Medical Progress and Its Critics
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I'd like to riff for a little bit on Jim Pinkerton's earlier post on whether we should be bullish about the future of medical innovation, or more cautious for any number of reasons.

The forces he talks about are all very real: green eyeshade accounting that is increasingly skeptical of the economic benefits of medical innovation, trial lawyers and bureaucrats whose job it is to ensure that even good intentions are punished, and a polarized political debate that ensures that even government's capacity to create a hosptiable framework for innovation (which it can do) is paralyzed.

I think there's something to be said for all of those problems, but I'm still bullish - in the medium to long term. As for what country we should be bullish about, that's a good question.

I also don't think that the life-sciences industry is quite where aviation is today - although his point is well taken. Huge gains were made in public health and longevity at the beginning of the 20th century, with the declines tailing off in the last seveal decades.

Still: heart disease mortality has fallen by roughly 50 percent in the last 50 or so years. AIDS, though still incredibly dangerous in poorer nations, has been tamed. The war on cancer has seen some impressive tactical victories, even though much of the field remains enmeshed in the molecular equivalent of trench warfare (slogging through the massive reams of data emerging from cancer genomics, etc).

I think a better description of where we're at now is that the last generation breakthroughs in medicine, for want of a better term, blockbusters targeted at large populations, has run its course. Maybe somebody will come up with a better statin, or better blood pressure drug, but patent expirations for many good drugs have made that hill an awfully big climb at both the FDA and with payers.

That also coincides with wealthy nations in the U.S. and Europe discovering that their current health care and pension entitlements are not sustainable given the graying of the population and slowing economic growth. That gives the upper hand to the green eyeshade types who's first impulse when they see a new drug or a new device is to say "no".

But, as Jim has written elsewhere, no amount of cost-cutting will allow us to grapple with the financial tsunami of caring for Alzheimer's patients; or deal with the inevitable rise in chronic diseases.

We can't continue subsidize the current U.S. health care system. I'd sum that up as socialized medicine at capitalist prices for taxpayers. Until consumers face real price signals in health care, the system will continue to be an expensive and inefficient mess.

Where will the innovation come from? First, I think we need better incentives for the right kinds of innovation. As I understand it, nearly 60% of health care costs are invested in labor. We need to reward innovations that sharply reduce health care labor costs, or substitute less expensive labor (nurses) for more expensive labor (doctors) through better diagnostics and decision support tools.

In a world where consumers drive more of their own health care decisions and are also are financially responsible for more routine care, I think we'll see quantum leaps in care coordination, along with labor saving devices.

Think about it: most of what you want to know from your doctor is driven by what he or she knows from a little bit of blood that is analyzed by the lab. Without the lab, the doctor's utility to you is sharply decreased. The biggest value to the patient is in the prevention and monitoring disease through "biomarkers" like blood pressure, cholesterol, sudden weight gain (or loss), etc. I could easily imagine most of that work done cheaply while you're shopping for groceries, at your local retail clinic staffed by a nurse that sends a report to your Gmail account.

When we become seriously ill, we want information from the best and the brightest, not the middle of the bell curve. That means a service economy in health care information (like Best Doctors) that makes that knowledge available to the average patient, not to only the elite patients. As the costs of whole genome sequencing drop, the kind of personalized cancer care that Steve Jobs sought for his cancer, will become available to all.

When will this disruptive innovation arrive? I think that all of the basic technology is either already here, or will be soon. But the system isn't designed to encourage entrepreneurs to displace the very labor and capital intensive parts of the system, which will fight fiercely to preserve the status quo.

But I think that's a rear guard action that they'll eventually lose. They're just to slow and expensive, and the molecular revolution, moving even faster than Moore's law, will eventually break their monopoly on patient care.

So I'm (relatively) optimistic that we'll see a discontinous leap in health care productivity when we get the incentives right. And that should have other economic benefits, not only by freeing up money for other productive uses, but by allowing us to reconfigure retirement so that turning 65 is more like, say, graduating from college.

Maybe you take a few years off to travel or write your first Great American Novel, but then you'll return to the labor market because you've still got 30+ years of productive work ahead of you.

What country will embrace this vision first? I don't know. I think the U.S. has the best combination of the software skills, social networking, and life-sciences assets to make networked molecular medicine a reality, but we could just as easily get leap-frogged by someone else.

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