Sunday, April 06, 2014

For pharma and medical device makers, U.S. is The Big Rock Candy Mountain

The New York Times' Elisabeth Rosenthal is out with another front-page chapter in her incomparable epic detailing the dysfunction of the U.S. healthcare system. She's spotlighted (123) price-gouging by various physician specialties, hospitals, and now medical device makers and pharma.

Rosenthal focuses mainly on diabetes treatment. It really has improved radically over the past two decades, with ever-more sophisticated insulin pumps and accouterments, and synthetic human insulin.  But near-monopoly pricing power -- unmitigated, in the U.S. alone, by strong government pushback -- forces many patients to buy more sophisticated treatment than they need, at astronomical markups. As is de rigeur in Rosenthal's pieces, the contrast with other wealthy countries hurts most. The contrast with the U.K. highlights strengths and, to a lesser extent, weaknesses of a system that contrasts starkly with our own:
In Britain, each hospital negotiates for pumps for its patients, getting prices that are typically less than half those in the United States, Dr. Pickup said. The vial of insulin analogue that Ms. Hayley gets for $200 at an American pharmacy is typically bought by British pharmacists for under $30 and dispensed free....

Even when governments negotiate prices and foot the bill, patients may feel the rising price of diabetes care in other ways: While about one-third of Type 1 diabetics use pumps in the United States, that number is under 10 percent in Britain. What is the right number? Since pumps are complicated to operate, young children cannot use them, and some patients prefer syringes that operate like pens because they do not like having pumps attached.

The British government will not dispense these costly items unless a patient’s diabetes has proved uncontrollable using other methods, but many doctors feel the devices are underutilized in Britain.
British policy on this front recalls to me the the dictum of former British health minister John Reid, recounted in T.R. Reid's (no relation) The Healing of America : "we cover everyone, but not everything." Now, perhaps the Brits could loosen up a bit, especially given the superior prices they negotiate. Perhaps they could force those who can afford the more advanced treatment to put some skin in the game, means-testing coinsurance.

Other European countries with much different healthcare systems from the U.K.'s also negotiate prices that are a fraction of those paid in the U.S.  The common denominator is government-imposed pricing discipline, (exercised through various means), not the U.K.'s state-run healthcare delivery system. There's two issues at work here: how a healthcare system decides who gets what treatment, and how that system -- or divided, weakened fragments of it -- determine how much to pay for each service.

But the ability of a health minister to affirm "we cover everyone, not everything" fills me with envy every time it comes to mind.

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