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I grew up, as did many people, believing that government agencies protected us in many ways. It seemed obvious that an agency named the Environmental Protection Agency protected the environment from would-be polluters and the Department of Education advanced the educations of Americans. As an aside, the government has long been acutely aware that names matter, which is why bills are named the Affordable Care Act and the Clean Water Act. Who could be against affordable care or clean water?

As I got older and went to college and then graduate school, I took economics and public policy classes and learned the problems with government agencies and the benefits of freedom, decentralization, spontaneous order, and self-regulating free markets. I changed my views and saw government agencies, such the U.S. Food and Drug Administration, in a new, more critical light. My perspective changed again, slowly and largely imperceptibly, when I went to work in the pharmaceutical industry. I was so busy dealing with my new responsibilities that I virtually stopped thinking about public policy issues. Then, one day, I noticed that I again believed in the FDA. If we didn't have the FDA, I thought, what menagerie of dangerous and inefficacious drugs would be on the market? Without the FDA, Americans could be dying. My thinking had come full circle, largely in the background and on automatic pilot.

This didn't mean that I liked or even respected the FDA, as I heard all the damning stories of the FDA's internal workings. I think at this point, however, my views were pretty consistent with many employees in the pharmaceutical business: The FDA was a messed up government bureaucracy that still performed a critically important function.

These days I think and write more about drug regulation and the FDA and my views have continued to evolve. I'm excited because I'm thinking about these issues more clearly than before, but I keep coming back to the same question: Do we really need the FDA?

I'd like to hear the stories of others. Have you always had the same view of the FDA and drug regulation? Has it changed over time? If so, why? What triggered the change? If it hasn't changed, when did you first become aware of your view?



As Milton Friedman once said, "I don't think the state has any more right to tell me what to put into my mouth than it has to tell me what can come out of my mouth." Of course, the state doesn't agree and the FDA's whole raison d'ĂȘtre is to tell us what we can put into our mouths.

Now consider Andrea Sloan, a vibrant woman fighting advanced ovarian cancer. She has been through countless therapies that have kept her cancer in remission, but it has returned once more. Now her doctor informs her that she has run out of options. "We had the conversation where he told me to get my affairs in order." In other words, prepare to die.

In the midst of this despair, she learned of an experimental drug, named BMN 673, which is being developed by the California biotech company, BioMarin. According to Dan Spiegelman, chief financial officer: "As a phase two small patient study goes, it's as good as it gets. We think our numbers stack up well at this level. The drug is clearly the most potent of the compounds we're talking about." BMN 673 may yet help Sloan with her ovarian cancer.

Of course, any drug, even an approved and marketed drug, has risks. Sloan understands these risks and still wants to try BMN 673. "I just want a chance to live a long and healthy life and I'll continue fighting until I get it." In other words, she's going to die anyway, so why not try a drug that might possibly work? A chance of living is always better than no chance.

There's one big problem. The FDA has not approved BMN 673 and BioMarin is not offering BMN 673 under a so-called compassionate use program. Now, you might blame BioMarin for not offering this new drug to Sloan and perhaps BioMarin deserves to be rebuked. But BioMarin is only a player in the drug development game and it is the FDA that wrote the rules. The FDA does allow companies to give experimental drugs to people in certain life-or-death situations. However, if Sloan suffered some sort of problem or, worse, died while taking BMN 673, it could preclude the subsequent development and FDA approval of BMN 673.

Companies know how difficult and dangerous the FDA's drug approval process is and they respond rationally by behaving conservatively. This is an example of that behavior. If Milton Friedman got his way and the state didn't tell us what we could put into our mouths, I have no doubt that Andrea Sloan would already be on BMN 673 therapy. This is just another example of how the FDA's policies kill Americans, all the while presenting BioMarin as the bad guy who says "no."


The cardiovascular benefit of statins is anything but news. But a very large retrospective study from Taiwan may bring the utility of these drugs to an entirely new level--it appears that the use of high dose statins cut the risk of senile dementia in older people. And by a lot.

And if there is one area where medical progress is sorely needed, it's Alzheimer's Disease. Because, despite being the target of vast amounts of research, all we really have is a vast amount of failures.

Treating Alzheimer's is bad enough (and the treatments for it are plenty bad). But preventing it? With the exception of taking steps to reduce vascular dementia (due to strokes)--forget it. Every vaccine, therapeutic or preventative, has been a total bomb.

Statins have been suspected of both increasing and decreasing dementia. Ironically, one reason that this study was conducted was to see whether cognitive dysfunction was a possible side effect of statins.

It didn't exactly turn out that way.

In a presentation to the 2013 meeting of the European Society of Cardiology, Dr. Tin-Tse Lin and Dr. Min-Tsun Liao of the National Taiwan University Hospital reported that not only didn't statins adversely impact cognitive function, but they had a significant protective effect .

Lin and colleagues used a database of one million people covered by Taiwan's national health insurance program. From this sample, about 57,000 people (aged 65+) with no history of senile dementia were selected during the period of 1997-1998. About 15,000 of these participants were taking statins.

During the 4.5 year follow-up period, about 5,500 people developed non-vascular senile dementia (not caused by strokes or blockages). And the data from this group are fascinating.

As shown in Figure 1, there was a substantial and dose-dependent difference in the number of dementia cases for participants who took statins--the higher the dose, the lower the risk of dementia. Also, the more potent statins showed a larger effect than the less potent, which in effect, strengthens this dose response trend (which is already impressive).

Screen Shot 2013-09-11 at 10.42.50 AM.png
Figure 1: Dose Response of Statins (Source:http://www.theheart.org/article/1578833.do). For clarity, hazard ratios (given in the report) were converted to percent reduction: 1.0 minus HR times 100 = percent reduction.

For example, for rosuvastatin (Crestor), the low, medium and high dose groups showed a reduction in the incidence of dementia by 63, 87, and 87(!) percent, respectively.)

The relationship between the potency of the particular statin and protection against dementia is similarly interesting (Figure 2, below).

There is clearly a relationship between the inherent potency of the statins (at equivalent doses) and their effect. For comparison, the low-dose group is used as an example). The potent statins (atorvastatin and rosuvastatin) clearly outperform the less potent statins (e.g., lovastatin) in reduction of dementia.
Screen Shot 2013-09-06 at 12.38.55 PM.pngFigure 2. Correlation of statin potency (low dose) with percentage of dementia reduction . Rosuvastatin is arbitrarily assigned 100 for reference purposes.

Of course, as a retrospective study (albeit a very good one), there are built-in limitations. It cannot prove that statin use will protect you against senile dementia--only that there is a strong association between the two. Cause and effect can only be determined by a prospective controlled study--something that will surely be done now.

This is far from definitive, but given the huge number of participants, the robust dose response, and the relationship between the strength of the statin and the magnitude of the response, it would seem that they are onto something here.

And when you add the fact that non-vascular-related dementia was excluded from the data, suggesting that the is more going on here than statins acting as lipid-lowering agents, it gets even more intriguing.

It is doubtful that high dose statin therapy for seniors will become standard practice anytime soon, but these results are certainly intriguing. Anything that can help combat Alzheimer's--perhaps the most devastating of all diseases--would be an enormous medical advance.



I gave a "Making Great Decisions" talk with my coauthor, David Henderson, to a successful mortgage lending company in late September 2006. Coincidentally, that was right around the start of the subprime mortgage crisis. Little did they know that they would be filing for bankruptcy in less than three years. Before you start faulting any advice we might have given them, you should be aware that the all-day meeting didn't go well and our clients exhibited a strange combination of disinterest, obtuseness, and belligerence. We were paid for our time and then sent away, but certainly never invited back.

What struck me as interesting was how this company set its mortgage rates. Everything was based on statistical analysis. The company had good computerized data which it analyzed thoroughly to set its rates and decide who to lend to. The first problem is that this good data hadn't been available for very long, so most of the history being analyzed had occurred during a period of low interest rates, economic growth, and stability. The second problem is that statistical analysis, while powerful, is equivalent to driving by looking in the rearview mirror. Statistics is concerned primarily with what has already happened, not what may happen. Decision analysis, on the other hand, focuses primarily on what may happen in the future. Decision analysis is the study of decision-making within uncertain and sometimes risky situations, and is inherently forward-looking.

How does all this relate to health care? Simple. The American health insurance market is about to undergo significant upheaval with the rollout of the Affordable Care Act (aka Obamacare). Here's what a recent Wall Street Journal article reported about the trouble facing insurers: "But because the marketplace created by the law is new, he says, there is no previous pricing or demographic information to help calculate rates. 'There is no experience,' Mr. Whisler says."

Exactly. Insurance companies are in the same position today that mortgage lenders were in circa 2005. Those companies that rely heavily on statistics are hereby forewarned that the future will not be like the past. The precise analysis of a market that no longer exists will not prepare them for a new world. What these companies need to do, instead, is use the techniques of decision analysis and think about what may happen, not focus on what has happened. The future isn't written in any book--we are actively creating it.


Has a third barrier to market access emerged to hinder the pharmaceutical Industry?

First, it was regulators that stood in the way of pharmaceutical products getting to market. The past decade or so has been a fallow period for the pharmaceutical industry in terms of the number of NMEs approved by regulators in the US and other major markets. However the past two years have seen an uptick that suggests that the industry might be, at long last, reaping the rewards of its investments in R&D and licensing to bring products to regulators with the data necessary to receive approval. While increasing its success at getting over the regulatory hurdles, the industry has faced increasing challenges in getting someone to actually pay for its products once approved for sale.

The second hurdle has been - and continues to be - payers who refuse to reimburse for products that do not demonstrate both economic and clinical value compared to the existing standard of care (see NICE, CMS lowering reimbursement rates, step-through programs instituted by private payers, etc.). Companies are only just beginning to realize the importance of market access as a goal rather than a corporate function that negotiates prices and rebates with a formulary manager. Building the capabilities to deliver the data that supports a product's value proposition to payers (as well as physicians and patients) has been a long, and in some cases, painful journey.

Even as pharmaceutical companies come to terms with the needs for CER and RWE in support of efforts to market their products, they may need to deal with an additional access barrier in certain markets: The patent office.

While pharmaceutical companies had to defend their patents against challenges from generic manufacturers in the past, they have not had to demonstrate any benefit for their products in order to receive and maintain patents. The sole criteria for being granted a patent was that the product was novel - not that it worked or that it was even safe.

In recent months the Indian patent office has refused to grant or has rescinded patents on pharmaceutical products on the grounds that they were not innovative enough. In addition to recent revocations of patents for two Allergan eye drugs (Ganfort and Combigen) the Indian patent office has rescinded patents on Pfizer's cancer drug Sutent, Roche's Hep C drug Pegasys, and a Merck asthma medication.

While this trend has not yet extended to other emerging markets, the Indian market is one of the highly anticipated engines of future growth for the industry. Pharmaceutical companies will need to demonstrate economic and clinical evidence of their product's innovation in order to persuade yet another stakeholder - the patent office - that the product is of sufficient benefit to the Indian population to be granted and to hold onto a patent.

The good news is that the same capabilities and data that are needed to convince payer stakeholders can be leveraged with the patent office. This additional hurdle simply provides added urgency for companies to undertake a fundamental rethinking of market access from the days when the regulator presented the largest barrier to entry.



A few months ago I asked: What is happening to health care in America? My answer was that no one really knows. Since then, events have reinforced this conclusion.

(1) The health care "law" is a moving target. President Obama unilaterally delayed the ACA's employer mandate by a year. His administration also delayed by one year the law's limits on patients' out-of-pocket costs. Now, to quell uproar among Congressional members and their staff, the Office of Personnel Management is planning to give extra money to those higher-income government employees set to lose their subsidized health coverage as they shift from the Federal Employees Health Benefits Program to coverage under Obamacare. These employees currently have generous coverage but, absent this revision, won't qualify for subsidies under the ACA. Without these subsidies they warn of a "brain drain." Will this stand? We don't know.

(2) You will note that it is the Democrats who are complaining the loudest to Obama about losing their subsidized health insurance. These are the very same Democrats who voted for the health care law just a few years ago. Now, if there was any doubt, it's clear that the lawmakers who voted on Obamacare had not read or had not understood what they were voting on.

(3) Obamacare's affects may vary widely between one person and another and between one company and another. For instance, a pharmaceutical company that markets hypertension or cholesterol drugs might see a different outcome from a pharmaceutical company developing and selling medicines for multiple sclerosis. The former therapeutic areas have room for higher patient treatment rates while most MS patients are already being treated. Anyone who says they understand how this will play out must first understand it from all such sides. There is no one answer.

(4) The 906 pages of the Affordable Care Act are being converted into tens of thousands of pages of "real" laws by the government regulators who are responsible for implementing the law. Who really knows what these regulators will come up with? I don't. They may not either.


The following exchange is a result of an op-ed from July 2012 where I debunked the utter nonsense that naturally occuring and plant-based drugs are better and safer. Someone took exception. Couldn't resist.

"You're just joshing."

No I'm not.

"Several Native Nations herbal healing traditions observe the benefits of the use of white willow bark for pain relief".

Big deal. The Chinese used to use elemental mercury as a laxative. Because something was used 5000 years ago, this means that it is somehow superior to what we use today? Can you say "Luddite?" And FYI, aspirin was invented to mitigate the stomach problems that salicylic acid was causing. Plus it actually works. And salicylic acid is used to remove warts.

"One would think the practice would have been discarded generations ago if the conditions associated with salicin had been widespread."

It should have been. Yet some people are so ideologically blind that they cannot accept the fact that medicine is just a *little* better off than it was back then.

"oh, that's right, you indirectly group Native Nations herbalists with ignorant Europeans who believed in a flat Earth, an Earth-centered solar system and alchemy's base metal to precious metal conversion myth."

Nice logic. Because people were scientifically ignorant 2000 years ago, that means that they are now. If I read you right, since the majority of people on earth didn't accept Copernicus 600 years ago, that means you shouldn't take an aspirin. Give me a few years and I'll try to figure out your logic. Make that a few centuries.

"Don't forget the "medical practitioners" who believed in bleeding for gout, who administered liquid mercury for a wide variety of medical complaints, and who refused to observe hygiene as a basic protection against bacterial infection until a blind researcher stumbled on the discovery of the association of certain strains of bacteria with certain disease processes."

You need to fact check. I don't think John Snow (who put 2 and 2 together, solving the 1850's cholera epidemic) was blind. But he may have needed reading glasses.

"You appear to debunk the people's chemist's assertions about aspirin by selectively attacking his advertising mis-statement that Mother Nature is the source of aspirin, and his hyperbole about the chemical giant, Bayer's motives for patenting its creation, aspirin. Granted: aspirin is sourced from plants".

No it's not. Aspitin is synthesized from salicylic acid, which is in plants. There is NO aspirin in plants.

"Granted: Bayer is legally able to patent the processes it developed for synthesizing aspirin from plant life. Common sense."

Absolutely, except for the common sense part. The patent for aspirin ran out 15 million years ago, so I have no idea what you are talking about. Nor do you, it seems.

"however, as a debunker who surely is interested in balancing both sides of the argument."

No I'm not. I'm interested in the truth. Science is not a democracy. And if I had to spend my time responding to every crackpot conspiracy theory. I would simply not have time to take care of more important priorities in my life, such as sorting lint and collecting Sponge Bob memorabilia.

"why no discussion of the people's chemist's scientifically justifiable attack on industrially derived aspirin's horrifying range of documented side effects?'

1) Because I didn't feel like it. 2) If aspirin is so bad, please explain why Americans consume 80 billion pills per year, yet the zombie apocalypse has yet to happen. Except on The Walking Dead, which is just plain awesome. (P.S.-should you choose to watch it, I'm just letting you know that it isn't real. And if you somehow believe it *is* real--not unlikely, given what I've read from you--please feel free to blame the pharmaceutical industry, which we all know is responsible for the assassination of Archduke Ferdinand of Austria, traffic on the Cross Bronx Expressway and the price of pork bellies on the Chicago Mercantile Exchange.

"internal bleeding, potentially deadly ulceration of tissue in the lining of the stomach and small intestine, Reyes syndrome in flu and chickenpox sufferers who have been administered aspirin, aspirin allergy-induced asthma."

I guess that explains why the lifespan of Americans is going up every year.

"According to the Mayo Clinic, "Side effects and complications of taking aspirin include:
1) Stroke caused by a burst blood vessel. While daily aspirin can help prevent a clot-related stroke, it may increase your risk of a bleeding stroke (hemorrhagic stroke).
2) Gastrointestinal bleeding. Daily aspirin use increases your risk of developing a stomach ulcer. And, if you have a bleeding ulcer or bleeding anywhere else in your gastrointestinal tract, taking aspirin will cause it to bleed more, perhaps to a life-threatening extent.
3) Allergic reaction. If you're allergic to aspirin, taking any amount of aspirin can trigger a serious allergic reaction.
4) Ringing in the ears (tinnitus) and hearing loss. Too much aspirin (overdosing) can cause tinnitus and eventual hearing loss in some people.
Do you accept the authority of the Mayo Clinic, Josh?"

I sure do. But you don't. You are taking all the potential side effects of a drug (and this applies to *any* drug). Failing to take into account both the risks and benefits of a drug is de facto proof of an illogical and ignorant analysis. Such a trite mindset. According to your "logic" there isn't any drug in on earth that should be taken, unless it comes from some weed or whatever.

Normally I wouldn't bother to respond to this, but 1) I'm in a bad mood today 2) your comments were so obnoxious that I just couldn't resist 3) Just in case we have any future encounters, don't try to out-obnoxious me. It's like pulling a sword on Zorro.

I mean this with love.


As if the FDA doesn't have enough to do.

Yes, they sure do, but this didn't stop them from issuing a warning last week that is so ridiculous that it gave me a headache.

But, if you believe the FDA, I'd better learn to live with that headache, because if I happen to take anything to relieve it I could end up taking an unplanned dirt nap. At least that's their message. Which will no doubt scare the hell out of many people, and for absolutely no reason.

But it also provides a great opportunity to examine the data behind this warning and recognize how absurd it really is.

For reasons that are entirely unclear, the FDA decided that acetaminophen (Tylenol) must now carry an additional warning that the drug can cause Stevens-Johnson Syndrome, a very serious (and potentially fatal) condition where epidermal cells die, causing the skin to slough off the body. SJS is an acute dermatological emergency.

There are multiple causes for this rare condition, including viral and bacterial infections, UV light or radiation exposure, but most cases are thought to be caused by allergic responses to certain drugs.The drugs associated with SJS include antibiotics (especially sulfa drugs), non-steroidal anti-inflammatory drugs (NSAIDs), and anti-seizure medications. And now acetaminophen is on the list. But why?

The FDA warning notes that there have been a whopping 107 cases of SJS (and 12 deaths) over a 43-year period that have been associated with acetaminophen use. Since Americans swallow about 30 billion acetaminophen-containing pills each year, a little math tells you that 1.3 trillion of them have been consumed during this time frame. And they are worried about 12 deaths over 43 years from 1.3 trillion pills? This is probably about the same relative risk as choking on a tuba.

So, what should Americans should do with this information? Should we stop taking Tylenol and switch to Advil? Probably not, since Advil (ibuprofen) is an NSAID--a class that is also linked to SJS. Should we simply live in pain because there is a barely minuscule chance that someone will have a bad reaction to a drug?

No, we shouldn't. Which is why the FDA warning is both ludicrous and harmful. They are telling people that if you take acetaminophen you need to be on the lookout for the symptoms of SJS. This is certainly helpful, since otherwise I wouldn't even consider seeking medical help if skin started falling off my body.

This is nothing but a useless and counterproductive scare. The label change will cause some people to avoid the drug, but will have absolutely no benefit. This is hyper precaution at its worst.

I'm more than willing to take my chances with the pills, but if you give in to the FDA's baseless warning and chuck all your pain relievers, it's no skin off my back.


The pharmaceutical industry - collectively and often individually - has tarnished its own reputation through unethical commercial practices such as off label promotions, bribery in China, covering up (or at best, not being as forthright as they might have been) safety concerns, and manufacturing problems leading to massive recalls. Besides creating their own problems, other players in the healthcare industry have pointed the finger of blame at pharma companies as a major cause of runaway costs.

Pharma companies are constrained in what they can say and how they communicate with key stakeholders such as the public or physicians. Whether they are marketing a particular product, or the company as a whole, they are limited by regulations and their message is likely to fall upon a skeptical (if not hostile) audience. Any attempt to get their own message out is undermined by the perception that they are greedy and self-serving.

While there has been increasing pressure for companies to publish all of their clinical trial data for some time, they can at least control the timing and method of its release. The publishing of data could be timed with the news cycle to enhance positive news and downplay anything that might harm the company's reputation.

Today, however, much of the data about marketed products is generated and stored beyond the control of the manufacturers, whose ability to manage their reputation is further weakened. As real-world evidence becomes more pervasive - and a more critical component of reimbursement decisions - control of that data will reside with payers, providers, and analysts more than with Pharma manufacturers.

Additionally, considering the abundance of unstructured and often non-validated data communicated about a product through "new media" such as health-care chat rooms, blogs, Facebook, and Twitter, it is easy to see how reputation management has become increasingly difficult for manufacturers to influence - let alone control.

Healthcare is one of the most popular topics discussed on the Internet. Chat rooms are full of patients, caregivers, and physicians discussing diseases, treatments, and side effects - all unregulated and often non-validated. While Pharma companies can monitor what people are saying, there's very little regulatory guidance on how they can and should participate. How should they be able to address misinformation? Do they have a duty to report side effects discussed in a chat room?

How Pharma companies manage their reputation in a world where the data is out of their control will be an increasing focus in the years ahead.


Across many categories, the US is exceptional. A few notable examples: we have one of the highest statutory corporate tax rates in the industrialized world; Americans spend more on health care than any other developed nation; and the American welfare state, compared to countries of similar wealth, is relatively small (and more targeted). One can argue back and forth about the merits of these points - for instance, those leaning left would certainly support high (and higher) tax rates on corporations; opponents on the right, however, see these as inefficient and as a drag on the economy. Similarly, ideological perspectives can color one's position on the latter two points as well.

Yet, you would be hard-pressed to find someone of any political stripe who thinks that the uniquely American concept of employer-sponsored health insurance is, on net, good or helpful to the American health care system. Tracing its roots to a poorly-devised Great Depression-era tax break (which allowed employers to treat spending on health insurance as wages, thus being able to deduct it from their taxes - the kicker is that now, health insurance spending is more valuable than wages because health insurance dollars aren't subject to payroll taxes), the American health insurance scheme rests primarily on the insurance that employers purchase for their employees - over 160 million Americans receive insurance in this manner.

This creates a whole host of unintended consequences ranging from bad to very bad to terrible (as is common with many government regulations). For starters, economists tend to agree that employer-provided health insurance tends to depress wages. Because employer-paid premiums are paid pre-tax, the federal government also loses about $250 billion annually from foregone tax revenue. But this isn't all. Employer-sponsored health coverage contributes to a phenomenon known as "job lock," where people remain in a job primarily for the health insurance. This means that the allocation of labor becomes less efficient than it otherwise would be. Lastly, there is a good deal of literature on how relatively generous employer coverage leads to greater health care utilization, which in turn leads to higher health care prices. In short, while employers should certainly be allowed to offer fringe benefits to their workers, it makes little sense to subsidize it through the tax code - after all, health insurance is no better if purchased by an employer than if purchased by an individual.

For all the negative impacts of employer-sponsored health insurance, the "job lock" phenomenon does have one positive effect - it keeps people in the labor force and working. This isn't to insinuate that perhaps the downsides are somehow balanced out - they aren't - but simply to point out a fact. Employer-provided insurance does increase the incentive to remain in the labor force. And a recent paper from researchers at Northwestern University, the University of Chicago, and Columbia attempts to gauge the impact of the Affordable Care Act's (ACA's) insurance expansion on labor supply.

At the core of the ACA are two forms of insurance expansion - one which expands Medicaid, and the other which creates the first ever national system of publicly subsidized health insurance (to be sold through exchanges). The basic functions of the exchanges should be clear to most readers of this blog by now - individuals with incomes between 100% and 400% of the Federal Poverty Line (FPL) will receive federal subsidies for the purchase of individual health coverage through state exchanges. Those below 139% of FPL, depending on the state they live in, may be eligible for expanded Medicaid coverage (which is effectively free for the individual). As the study's authors note, "The ACA will weaken the link between employment and health insurance through the creation of a series of state-based individual insurance exchanges."

For their analysis, the authors make use of an understudied natural experiment. To make a long story short, in 2005, Tennessee discontinued the expansion of its Medicaid program (TennCare), disenrolling about 170,000 people from the program. Because the population that lost coverage with the TennCare disenrollment is relatively similar to the population that is likely to gain coverage under the ACA (more than that, TennCare was similar in some levels to the ACA, as the program also provided income-based subsidies on a sliding scale, accounting for the possibility of a marginal tax cliff), the behavior of Tennessee's labor market post-disenrollment appears to be a decent indication for what we may see under the ACA.

So what do the study's authors discover? Based on their analysis, the TennCare disenrollment resulted in a huge employment increase of about 6 percent (the authors conduct additional analysis to ensure that. Applying their results to the US as a whole, accounting for the ACA, the authors estimate a 0.3 to 0.6 percentage point decrease in employment - at a time when we quibble about 7.5 percent versus 7.6 percent unemployment, these numbers are highly significant - between 530,000 and 940,000 people.

Does this study, then, condemn the ACA as a disastrous job killer? Not quite. Certainly, the ACA's (now delayed) employer mandate will likely lead to reduced hours (involuntary part-time employment) and may reduce the total size of the workforce. But this study looks at the ACA not from the perspective of labor demand, but rather in terms of labor supply - that is, given a certain subsidy level, whether or not a person will decide to participate in the workforce. If the weakened link between employment and health insurance means that it is no longer beneficial for someone to keep working, then he will stop working. There is no implication of "welfare loss" for the individual.

And perhaps it is best to view this exit from the labor force as something of a necessary evil. If enough workers choose to drop out of the labor force because the ACA has weakened the work incentive (more precisely, it will displace the incentive coming from relatively cheap health insurance), then over the long-run, wages should rise to compensate for the diminished incentive. This could only be a good deal for workers and the economy as a whole, as workers will have higher cash wages (which would bring more revenues to government) and health care would no longer be an obstacle to switching jobs.

But more broadly, the "job lock" phenomenon (the authors are careful to call it "employment lock" because they focus on the actual decision of whether or not to participate in the labor market) presents a problem for any type of health care reform. Even more conservative reforms, such as universal HSAs, would likely result in reduced labor force participation. The problem when it comes to the ACA, however, is that many of the beneficiaries will already have high marginal tax rates as a result of other public programs - the ACA simply adds to it (though to a lesser extent than other programs).

Moreover, when it comes to the ACA, there is also a real potential for increased job lock. The employer mandate (which requires companies with more than 50 full-time equivalent employees to offer health insurance) ensures that the majority of the US will remain on employer-based plans, and those who receive newly-minted insurance through their employers (assuming they keep their hours and their jobs) will have less incentive to switch jobs. The mandate was likely included simply as a way to discourage employers from dumping workers onto the exchanges (to keep the cost of the law down); while it may do so, it also reinforces the unhealthy link between a job and health insurance.

Perhaps the best course for policymakers would be to pursue an end to tax-favored treatment of employer-sponsored health insurance. It would be an uphill battle, but ending the deduction would make concerns such as these largely moot - to much of the country's benefit.  


Having survived six years of stage-4 colon cancer, the last thing my dear friend Jim Capuano needed last summer was a grand mal seizure followed by a ten-day medically induced coma, from which he miraculously awoke.

And it was preventable. He was a victim of the West Nile virus, which is spread by mosquitos--the same mosquitos that shouldn't have been there in the first place.

We are both long-time summer residents of Ocean Beach, one of the 17 communities on Fire Island, a barrier beach off the south shore of Long Island. As an incorporated village, Ocean Beach has the authority to opt out of the mosquito control program that is conducted annually by the Suffolk County Department of Health. So, for decades, while virtually every other community on Fire Island (not to mention vast areas of Long Island and New York City) had been getting sprayed, Ocean Beach was not.

For years the village played Russian roulette with West Nile. Last year there was a bullet in the chamber.

But the culprit is not the village--it is chemophobia, the irrational fear of all chemicals. And it was this fear that drove Ocean Beach to make a series of poor decisions over the years. And who could blame them?

Earlier this week, residents of Westhampton Beach were seen running into their houses after Suffolk County sprayed their town with Anvil without advance warning. So, what were they running from? The answer is nothing.

As a former organic chemist, I know firsthand how important it is to be aware of which chemicals are dangerous and which are not. Our lives depend on this. Anvil is most definitely not, yet you would not know this from the hyper-precautionary notice from Suffolk County.

Among other things, they advise you to close all your windows and doors, for 30 minutes, wash clothing that comes into contact with the spray separately from other clothing and bring all homegrown vegetables inside and scrub them with detergent. No wonder people are scared. This sounds like chemical warfare.

But it is nothing of the sort. In fact, it's quite the opposite.


Anvil is virtually non-toxic to mammals (including humans). Based on rat toxicology (an imperfect, but still useful method of estimating human toxicity), a lethal dose for people would be roughly 350 grams--about 12 ounces--if you drank it. Just for comparison, the minimum lethal dose of Tylenol in humans is about 8 grams.

Nor is the chemical in any way, shape, or form a carcinogen. Anvil fails to even make it onto California's Proposition 65 list of carcinogens and reproductive toxins, which includes dozens of common substances, including alcohol, Valium, and tetracycline.

Ironically, Anvil, on a scale of 0 to 5 (with 5 being the most toxic) falls into health category #1--"May Be Irritating." Yet, both DEET, which we constantly spray all over our bodies, and citronella, which we breathe when we light anti-mosquito candles, are in category #2--"May be harmful if inhaled or absorbed."

Does it really make any sense to put a more toxic (albeit still mostly safe) chemical on you rather than spray a less toxic one on the bugs? Keeping in mind that the active component of Anvil, sumithrin, is used in flea and tick collars, and directly on your child's scalp for head lice, is this really something to worry about?

No, it's not--something that we wish Ocean Beach had realized years ago.

This awful episode, however, did serve a purpose. It helped people to reevaluate the way they view risk vs. benefit--the heart of this issue. In this case the risk of not spraying far outweighed the risk of spraying--something that can only be gauged by examining the actual science--rather relying on fear, emotion and hyperbole.

And the story actually ends well.

After listening to us speak at a recent town meeting, the Ocean Beach board of directors wisely changed the longstanding policy. Ocean Beach will be sprayed today.

And in two weeks, Jim will be pitching in the 9th Annual Ocean Beach Softball Tournament. Even though we will be on different teams it will be hard to root against him.

Note: To see ACSH's Director of Videography, Ana Simovaka's poignant interview of Jim, click here.


Dr. Scott Gottlieb recently wrote an article in Forbes asserting that governmental healthcare agencies such as CMS are practicing medicine by asserting "their own clinical judgment about when and how seniors get access to new medicines." He argues that CMS extracts concessions from manufacturers by preemptively making their displeasure about new innovations known. Dr. Gottlieb portrays manufacturers as powerless in the face of an overzealous bureaucracy determined to cut spending with no consideration of the impact on innovation and patient care.

The pharmaceutical and medical device industry is not powerless to counteract this downward pressure on price constraints for new products. We know payers (government and private) are seeking to reduce costs any way they can. In the absence of any evidence that the new products deliver a commensurate improvement in outcomes, the agencies are acting rationally in considering cost as the sole determinant of value. Pharmaceutical and medical device manufacturers need to develop and present compelling data as evidence of the value of their product if they want to be reimbursed at all -- let alone at higher levels than existing treatments. This presents two significant challenges manufacturers must address.

First, they need to generate compelling data to support the economic and clinical value of their products. In the case of the Sapien aortic valve replacement that Dr. Gottlieb cites, the increased cost of the product and procedure is offset by the reduced risk of infection, shorter hospital stay and greater patient satisfaction achieved by minimally invasive surgery as opposed to conventional invasive open-heart repair. Edwards Lifesciences -- the manufacturer -- has to demonstrate not a product to product cost comparison, but that the total value of its offering is greater than that of alternative treatment options. In many cases the research methodology necessary to produce this data is different from the randomized clinical trials (RCT) that of been used to gain regulatory approval of the product. New skills and capabilities are needed to develop data based on real world evidence (RWE) and comparative effectiveness research (CER).

Second, companies will need to do a better job communicating the value supported by this new evidence. For a long time manufacturers have allowed others to control the narrative, to portray them as greedy and uncaring. This impression is enhanced when manufacturers behave in a manner that leads to substantial fines and product withdrawals due to avoidable marketing malfeasance (e.g., numerous off-label promotion verdicts), manufacturing lapses (e.g. J&J recently) and poor decisions relating to safety issues (e.g., covering up or not publishing poor data).

Bad news such as fines and consent decrees travels louder, faster and further (and sells more media) than the good news that comes from the development of new medicines and products that improve patient lives. Manufacturers have to share data about their products' value more clearly and work to take the reins of public perception back. Leveraging patient advocacy groups, the media and others can influence decision makers -- but this is only a viable strategy if you have the data supporting your product.

The pressures to reduce reimbursement are real. The best defense is to get data supporting the economic and clinical value of your product and then aggressively get that data out to convince the decision makers.



It is hard to write legislation that is free of unintended consequences. It's that much harder for larger bills and it gets even more difficult for bills that are debated quickly and passed using backroom deals to secure key votes. Enter the 906 pages of the Affordable Care Act (ACA), or Obamacare.

Consider the employer mandate. The ACA says employers with more than 50 employees must provide affordable and comprehensive coverage to all full-time employees (i.e., 30+ hours per week). What does affordable coverage mean? According to the ACA, it means that insurance premiums must not exceed 9.5% of an employee's family income. If the premiums exceed the 9.5% level, the employee may purchase insurance through a Health Insurance Exchange, where the employee might be eligible for subsidies.

Let's say you are an employer who wants to provide employer-sponsored insurance (ESI) to your higher income employees, but not to your lower income employees. Obamacare provides you with the perfect solution. You simply need to ensure that the insurance you provide is sufficiently expensive so that it is above the 9.5% threshold for at least the lower income employees. (Note: this doesn't fit with the bill's "affordable" moniker, does it?)

The ACA allows for employees who face this expensive coverage to opt out of their ESI and purchase insurance through an exchange, but only the lower income employees will receive a subsidy, so they will be the only ones who will likely opt out, leaving the higher income employees to remain with the ESI. You, the employer, will need to pay a $3,000 annual penalty for each of these employees who drops out, but that's far below the approximately $10,000 that ESI would have cost you.

So the employer who wants to provide ESI to the company's top talent only has found an easy way to do so. Interestingly, even the employer who wants to provide ESI to all employees will find that the economics are strongly against him or her. Those employees who earn less than 400% of the federal poverty level may save money on the exchanges courtesy of subsidies from U.S. taxpayers. The economics of Obamacare may force the employer's hand in this matter.

Did Congress consciously design this provision of Obamacare to entice employers to select more expensive employer-sponsored insurance and force out lower income employees? We will never know for sure, but I certainly doubt it. This looks like yet another unintended consequence.


This week, an Australian group published a study that claimed that pigs that were fed a GM diet developed inflamed stomachs and larger uteri. Does this mean genetically modified foods bad for you?

Without even attempting to answer this, it is clear that some people believe that they are. But what is this belief based on?

Unfortunately, the "answer" is a combination of agenda-driven science and reporting--not real science. And sometimes money.

The study appeared in the obscure Journal of Organic Systems--a journal heavily funded by the giant organic food industry. But even a cursory look at the actual study data revealed that, despite the flashy headlines, there is nothing there. Nothing.

Nonetheless, it still generated quite a bit of press coverage, which was undoubtedly the point of the whole exercise. There were thousands of online references to this study, and virtually all of them said the same thing: "Pigs fed GMO feed found to have severely inflamed intestines."

Too bad it's all garbage. By selective reporting of data, the authors managed to fool pretty much everyone. Here's how:

A group of 168 pigs was divided into two groups--half ate a "normal" diet and half ate the identical diet, except the corn and soy in their diet were genetically modified. After 23 weeks, the pigs were sacrificed and examined.

The conclusion: Pigs that ate the GM diet were more than twice as likely to develop severe inflammation of the stomach and also slightly more likely to have a heavier uterus.

Can this really be true? Does GM food really damage pig stomachs or cause enlarged uteri? Do the data match the headlines? Not even close. The devil is in the details, and upon closer inspection, the conclusion goes to hell. Here's why:

As part of the autopsy, the group examined the weights of 8 pig organs. There was a statistically significant difference in only one organ--the uterus--and just barely-- 0.12 percent of the GM-fed animal's body weight compared to 0.10 percent from the other group. Statistical significance is a mathematical method of teasing out real data from numbers that arise by chance. It is helpful, but not foolproof.

Worse still, 18 categories of pathological abnormalities were measured, but the authors found only one category with a significant difference--severe gastric inflammation.

True--GM-fed pigs were more than twice as likely as non-GM fed animals to develop "severe" stomach inflammation. But the GM-fed pigs also had a lower (although not statistically significant) incidence of both more severe stomach conditions (erosions, ulcers) and less severe conditions (mild and moderate inflammation). And twice as many pigs fed GM diets showed no inflammation.

Does this make sense? No--and it shouldn't. This is because the authors based their conclusion on two pieces of statistically significant data, and pretty much ignored 95 percent of the rest of the study. It's a common trick.

If you perform enough measurements in any study, it is virtually certain that something statistically significant will show up, just by chance. But when the remaining data fail to support (or even contradict) these findings, the conclusions become meaningless. Which the authors clearly knew, yet still presented it as fact.

Sadly, this is the typical way that agenda-driven science is done these days, and it works. Sloppy or ideology-driven journalists report these "findings" as facts and they become just that in the collective consciousness of non-scientists around the world.

As such, complex and important medical and scientific issues do not get a place at the table, leaving behind nothing but confusion and bad information.

No wonder no one knows what to believe anymore.


The 2012 presidential election was perceived (at least by those on the left) to be a referendum by voters on health care policy. Indeed, Democrats enacted what is arguably the biggest health care reform since 1965 - when Medicare and Medicaid were created - in the form of the ACA, or Obamacare. It wouldn't be a stretch to say that Republicans lost the election, at least partly, because of a lack of a coherent policy geared at repairing the broken American health care system (though it also isn't a stretch to say that Obamacare does not fix the broken health care system). Yet, it might be wise not to throw out the baby with the bathwater - one important Republican reform idea, most recently proposed by Representative Paul Ryan, is receiving some well-deserved traction.

Medicare's payment advisory commission - MedPAC - recently released a report addressing a number of growing challenges in the Medicare program. Chief among them (and the first chapter of the report) is the recognition that Medicare fee-for-service (FFS) is likely not the most efficient and cost-effective way to cover the care that beneficiaries will need. The alternative approach to the standard FFS model is essentially what Paul Ryan and other conservatives have been promoting for some time - premium support. Although MedPAC (understandably) doesn't adopt the premium support moniker (instead referring to their model as "competitively determined plan contributions" or CPC), the structure is very similar to what we saw in Ryan's proposals.

At its core, the premium support model injects about as much private sector competition as could be imagined into the Medicare program. Ryan's version of the model would have private plans - ostensibly, those that provide coverage through the Medicare Advantage program - compete with Medicare FFS on a cost basis. The benefit structure would be pre-defined by law, and the Medicare program would provide beneficiaries with vouchers (pegged to the second-cheapest plan in their region) that they could use to purchase Medicare-equivalent coverage. Any cost above the voucher would be borne by the beneficiary. Private plans would compete with Medicare FFS for members, and in the end, whichever program could pay for the same benefits at lower costs would come out on top.

For all the criticisms that Ryan's premium support proposal received, it isn't the first time the idea was considered. First off, the idea goes back to a 1995 proposal by Brookings Institution scholar Henry Aaron. The premium support model also received play in the Domenici-Rivlin proposal to reduce the nation's debt.

But the idea of injecting more competition into Medicare is more than just volumes of failed legislation - the program has experimented with competition already. Medicare Advantage, an alternative Medicare funding arrangement already allows Medicare beneficiaries to purchase private coverage using Medicare dollars. (It should be noted, however, the MA is not, in and of itself, a competitive program, and the report notes that MA costs are tied more closely to FFS costs and are largely unrelated to the commercial market.) The difference is that payments to MA programs are based on regional administrative benchmarks tied to FFS costs; plans bidding below the benchmark receive rebates which are used to either offer additional benefits or reduce premiums; plans bidding above have to charge enrollees additional premiums. Moreover, MA plans don't compete with FFS in the full sense of the word - beneficiaries that choose to go with FFS face no penalty if the cost of providing FFS benefits is greater than the cost of providing MA benefits (although MA plans generally cost more per-beneficiary than FFS does, there are important nuances - for instance, MA patients tend to have shorter hospitalizations, even though their health status is comparable to those in FFS).

In MedPAC's discussion of CPC models, the authors note that fundamentally, differences between CPC models depend on how the federal contribution is calculated. They present three illustrative scenarios:

1)      Federal contribution is 100% of local FFS costs. Under this approach, the federal contribution is tied explicitly to FFS spending. This ensures that no plan would get reimbursed more than what FFS would spend for a particular beneficiary.

2)      Federal contribution is based on a weighted average of local FFS costs and local bids. Because the contribution would be based on both FFS and private plan bids (FFS competes directly with plans), low-spending areas would see higher plan bids (resulting in higher contributions) while high-spending areas would see lower plan bids (and lower federal contributions).

3)      The final option takes the lesser of FFS costs and private plans. FFS does not compete directly with plans under this option, but this results in the lowest cost of reimbursing private plans. The low-use / high-use dynamic from the second option is still in play, however, but no matter what, contributions could never become greater than FFS costs.

medpac.png

MedPAC's analysis reveals an interesting dynamic in how competitive bidding may play out - the structure of the federal contribution can essentially act as a transfer mechanism from FFS beneficiaries to those who choose to participate in private plans. The model that reduces federal contributions the most - the third scenario from above - also results in the greatest premium increases across the board, for FFS beneficiaries and those who enroll in private plans.

However, the authors of the report offer additional considerations. A CPC-based Medicare reform may choose to allow variations in benefits (while maintaining an equivalent actuarial value as Part D does) for instance, which would allow plans to better tailor benefits to particular populations or regions. The question of an administrative benchmark is also salient, especially with regard to political feasibility - prior CPC demonstrations were shut down largely because stakeholders opposed the elimination of benchmarks.

But perhaps one point in particular deserves some attention - high-use areas (big cities, generally) can see substantial benefits from greater competition: FFS use in Oklahoma City, for instance, is 16 percent above the national average; MA HMOs bids, according to MedPAC's analysis, are 8 percent lower. Yet, in low-use areas, the reverse is true. The explanation offered, and it is fairly convincing, is that MA HMOs tend to have somewhat higher administrative costs in order to better coordinate care - these fixed costs are more easily offset in high-use areas making it easier to compete with FFS on cost.

Fundamentally, injecting more competition into Medicare may work in some areas and not work in others. But that's the beauty of competition - the plans that can't compete with FFS shouldn't be expected to enter the markets where they can't. But if they can, indeed, offer significant benefits in high-use markets, CPC-based reform should be on every policymakers wish list.


A wave of healthcare mergers and acquisitions has made headlines lately, but it's not the first time in recent history that healthcare providers have attempted to consolidate their market power this way. In the 1990s hospital systems grew by acquisition and affiliation, but were largely unable to achieve the synergies they wanted. The motivation at that time was to protect -- by acquiring -- their referral base. This time they are driven largely by defensive pressures to increase their clout in negotiation with payers as well as to avoid being taken over themselves. Additionally, some recognize that to form an ACO they need to acquire some specialty practices in order to provide the range of services their assigned beneficiaries require.

These large-and growing-hospital systems are seen by some as an antidote to rising costs. Efficiencies of scale that can be achieved through consolidation will, it is anticipated, drive down costs thus leading to lower prices for all consumers whether government or privately insured. However our confidence in the hospital's ability to achieve these benefits is low based on previous experience in the 1990s and beyond.

In fact, the evidence already suggests the opposite is happening. Costs for basic services at a hospital are often significantly higher than at an independent provider. For example, the charge for a basic MRI in a hospital setting is estimated to be between $1700 and $2200, while the same procedure at an outpatient imaging center is charged at $700-$1000.

Why so much higher? Two often cited rationales are: first, that the hospitals have greater overheads - so much for the synergies of scale - and secondly, that large hospital systems are able to negotiate better reimbursement rates due to their size. Even if they could reduce the cost to treat, why would the hospital feel compelled to shrink their margin by lowering their reimbursement rate? Research from Northwestern University showed that prices were increased by about 40% after the merger of neighboring hospitals.

Another possible reason for such high cost is that the rates quoted from the chargemaster bear little or no relation to the costs incurred to provide service. The justification for the amount in the chargemaster is opaque. The lack of transparency allows hospitals to charge cash-paying patients (those who are uninsured or wealthy medical tourists) whatever they want. This figure is not connected to either the costs incurred or the amount negotiated - increasingly from a position of strength as the only provider in the community.

Hospital systems have a poor track record of creating value from acquisitions and consolidation. They haven't successfully integrated physician practices, nor have they leveraged their scale to reduce their costs and manage their overhead allocation. This is largely because nobody has held them accountable. As long as there continues to be a lack of transparency about not only what they charge but how they calculate these figures, they will continue to create fantastic numbers for inclusion in the chargemaster and use their dominant market position to defend their reimbursement levels.


The brouhaha over California's premium rates (see Will Wilkinson's terrific coverage for a good summary) is largely dying down, especially as the NSA is now commanding the attention of many journalists. Largely, the debate over California's proposed premiums for 2014 centered around three issues:


1) Are premiums they increasing?
2) Are benefits more comprehensive?
3) Will people pay less?

Thanks to Avik Roy's fantastic coverage and analysis, we know the answers to all three questions. Rates will increase for most young people (the large plurality of the uninsured), even when taking into account subsidies, and even for benefits comparable to Obamacare's minimum requirements.

So, at least in California, there will certainly be rate shock for young people, which may hamper the ability of Obamacare to offer affordable rates to the rest of the incoming uninsured.

But amidst the debate over how much who will pay, one piece of the question was ignored - what is the fundamental goal of expanding coverage? Austin Frakt highlights four options - for my purposes, I would argue that maximizing coverage while minimizing premium increases is the primary goal. And certainly, few would argue that maximizing coverage of young, healthy people in particular, isn't important in minimizing premiums. Therefore, it seems safe to say that in order to maximize coverage while minimizing premium increases, you need to ensure that a large number of young and healthy people sign up for coverage, to balance the risk pool.

Indeed, even more specifically, one could argue that the goal of Obamacare is to expand coverage to those who are unable to get it - that is, those with pre-existing conditions who may be denied coverage or may be charged exorbitant rates. This is why the law includes a pre-existing condition exclusion (rating on health status is no longer allowed) and limits age-rating. The goal is to redistribute from the healthy to the unhealthy - which is why the individual mandate and the premium subsidies are necessary as sticks and carrots, respectively.

It seems odd, then, that we rarely question whether pre-existing conditions are a massive problem in this country. According to HHS, somewhere between 50 and 129 million people under 65 have pre-existing conditions that could preclude them from purchasing individual insurance policies. This number is almost certainly inflated, but even taking it at face value reveals that most of these people likely have employer-sponsored coverage or Medicaid - 160 million Americans receive coverage through their employers; around 56 million receive coverage through Medicaid.

What about the uninsured population? HHS claims that some 25 million uninsured Americans suffer from a pre-existing condition. This is more than likely far from being within the same universe as the real number - data from the Society of Actuaries puts the number of uninsured in poor health at around 500,000; less than one percent of the total number of uninsured. Even taking into account those considered to be in "fair" health, the number rises to about 2.7 million - only about 5 percent of the uninsured.

So if this is the case, that those in poor health make up, at most, 5 percent of the uninsured, an important question comes to mind - is there a better way of covering these people? The fact that California's largely unregulated individual market has become the largest in the country indicates that the majority of the uninsured (the young and healthy) could probably get relatively affordable coverage with minimal intervention. It makes little sense, then, to force an expensive and comprehensive insurance product on them, to cross-subsidize those in poor health. A more straightforward, and less distortionary approach would use high-risk pools to enroll those that truly have pre-existing conditions and are uninsured. To be fair, states have tried high-risk pools in the past, but they have suffered from a lack of funding and significant obstacles (Minnesota being one of the few success stories) - but these issues are easier to address than the adverse selection created by pricing young people out of insurance exchanges to help cover the 1 percent.. 


In recent weeks, early reporting data from Advocate Health Care's accountable care organization (ACO) has reignited discussion about the sustainability and scalability of the ACO model. This is especially noteworthy since ACO advocates are touting the 2% savings Advocate's ACO has achieved. Unfortunately, most of the discussion so far has focused on the obvious issues, like upfront infrastructure investments and concerns about the fact that patients aren't required to stay within the ACO. But these concerns barely scratch the surface of the issues surrounding ACOs.

Let me put what I see as the real problem with ACOs in context. The goal of ACOs -- getting to better healthcare at lower cost -- is laudable. But the means are fundamentally flawed.

I've been an advocate for healthcare reform in this country for many years... moving to a market-based system that centers on the consumer and reflects transparency in cost and quality while connecting payment with outcomes. The means to do this are there. My firm has identified about $500 billion in unnecessary care, in cost due to medication errors, and in cost due to poor care coordination. Add to that the estimated $250 billion in fraud and abuse, and you have a substantial amount of money in our healthcare system that could be redeployed. That's more than enough to provide coverage for those that can't afford it.

With the Patient Protection and Affordable Care Act (PPACA), there were really 3 goals: insurance reform, delivery reform, and payment reform. So when I read the legislation and saw the 9 pages describing the ACO, I thought, "This is not going to work." It flies in the face of everything we know about organizational design and human behavior. And to make matters worse, it's an overlay on the existing fee-for-service model.

Theoretically, the idea of combining all providers across the continuum of care under one umbrella sounds good. But if you've ever worked at a large company, you know that having everyone nominally working for a single organization doesn't mean that everyone is aligned, and it doesn't mean that you won't have silos. And as designed, the ACO model is very complex, and it's very difficult to implement. It creates a bureaucratic overly on a broken system.

So that 2% that Advocate has saved? They've got a lot further to go to get to $750 billion.

Accountable care is needed. But as I've argued consistently, ACOs are not. So the obvious question becomes, what will get us to better health outcomes at lower cost?

Imagine an alternative where primary care physicians are able to take time to diagnose patients and help them make better choices for their own health. Insurers incent beneficiaries financially to make better health choices. Employers create financial incentives to make good decisions about health. Physicians make information about cost and outcomes available, like in any other industry. It's a fundamentally different approach -- one that is market-based and patient-centered, not organization-centered.

Consider the example of Lasik and cosmetic dermatology. When the technology was first developed, it was very expensive. But in the years since, the costs have gone down while quality has improved -- like in any other industry. Years later, many more people are able to take advantage of these services. And they pay for them differently -- it's a bundled price for a whole procedure, instead of paying separately for every minute detail.

The only way to get costs under control is by changing payment. Providers need to have incentives to keep patients out of the hospital. We're starting to see some signs of that already -- outside of the PPACA legislation -- in CMS's refusal to reimburse "never" events. Ironically, CMS already had the administrative authority to do this and didn't need PPACA.

In the end, it's all about payment for outcomes and putting the consumer at the center. The ACO model fails to do this.

One of the most disappointing things about the recent commentary is that while some questions have been raised about sustainability and scalability, what's largely been absent from the debate are questions about ACOs' viability. ACOs will fail to improve healthcare costs and quality because they take a fundamentally broken system and create a complex bureaucratic overlay, making an already complicated system even more complex. And each layer of complexity will only add cost, decrease efficiency, and reduce transparency.

The answer isn't a new, complex organizational model, but rather greater transparency and greater accountability for costs and outcomes. Creating incentives that focus on achieving quality outcomes, providing choice and allowing real competition will get us there -- ACOs won't.


If there is a perfect example of 1) state of the art pharmaceutical research, and 2) the importance of the so-called "me-too" drugs, it is the massive effort over the past two decades to find treatments for (and possibly eradicate) hepatitis C--a blood borne viral infection of the liver that has infected about 200 million people worldwide--four times the number of people infected by HIV.

The causative pathogen, hepatitis C virus (HCV) takes hold in the liver, where it relentlessly replicates, causing irreversible damage, often leading to cirrhosis and less frequently, liver cancer over the course of two to three decades. It is the leading cause of liver transplants in the U.S.

Beginning in the 1990s, virtually all major pharmaceutical companies had major HCV research efforts, and to say that it worked out is quite an understatement. But there was a long way to go.

Until 2011, when two HCV protease inhibitors, Incivek (Vertex) and Victrelis (Schering-Merck), the first direct-acting antiviral agents for HCV were approved, the standard of care was interferon and ribavirin-- a combination that was less than 50% effective and fiendishly toxic, causing many patients to stop treatment, even though they may have been signing their own death certificate in the process.

The two protease inhibitors, which were coincidentally approved within two weeks of each other, boosted the cure rate to about 80%--a huge advance, but not without some problems--sometimes severe skin rashes and anemia. And each drug was meant to be added to the interferon-ribavirin combination rather than replacing it, making the side effects even worse.

As is so often the case in drug research, the breakthrough drug against a given disease, while extremely important, will often be surpassed by the next generation of similar drugs, often referred to (usually in a pejorative way) as me-too drugs. This is precisely what is happening in the world of HCV research right now.

Gilead, Abbott (now AbbieVie), and Bristol-Myers Squibb are leading the way with drugs and cocktails that not only eliminate the need for interferon, but show cure rates approaching 100 percent--something that was unimaginable even 10 years ago.

This has created an interesting dilemma. Three years ago, some doctors were suggesting that patients wait until Incivek and Victrelis were approved rather than undergo the older interferon-based therapy. And this is happening once again. There is an ongoing debate over whether it makes sense for previously-untreated patients to wait a few months until the second-generation drugs are approved.

In drug research, this is about as good as it gets. Using a strategy of drug design similar to one employed in HIV research, pharmaceutical companies succeeded in doing something that was thought to be impossible--potentially wiping out one of the most world's most important viral infections.

These results highlight the obvious-- it is counterproductive and illogical to forgo research in a particular area simply because there are already drugs approved for that indication. Right now there are least three more protease inhibitors in the pipeline and roughly ten different polymerase inhibitors (drugs that act by a different mechanism). Unnecessary? Hardly.

It is all but certain that of the multiple "me-too" drugs in development, some will rise to the top and some will fail as they are subjected to more pre-and post-approval scrutiny. This will mean a world of difference for patients as the best drugs and drug combinations become clear--something that would be impossible without multiple therapy options.

This should really go a long way towards shutting up fools like Marcia Angell of the Harvard Medical School, a perennial industry critic who believes that one drug is sufficient for any disease, and that "me-toos" are simply tools for maximizing drug company profits. It would be impossible for her to be more wrong.

This mindset was dead wrong with HIV. Without multiple choices, optimized cocktails, which are now doing incredible things, would have been impossible. It is just as wrong here. The lives of 200 million people will bear this out.


There are bad headlines and bad headlines.

The bad ones are merely poorly written and confusing. The bad ones actually lead you to the wrong conclusion. When they inevitably get picked up by news organizations and mindlessly passed around, the already-scientifically-ignorant and confused American public absorbs them and becomes even more so.

Last week's, "Diet soda as bad for teeth as meth, dentists prove" hit a new low. It was so wrong on many levels that it is worth tearing to bits. Which is exactly what I happen to be in the mood to do.

Bad headlines are nothing new. I see them all the time. But, this one would have you believe that there was actually a legitimate study that likened the consequences of drinking diet soda to the complete destruction of teeth and gums from chronic use of methamphetamine.

And this idiocy was picked up verbatim by hundreds of news sites, including NPR (!), and will undoubtedly be filed away in the consciousness of the many people who saw it. At this point it becomes fact. Which is especially unfortunate in this case, because just about everything in it is wrong.

For example: According to author Dr. Mohammed Boussiouny, a professor of restorative dentistry at the Temple University School of Dentistry "[m]eth, crack and diet soda have one thing in common: They're highly acidic and can cause erosion and significant damage without good dental hygiene."

But anyone who's made it through a high school chemistry course will tell you that not only are methamphetamine or crack cocaine not acidic, but they are in fact basic--the exact opposite of acidic.

Here are a few more flaws:

"The case study looked at the damage in three people's mouths."
It is not a study. It's an opinion by a dentist, and a mighty stupid one at that.

Yet, somehow this made it into the journal General Dentistry: "You look at it side-to-side with 'meth mouth' or 'coke mouth,' it is startling to see the intensity and extent of damage more or less the same," said Boussiouny.

Boussiouny is basing his "study" on one woman, whose teeth were completely rotted away and unsalvageable. From this he magically concludes that the acidity of diet soda will eat away your teeth until you have something resembling "meth mouth." Look up the photos if you wish, but please have a strong stomach.

The conclusions are based on one person.
The woman drank two liters of diet soda for about 5 years, and for some reason liked to hold it in her mouth before swallowing it. Her teeth rotted, therefore it must have been the diet soda, right?

Not really--the woman in question hadn't seen a dentist in 20 years, which was conveniently left out. Any remote chance this may have had something to do with her condition?

And here's the fundamental problem with a study with one subject: A man walks down 54th street and a piano falls on his head. Therefore, everyone else should make a serious effort to walk on 55th street instead. Ridiculous? You bet. Just like any study of one.

Diet soda is the culprit because it is acidic.
Well, so is regular soda. And it just happens to contain sugar, which has been rumored to cause tooth decay. Duh. So, is it diet soda that is the culprit? Or just the soda? Or the lack of dental care? Or the exchange rate of the Euro? Absolutely impossible to tell. Would this happen to someone who drank two liters of sugared soda a day for 5 years and failed to see a dentist for 20 years? Who knows? They only mention the term "diet" at all because this is what the one woman they based this asinine study on just happened to drink diet soda. Or because someone has an itsy bitsy agenda.

Yet, this will no doubt be taken as an indictment of diet soda, when in fact the fact that the stuff is artificially sweetened is not only irrelevant, but probably less harmful to your teeth.

While it is unlikely that anyone will die from this (except maybe diabetics who switch back to sugar-sweetened soda for no reason), the cumulative effect of sloppy and agenda-driven reporting is a bit more serious.

I have no doubt that it is responsible for a huge database of misinformation that drives people to do exactly the wrong thing: skipping vaccinations, following useless or dangerous diets, taking herbs instead of seeing a doctor, and failing to take potentially life-saving medications because they scared to death over minuscule or non-existent risks.

It is hard enough to make many decisions when you have the correct information at hand. Throw in garbage like this and it becomes impossible.


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