Monday, April 5, 2010

Market Based Health Care!

Found this on AOL News this morning:

Prescription Data-Mining Case Goes to the First Circuit

One of drug marketers' key tools in targeting physicians for increased sales is doctors' prescribing history. Using that data, marketers can see who's prescribing the competition's products and tailor pitches to convert them; who isn't prescribing much of anything and try to change that; and who are big prescribers and reward them, cultivating even more business.

Research has shown that drug marketers are successful at influencing physicians' prescribing habits, for example, inducing prescriptions for expensive brand-name drugs when effective generics are available. As a result, some states are trying to curb marketers' effectiveness, including limiting access to physician prescribing history.

The First Circuit has already upheld one such law, from New Hampshire, and now is set to hear a case involving a similar law from Maine. If such laws are routinely upheld and spread across the land, drugmakers could see profits take a hit.

Ever wonder why health care costs keep rising at astounding rates?


  1. So what's the solution? Nationalize the pharmaceutical industry?

  2. One solution is the laws being challenged, which has been done at the state level, Andy. I find your championing of the private sector, fee for service medical industry interesting, especially since you are a TRICARE dependent and haven't had to bear the cost of medical care on your own hook. Since you never plan to have a stake in any system other than taxpayer provided healthcare, from whence do your notions come?

  3. Al,

    You are making a lot of completely false assumptions. When have I ever championed the fee-for-service medical industry? That is something I have NEVER done considering I think FFS is one of the primary problems in our system and I have said so on many occasions. As for "championing the private sector," why is it so bad? It is, after all, the private sector which ultimately funds the public sector including your retirement benefits and my income. That doesn't mean the private sector shouldn't be regulated or get to do whatever it wants, but I am skeptical of government's ability to micromanage outcomes.

    As far as health-care goes, if you've read what I've written here previously, you'd know that I'm not ideologically invested in any particular proposed system. For example, I've said before here that I don't have a problem with a single-payer system as long as it goes the full-monty; ie. I don't think simply slapping a single-payer finance system on top of fee-for-service is going to work. Personally, I think we need to get employers out of the health insurance business, but that doesn't seem to a popular idea these days.

    Regardless, my primary concern is sustainability and affordability and I think those two goals can be achieved a variety of ways. Oh, and BTW, Tricare isn't affordable or sustainable either and it's the closest thing there is to a nationalized single-payer system we have in this country.

    As far as the pharmaceutical industry goes, my question stands. What do we do about it? It's not just about marketing, but things like this. If you think you can regulate away bad behavior, I think you're kidding yourself.

    Which brings me to what I see as the root question, which is why do insurance and pharma companies act the way they do. Is it because they are greedy and evil and are out to screw the little guy as much as possible or is it because they are doing business in such a dysfunctional system that incentivizes bad behavior? If you believe the former then you probably think you can regulate their behavior to achieve the outcome you want. Historically, I don't think that's worked out too well in health care and in the financial industry. I subscribe to the latter view, which is why I am, and have long been, for real systemic health CARE reform, not simply finance or other reforms at the margins. My position is the system needs to get fixed and a lot of these "bad behavior" problems will go away. It's all about incentives. I think keeping incentives for bad behavior while simultaneously trying to regulate that bad behavior away is bad policy, plain and simple.

  4. part 2

    Since you never plan to have a stake in any system other than taxpayer provided healthcare, from whence do your notions come?

    Again, you seem to have forgotten what I've written on this topic in the past. Looking to the future I see that it is very likely I'm not going to have the entitlements you enjoy today and I am planning accordingly. This is a point I've made here many times times before. My wife and I realize that the promises made for her military retirement benefits as well as our social security and medicare cannot be kept.

    Furthermore, I am completely aware how little this recession affects me. Our primary income comes from my wife's military pay supplemented by my modest Guard income and a bit of contracting work (which is also off the government titty). Like all federal employees, we got pay raises this year. You think or assume I don't see that? I live in Ohio currently, an area hit hard by the recession, I see how good I have it. I know I am on the gravy train and I do think it's wrong that most government jobs these days are superior in almost every respect to private sector jobs. That needs to change IMO.

    Does that clear up your assumptions about what I believe and where I stand?

  5. "As for "championing the private sector," why is it so bad?"

    For the same reason that the notion of a "private sector" in power generation is so bad: there is no way for any sort of "merket" to flourish. The power generation market is a natural monopoly ruled by the massive costs to construct the generating facilities. No "competitor" will be able to raise the capital needed to challenge an existing producer that already has the generating capacity. Plus the complete opactiy of the "market" practically cries out for the sort of illegal shenangans that made Enron infamous.

    In the case of medical treatment, it's the vast gulf between provider knowledge and consumer ignorance, coupled with the unrealistic expectation that someone with a herniated disc or liver cancer will "shop" for a provider.

    Al's pharma marketing is a perfect example. The pharma company has a massive advantage in leverage over every other "player" in the game.

    Relatively speaking, our government does a pretty decent job at a lot of what it does. It's not like we're freaking Zambia. ISTM that a government official - whose interest is in healthy citizens paying taxes - is at least as objective as an insurance company or medical provider official whose interest is in his or her own corporate balance sheet or financial statement.

  6. This comment has been removed by the author.

  7. Actually, Chief, the time of the "natural monopoly" for power generation is coming to a close. There are a lot of (relatively) low capital power generation technologies coming on line.

    This is causing great anxiety for all those companies invested into multi-billion dollar plants, and 50 year mortgages.

    Power distribution on the other hand...

  8. Ael: Don't be too sure. The technology for private solar has been there for thirty years, and few people have the capital to move off the grid. I doubt if the dawn of reliable private power generation is closer than a generation away, if that. And, as you say, distrobution...

  9. There are a few changes already stirring the pot.

    First, there is the "run your power meter backwards" trick through putting solar on your roof. Technically, it is a no brainer. Regulation-wise, not so much as the vested interested dominate the regulatory boards.
    This can change quickly, given the political will.

    Second, both wind and solar scale linearly with capital invested. This is quite different from the mofo big generator that the coal plants use.

    Third, once you factor in a resonable price for carbon, the economics of power generation change dramatically.

  10. Ael: Second, both wind and solar scale linearly with capital invested.

    If electricity were a pure and simple discretionary consumer product, the above would be acceptable social policy. But what you state fails socially, as electricity is a life necessity, capital is not evenly distributed, and without restraints a generate your own and sell back to the grid system could easily begin to place a penalty on those who cannot generate their own due to economics or where they live (which could include many high density housing residents). Without going into excessive detail, for this generate and sell to exist, there must be a grid, and that grid is underwritten by a all subscribers. When self generation is too incentivised, those who cannot afford self generation can end up paying a premium for their individual access to the grid, no less the electricity itself. I could go on with a screed about how much of the grid actually belonged to all of us through taxes and regulation before it was privatized, yet we have never individually received back our massive capital investment in the privatizing process.

    My heartburn expressed in my original post is that drug companies spend money to increase the PRESCRIBED (not voluntary) sales of their higher priced brand name versions. They are not just trying to convince the consumer (patient) to spend more on a given treatment, but are trying to get the doctors to PRESCRIBE the higher priced alternative (not consumer choice). And, of course, the cost of these data mining programs, the pharma reps and physician incentives are added into the costs of the premium priced drugs being promoted. Now, those who have insurance see little immediate direct impact, as they pay only a pittance of the sale price - in the short run. But the insurer has to make a profit, and in the long run, all insured will pay higher premiums to cover both the costs of the drug companies' data mining and promotion programs and the profit goals of the insurer. All to get a more expensive version of a pill that has no advantage over the generic version. It's funny that we said that one reason the USSR failed was the evils of a "Command Market" over a "Demand Market", yet in all actuality, much of health care provision is a "Command Market" driven by profit goals, not social well being. And, all those who are insured, whether or not they accept higher priced drugs being forced upon them pay the bill through higher insurance premiums. And as premiums have risen, more and more people have been priced out of the market.

    I am not an advocate of conclusions being made from anecdotes, but I share the anecdote in Part 2, because it was my first realization that something was rotten in the way we do medical care in the US. Read on----

  11. Part 2

    My first suspicion that our heath care "system" was not serving our total society came in the mid 70's. A good friend was a Professor of Biochemistry at a major state medical school. A bit of a controversy arose over the school's more lenient standards for minority students. Without going into all the arguments, the one argument that sent my friend into orbit was the following, expressed by several senior deans of the school:

    Yes, we are retaining students who exhibit slow progress and less than the typical mastery of the subject matter expected from the bulk of our students. However, these students come from poor towns and neighborhoods that have difficulty affording the going wages of our typical graduate. They are more likely to return to their communities to practice, as they are used to a more modest lifestyle. Thus, by being more lenient in our standards, we hope to provide doctors to communities that might go without otherwise. In short, we are providing a social good.

    My initial reaction to this was repugnance at the elitism and attitude of racial superiority being shown. And, my initial reaction was also one of, "How do we guarantee these lesser physicians only practice in poor communities? Will their degrees be so annotated?" Then my friend suggested I think about how this was also a pure and simple case of the quality of medical care devolving to being driven by market forces. "Let's produce discount, low quality doctors for those who can afford name brand models.", he said. Of course, the poor won't have a choice in the quality of their physician with this logic, and the logic intended to institutionalize sub-par medical resources for the poor, rather than finding a way to distribute quality physician care to all.

    So, tying the two parts of my post together, it appears, that it is acceptable to expect all insurance subscribers to pay the distributed cost of big pharma's marketing programs, but it is not acceptable to expect the medical provider sector to make sacrifices to deliver the same level of access and care to every member of our society. And by access, I do not accept the "No emergency room can turn you away", as that is not equal access.

  12. Andy

    I must admit that my response was somewhat emotional and based on your curt and, in my mind, trite response of

    So what's the solution? Nationalize the pharmaceutical industry?

    Which contributes nothing to the solution of the problem.

    Other industrialized nations contain pharma costs by simply outlawing many of the marketing practices so common in the US, and prohibiting the passing on of these costs in the pricing of their products within their borders. It's not that these costs are "hidden". They are proudly posted in the company tax returns so as to avoid taxes on them. When a big pharma company spends more on Direct to Consumer Advertising of prescription drugs than R&D, you gotta wonder.

  13. Al,

    You're right that my response was both curt and trite, so my apologies on that. I should have explained myself better.

    I've travelling at the moment and will write something clearer in a day or two when I return. Best wishes to all of you.


  14. Al,

    One thing I would like to know is how drugs are priced in other systems. After all, several of the top pharma companies are not American. I get the feeling that the US pays premium prices which ends up underwriting the R&D and enabling cheaper prices in other countries.

    I can't find the link right now, but there was a study showing a similar effect with medical equipment like MRI's. Manufacturers are able to charge US providers more for a number of reasons. They may sell equipment at a loss to other countries, but it's made up for in the US.