Why I drink Samuel Adams beer

Good... and good for you?

Good… and good for you?

When I worked at the Boston Consulting Group in the 1990s, the firm held internal quarterly conferences to present new insights and build a common culture among consultants. One of the best guest speakers was Jim Koch, a former BCG consultant who founded Boston Beer Company, maker of Samuel Adams. Jim’s insight was that there was room  in the market for a fresh beer made with premium ingredients. He converted that insight into a company that has been a driving force in the craft beer industry. Unlike any of our other speakers, he advertised his product by popping open a beer and drinking it while giving his talk!

Recently I’ve become alarmed at the use of certain food additives, especially artificial emulsifiers, but also others such as preservatives and clarifying agents. I’m worried that some of these products may be contributing to inflammatory bowel disease, metabolic syndrome and other health problems.

Two important components of my diet are ice cream and beer, so I wrote to my favorite companies to find out what they put in their products. Sadly, JP Licks includes artificial emulsifiers in their ice cream –although they are looking for alternatives.

But Sam Adams, did not let me down. Here’s what I received from them:

Dear David,

Thank you for your question regarding the ingredients in our Samuel Adams beer. When a drinker contacts us, we take their words as seriously as we take our beer. 

We do not add any coloring or preservatives to our Samuel Adams beer, nor do we use any adjuncts, which lighten and cheapen it. Our beers are made with all-natural, high-quality ingredients. Samuel Adams Boston Lager was the first American beer to pass the German Beer Purity Law also known as the Reinheitsgebot. The Reinheitsgebot requires German brewers to only use the traditional ingredients found in beer: water, malt, hops and yeast. Samuel Adams Boston Lager consists of 4 ingredients: Water, a special Samuel Adams blend of two-row malted barley, Bavarian hops, Hallertau Mittelfrueh and Tettnanger, and proprietary Samuel Adams lager yeast. To add additional complexity to our brews, some of our other recipes use spices or fruit (not to be confused with adjuncts) including vanilla, grains of paradise, cinnamon, chocolate, rose hips, and fruits like lemon zest, cherries, and orange peel.

Because we do not use any preservatives, we strive for freshness at Samuel Adams. This is why all of our beers have a freshness dating that gives a recommended date to consume by. Although beer doesn’t go bad in the sense that milk does, we believe freshness is a fundamental component of any quality beer.

We hope this answers your question. Thanks again for contacting us, and please continue to enjoy Samuel Adams beer knowing we use only the finest quality ingredients!

Cheers,

[Name redacted]
Consumer Response Representative

Image courtesy of nongpimmy at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

ACA progress according to Athena and RWJ

Note the big jump in Medicaid in expansion states

Note the big jump in Medicaid in expansion states

Healthcare wonks everywhere are excited that Athenahealth and the Robert Wood Johnson Foundation have teamed up to analyze and publish a physician-level view of the impact of the Affordable Care Act. Healthcare industry veteran Josh Gray (whom I first met 20+ years ago at Boston Consulting Group) is leading the effort for Athena. ACAView mines encounter data from tens of thousands of Athenahealth physician customers to answer questions such as:

  • Are physicians seeing more new patients in their practices?
  • Were new patients sicker than new patients in the past?
  • What percent of previously uninsured patients obtained insurance in 2014?
  • How did the situation vary between states that expanded Medicaid and those that did not?

The analysis largely demonstrates that ACA implementation is going smoothly and that non-Medicaid expansion states are shooting themselves in the foot. In particular:

  • Physicians are not being overwhelmed with new patients
  • New patients are not sicker
  • Uninsured rates have fallen significantly everywhere, with much sharper drops in Medicaid expansion states
  • The ACA has eliminated age disparities in coverage

Check out the full report for the details.

By healthcare business consultant David E. Williams, president of Health Business Group.

Digital pathology in action: Interview with Omnyx CEO Mamar Gelaye

Omnyx CEO Mamar Gelaye

Omnyx CEO Mamar Gelaye

Pathologists are physicians who play a critical role in disease diagnosis and treatment planning. Yet if you’re a patient, chances are you’ve never met one, because pathologists typically work in the hospital laboratory, analyzing slides and providing their reports to the treating physician.

Turns out pathology is also one of the last areas of medicine to embrace the digital revolution. That’s changing now as pathology discovers the benefits of digital solutions and connects more directly to the rest of the care team.

The University of Pittsburgh Medical Center (UPMC) is a leader in the field of digital pathology, and has teamed with GE Healthcare in a joint venture called Omnyx. I interviewed Omnyx CEO Mamar Gelaye to learn more.

Here’s what we discussed. (Use the timestamps if you want to jump to specific questions):

  1. What role does pathology play? Why does it matter to the patient? (0:11)
  2. We’ve all heard the term “staging” but what does it mean? (1:25)
  3. How does a traditional hospital pathology lab operate? (2:06)
  4. What are the limitations of the traditional approach? How does digital help? (4:04)
  5. Why is pathology among the last to digitize? (7:13)
  6. What elements are digitized?  (8:06)
  7. When a pathology lab goes digital, what happens to all the physical specimens? (8:56)
  8. What impact does digital pathology have on patient care? (9:48)
  9. Why are UPMC and GE working together? (11:25)
  10. What is the long-term potential of digital pathology? (13:37)
  11. Is it possible to use digital pathology to extend the team beyond the walls of a single hospital? (14:44)

By healthcare business consultant David E. Williams, president of Health Business Group.

Hospitals say: Show me the money! (I’m quoted)

Hospitals and other healthcare providers are struggling to collect out-of-pocket costs from patients. This has always been the case to some degree but with the growth of high-deductible plans and other forms of cost-sharing, patient payments have become a much more significant share of the pie.

This state of affairs can lead to some ugly publicity. Hospitals are more likely to collect if they do so upfront, but it can also strike patients as rude and even unethical.

The Pittsburgh Tribune-Review covered this topic, leading with an example of a breast cancer patient who was told her surgery would be canceled if she didn’t bring along her $900 co-pay.

I’m quoted in the story:

David E. Williams, a health care consultant in Boston, said patients are leery of hospital bills because they don’t understand the complexities of health insurance. He encouraged people to become more familiar with the plans.

“If hospitals wait to bill later, the patient, in addition to being generally less likely to pay, may not believe that they actually owe it because they’re not sure how the insurance works,” said Williams, co-founder of the Health Business Group.

With high-deductible plans, a patient who once was responsible for $50 might be on the hook for thousands of dollars, Williams said. Owing money for a health-related procedure is different from owing money for a car, he said.

“If you don’t make your (car) payment, somebody can repossess it. They are not going to undo your surgery or take your knee replacement,” he said.

By healthcare business consultant David E. Williams, president of Health Business Group.

Biosimilars are not generics

Same thing only different

Same thing only different

The Wall Street Journal (Big Pharma’s Unfamiliar Biosimilar Threat) warns us that pharmaceutical companies are overvalued because investors have not realized that copy-cat versions of biotech drugs, aka “biosimilars” will hurt profits substantially. It’s not an unreasonable assertion.

And yet, the Journal follows with a common but false explanation of what biosimilars are:

“Biosimilars are analogous to generic versions of traditional small-molecule pharmaceuticals.”

Actually they are quite different. Generic versions of traditional drugs like Lipitor are meant to be exact copies of the original. That means pharmacists can –and generally must– automatically substitute generic atorvastatin for brand name Lipitor. There is no differentiation for generic makers of atorvastatin –you won’t see them advertising on TV or sending reps into doctors offices. Instead, they compete on price. When a traditional drug goes generic, sales of the branded product plummet, and once several generics hit the market they typically sell for less than 10 percent of the original price.

Biosimilars are not exact copies of the original biotech drug –that would be too difficult to achieve. Instead, they are “similar” products that have to be tested on patients before they can be approved. Once approved, they will have to be marketed to get physicians to prescribe them. A pharmacist can not simply substitute a biosimilar for the original product. The relatively high cost of biosimilar development means we can expect fewer competitors, more differentiation, and substantial sales and marketing efforts.

Those characteristics make biosimilars much more like the me-too versions of traditional drugs, where a variety of similar drugs appear in one class. Think statins: Lipitor itself was a me-too product, the fifth statin on the market after Mevacor, Zocor, Lescol and Pravachol. But Lipitor didn’t compete on price. Instead Pfizer leveraged superior marketing and clever clinical trial designs to differentiate itself.

I expect biosimilar makers to try the same kinds of tactics as the me-too drugs of yore. As I’ve written, Pfizer itself is getting into the act  (see Pfizer and Hospira: It’s not about generics.) “Experts” expect biosimilars to cost 20-30 percent less than the original. Some more aggressive analysts say 40-50 percent less. We’ll see a range, but I’m willing to bet someone will try to price the same or higher based on a differentiated claim.

The market won’t play out exactly the same way as me-too drugs because:

  • Health plans and pharmacy benefit managers are on to the drug industry’s games and will be more aggressive
  • The market for biotech products is more specialized; drug companies can’t expand the number of patients so dramatically as they did by marketing products for common conditions
  • The products are very pricey, leading to unsustainable increases in treatment costs. Consumers, policy makers and doctors understand this and have incentives to do something about it by pushing prices down

Image courtesy of Supertrooper at FreeDigitalPhotos.net

By healthcare business consultant David E. Williams, president of Health Business Group.

Sovaldi: a near-perfect example of price discrimination

The controversy over the pricing of Gilead’s Sovaldi for Hepatitis C is a textbook example of price discrimination in action. I hope that my quick review of some of the principles involved will help explain what’s going on.

Gilead sells Sovaldi for high prices in the US: up to $85,000 or so for a course of treatment. The price is a little lower in Europe, substantially lower still in middle income countries and less than  $1000, or 1 percent of the US price in poor countries such as India. Such stark differentials set up major financial incentives for people in richer countries to obtain the product in poorer countries. With more than $80,000 per patient at stake, grey marketers could easily make millions of dollars and even an individual patient from a rich or middle income country would find it financially worthwhile to go to a low income country to procure the medicine.

This isn’t just theoretical. I was approached by a consultant representing large US employers who were exploring pharmacy tourism that would send patients abroad for their drugs.

Gilead has responded by taking steps to limit diversion of product. Patients must present IDs showing they are residents of the country to be eligible for the low-income country price. Patients can only get one bottle of medication at a time. Naturally some folks, including Doctors Without Borders, are complaining about the burden on patients and caregivers, and accusing Gilead of being greedy and maximizing profits.

Although the anti-Gilead people have a valid perspective, my sympathy is mainly with Gilead. The concept of price discrimination: charging different prices to different customers based on willingness or ability to pay, maximizes a monopolist’s profits but it also maximizes societal benefit. As the simplified chart below illustrates, Gilead makes the most money if it can sell the medication at different prices in different countries. That also leads it to sell the highest quantity of product, meaning more people can be treated.

 

Price discrim

If Gilead were required to charge the same price everywhere in the world –as shown below– it would result in a windfall for consumers in high income countries (“consumer surplus”) and lack of affordability in poorer countries (“deadweight loss”), because patients in poorer countries could not afford to be treated. Even assuming Gilead wanted to maximize its profits in that scenario fewer people would get the treatment.

No discrim

 

Because of the opportunity for price discrimination, Gilead was willing to introduce Sovaldi in rich and poor countries at the same time –something that doesn’t usually happen.

For price discrimination to work, the following conditions must hold:

  1. The firm (Gilead) must have some monopoly power. In this case the monopoly is based on patent rights. Gilead critics can try to undermine this power by encouraging governments to ignore patents.
  2. Markets must be able to be segmented and kept separate. Here that means segmentation by country, but theoretically it could be done down to the individual level so that rich people in poor countries pay the same or more than poor people in rich countries. (In rich countries there are other mechanisms to do this, such as patient assistance programs, but let’s not make this even more complex.)
  3. There can not be leakage between markets, otherwise the price is eroded in the expensive market. That’s why Gilead needs to confirm residency and why pharmacy tourism undermines societal benefit.

Price discrimination maximizes profits and maximizes societal benefits by increasing the number of people who can afford treatment, while rewarding the monopolist for bringing a valuable innovation to market. It’s not necessarily true that patients are harmed when Gilead maximizes its profit.

Allowing and even encouraging price discrimination is good global health policy. It encourages innovation and lessens global disparities.

By healthcare business consultant David E. Williams, president of Health Business Group.