To Reduce Drug Prices, Solve R&D Crisis

 

A new NCPA study concludes that Congress must act to reduce the regulatory burden on pharmaceutical research and development.

Reducing the prices of specialty drugs requires improving the productivity of research and development (R&D). On that front, the news is sobering. Last December, Deloitte and Thomson Reuters examined newly introduced drugs from the 12 pharmaceutical companies with the largest R&D budgets.5 They found it cost $1.3 billion to bring one of these new compounds to market. However, the peak sales forecast for each of these drugs declined by 43 percent, dropping from an average of $816 million in 2010 to $466 million in 2013.

The high nominal prices of new drugs do not compensate for the smaller patient populations they target. Deloitte and Thompson Reuters estimate the internal rate of return (IRR) of R&D spending has dropped in half since 2010, from 10.5 percent to 4.8 percent. Sales of new drugs are not overcoming the loss of patents, weak pricing power for older drugs, or the reduced productivity of R&D.

The Kline-Ryan-Upton Republican Off-Ramp from Obamacare

 

Tomorrow is the day the Supreme Court hears oral arguments in King vs. Burwell, and all the talk is about what Congress will do if the Supreme Court directs the Administration to obey the law by not paying subsidies in the majority of states, which have declined to establish their own Obamacare exchanges and defaulted to the federal one.

The Wall Street Journal ran an op-ed (available by subscription) by John Kline, Paul Ryan, and Fred Upton, who chair committees of jurisdiction in the House of Representatives that will be tasked with proposing a Congressional response to this decision. Here’s what they write:

Let people buy insurance across state lines. Stop frivolous lawsuits by enacting medical-liability reform. Let small businesses band together so they get a fair deal from insurance companies.

Obamacare Subsidies Made Up One Fifth of Government Transfer Payments in January

 

January’s Personal Income and Outlays report from the Bureau of Economic Analysis shows how significant Obamacare’s subsidies are in the scheme of government transfer payments to households, accounting for 21 percent of the increase in government transfer payments in January:

Personal current transfer receipts increased $24.8 billion in January, compared with an increase of $13.8 billion in December. The January estimates of current transfer receipts reflected several special factors…… Other government social benefits to persons was boosted $5.3 billion, primarily reflecting health insurance premium subsidies paid in the form of tax credits to enrollees of the Affordable Care Act exchanges.

The Fall of Government Unions And Slowing Health Costs

 

An op-ed in the Wall Street Journal (available by subscription) about a recent legal decision on retiree health benefits shines the light on is a reason for optimism about the slow growth in health spending.

As readers know, I look pretty closely at the economic data from various government agencies, and they are starting to show an uptick in health spending and prices. However, a recent Supreme Court decision weakens the power of government unions to demand exorbitant retiree health benefits, according to Robert C. Pozen and Ronald J. Gilson.

Guess Where Fair and Transparent Hospital Prices Exist?

 

Britain has long had an active cash market for medical care provided by private hospitals, which helps people get around the long waits in the National Health Service, and also serve people from abroad.

Nuffield Hospitals advertises firm, fixed, all-inclusive prices good for 60 days after an initial consultation. For more complex procedures, one pays for the initial consultation and the hospital develops the price from that. The Nuffield price generally includes post-operative care, rehab, and required readmissions.

Like Walmart, Nuffield will match competitor prices under reasonable conditions — “If you find an alternative private hospital in your local area offering a better price for the same surgical intervention, sold with the same service conditions, we’ll lower our price to equal it.” The conditions require the other private hospital be within 15 miles of the Nuffield hospital, exclude NHS private patient prices and require a written quote.

Bupa offers private insurance, elder care, and private hospitalization. Beneficiaries of its Health Cash Plan pay providers, send Bupa the bill and receive the Bupa contract amount in cash. Bupa advertises no pre-authorizations to see specialists and 24/7 phone consultation with nurses and GPs.

Licensing Out-of-State Doctors: Half of Medical Boards Perform Poorly

 

caduceus_blogTelemedicine embraces technologies as diverse as surgeons operating robots remotely, radiologists reading scanned images remotely, or psychiatrists conducting therapy sessions via videoconference. A new research article in the Telemedicine and E-Health Journal shows how difficult state regulatory barriers are making it for doctors to practice effective telemedicine.

One barrier to effective adoption of telemedicine is that states license physicians, and those licenses are not portable. When physicians seek licenses in other states, they face pointless administrative hassles.

Health Spending Chews Through A Weak Economy

 

Today’s second estimate of fourth quarter Gross Domestic Product (GDP) confirmed what we pointed out from the initial estimate released on January 30: Health spending is chewing up more and more of the weakening economic recovery.

GDP growth was actually revised down from the initial estimate of 2.6 percent to a second estimate of just 2.2 percent. In dollar terms, it was a drop from $106 billion to just $88.1 billion.

Health spending, initially estimated at $20.4 billion was tweaked up a little to $21.4 billion. In other words, health spending devoured one quarter of GDP growth in the fourth quarter.

These are the wages of Obamacare: An increasing share of our prosperity diverted to a health sector that is increasingly frustrating to patients and physicians alike.

The Future of Medicine and the Internet of Things

 

As previously noted on this blog, investments in digital health ventures doubled in 2014. Institutions, analysts and MDs envision the opportunity to reduce the colossal inefficiency of current medical practice by exploiting the Internet of Things.

According to a recent JAMA article, the number of mobile devices connected via the internet is doubling every five years, and there will be nearly seven connected devices per individual by 2020.

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Source: Digital Medical Tools and Sensors from JAMA.

The National Health IT Czar Does Not Need A Big Budget Hike

 

A similar version of this Health Alert appeared at Forbes.

One overlooked “ask” in the President’s 2015 budget was a 25 percent hike in the budget of the Office of the National Coordinator of Health Information Technology (ONC). Admittedly, it is a small amount of money, $75 million. Nevertheless, it is a 25 percent hike in a budget that should be reduced.

Although the costs of operating the ONC are small, it has an outsized role in determining how health information technology (HIT) is being deployed. HIT includes a wide range of products, technologies, and services, such as electronic health records (EHRs), mobile and telehealth technology, cloud-based services, medical devices, and remote monitoring devices, assistive technologies, and sensors.

The experience of the ONC in its first few years of existence warns against allowing it to exert too much control over HIT. In 2004, the ONC was originally envisioned as the “coordinator” of HIT. However, in 2009, the ONC became the financier, certifier, and regulator of much of HIT. The federal government allocated a 5-year budget of $30 billion to disburse as incentives to hospitals, physicians’ offices, and other health facilities, as encouragement to install electronic health records (EHRs). ONC was given the power to certify EHRs that would qualify providers for the incentive payments.  A new NCPA study concludes that this has proven expensive, unproductive, and potentially harmful, which leads to the conclusion that the federal government should play a minimal role in guiding HIT over the next decade.

FDA Allows Direct-To-Consumer Genetic Tests

 

One year after a very public squabble with genetic-testing company 23andMe, the Food and Drug Administration has decided not only to allow 23andMe to directly market its genetic test to consumer as a diagnostic device, but to free other genetic-testing companies from pre-market review or prescription status:

“The FDA believes that in many circumstances it is not necessary for consumers to go through a licensed practitioner to have direct access to their personal genetic information. Today’s authorization and accompanying classification, along with FDA’s intent to exempt these devices from FDA premarket review, supports innovation and will ultimately benefit consumers,” said Alberto Gutierrez, Ph.D., director of the Office of in Vitro Diagnostics and Radiological Health in the FDA’s Center for Devices and Radiological Health. “These tests have the potential to provide people with information about possible mutations in their genes that could be passed on to their children.”