Category Archives: Patents

There are many indications that there is no real health care “market.” That is health care companies, practitioners and suppliers competing for customers in a open system with transparency and equal open access to information about costs and quality. This article from the Boston Globe lifts the veil on pricing variations in Boston

“One reason patients don’t shop for care is that, as a practical matter, they can’t. The pay rates of different caregivers have long been treated as confidential data, veiled by nondisclosure agreements between insurers and hospitals. As a result, there has been no public notice or debate as an insurance system that a decade ago paid hospitals and doctors similar amounts for the same work has grown into one that disproportionately rewards a few.”

And if the consumer shopped for his care:

“I think a consumer that relies on the cross-section of information that’s out there and available to them, it’s akin to being a cork floating in the ocean,” said Dr. David F. Torchiana, head of the Massachusetts General Physicians Organization. “You’ll be driven in random directions by the randomness of the information that you will obtain.”

The confidentiality and closed nature of the system breeds unequal payment for care. We’re talking thousands of dollars difference for the same procedure done by similarly qualified practitioners with similar outcomes.

“If the white slip of paper directs him to do the procedure in Framingham, the insurance company will pay the hospital about $17,000, not counting the physician’s fee. If Alderman is sent to Brigham and Women’s Hospital in Boston, that hospital will get about $24,500 – 44 percent more – even though the patient’s care will be the same in both places.”

“The Blue Cross data show that about 10 hospitals – four Boston teaching hospitals and six community hospitals – are paid at least 30 percent above the state average, while 12 hospitals make at least 20 percent below average, including Cambridge Hospital, which earns about half as much per procedure as the Brigham and Mass. General.”

The system is set up a bit like a shell game. Information is withheld so as to manipulate the system. Pricing is “confidential,” the amounts paid by our insurers for our care, is not available, and the the efficiency and quality of the various provider never evaluated or revealed. In Massachusetts, by the way there doesn’t appear to be wide variations in quality to justify the price differential.

What’s damning about health care in the U.S. is that corporate and non-profit supplier’s main interest is in maintaining profits for stockholders or to increase their hold on the market, not assuring quality affordable healthcare.

Meanwhile the notions of value and efficiency in health car go begging. We need change!!

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Price competition is fundamental to the capitalist system. In a perfect world, competition leads to the right price for product and results in value to consumers. Such competition however is anathema to health care.

Why?

On one hand we have patent monopolies which allow patent holders to charge whatever they want for a product for a generation.

Second we find it difficult as a society, as health providers and as consumers to place a monetary value on health care, a surrogate for life itself.

Third, the system is full of conflicts of interests. Providers, patients and industry all have agendas. Patients want to live but don’t fully understand the nuances of the decision. Pricing information is hard to find. Industry’s interest is in profits not the best health care decision. Information on health care decisions is complex and guarded. As a result value in medicine is an oxymoron.

I’ve focused on cancer medicines in previous posts in part because pricing is extreme and also because patients with cancer perceive that they face the ultimate dilemma-pay or die. Cancer pharmaceutical pricing is indeed a death tax, a system that redistributes wealth rather than assures quality care at reasonable price.

The question is whether there is, or should be, a quid pro quo for a government granted pharmaceutical patent monopoly. One that will assure reasonable pricing. This article on Financing Drug Research offers some suggestions. Medicynic suggestions won’t cost a penny and are a good start to a new health care system:

1. Require the government and pharmaceutical companies to negotiate prices for patented medications purchased for government programs and beneficiaries. Including Medicaid, Medicare, the Federal Employee program and Tricare this would affect 100 million citizens (1/3 the population of the U.S.) Since we like transparency we should make the negotiated prices public.

2. Enforce the reasonably pricing provisions of Dole-Bayh. Retrieve the taxpayer’s contribution to drug development costs (approximately 20 billion a year to basic medical research) from patent holders and use these proceeds to defray pharmaceutical prices to consumers. This would also require the disclosure of the real development costs of pharmaceuticals.

3. Prohibit direct to consumer (DTC) advertising. In a 30 second ad full disclosure as outlined below is not possible. As a result patients do not fully understand the limits and costs of any given product. Few countries allow such advertising.

4. If we don’t wish to completely prohibit DTC advertising, require full disclosure. This would include mention of the risks of treatment and a summary of proven benefits and competing approaches in clear language that a lay person can understand. The price of the medication, with estimates of monthly and yearly costs as well as a measure of cost effectiveness (cost/unit of additional survival time or other approved measure) must be also be provided to fully inform the consumer.

5. Require clinical studies to include cost data as well as a measure of cost effectiveness (QALY-Quality adjusted life year or other) in the discussion of any phase II, III or IV study reporting positive results.

6. Monitor the FDA approval process to be certain that generics come to market quickly on patent expiration.

7. The Canadian system controls patented drug prices by not allowing marketing unless the drug is priced right. A similar program could be instituted here to decrease our pricing to the level of other industrialized countries.

8. Alternatively, link the length of patents to reasonable pricing. As part of the FDA approval process the proposed price of the new medication would be compared with similar medications already on the market and with the same medication in other countries. The same process that the Canadian patent drug review board uses. If priced a significant amount over the comparator, the patent length would be decreased by some period of time to be determined by the review process–there are many ways such a link could be structured. For unique innovative drugs the cost of development could also be factored into the pricing length of patent equation. Price increases during the duration of the patent would be tied to the rate of inflation. If they exceed that rate the patent length would be proportionally shortened.

Ten issues that go away with a national health insurance system:

1. The approximately 47,000,000 uninsured: All will have access to coverage with incentives for provider efficiency and the most cost efficient interventions.

2. The profit squeeze on employers who provide health insurance to employees: It’s estimated that U.S. car makers have expenses of over $1500/car related to health care coverage for employees. A national system, delinked from employer based insurance, allows our employers to compete on the same basis as those in other industrialized countries.

3. Our disgraceful system of health care for GI’s and their families: Incorporating the VA and military health care systems is into a National Health Insurance program provides more and better options for care. These will be community based and thus provide more convenient access.

4. The administrative duplication and fraudulent behavior of multiple insurance providers, each with their own administrative overhead and fiduciary responsibility to generate profits: It’s estimated that we spend 30% of our expenditures for health on administration ($1059/capita in U.S. vs $307/capita in Canada). That could easily be halved or more with a national health program.

5. The conflict of interest between insurers, providers and patients.

6. The crisis in emergency rooms: With insurance people will have a place, other than ER’s, to go with non-emergent medical issues

7. The dance of the veils billing system: There is no set price for services. Those with leverage, i.e. large insurers, are given large discounts while the individual pays the full amount. If everyone has insurance there will be one negotiated price.

8. Big PHARMA’s free ride: We pay more for medications than any other industrialized country. PHARMA’s mantra that they need profits to encourage creativity is bogus when one considers they spend more on promotion and advertising than research. In a national insurance scheme drug price negotiation will be the rule–as it is in the rest of the industrialized world. (see more below)

9. Bankruptcy due to enormous medical bills

10. Our mediocre health care outcomes: We spend more per capita than anyone, yet our outcomes are in the middle of the pack. With universal access we can expect this to change.

None of this will be automatic and actually having an efficient functioning system of care will require much due diligence and negotiation.

What won’t change is physician unhappiness with reimbursements and the continuing issues with intellectual property rights. No where in the world are physicians as well paid as here. We’ve made the profession entrepreneurial and money driven and in the current non-system reward procedures rather than primary care. It can be anticipated that a national health insurance scheme will want to flatten the disparities and redistribute, somewhat, the fees. One would hope this would guarantee all physicians reasonable reimbursement for their time and expenses. However, meeting the expectations of the profession will be almost impossible–as it is now.

We do need some type of protection for innovators in our system. We should not however delude ourselves that this is a “free market”. Patent protection creates monopoly and in health care that has resulted in a life threatening market distortion that we can no longer afford. We need to somehow require patent holders to price their products responsibly and to be efficient in their product development and marketing. Once again meeting the expectations of the industry and their stockholders will be almost impossible–as it is now.

But in both cases the status quo is not working.