Control Drug Costs — help from the ACA

costThe Affordable Care Act (ACA) does have some teeth to reduce drug prices.  The ACA formed a 15 member group intended to restrain the growth in cost of Medicare without reducing benefits.  The Independent Payment Advisory Board (IPAB) has powers to improve efficiency and prevent Medicare from being victimized by business interests.

Mergers of large pharmaceutical companies have created near monopolies for setting prices — the new specialty drugs are a case in point.  Also, by repeatedly suing smaller companies and generic manufacturers the competition is under siege if not defeated.   The huge rise in drug prices have become a national disaster because individuals and Medicare just can’t afford the price gouging.

The IPAB has some power to help the problem — hopefully they will act to implement reference pricing of new drugs.  It forces drugs with a similar effect to charge the same amount — old drugs and new.  So if a new wonderful drug “Neximabob” is no better for arthritis than ibuprofen then the prices must be the same.

The Federal Drug Administration can not require drug-comparison research.  This has been a wonderful marketing loophole for big pharma.  It’s time consuming to do comparison research.  By the time “Neximabob” is found to be a sham, billions of prescriptions have been filled,billions of dollars have been paid and Medicare has lost billions.  But, you will be happy to know, the FDA says “Neximabob” is safe and effective.

The IBAP can act on expert opinion rather than wait for full comparison research.  One option for drug companies is to do the comparison research (which they fight) or do more lobbying (more that the hundreds of millions they already spend).

Guess where the money for drug lobbying comes from?  the very tax payers and Medicare recipients who pay for the medications in the first place — it’s just not fair.  Next time you hear the IBAP is so so bad you will know who is speaking — it’s not consumers!

Note:   According to the Congressional Research Service the IBAP is not currently active because the rise in Medicare cost in 2015 is not enough to trigger actions by the committee.  There is some thought it may become active in 2017 unless repealed by Congress.


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Over prescribing — high risk for the elderly


Elderly patients are taking too many drugs.  And, in most cases the drugs can be stopped.  This surprising idea was highlighted by Dr. Ezekiel J. Emanuel in his New York Times article 11/22/15.  He backed up his statements with a study from 2010 (JAMA).  The figures that follow are from that study.

The first figure is the logic diagram for stopping medications in elderly patients who have several chronic diseases.  The second figure is the list of medications that were stopped in the study.  Only 2% of the stopped medications eventually had to be restarted.  The cost savings alone is huge and the reduction in the risk of side effects is likewise tremendous.  “Less is more”.

Health care providers often prescribe drugs intended for younger healthier patients to older sicker patients.  Often the drug testing originally done to approve drugs excludes older sicker patients due to the risks of side effects.  A drug might add many years of life to a 50 year old but that’s not likely for an 80 year old with multiple problems.   In fact, over medicating elderly patients may hasten death — this has been proven in many studies.

Dr Ezekiel suggests asking the following questions to the health care providers who prescribe medications, tests or treatments to elderly patients (or perhaps any patients):

  1. What difference will it make?
  2. How much improvement is expected?
  3. How likely and severe are the side effects?

Evaluate the answers carefully, if the answers are: small difference, not much improvement, and fairly likely side effects then perhaps that drug, test or treatment is not needed.

Dr. Emanuel favors the advice of teaching hospital doctors like him, but it’s just not practical or necessary for patients to get a university consultation.  Stopping medications is not rocket science.  As the graphic says, it may be better for many elderly patients to get “hugs not drugs“.


Figure 1




Figure 2


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Specialty Drugs — at a price you can’t afford

specialtydrugcostBig Pharma blows the lid off the price for “specialty drugs”.  Those drugs now cost more than an average American’s income.  By 2020 the average specialty drug will cost $80,000 per year, just pray you don’t need two of them!

The data plotted above come from AARP.  The raw data is concerning and three questions beg to be answered:  WHY is this happening, IS THIS A PROBLEM and if it is a problem WHAT IS THE SOLUTION.

WHY?  — because big pharma wants to make a lot of money.  Somewhere, long ago and far away, some researcher wanted to help people with difficult medical problems.  But, that altruistic thought was crushed as the drug was marketed.

PROBLEM? — absolutely, the US healthcare system can not afford the drugs and neither can average individuals.   If a drug costs a trillion dollars it’s not a drug, it’s a joke.  So where is big pharma going wrong?  Here are some possible choices:

  • Too much is spent on research
  • Too much is spent on advertising
  • Too much profit is paid to shareholders

Where is US healthcare going wrong?

  • Too little regulation exists to require cost effectiveness research before marketing drugs
  • Too little drug price control is being exerted by the government.
  • Too little mirroring of price controls in other countries that shift profit taking to the US.

SOLUTIONS?  — if the trend is allowed to continue “Bronze” health insurance will not cover specialty drugs but “Platinum” insurance will.  Sadly, only the top 1% will be able to afford the “Platinum” plan.  The US will have more of a two tier healthcare system with a huge gap between the 99% and the 1%.

  • Impose cost controls on drugs — extremely high priced drugs should trigger rules to lower profits so such drugs will either cost less or not be produced.
  • Demand cost benefit analysis on all drugs before marketing — if the benefit is not worth the cost then don’t add them to the formulary for Medicare or Medicaid.
  • Wrap drug costs inside health plans.  That way other factors get consideration, like preventive care,  hip surgery, simple childhood vaccinations,  and pregnancy.  The big pharma bill should not be coming “off-the-top”.




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Insurance CEO Paid $66,000,000 — for what?

hatinringThe author of this blog is willing to be the CEO of United Healthcare for a mere $60,000,000 / year.  That would save the insurance company 6 million dollars a year — a real bargain.   So why does United Healthcare need a new CEO?

The Wall Street Journal reported today that United Healthcare (the nations largest healthcare insurer) can’t seem to make enough money with clients who get insurance on the government exchanges.  They feel other insurance companies should have those pesky patients, who cost more for a couple of years, because they did not have insurance before.

United Healthcare (NYSE:UNH) has been having a lackluster financial situation for the past few months, like almost all other stocks — perhaps a little worse.  Reports show the health insurer will lower its earnings-per-share outlook to $6 per share, down from its earlier forecast of $6.25 to $6.35 per share.

Could it be that the 25 cent drop in earnings is due to business on the exchanges? — surely it’s not the fault of the CEO?   But, why take a chance, get a new CEO.  The company could get a new CEO for half the price and even might be able to snag someone with a PhD in economics to help figure out what to do.   Duh — lower the operating costs!

Presidential candidate, Dr. Ben Carson*, says insurance companies should be low-cost non-profit operations simply to process claims.  It makes a lot of sense.  Why is so much profit being extracted from the US healthcare system by insurance companies?  It does not need to be that way.  The companies keep about 20% to 25% of premiums for CEO salary, expenses and profits.  In France, insurance companies are limited to 6%.  Yes, it can be done.



* This is not a political endorsement, just an observation.


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Maryland’s Global Hospital Budgets — a start

marylandmapMaryland and Medicare started a global payment scheme for hospitals January 1, 2014, and data on the program are now being reported (NPR and NEJM).  Some success is noted for reducing unnecessary procedures and blunting the rise in costs for Medicare and the 28 Maryland health insurance companies.

Maryland is a small state but has 6 million residents.  They have had a cost control system for hospitals for the past 40 years — up until now all insurance companies, except Medicare, paid the same amount for any given hospital service — Medicare paid less.

The “Maryland All-Payer Model” adopted in 2014 had 2 basic elements:  1)  Hospitals would be paid the same rate by all payers including Medicare and 2) Hospitals would be paid a global fee rather than the previous “fee-for-service” model.   The global fee is adjusted to some degree by quality targets.  There is no adjustment for number of services.

Maryland healthcare overall was ranked 17th by the Commonwealth Fund within the 50 states and District of Columbia.  But, the hospitals were ranked much lower at 33rd in the category of “Avoidable Hospital Use & Costs”.  The All-Payer Model was designed to target the unnecessary services by hospitals.

The Hospitals liked the plan because Medicare would be contributing more money and they could get the same revenue without driving so hard to perform services (like cardiac catheterizations).   The insurance companies liked the plan because it reduced risk and potentially could reduce cost — they could make more money.

Doctors are not very happy because they make money by charging fee-for-service associated with many of the services (like cardiac catheterization) — fewer services, fewer charges.  Likely, a number of hospital physicians will look for positions elsewhere as services are reduced.

The program seems to be having some effect:  the growth in Medicare service continued to rise but was reduced by about 1% whereas nationally the growth increased by 1%.  From a patient standpoint the rates of potentially preventable conditions in Maryland made big improvements (except for catheter-related urinary tract infections and foreign bodies left in people after surgery which both had a big increase for unknown reasons).

The obvious future direction is to gradually reduce the payments to hospitals — to mitigate a potential huge windfall profit.  Hopefully, quality monitoring will be expanded to make sure the hospitals are not just “studying for the test” and ignoring other areas with less scrutiny.   It seems Maryland and Medicare have taken an important step away from fee-for-service.  Hopefully other states will follow suit.

It is interesting to note that Colorado will have a ballot question next year to move to a single payer for health care in that state.  Similar to Maryland, but circumventing insurance companies all together.  Perhaps we are seeing the start of efforts to get rid of fee-for-service which is a huge driver of excess cost in the US health care system.

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Health Care Lobbying — it’s not for quality


Health care lobbyists are not your friends.  They do not promote quality health care, instead they promote health care business profits.  If only hundreds of millions of dollars could be spent on lobbying for health care quality, on health care access, and on lowering health care cost then the US might not be last in the quality ranking for industrialized countries.  The data below are from the Center for Responsive Politics.  The table shows the amount of money spent for lobbying in 2015 for various industries.   Any wonder why we don’t see much change?

Industry Total (millions) X = 10 million $
Pharmaceuticals &
Health Products
Insurance $118 XXXXXXXXXXX
Oil & Gas $97 XXXXXXXXX
Business Associations $96 XXXXXXXXX
Electronics Mfg &
Electric Utilities $88 XXXXXXXX
Misc Manufacturing &
Health Professionals $73 XXXXXXX
Securities &
Hospitals &
Nursing Homes
Telecom Services $64 XXXXXX
Air Transport $60 XXXXXX
Education $56 XXXXX
Defense Aerospace $56 XXXXX
Health Services &
Real Estate $52 XXXXX
Civil Servants &
Public Officials
Commercial Banks $46 XXXX
TV/Movies/Music $45 XXXX
Automotive $43 XXXX

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Cognitive Behavioral Therapy — good thinking

innerthoughtsFinally, a psychological treatment that works!  The first witch doctor probably said the same thing; so, what is different now?  A treatment method called Cognitive Behavioral Therapy (CBT), and it can be administered by an Internet application and it still works!  It’s not dependent on a therapist.  That little fact changes everything — it’s not charisma, it’s science (see reference).

The article cited above is about treatment of insomnia (something that may affect 25% of humans).  But, many other conditions, like depression, also seem to have good results with the method.  In randomized studies, the treatment works as well, sometimes better, than drug treatment (in milder cases).

Mental health problems seem to be divided in two groups: mental problems related to brain dysfunction (most effectively treated with medications) and mental problems occurring with  a normal brain.  This is like the difference between computer hardware problems and computer problems caused by pushing the wrong buttons.  Admittedly it’s sometimes hard to tell the difference and patients can really hurt themselves either way.

So what is CBT?  First consider a dog brain:


Now the human brain:

BED TIME –>  {if I don’t sleep I feel terrible, beer or a cigarette may help, I did not sleep well yesterday, if I don’t sleep for 8 hours I will die, I can’t stand this anxiety} –> NO SLEEP

That human internal conversation is the difference.  And,  the internal conversation can cause problems especially if they come to incorrect conclusions taken as truth.  CBT, with the help of a trained therapist (or sometimes a computer), teaches the patient to critically analyze the internal conversation to avoid behavior which makes the situation worse or behavior which is based on a flawed conclusion .  Unlike traditional psychotherapy this is not a long-term engagement — people learn to do CBT themselves and feel better or sleep better as a result.

CBT is clearly part of quality health care and may reduce the overuse sedatives and anti-depression drugs.

Click the links:  overview of CBT for insomnia, computer treatment of insomnia and principles of CBT.

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