Drugbaron Blog

June 4, 2013 no comments

Better drugs cannot cure healthcare system woes

For those of us investing money or our careers developing new and better drugs, its easy to assume that we are tackling the biggest unmet need in healthcare.  New drug approvals (and even positive early stage studies) are, after all, the biggest news in healthcare.

But to be effective, drugs need to be efficiently delivered to the right patients.  And that’s the job of the healthcare system.

And it’s a system that creaking under the weight of the demands placed upon it.  Effective new drugs, often with eye-watering price tags, appear only to increase that pressure.

In the end, the 20th century panacea of free, limitless healthcare is a poison chalice

Sometimes it feels like governments, even patients, resent the industry for producing new, effective, expensive medicines.

As DrugBaron noted before, pricing for orphan drugs has to be high enough to make R&D in such areas economically viable.  Cutting prices would cut the incentive to research, and eventually harm patients.   So if cutting drug budgets isn’t the answer, how do healthcare systems cope?

The solutions, such as they are, depend on recognizing the real culprit – a healthcare system that tries to provide too much care.  The principle of universal entitlement is actually creating more problems than it solving.  And drug budgets should not be getting the blame.

Healthcare systems are under intolerable pressure – that much is clear.  For much of the 2000’s healthcare spending in the US has out-stripped GDP growth by at least 3%, ensuring that today it takes an unsustainable proportion of national wealth.

If rises in healthcare spending have been less eye-watering Europe, that only reflects the stealth tactics from politicians to hold down demands for more and better healthcare from their voters by promising more while delivering less.  And increasingly, that looks like a tightrope from which they must inevitably fall.

Where does the pressure for rising health expenditure come from?

New, improved medicines should not, in theory, cost a greater fraction of national wealth than they used to.  After all, as the last generation of innovative medicine become today’s generic standard of care their prices fall dramatically – only to be replaced by the next crop of high-priced proprietary innovations.

New approvals have been steadily declining over 15 years, and even when approvals increased for 2012 most of the new drugs addressed small markets or provided only incremental benefit that could scarcely attract a premium.  That is hardly the kind of output that can drive higher costs.  If anything the combination of the ‘patent cliff’ and declining new approvals should have driven costs down across the system.

As DrugBaron has already noted, the shrill voices focusing on the handful of approved drugs for rare diseases that sport eye-watering price tags is missing the point entirely.   Those drugs deliver real patient benefit while consuming a tiny fraction of total spending.  Drugs like Kalydeco™ for cystic fibrosis and Soliris™ for paroxysmal nocturnal hemoglobinuria are the heroes, not the villains, of the piece.

So far, drug companies have done an impressive job convincing the world that as their output has declined, the cost of each new innovation has risen.  This has allowed their collective revenues from prescription drugs to remain broadly flat despite accelerating patent expiries and declining approvals.

This has provided a decade of air cover so that at least the smarter pharma companies have been busily re-inventing the way they discover and develop drugs to cut their costs significantly – those that have succeeded will no doubt continue to prosper.  Those that have been slower and less successful at restructuring their operations may find their customers, and hence their investors, much less forgiving in the future.

Again, though, an up-tick in approvals won at lower cost of development should not drive cost expansion for healthcare system-wide.

By soaking up an ever bigger proportion of national productivity, healthcare leaves behind diminishing resources for other much needed investments

Where, then, is the drive for increased spending on health?

One night in the Emergency Room of his local hospital may have provided DrugBaron with an insight into the real problem underlying exploding healthcare costs.  Sitting in a cubicle for four hours with acute appendicitis proved to be a very valuable learning exercise. Pain heightens awareness.

With anonymity preserved by the cubicle curtains, it is nevertheless impossible not to gain a pretty good impression of what it is going on with the other patients around you.

To the right, an elderly lady had arrived from a nursing home.  Judging by the conversation this wasn’t the first time she had been brought to the Accident and Emergency Department.  Clearly she had not suffered an accident – nor, as far as its possible to tell from a distance, was it an emergency.  Suffering from a degree of dementia this lady was brought in because she was refusing her medication and it seems refusing to eat as well.

As the evening unfolded, she asked twenty or more times for tea and for chocolate, and was undoubtedly in need of some attention.  Just not from an Emergency Room doctor.  Chronic non-compliance rather than an acute medical condition seemed to be the diagnosis.

Nevertheless, as midnight neared, the medical team were unwilling to dispatch her back to the nursing home (again), and re-enacted what had clearly become an established pattern: they admitted her for observations fully expecting her to go home the following day.  No doubt to return in similar circumstances within weeks.

The critical take home message is this: better drugs are not the solution to healthcare’s cost conundrum – but neither are they the source of the problem

To the left, a young man clearly known to the team, was having difficulty making himself understood – so affected by alcohol (or some such) was his speech.  It was freezing cold on the streets of Cambridge this particular night, and with no where else to go he had made for the hospital with some vague story of an injury to his arm.

One doctor after another (presumably in graded order of seniority) examined him over a period of hours, all reaching the same conclusion: there was no injury.  It was possible to make the same diagnosis even from the next-door cubicle simply by listening to the way the symptoms, and even the location of the injury from wrist to elbow and, yes, right arm to left, changed as frequently as the medical staff.

Again, as midnight approached conscious of the consequences if they discharged the patient and then he suffered some acute episode due to something they had missed, this patient too was admitted without any likelihood of a cure – this individual had problems that the best doctors cannot treat.

Nor were these two cases isolated incidents.  The waiting area was filled with minor injuries and – even early on a Sunday evening – with a large excess of people under the influence of drink or drugs.  Only a small minority (including, as it turned out, DrugBaron) had suffered either an accident or a medical emergency.

The problem of a health services overwhelmed with people whose problems can be addressed with drugs or surgery is nothing new

The picture painted by these anecdotal examples is not news either.  Health bosses and governments across the Western world recognize the problem.

But the potential solutions, thin on the ground as they are, share one thing in common: they are deeply unpalatable.  Rationing, co-pay, and tiered service levels are all either deeply unpopular where they exist, or politically impossible to impose.

In the UK, the principle of universal entitlement (availability of every kind of healthcare intervention), not just universal access (availability to all), free at the point of delivery is the expectation of almost everyone in society, even if in practice it can never be delivered.  No-one is willing to grasp the nettle and point out that this noble principle is itself the source of the spiraling costs and – worse still – of egregious waste.

Keeping people away from hospitals and doctors who do not need medical treatment is the only way that rising costs can be countered.  Doing so would, at a stroke, staunch bleeding healthcare budgets while scarcely impacting on the health of the nation.

If that sounds heartless, analytical and uncaring, it is not

Both the elderly lady and the young homeless man are deserving of our sympathy and our support, and of public resources to help them in their time of need.  But giving them limitless access to healthcare turns out to be the wrong kind of help.  No amount of healthcare will resolve the underlying problems of poor pastoral care in nursing homes, social breakdown and the loss of the family unit or the supply of inexpensive housing.

In fact, by cherishing the principle of limitless, free healthcare above all else, society – and the governments that represent them – risk exacerbating these problems still further.  By soaking up an ever bigger proportion of national productivity, healthcare leaves behind diminishing resources for other much needed investments.

In the end, the 20th century panacea of free, limitless healthcare is a poison chalice.

Solving these problems lies outside the expertise of drug discoverers and developers.  Our pills, no matter how innovative and clever, cannot address the fundamental problems our healthcare system now faces.

But the critical take home message is this: better drugs are not the solution to healthcare’s cost conundrum – but neither are they the source of the problem.  We must not allow politicians, or indeed the public at large, to take shots at effective drugs just because they happen to carry a high price tag.  Those price tags are essential to made innovation economically viable.  Instead, we must all place the blame squarely where it belongs, hard as that can be: on the central principle of universal entitlement.

A system that rations highly effective drugs like Kalydeco™ for cystic fibrosis yet admits people into hospital for chronic non-compliance or homelessness is in urgent need of reform

Cutting waste means more than doing the same things with greater efficiency.  It means more than paying the lowest possible price for a given service or product (something not to be taken for granted, as the Irish population knows, with common generic medicines costing as much as ten times more in Ireland than in the UK).  It even means more than switching from a higher priced proprietary drug to an equally-effective generic (where the sometimes unpopular NICE methodology in the UK has made substantial progress).  In the end it means realizing that yet more healthcare isn’t the answer for most people’s problems – and less healthcare means more resources available to target some of society’s thorniest issues.

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