the seventh annual Charles River 1 mile race – it started in 2007 (and missed 2009 and 2010 because the water quality was meh.) At this point the EPA gives the Charles River a B+. The water quality is safe for boating 91% of the days each year, and it’s safe for swimming 65% of the days.
There has been one public swim (last Tuesday) in addition to the race; there is one remaining public swim in the Charles a week from today. Free registration is required. Details are here.
Availability of good public accommodations for exercise – like bike trails and gym equipment, and yes, even public swimming in rivers, is good for health and is necessary to address our obesity epidemic. Being sure that sewage isn’t flowing through the heart of our cities is an awfully good idea too.
Today I’m celebrating that the Charles River has come a long way since 1977.
Friday, July 17, 2015
Today’s Managing Health Care Costs Number is 177 million
NNT = number needed to treat; NNH = number needed to harm
This week JAMA published a simulation showing that statin therapy to prevent heart attacks and strokes is more cost-effective than previously thought. An editorialist points out that if the threshold to recommend therapy is a cost per quality adjusted life year (QALY) is $100,000 – we should recommend that even more Americans take statins.
The lay press headlines have been unequivocal:
New York Times “Two Studies Back Guidelines For Wider Use of Statins”
Boston Globe: “Studies May Raise the Use of Statin Drugs”
Boston Globe: “Studies May Raise the Use of Statin Drugs”
LA Times: “Even people with low risk of heart attack, stroke can benefit from taking statins, study says”
There are four indications to be on statins
1) LDL >190
2) Diabetes and LDL>70
3) History of heart attack
4) 10 Year risk of cardiac event over 7.5%
Eight percent of the adult population fits into indications 1-3, and they benefit enormously from statins. The question has been answered – and they should take statins! The benefits are huge. For instance, people who had bypass surgery when I was new in practice very frequently needed redo operations in 10-12 years. That’s rare in the era of statins (and angioplasty).
The study focused on the 92% of American adults who don’t have an iron-clad indication to be on statins. When I use the data from the JAMA article, it appears to me that use of statins for those with 10 year risk of cardiovascular disease of 7.5% will help 1 of 29 people (number needed to treat), and will harm 1 in 100 (number needed to harm). That’s a clear choice.
The researchers and an accompanying editorialist suggest that based on cost effectiveness we should lower the threshold to those at 4% or more 10 year risk of cardiovascular disease – and show that each quality adjusted life year (QALY) would cost just $81,000. These recommendations would mean that 61% of adult Americans (almost 177 million people) would be recommended to take statins.
This might be true for the overall population, but the analysis from the point of view of individual patients is quite different. Changing these recommendations would indeed save many from heart attacks (the researchers say 120,000.) They would also cause additional cases of diabetes. The proposed new recommendations would prevent a cardiovascular event in 1 of 101 new patients on statins (number needed to treat) –but would cause diabetes in 1 of 93 of those newly treated (number needed to ham).
Should we include statins for primary prevention in health insurance plans? Absolutely!
Should individuals with 10 year cardiovascular risk between 4% and 7.5% take statins? Should their doctors offer therapy – or should they be insistent?
I think it’s an individual decision – and that many sensible people would double down on their diets and exercise and not take statins to prevent cardiac disease. I wouldn’t want us to conclude that high rate of statin use among those at relatively low cardiovascular risk was a measure of a physician’s quality.
One more observation. This study once again shows that even inexpensive generic medications are only cost-effective, not cost saving, except for very narrow populations at exceptionally high risk. Drugs save lives, not dollars.
I’ve posted my spreadsheet at this URL. I calculate that the number of Americans who could be saved from a cardiovascular disease by changing the guidelines is 376,000 (not 120,000, which the authors state), and the number of new cases of diabetes would be 405,000. For this post I have used a population of 100,000 since absolute numbers aren’t necessary for NNT and NNH calculations. Please post a reply if you can tie prevented cardiovascular disease numbers to the journal article, or if you find an error in my spreadsheet)