Category Archives: Policy and politics

Are Massachusetts healthcare costs ok after all?

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The best defense is a good offense. I assume that’s what Partners HealthCare CEO David Torchiana had in mind when he penned First do no harm in the Boston Globe. In a nutshell, he argues that healthcare costs in Massachusetts are more affordable for businesses and individuals than elsewhere in the country, that they are becoming relatively more affordable, and that the state should resist the urge to impose further cost controls.

I’ve made similar arguments about affordability myself. See for example, Massachusetts: Land of affordable health insurance from back in 2011.

And yet…

While Massachusetts has retained its affordability relative to other states, healthcare is taking up a higher and higher percentage of families’ incomes, including in Massachusetts. Medicaid and other healthcare spending dominates the state government’s spending growth, squeezes out discretionary initiatives for priorities such as education, and necessitates the tough budget cuts Governor Charlie Baker is making.

I’m sure I’m not the only one whose eyebrows were raised by Torchiana’s sanguine perspective.

Partners also should not claim too much credit for the reasonableness of healthcare spending in Massachusetts, considering that its own costs are among the highest. Despite receiving substantially higher reimbursement from commercial payers than other providers and enjoying a richer payer mix, Partners recently reported a record loss of $108 million for the year. Meanwhile, its smaller rivals –including those who treat a higher proportion of Medicaid patients and receive lower commercial reimbursement rates– are reporting better financial results.

If Partners had remained just Massachusetts General Hospital and the Brigham & Women’s Hospital I don’t think its executives and lobbyists would have to expend so much effort fending off the state. Massachusetts residents are justifiably proud of the worldwide reputations of these hospitals, which draw tremendous research dollars from the NIH and elsewhere, attract patients from around the world, and are equipped with the medical expertise and equipment to treat the most complex conditions.

No, the issue is that over the years Partners has dramatically expanded its footprint throughout the region, buying up or partnering with community hospitals and physician practices, and expanding its own overheads as it grapples with the balance between central and devolved management. Partners is now in the business of providing routine care throughout the region, and that helps drive up costs and puts the company in the spotlight. As the state grapples with bringing costs in line with benchmarks, Partners cannot expect to be given a free pass.

So there are a couple of alternatives: #1: Partners can bring its own costs closer in line with rivals or #2 it can divest its community assets and focus on being a great academic medical center. From what I can see, Partners is pursuing a light version of #1 while simultaneously slowing its plans to further expand in the community and mounting a charm and lobbying offensive with the state and the public.

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

Would an FDA radical make any real difference?

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Totally radical, dude!

Trump considers naming FDA chief who would radically overhaul the agency, blares the headline from STAT. The candidate, Jim O’Neill is indeed a radical: he wants to eliminate the requirement for drugs to demonstrate efficacy in order to gain approval, favors payments for organ donors, and is part of a group that wants to create sea-based libertarian communities.  He also doesn’t seem to know much about the FDA and its people –he said “one thing that surprised me is that the actual human beings at the Food and Drug Administration like science; they like curing disease and they actually like approving drugs and devices and biologics.”

As scary as the guy sounds, in practice he probably would not have much of an impact. Here’s why:

  • Just because a drug or device is FDA approved does not mean payers will pay for it. Pharma and device companies have to demonstrate that their products work and that they are cost effective before they will be reimbursed
  • Since the biggest payers are Medicare and Medicaid, even if you take FDA out of the business of judging efficacy the government is still heavily involved. (However, some Republicans including the likely HHS Secretary look favorably on eliminating Medicare and Medicaid, which I guess would negate my point)
  • O’Neill still thinks products should be shown to be safe before they gain approval, and that’s arguably more important than efficacy in terms of saving lives. But safety can’t be fully evaluated without considering efficacy. A really effective drug that’s active against a serious illness can be considered “safe” even if there are occasionally serious side effects and even deaths. But we wouldn’t accept the same safety profile as “safe” for more benign conditions
  • O’Neill says FDA is under too much pressure from Congress in its current structure. Whenever there is an unpopular decision the commissioner has to testify before Congress, where he’s raked over the coals. I think the same thing will still happen –the public will rise up, perhaps even more, if FDA backs off its traditional role

Ted Cruz actually had an even more radical approach.

So, rest easy for now.

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

Recreational marijuana is becoming legal. How will the laws be implemented?

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I opposed the ballot question legalizing recreational marijuana in Massachusetts. Nonetheless, the measure passed and it looks like legalization is going to happen. I asked marijuana entrepreneur Rob Hunt, President of Teewinot Life Sciences, to provide the industry perspective on some of the key issues.

Here’s what he had to say:

How does recreational marijuana interact with the market for alcohol? Do you expect alcohol sales to rise or fall? Why?

The adult use cannabis market should have almost no impact on the alcohol market at all. What this market represents is simply an orderly conversion from a long-standing illicit market to a now regulated legal market. It is not as if this new adult use market is emerging from nowhere, it already exists and has existed for years. Now adult cannabis users simply have a safe way to purchase cannabis from licensed retailers who have laboratory tested state-approved products rather than from a criminal enterprise with no safety considerations or government oversight.  

What is the evidence of the impact of marijuana legalization on the black market?

Adult-use legalization will have a very large impact on the illicit market. Using Colorado and Washington as comp sets, the legalization of adult-use almost eliminated the illicit market overnight for adult cannabis users within the state. There is simply no reason for one to put themselves in a potentially dangerous situation when they can go to a local shop down the street that has a larger selection of tested products at a comparable price. Best of all, in a legal market, the money stays in the local community and generates tax revenues for the state and the Federal Government.

Some (including me) are concerned that the availability of edible marijuana products will pose a danger for children but also for adults and pets, especially when they are packaged as candies or treats. Are these concerns warranted?

The cannabis industry is very aware that edibles must be very closely monitored. The trend is to make edibles less potent for this reason and to make sure that labeling and packaging are obvious and accurate and that the exit packaging is childproof. As for making products that are packaged as candies or treats, it is no different than making an alcohol product as a blend with fruit juices or iced tea. Flavor should not be the consideration, education and making sure products are kept in safe places should be a much larger consideration for adults using any cannabis product.

According to published research, about 30 percent of marijuana users have some degree of marijuana use disorder, including dependence and addiction. What is the argument for introducing a product that causes harm in a significant percentage of users?

I think the most simple answer is that the state is not “introducing” a product at all. This product was, is and would continue to be available to anyone that wishes to consume it on the illicit market. The question that should be asked is “If this product is already available to anyone that wants it, would it not be smarter to regulate it, keep it out of the hands of children, make sure it is labeled and packaged properly, has potency information available and is grown using specific standards?” If the answer to that question is yes, which is what the voters recently decided it was, then the next question, to address the concerns of many should be, “With the revenue and taxes that are being produced from this now regulated program, would it not be prudent to reallocate some of those dollars back to education and treatment for those who need it? Furthermore, perhaps should we not allocate some of the money that was previously earmarked for incarceration to rehabilitation?” 

The medical marijuana ballot initiative was passed in Massachusetts just a few years back. Was that initiative mainly a tactical stepping stone by the marijuana industry on the way to recreational legalization, as appears to have been the case in Colorado? 

The two issues are not at all related. Those who need cannabinoid based medications to treat a host of indications had no other options to procure it outside of these compassionate state programs. This was a health question. It is very likely that cannabinoid based medicine continues to move away from the plant and further into the lab. Patients that require cannabinoid based therapies are not concerned with cannabis, they are focused on the complex chemical compounds that the plant produces called cannabinoids. There are to date one-hundred and eleven of these cannabinoids identified. Many of them have been proven to have efficacious qualities, most notably to treat spasticity and for palliative care. As science progresses, new ratios and formulations of cannabinoids will be developed to advance where these medicines will be used to treat the infirm. 

Legalizing cannabis for use by responsible adults is a social justice question. These laws were passed simply to allow adults to use a product that has been statistically shown to be less harmful than alcohol without fear of arrest or incarceration. 

There is a very clear bright line distinction between these two laws and the reasons for their respective introduction. The one thing they both have in common, as evidenced by the percentage of voters supporting each, is that they are sensible policy by comparison to cannabis prohibition.

What did the Massachusetts ballot measure get right, and what are you concerned about?  

It is too early to tell either way. The law just passed and has not made it through rulemaking yet. We will see how it is implemented before we will be able to opine on what is right and wrong with it. 

What do you project as the net economic benefit or harm to Massachusetts? What are the key factors to consider?

As James Carville once famously said “It’s the economy, stupid” This law will create many new local jobs both directly tied to cannabis and on the ancillary as well. More importantly, it will take jobs away from criminal enterprises. Previously revenue derived from the sales of cannabis flowed directly back to Mexican cartels, Canada, or local criminal organizations. Now it will all stay in the Commonwealth. Then there are the taxes. Not just the excise taxes, but the Federal and State business taxes, payroll taxes and others. Lastly, the state will not need nearly as much capital for prisons, policing or other programs reliant on cannabis prohibition. You will also see much of this windfall redirected to support social welfare programs. That is good for all citizens in the Commonwealth.

As for harms, there will be a greater need for proper cannabis education and that will cost money. New state agencies or internal departments will be created to oversee the program and that will have related costs as well. Finally, there will no doubt be capital required to treat some users as there is with alcohol and tobacco.

There is tension between US and state law in places like Massachusetts that have voted for legalization. What are the key issues and what is your expectation for how they will be addressed by the incoming Administration and Congress?

I do not think there is enough room to discuss all the related issues in a short article. Things to consider are: the 10th Amendment to the Constitution, The Supremacy clause, the Rohrabacher-Farr amendment, the power of the incoming Attorney General – Jeff Sessions, How Trump or Pence decide to direct AG Sessions, how people close to the administration who are strongly supportive of cannabis progression, such as Peter Thiel or Congressman Dana Rohrabacher, influence the administration policy. 

But the most important issue to consider when addressing any political question is – What is the will of the people? What do they want? Because ultimately, politics is about winning elections and if a politician believes that an issue is important enough to the voters in their district, then they will not likely take a stand against it if they wish to remain in office. At this point in time, there is no doubt how the voters feel about advancing cannabis policy. Almost 60% of the electorate supports adult use cannabis and that is taken from polling across both sides of the aisle in liberal and conservative states alike.

Anything else you would like to add? 

Please take a look at what is being done on the true pharmaceutical side of cannabinoid-based therapy. I am certain that it will alleviate many of your articulated concerns. When you realize that these pharmaceutical and biotechnology companies are conducting clinical trials and are undertaking all the same steps with the FDA as for any other forward thinking drug development, I am certain that it will illuminate that this issue is about helping patients and not about finding a way to back-door legalization. I am happy to point you in the right direction.   


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

Promises promises

Post-election Donald Trump is making healthcare promises he can’t keep. Here’s the transcript of Trump’s 60 Minutes interview from Forbes.

Stahl: And there’s going to be a period if you repeal it and before you replace it, when millions of people could lose -– no?

Trump: No, we’re going to do it simultaneously. It’ll be just fine. We’re not going to have, like, a two-day period and we’re not going to have a two-year period where there’s nothing. It will be repealed and replaced. And we’ll know. And it’ll be great healthcare for much less money. So it’ll be better healthcare, much better, for less money. Not a bad combination.

I would love to see great healthcare, that’s much better, and costs much less. But Trump has no idea how to make that happen and neither do his advisors nor the Republicans in Congress. I wonder if they believe their own rhetoric or if they realize it’s BS.

In any case, now it’s their responsibly to deliver.


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

Goodbye Obamacare? More like hello single payer!

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Once Donald Trump enters office, Republicans will be in a good position to repeal Obamacare, something they have been foaming at the mouth to do for quite some time. Democrats might be able to filibuster to prevent an outright appeal, although the majority has other ways to gut the law, such as the reconciliation process.

I say let them go ahead and repeal Obamacare without putting up a big fight. As Trump told 60 Minutes, “I am going to take care of everybody. Everybody’s going to be taken care of much better than they’re taken care of now.” He also promised to provide “quality, reliable, affordable health care.”

I look forward to hearing the great ideas revealed by Trump and the Republicans in Congress. If they can do what they say then I’m entirely in favor of it and will give them the credit that’s due.

Meanwhile, I’m going to feel free to criticize the stock initiatives of the Republican party, which were largely mirrored in Trump’s campaign statements:

  • Repeal Obamacare, by which they really mean keeping the popular pieces like making health plans accept members with pre-existing conditions without charging higher premiums, but at the same time jettisoning the unpleasant aspects such as the individual mandate and taxes that help subsidize coverage. Sounds nice, but without a mandate, plans will suffer from adverse selection, premiums will skyrocket, and people will be left uninsured
  • Let health plans sell insurance across state lines. This one is highly touted but in reality it’s a big yawn. The plans themselves have little appetite for moving across borders and even if they did, most new entrants won’t be able to establish strong enough negotiating positions in the markets to bring down premiums
  • Change Medicaid to block grants so states can do what they want with the money. This isn’t a terrible idea because it could allow states to more freely innovate and tailor Medicaid to meet local needs. In practice it’s likely to be used just as a way to screw the poor
  • Promote drug re-importation. Remember the senior citizen buses to Canada in the 1990s before Medicare Part D and the mail order pharmacies with drugs supposedly from Canada, that disappeared once Obamacare required drug coverage? Well, the GOP might bring these back. But the drug market has changed and the most pricey new meds won’t necessarily be attainable from abroad anyway
  • Let individuals who buy their own health insurance take a tax deduction the way businesses already do. Again, sounds great in theory but it’s a regressive approach that rewards higher income people who are in the top tax brackets. It also encourages premiums to rise and widens the budget deficit. The Cadillac tax or some variant that limits deductibility by businesses is more fiscally responsible
  • Expand Health Savings Accounts (HSAs), allow them to be shared among family members and passed on as part of one’s estate. Not a bad idea but hardly a game changer in its own right

Remember, thought, that the Republican ideas above were presented by conservatives, while Trump himself has been at least a liberal and frankly more of a socialist when it comes to health care policy, at least based on his earlier writings. Once he learns that the ideas of the conservatives in Congress won’t produce universal coverage, he may well go back to improving –instead of replacing– Obamacare, moving to a Canadian style single payer system, or opening up Medicare for all, just like Bernie and much more radical than Hillary.

I can’t wait to see how it all plays out.

Image courtesy of Thanamat at FreeDigitalPhotos.net


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

 

PCSK9 experience shows drug market isn’t completely broken

 

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Why isn’t this thing growing?

Everyone knows that the market mechanisms that make most of the US economy efficient are lacking in healthcare. That’s especially true for pharmaceuticals, where drug companies can raise prices at will, and only the government can step in with price controls to put things right. At least that’s what we’ve been hearing in the press and on the campaign trail for the last year or more.

So I read with interest a recent STAT article These pricey cholesterol drugs aren’t selling. And that has the biotech industry sweating, about how the market is blocking high-priced drugs –and preventing pharma companies from doing all the things we’ve been told they can do at will.

No one disputes that the new drugs, Repatha and Praluent, are excellent at lowering bad cholesterol, or LDL. They often succeed where the traditional treatment — an inexpensive class of drugs called statins — fails. The problem boils down to doctors who are reluctant to write prescriptions, insurers who are unwilling to pay for them, and drug companies that have failed to understand a fast-changing marketplace.

The failures could send a chill through the still-booming biotech business, which relies on the idea that the risky, expensive process of developing new drugs can one day pay off big.

Contrary to the views expressed in the STAT article, I think the market is actually doing an ok job here. There are two main reasons why the drugs haven’t sold well:

  • First and foremost, while they are proven to lower cholesterol they are not proven to reduce heart attacks or strokes or to lower death rates
  • Second, most patients do just fine with generic statins, which are inexpensive and have a long track record, compared with the new drugs that have list prices of about $14,000 per year

The result is that doctors who want to prescribe the drugs have to jump through a lot of hoops to get insurance company approval. That’s a hassle and it’s expensive and time consuming, so I sympathize. But by the way, before we get mad at the PBMs and insurers, consider that the experience for prescribers might not be that different under a fully capitated payment model since health system administrators would still be worried about their budgets.

The companies that make these drugs are conducting studies of the impact on outcomes that people really care about: heart attack, stroke, death. If they demonstrate that the drugs are effective on these measures, they will have no problem generating prescriptions or charging premium prices –at least in the United States.

Image courtesy of iosphere at FreeDigitalPhotos.net

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