Andrew von Eschenbach wrote an op-ed piece for The Wall Street Journal in which he proposed that, "[i]nstead, after proof of concept and safety testing, the product could be approved for marketing with every eligible patient entered in a registry so the company and the FDA can establish efficacy through postmarket studies."

John LaMattina expressed disappoint in von Eschenbach's position via a Forbes article, laying out a few criticisms. I will address just one here. LaMattina stated that physicians, patients, and payers must be convinced, beforehand, that the risk of taking a new medicine is worth the potential benefit. I agree. He went on to say that if von Eschenbach gets his way, "[t]he doctor might just as well prescribe a placebo," implying that so little efficacy data would be available that new products would be indistinguishable from placebos. I disagree.

Von Eschenbach is not pushing placebos and is not against efficacy data in general; he simply wants to move most of the expensive and lengthy process of proving efficacy from before the product is approved until after. There will still be some proof of efficacy before launch--at least from the proof of concept and safety testing--but the decision on how much more proof of efficacy would be needed before launch would be the responsibility of the pharmaceutical companies, not a government agency.

Question: How do drug companies make internal go/no development decisions? Answer: With data on safety and efficacy. I guarantee that a new drug being developed for pain, will, at an early stage, have some data showing pain relief.

As I reflect on the PPACA (Patient Protection and Affordable Care Act) legislation on the Supreme Court's docket - all 2700 pages of it - it occurs to me that it's a perfect example of the bureaucratic mindset, and why that kind of thinking can't work.

One defining characteristic of the bureaucratic mindset is an extraordinary level of obsessive compulsiveness. In this world view, the solution to a complex problem is to anticipate every possible contingency and write down what the response should be in each and every case. Of course, this approach is hopeless and self-defeating, and even worse, sets the stage for the regulated to eschew responsibility for compliance, and for abuse by agents of the bureaucracy itself.

It's a hopeless approach because you can't possibly anticipate all the contingencies, and it's self-defeating because to the extent that you even try, you create an impenetrable wall of regulation that defies mastery by any individual. That's why, for example, we have a whole industry that's evolved to help citizens with their taxes. The tax code - all 70,000-plus pages of it, is another exemplar of what the bureaucratic mindset produces.

Although it's virtually impossible to anticipate every possible contingency and prescribe the appropriate response, the attempt to do so, and the presumption that it's been done virtually eliminates the opportunity for individual judgment, and in doing so, eliminates any sense of personal responsibility. The truth is, very complex problems defy simplistic prescriptions. That's not to say that complex issues can't be regulated.

The FDA creates guidelines for an extraordinary range of complex issues involved in regulating and enforcing the Pure Food and Drug Act and its extensions. The agency has no shortage of detractors, but review of its regulatory output suggests that it attempts to avoid the bureaucratic mindset by offering guidelines, not prescriptions for managing the issues for which it is responsible.

For an example of the alternative, consider HIPAA - the Health Insurance Portability and Accountability Act of 1996. Intended to protect patients' rights to privacy of their health information, HIPAA's byzantine prescriptions and penalties have inspired an industry of healthcare providers largely clueless about the letter and the spirit of the law, who take no accountability for its accurate implementation, or responsibility for the inconvenience they create.

Finally, products of the bureaucratic mindset set the stage for abuse by the bureaucracy itself. To the extent that there is oversight, legislation like PPACA invites arbitrary and politicized action, because the requirements are so complicated and contradictory that ultimately they can be used to justify any decision. The tax code has been the "take-down" tool of last resort by law enforcement for many years. PPACA is only 2700 pages, but that's more than enough to serve the same purpose - and all the rules aren't out yet!

Implicit in the bureaucratic mindset are the following underlying assumptions:
1. people's judgments cannot be trusted.
2. bureaucrats who write regulations are sufficiently omnipotent to anticipate all contingencies and prescribe optimal responses to all of them.
3. people who genuinely want to do a good job will be satisfied following rules that others have laid out.

In short, the bureaucratic mindset is the outgrowth of a kind of terminal hubris that imagines those who create and enforce the rules as the only stakeholders worthy of any respect. We've had enough of that already. I, for one, would like to see more judgment and fewer rules. We'd all be better off for it. We might even get better health outcomes at lower cost ...

There's no such thing as a free lunch or free health care, a lesson my colleague Nicole Gelinas illustrates again in a City Journal article on, of all things, a European breast implant scandal.

It turns out that a French medical device company sold "tens of thousands" of breast implants filled with industrial grade silicon, in an effort to cut costs and boost profits. Replacing all of the implants, Gelinas reports, could cost hundreds of millions of dollars.

Hence the question: Who pays? Suing the manufacturer is one possibility, although it seems to have shut down. Eventually, Gelinas believes the bill will be paid, in whole or in part, by taxpayers:

Britain's National Health Service has said that it will pay to remove implants that women got after breast-cancer surgery. That sounds reasonable enough. But the French government has already said that it will pay to remove all victims' implants, putting pressure on Britain to do the same. ...

The NHS may pay for another reason: its medical experts could determine that doing so would avoid higher government costs later, as women suffer the ill effects of silicone seepage and come in for government-paid care. The NHS knows that it's likely to do a better job treating these women than would a clinic whose managers view them as people they will never see again. Indeed, national health officials have said that the government might pay for implant removal if women show a "clinical need," a standard they didn't define.

Clinical need is becoming an increasingly fuzzy concept in every health care system. If you're sixty years old, and want to keep jogging, should taxpayers pay for your new bionic knee? If it turns out that green tea prevents cancer, will insurance have to cover Lipton (or maybe Tazo)? How about gym memberships and yoga (regular excercise decreases stress, which is a risk factor for a number of bad health outcomes)?

The line between what's needed and what's wanted is fundamentally blurred by the third party schemes that we use to finance health care, either through taxes (as in much of Europe) or through combination of taxes and private funding (in the U.S.).

When other people pay for your health care, it creates a powerful incentive for small groups of highly motivated providers and special interest groups to demand that insurance cover everything from birth control pills to chiroprators' services. Insurance mandates lower cost for the people who use those products or services, but raises costs for everyone else (and as health insurance costs rise, more people become uninsured!).

Gelinas - and I agree with her - suggests that "government require all but the destitute to pay for their day-to-day healthcare", and that insurance (public or private) should return to its classic role paying for catastrophic costs.

This scheme wouldn't end all of our health care arguments. There'd still be plenty of debate about what constitutes catastrophic care. But that situation would be much preferable to our current system where the federal government is mandating Catholic Hospitals to pay for birth control pills - which sell for $4 for a $30 supply at Wal-Mart, to say nothing of the hundreds of additional mandates imposed on health insurance at the state level.

When insurance covers routine care it distorts how we use the the health care system (through overuse), drives up health care costs (subsidies raise prices), and shifts spending away from other public and private priorities (like education and defence).

The best defense of a catastrophic based insurance system is that it actually reflects demographic reality. Insuring the vast majority of healthy Americans against catastrophic costs would be far less expensive than the first dollar coverage for all medical expenses insurance offers today - as Chris Conover at AEI illustrates here.

The savings could then be funneled into subsidied coverage for the relatively small number of Americans with persistently high medical costs - through risk-adjusted vouchers, or high risk pools.

This would be a direct, simple, and sensible alternative to the Byzantine structure of the Affordable Care Act, which basically extends high cost insurance to the uninsured through massive government subsidies. If the Supreme Court strikes down the ACA, or if a fiscal crisis forces Congress to revisit the issue, universal catastrophic coverage should be the first market-based alternative on the table.

An interesting article in today's Wall Street Journal explores the proliferation of websites that make it easier for users to search through the FDA's "often impenetrable database" of Adverse Event Reports (AERs). The CEO of one of the sites "likens these efforts to the advent of J.D. Power and Associates safety ratings for cars. 'Suddenly, manufacturers started competing on quality,' she says. 'The best way to drive quality improvements is to make things crystal clear and transparent as possible.' "

That's true, as far as it goes. But it doesn't go very far. The Journal article discusses a number of shortcomings with the data available from AERs. "Most reports come through drug and device manufacturers, but patients, physicians, family members--even lawyers--can send reports to the FDA, and they often contain errors and inconsistencies," for example. And, although drug manufacturers are required to report any adverse events they discover, or that are brought to their attention, most incidents are never reported at all by doctors or patients.

Other problems include the fact that "there is no way to determine whether a side effect is due to a drug or a coincidence. (Device malfunctions are even trickier, since operator error or surgical skill can affect how they perform.) For another, the reporting doesn't necessarily mirror the true incidence of problems. New drugs tend to generate more reports than older ones, and a negative news story about a drug or device can prompt a sudden spike in reported problems. ... What's more, the FDA files don't indicate how widely a drug or device is being used, so there is no perspective."

Still, defenders argue that more information is better than less. " 'If your doctor tells you to take a drug and it's three times more likely to give you a heart attack than another drug, not having that information seems foolish'," says the president and co-founder of one of the sites. Ordinarily, I would agree that more information is better than less. Unfortunately, what might, at first glance, appear to be more useful information, may actually just be out of context data. And it's important to recognize that "data" and "information" are not the same.

Let's assume, for the sake of argument, that the database of AERs was sufficiently complete to provide an indication that one drug is three times more likely to give you a heart attack than another. That doesn't give you the information you need to determine whether the drug is worth taking. The most important missing factor is how effective the drug is at treating the underlying medical condition. When it comes to choosing among treatment options, patients very frequently are willing to trade somewhat higher risks for greater rewards -- particularly when the risks associated with the underlying medical condition are great. But also relevant is how prevalent the background rate of the specific adverse event is and by how much the risk of that adverse event is raised. And how does this whole mix of risks and benefits of one drug compare to those of the other drug?

I don't want to be entirely critical here. And I do certainly want to be on record as tentatively supporting the move to make FDA data easily accessible in a user-friendly way. But without taking into consideration all the relevant factors, merely reporting a certain sub-set of data is problematic to say the least -- possibly even dangerous. What if I find that my blood pressure medication or diabetes drug has a higher incidence of reported AERs than an alternative and I stop taking it before I have a chance to consult my doctor? Since we know that patient compliance with prescribed drug regimens is a genuine problem, that scenario doesn't seem so far-fetched. In such a case, the availability of data, rather than information, might actually cause me to choose a less safe course of action.

I am decidedly not endorsing the standard FDA line that " 'the best source is to read the product label and talk to your doctor or pharmacist'," as FDA director of surveillance and epidemiology Gerald Dal Pan told the Journal. FDA doesn't always have the best information. And I would, indeed, like to see better efforts by the private sector to deliver information to consumers. I'd just like to see it done better than this. It is clear that the Internet will be able to help deliver a broad range of useful information to patients. And it is already making the collection and dissemination of both risk and benefit information easier (see here for a wonderful example).

Clarimed founder and CEO Nora Illuri is right to suggest that "The best way to drive quality improvements is to make things crystal clear and transparent as possible." But when it comes to drugs and medical devices, "quality" is complex, multi-variate trait. And overall medical product quality isn't likely to improve if we focus on only one of those variables.

While Mitt Romney may like to fire people who provide him with bad services, Peter Suderman at Reason explains why many Americans with private coverage can't fire their insurer - because their employer picks their coverage and pays for it.

About 45 percent of Americans get health insurance through their workplace, and they don't have many choices to pick from. Now, some employers offer a limited choice of plans and options, but even in those cases it's far from a wide-open marketplace. For the most part, employees are stuck with the health insurance their employer offers.

The tax exclusion for employer sponsored benefits has shaped the American health care market for decades, locking people into job-based insurance, decimating the individual health insurance market, and making it difficult for people to pick a health insurance plan early in life and then stick with it. Romney frequently talks about wanting to make health insurance work more like a market, but neither he nor any of the other Republicans have proposed getting rid of the tax exclusion for employer-provided benefits.

Peter's critique is right on the money and well understood in health policy circles - but that hasn't led more than a handful of policymakers to propose ending the exclusion outright, or replacing it with a limited tax deduction. Medicare may be the third rail of American politics, but the employer deduction for health insurance doesn't seem to be far behind in its ability to derail campaigns and candidates - just think of how then Senator Barack Obama savaged John McCain's plan for an individual health insurance tax credit in 2008.

With Dr. Donald Berwick's recess appointment ending last week, the media is full of praise for his common sense approach to Medicare reform, and how his reform of the program was stymied by evil Republicans who refused to confirm him.

Writing today in the New York Times, Joe Nocera repeats the meme in his column today:

Dr. Berwick, I'm here to tell you, was the most qualified person in the country to run Medicare at this critical juncture, and the fact that he is no longer in the job is the country's loss. ...

Naturally, this view made him anathema to Republicans, who blocked his nomination in the usual way. They pored through his old speeches and articles, plucked out a few comments they objected to -- he once praised the British health care system! -- and announced that they would never confirm him.

Well, this is a story line guaranteed to evoke outrage among liberals...except that it's probably untrue.

While it is likely that most Senate Republicans would not have voted to confirm Dr. Berwick, it is also irrelevant since the President had 59 Democratic votes in the Senate up until November 2010. That means they would only have needed one lone Republican vote to have him confirmed.

And, in fact, Democrats did not even hold a confirmation hearing for him, which would have allowed him to confront and (potentially) persuade his Republican critics.

Instead, it was Democrats' tactical (read political) decision not to hold a confirmation hearing for Dr. Berwick, since the American people might have found his many past statements in favor of rationing or his praise for the British NHS health system (which actively rations access to, among other things, new cancer drugs) deeply problematic in the run up to the November 2010 elections. In fact, that record might have made it very difficult for Senate Democrats in swing states to vote for him - creating a bipartisan vote against his confirmation and a huge embarassment for the Obama Administration.

In other words, revisionist history notwithstanding, Democrats found it inconvenient to actually schedule a hearing and vote for the man who they now say is indispensable for Medicare reform.

This is not to say that much of what Berwick advocates - bringing private sector quality control and managment techniques to Medicare - is at all objectionable. It isn't. What is objectionable to conservatives is his unabashed faith in central planning, a faith that would make any Soviet era bureaucrat blush. My colleague Avik Roy makes this exact point in a recent Forbes column.

What Berwick ignored in his work - and continues to ignore - is that systems that strangle consumer choice and competition are doomed to failure, as David Gratzer and I wrote after he was nominated:

Across the economy, companies thrive by becoming more and more responsive to consumers. Innovation is driven by competition and feedback from the bottom up - the iPhone (and its smartphone competitors) is the result of decades of us demanding better and faster machines.

In contrast, Dr. Berwick (who has professed his love for Britain's government-run National Health Service) thinks that the secret to improving American health care is having experts in Washington dictate prices and force process reforms on thousands of hospitals, hundreds of thousands of physicians, and tens of millions of patients, by sheer dint of ambition and will. Alas, he has fallen victim to the Harvard Disease: the idea that having experts peer through reams of data will lead to system wide improvements.

A record tempered with more humility about the power of top-down managment and more openness to market-based reforms would've not only made Dr. Berwick more politically palatable to his critics on the right, but it would've made him a better reformer.

The Supreme Court's recent announcement that it would examine the constitutionality of PPACA in the spring was not surprising; in fact, bloggers and pundits were predicting the announcement for quite some time. So by this time next year, the Supreme Court may have overturned the law because Congress has exceeded their constitutional authority by mandating that U.S. citizens must purchase particular products or face financial penalties.

But regardless of what happens on Constitutional grounds, PPACA has heralded a new level of bureaucracy (approximately 2700 pages worth) only adding complexity and cost to a system desperately needing reform. While PPACA took on the insurance sector and attempted to create 'access' for uninsured Americans and coverage for pre-existing conditions, it did so at great cost, and didn't deal with the fundamental issues of delivery and payment reform. Ironically, and predictably, costs rose 9% in 2010 and are projected to continue down this path.

Until we address fundamental business model changes in healthcare -- focused on transparency, accountability and market based innovation centered on the consumer -- nothing will really change for the better. Everyone agrees on two things... the system is broken... and someone else needs to fix it.

Healthcare is an industry in transition -- globally. It faces sweeping regulatory change, changes in competition, technology and market expectations. At these times, innovative companies able to challenge base assumptions about their business -- their consumers, the products and services they offer and how they go-to-market -- will be the winners.

Whatever happens in the Supreme Court, we need to finish the job and do it right.

If you were HIV positive, would you treat yourself with daily doses of drain cleaner? No, you wouldn't. You would instead use a drug like Atripla (efavirenz, emtricitabine, tenofovir) from Gilead Sciences. If you suffered from gastroesophageal reflux disease (GERD), would you use electroshock therapy or Nexium (esomeprazole) from AstraZeneca to treat it? Clearly, you would use Nexium.

These two examples are black and white and virtually all reasonable people agree that the drugs mentioned above are better for those conditions.

Not all assessments are black and white, of course; some are shades of gray. We need to realize that the FDA works primarily in unclear, gray areas, with some reasonable people saying a drug works and others saying it doesn't.

On Friday the FDA revoked the approval for Avastin (bevacizumab) for metastatic breast cancer and this is controversial because many people, including breast cancer patients, oncologists, the European Medicines Agency, and the National Comprehensive Cancer Network believe that Avastin is an important therapy for breast cancer.

The government's solution is to say that one and only one judgment will prevail--the judgment of the FDA. Here's a simple solution: Let us find our own path to the truth.

You might like Ford and I might like Toyota. You might like New York and I might like California. You might like Thai and I might like Mexican. Instead of being limited to the other's choices, you and I are both better off eating our favorite foods and driving our favorite cars, just as all breast cancer victims are better off having some real therapy choices.

Black and white situations are obvious and uncontroversial. Gray situations are not obvious. It is exactly in these unclear, gray situations that the FDA should step aside and let reasonable people follow their own judgment.

Yesterday, I interviewed U.S. Rep. Paul Ryan, Chairman of the House Committee on the Budget, about the near complete absence of market signals in health care in the U.S., the future of medical innovation under the Affordable Care Act, and how providers - finally - might be coming around to the view that a market-based, patient-centered health care system is the only thing that will save them from gradual strangulation under IPAB's price control regime.

Chairman Ryan's summary of what life is going to be like under IPAB has the merit of being both true and funny:

"For providers in an [Independent Payment Advisory Board] price-controlled system, they're really just trying to pay their hostage takers to shoot them last, and that simply won't work. Providers are beginning to realize this. They're beginning to realize that hard-core price controls don't pay them based on quality. Even if they innovate, even if they work hard, even if they increase productivity, they're paid the same as anybody else who doesn't do that. They're not being rewarded in the way the market would reward them for [innovation]."

IPAB is fatally flawed in many different ways: it is entirely unaccountable, treats different providers differently (hospitals, for instance, are exempted from cuts for five years), can't change benefits or premiums for Medicare beneficiaries, and has to hit its budget targets annually, which will penalize innovations that may be high cost at first, but in the long run save the system much more money.

Switching to the defined contribution model for Medicare that Chairman Ryan advocates would have many benefits over the status quo. First, it would provide a true safety net for seniors, especially the sickest and poorest beneficiaries. Second, it would empower seniors to choose the insurance that best fit their individual needs. Third, private insurers would have a powerful incentive to coordinate care for beneficiaries, keeping costs down and improving overall quality. Finally, since Washington couldn't play favorites among providers any more, insurers would shift spending to whatever technologies or services truly offered the best outcomes at the least cost.

This is not throwing seniors to the wolves, or letting insurance companies run rampant - it simply adds much of what has been missing from health care markets up to now: price signals, transparency, and consumer choice. Competition and comsumer choice have already proven their worth in Medicare's part D drug program, which has come in more than 40% under initial budget estimates.

Chairman Ryan's plan has been portrayed as radical, but in reality it is merely a common sense approach to incorporating basic market principles into Medicare while still protecting seniors from catastrophic costs.

On the other hand, maybe common sense is a radical idea in Washington, D.C.

Now that the Supreme Court has agreed to hear a case challenging the Affordable Care Act's mandate that all uninsured individuals purchase insurance or pay a fine, we may finally learn whether Congress' constitutional powers under the Commerce Clause have any effective limits.

A recent New York Times article captured the question nicely:

If the federal government can require people to purchase health insurance, what else can it force them to do? More to the point, what can't the government compel citizens to do?

Critics of the mandate - and even judges who have found the mandate constitutional - seem to agree that this is a novel use of Congress' powers under the Commerce Clause. And, as the Times' points out, the Administration has had a tough time articulating what, if any, limits on these powers there might be.

On the left, the response has generally been: So what? This is a slippery slope argument, and there's just no way Congress would ever require Americans to, for instance, eat broccoli three times a day or buy GM cars under its Commerce Clause powers. As Walter Dellinger, former Solicitor General in the Clinton Administration put it to the Times:

"If it is within the scope of regulating commerce to set a minimum wage," he said, "one might argue, then Congress could set the minimum wage at $5,000 an hour." But that would never happen, he said, for practical, political and legal reasons.

Dellingers' point is (mostly) well taken: Congress won't do anything utterly ridiculous, because it is limited (at least sometimes) by the political consequences of its decisions.

But I'm not worried so much by the ridiculous legal implications as the utterly mundane policy implications. Upholding the mandate, and giving Congress a "blank check" on its Commerce Clause powers makes it even easier that it already is for policymakers to enact bad public policies.

The mandate itself is bad policy. Massachusetts enacted an individual insurance mandate in 2006 in the name of controlling costs and expanding coverage. It has managed to modestly expand coverage, but it has utterly failed to control costs.

And, you could argue, this is precisely because the mandate allows the state to continue to ignore the impact of state regulations on insurance prices because it now has a captive market. One of the key elements of good working markets is "exit", i.e., consumers should have the ability to refuse to purchase goods and services that they don't want. If they can't exit - or shop for other effective options - providers lose a powerful incentive to improve their services or operate more efficiently.

And because costs continue to rise at unsustainable rates, Massachusetts has had to impose price controls on insurance companies, and is currently considering global price controls on all providers. Price controls don't and can't work. They throttle innovation on the one hand, and drive rationing on the other hand.

The federal mandate also allows Congress to conveniently ignore the biggest cost drivers in the system: the open-ended tax deduction of employer provided health, and open-ended spending for Medicare and Medicaid. (Yes, they ACA contains some modest cost control provisions, but they boil down to more unsustainable price control schemes.)

If the mandate stands, consumers will be forced to purchase richer benefit packages than they might otherwise choose in a competitive market. The mandate, combined with rapid expansion of federal regulation of health insurance and federal subsidies, is a recipe for fiscal disaster.

One point that I'm sure that even Dellinger would concede is that minimum wages don't have to reach $5,000 per hour to become economically destructive. Economists seem to agree that the current minimum wage structure has at least some negative employment effects at current "low" levels, especially for some lower-income minorities.

The minimum wage law is, in fact, a great example of how the pursuit of bad policies under open-ended government powers is very much like the addition of sand into the gears of the economy: very few of Congress' decisions under the Commerce Clause are ever questioned (let alone overturned), and so while the economy easily shrugs off a few grains of sand (or a few bad regulations) tens of thousands of such "grains" eventually accumulate, causing markets to perform much less efficiently than they otherwise would.

And health care is one of the most extensively regulated (and subsidized) parts of the U.S. economy. Is it really any wonder that it's so dysfunctional?

I happen to agree with the criticism of the mandate that it's an impermissible regulation of "inactivity", i.e., it coerces individuals to purchase a product they might not otherwise purchase, at least under current arrangements. But I'll leave the legal arguments to the lawyers.

I'll just conclude by making the point that overturning the mandate - and imposing what is really a very modest restriction on Congress' Commerce Clause powers - would not restrict other, more constitutional options for health care reform. Congress would still have subtantial power to reform health care through its power to tax and spend for the general welfare. What it would do is force Congress to go back to the drawing board to try and find more incremental ways to expand coverage. From my perspective, that would be a great policy outcome.

If you're interested in how the arguments are likely to play out in the Supreme Court, this is a great primer.

Walmart is looking to join Walgreens and CVS' "Minute Clinics" as part of a growing number of retail health clinics nationwide. Many Americans don't have a primary care doc, or at least one they see regularly. To meet the need for quick and effective health services, big-box retailers have opened clinics within their own stores. Paul Howard, in his Manhattan Institute study, "EASY ACCESS, QUALITY CARE: The Role for Retail Health Clinics in New York," argues that retail clinics offer an affordable and efficient alternative to the doctor's office or in the case of the uninsured, the emergency room. Julie Appleby quotes him on Kaiser Health News today:

In-store medical clinics, such as those offered by Walmart and other retailers, could also be players in another effort in the health law: encouraging collaborations of doctors and hospitals who want to win financial rewards for streamlining care and lowering costs. Such collaborations, known as "accountable care organizations," might contract with in-store medical clinics, says Paul Howard, a senior fellow with the Manhattan Institute for Policy Research. He has studied retail clinics, some of which have recently expanded to offer services beyond simple tests and vaccinations, such as helping monitor patients with diabetes or high blood pressure.

Read Howard's study on retail clinics here.

Find Julie Appleby's article reposted at MSNBC, NPR, and National Journal.

At National Review Online's Critical Condition blog, I have a long post explaining why imposing price controls on Medicare Part D in the name of deficit reduction will lead to less innovation and fewer American jobs:

Cost cutting would come in the form of laying off workers (or reducing pay and benefits), sending more jobs and manufacturing facilities to low-cost countries abroad, or reducing investment in discovering new medicines. None of these responses should count as a winner for the U.S. economy. One recent study found that the president's proposal could reduce direct and indirect employment in the pharmaceutical industry by up to 238,000 jobs by 2021.

Reducing research-and-development spending might seem like a clear "winner" for the supercommittee, since fewer expensive new drugs would come on the market. The government's drug tab would decline rapidly (aided by the expiration of existing drug patents), but as the U.S. population aged and more people became afflicted by cancer, Alzheimer's, and other expensive chronic illnesses, we'd just spend more money on hospital care and physician care -- actually increasing overall health-care spending. (Economist Frank Lichtenberg estimates that for every $1 that Medicare spends on newer medicines, it saves about $6 in other health-care costs, mainly from reduced hospital costs.)

As they say, check out the whole thing.

Today, my colleague Diana Furchtgott-Roth testified on the marriage penalties in the Affordable Care Act:

For a bill that is supposed to make Americans healthier, the disincentives for
marriage and work under the new health care law are truly startling. Beginning
in 2014, when the new law takes effect, Americans at both ends of the income
scale will find it more advantageous to stay single than to marry, even more so
than under the current tax code. And women will face greater incentives to leave
the workforce.

You can find her testimony here.

One of the hotly debated issues that continues to surface and resurface is the question about conflict-of-interest concerns when it comes to physicians and their relationship to manufacturers and specific products. In a nutshell, critics argue that physicians should have no monetary relationship to the products they use, recommend or prescribe in the treatment of their patients. Their only concern should be their patient's well-being, and a financial tie to testing or products puts that focus at risk. Taken on face value this seems like a reasonable position. But is it?

Imagine an experienced orthopedic surgeon who decides he has a better idea for a surgical implant in the treatment of lower back pain, especially degenerative disk disorder than what's on the market. He builds a prototype, gets a patent, takes it to a manufacturer who likes the concept, agrees to invest in clinical trials and successfully commercializes the product. The manufacturer has a royalty agreement with the physician-inventor and both parties make a lot of money as the market realizes the superior value of the product based on legitimate, objective outcome data. So what's the problem? If the inventor believes in his product line, thinks it's in the best interest of his patients to use it, why should he be penalized from using it... and since he invented it, why shouldn't he be compensated for it? Based on some policy positions this isn't a good thing.

The New England Journal of Medicine has a thoughtful article on labor productivity problems in health care:

Of the $2.6 trillion spent in 2010 on health care in the United States, 56% consisted of wages for health care workers. Labor is by far the largest category of expense: health care, as it is designed and delivered today, is very labor intensive. The 16.4 million U.S. health care employees represented 11.8% of the total employed labor force in 2010. Yet unlike virtually all other sectors of the U.S. economy, health care has exprienced no gains over the past 20 years in labor productivity, defined as output per worker...

Zero. Zilch. Nada. No productivity growth in the past 20 years, even as health care employment has surged and the rest of the economy has benefited from enormous productivity gains. (Arnold Kling and Nick Schulz also discuss the productivity problem in depth in a recent National Affairs article.)

Why is labor productivity in health care so appalling? Lots of good reasons, but here's the fundamental one: Our health care system, as its constituted today, has no incentive to ask whether the adoption of any new good or service is actually "worth it".

In other sectors of the economy, if a business makes a bad capital investment, or hires too many workers, they will go belly up as prices rise beyond the tolerance of consumers. Consumers will refuse to buy their services, and switch to more efficient competitors. Third party payment systems (especially Medicare) have so insulated consumers from prices that there's no reason for health care providers to become more efficient. In fact, they usually lose revenue if, for instance, they do a better job of reducing hospital readmissions.

In health care, if a hospital makes a bad decision to add a new wing, or buy some fancy piece of technology they don't need...there'll be a ribbon cutting ceremony and policymakers will cheer them on.

Until we find a way to drive real competition - and thus real productivity gains - in the health sector, health care spending will sap resources from other, more productive sectors of the economy.

Having written pieces on the issue of regulation and innovation... one of which appeared in Medical Progress Today... (Regulation's Impact on Innovation: A Two-Edged Sword) I was struck today by a blinding flash of the obvious.

The Senate Finance Committee has gone on the war path against three of the nation's largest home health agencies, potentially setting in motion a fraud and abuse case. At the heart of the attack is mounting 'evidence' that alleges these companies changed clinical practice to maximize reimbursement based on guidelines set by Medicare, their largest customer. Really?

The goal of business is to maximize shareholder value, and value is realized when products and services meet a need for a defined market segment. In this situation, Medicare was concerned that eligible patients wouldn't get the required visits they needed, so it created bonus payments for companies to provide more services. Clinical practice was allegedly modified to maximize the new incentives that CMS instituted to drive certain behavior.

Assuming this is true, why the Senate Finance Committee should find this surprising is the real surprise here! If CMS was really interested in the quality and appropriateness of service delivery, it should focus on outcomes and audit the quality and appropriateness of the services delivered and the outcomes achieved.

Unfortunately, not trusting the industry to deliver appropriate services based on clinical judgment, it chose to create payment incentives instead. It wanted to ensure more services would be performed; it got what it wanted -- more services -- and now it's spending taxpayer dollars looking for evidence of abuse. Reward volume, and you get volume. It's that simple. The government should see providers' behavior here as a consequence of its own actions.

CMS has a role and right as payer to demand accountability for the quality and effectiveness of what it's paying for. Better yet, the consumer should be expected to drive accountability, since they're the ones receiving the services, and they do this in the purchase of goods and services in other parts of their lives.

Prostate cancer survivor (and former "Junk Bond King") Michael Milken has an op-ed in today's Washington Post, discussing the recent U.S. Preventive Services Task Force recommendation that otherwise healthy men should not routinely get a PSA test to check for prostate cancer. Although high levels of prostate-specific antigen (PSA) may signal the presence of prostate cancer, the test yields many more false-positive than true-positive results, which in turn leads to unnecessary treatment that is itself often dangerous--sometimes leading to incontinence or impotence.

Milken acknowledges the risks of over-treatment. But he instead calls for more, rather than less, testing because it can "raise a red flag calling for a doctor-patient dialogue on medical options, risks, benefits and costs. We need to make better use of it, not ban it, and, as the American Cancer Society recommends, better inform patients of overtreatment risks." He then argues that the Task Force "recommendation could produce a cruel form of rationing in which the well-off and well-informed would get PSA tests while many of the poor wouldn't."

Rapidly rising costs - mainly attributed to new technologies and new medicines - have been a major concern in the United States for decades, resulting in several attempts to emphasize value over pure clinical efficacy. These can be traced back to the birth and growth of HMOs, even the name of which ("Health Maintenance Organizations") pointed toward the concern with value - "we won't just treat ill health, we'll prevent it", which is generally agreed to be the more cost-effective approach.

More recently, Consumer Directed Health Plans have been billed as a way to get people to weigh the costs and benefits of different treatments, putting the onus on them to make rational economic decisions about which products to use (or not use), and promoting activities that prevent or mitigate disease (out with the hot dog, in with the gym membership, salad, and statins).

Some have derided these plans as a way to shift risk and cost away from insurers and employers and onto the insured, and that is one of their effects. But critics also ignore the potential for these plans to challenge companies to design and market higher value products at lower costs. Shifting of costs and risks - if done well - will create better incentives for value-conscious consumption of health care than trying to set directives from the top town via restrictive national reimbursement policies. (This is the more popular approach in Europe, although the U.S. has avoided this route, so far.)

In a truly consumer-directed marketplace, caveat venditor: Let the seller beware. Demonstrating clinical effectiveness simply won't be enough for today's savvy consumer who can compare treatments on Web MD and buy $4 generics at Wal-Mart.

Building consumer value is something that Apple, Target, Amazon have mastered. If they want to avoid sclerotic, price-controlled markets, pharmaceutical and device manufacturers are going to have to master the same consumer value equations. For some thoughts on how to do this, see here.

The Medical Progress Today blog provides a forum for economists, scientists, and policy experts to explore the scientific, regulatory, and market frameworks that will best support 21st century medical innovation.  We will focus especially on the U.S. Food and Drug Administration, the agency responsible for overseeing the nearly half-trillion dollar drug and medical device markets in the United States.

The blog will range widely in terms of topics and POV.  But, at its heart, MPT is about harnassing the power of science, market incentives, and (prudent) regulation to create the kind of health care system that we all want - more effective, efficient, and affordable.

We live in a time of breathtaking advances in the capacity to treat--and cure--illness. The translation of the human genome and an explosion of information from new sciences like metabolomics and proteomics have given researchers powerful new tools for understanding, treating and (eventually) curing deadly diseases like cancer and Alzheimer's. The old medical paradigm treated illnesses symptomatically with one-size-fits all medicines; the new paradigm will analyze disease at its molecular roots and to develop personalized therapies that match a patient's own unique biochemistry.

The question is not whether personalized medicine will become a reality, but when. Innovation is currently struggling in the face of regulatory, reimbursement, and insurance frameworks built around public health assumptions that fit the middle of the last century, rather than the first decades of the 21st century.

Turning personalized medicine from an aspiration into a reality will require regulators, companies, and researchers to breakdown binary regulatory frameworks; develop collaborative approaches to rapidly validate new technological standards; and embrace clinical tools that allow patients and physicians to become full partners in the innovation process.

Through both this blog site and the original essays it will commission, MPT will provide a forum to explore the most current ideas--and emerging challenges--in the field of personalized medicine.

We hope that you will find MPT a vital and provocative resource for building a health care system ready to embrace the full potential of personalized medicine and sustain U.S. leadership in biomedical innovation.