Can the U.S. Repair Its Health Care While Keeping Its Innovation Edge?

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The United States health care system has many problems, but it also promotes more innovation than its counterparts in other nations. That’s why discussions of remaking American health care often raise concerns about threats to innovation.

But this fear is frequently misapplied and misunderstood.

First, let’s acknowledge that the United States is home to an outsize share of global innovation within the health care sector and more broadly. It has more clinical trials than any other country. It has the most Nobel laureatesin physiology or medicine. It has won more patentsAt least one publicationranks it No. 1 in overall scientific innovation.

Strong promotion of innovation in health care is one reason the United States got as far as it did in our recent bracket tournament on the best health system in the world. Though the United States lost to France, 3-2, in the semifinals, it picked up its two votes in part because of its influence on innovation, which can save lives in the United States and throughout the world.

Now we shouldn’t delude ourselves into thinking Americans are inherently more innovative than people in other countries. In fact, many American innovators are immigrants who may or may not be citizens. Many technological and procedural breakthroughs in medicine have occurred in other countries.

Rather, the nation’s innovation advantage arises from a first-class research university system, along with robust intellectual property laws and significant public and private investment in research and development.

Perhaps most important, this country offers a large market in which patients, organizations and government spend a lot on health and companies are able to profit greatly from health care innovation.

The United States health care market, through which over one-sixth of the economy flows, offers investors substantial opportunities. Rational investors will invest in an area if it is more profitable than the next best opportunity.

“The relationship between profits and innovation is clearest in the biopharmaceutical and medical device sectors,” said Craig Garthwaite, a health economist with Northwestern University’s Kellogg School of Management, and one of the judges in our tournament. “In these sectors, firms are able to patent innovations, and we have a good sense of how additional research funds lead to new products.”

High brand-name drug prices, along with generous drug coverage for much of the population, fuel an expectation that large biopharmaceutical research and development investments will pay off. Were American drug prices to fall, or coverage of prescription drugs to retrench, the drug market would shrink and some of those investments would not be made. That’s a potential innovation loss.

This is not mere theory, economists have shown. Daron Acemoglu and Joshua Linn found that as the potential market for a type of drug grows, so do the number of new drugs entering that market. Amy Finkelstein showedthat policies that made the market for vaccines more favorable in the late 1980s encouraged 2.5 times more new vaccine clinical trials per year for each affected disease. And Meg Blume-Kohout and Neeraj Sood found that Medicare’s introduction of a drug benefit in 2006 was associated with increases in preclinical testing and clinical trials for drug classes most likely affected by the policy.

Health care innovation can have direct benefits for health, well-being and longevity. A study led by a Harvard economist, David Cutler, showed that life expectancy grew by almost seven years in the second half of the 20th century at a cost of only about $20,000 per year of life gained. The vast majority of gains were because of innovations in the care for high-risk, premature infants and for cardiovascular disease. These technologies are expensive, but other innovation can be cost-reducing. For instance, in the mid-1970s, new dialysis equipment halved treatment time, saving labor costs.

Even with those undeniable improvements, there are questions about the nature of American innovation. Work by Mr. Garthwaite, along with David Dranove and Manuel Hermosilla, showed that although Medicare’s drug benefit spurred drug innovation, there was little evidence that it led to “breakthrough” treatments.

And although high prices do serve as incentive for innovation, other work by Mr. Garthwaite and colleagues suggests that under certain circumstances drug makers can charge more than the value of the innovation.

The high cost of health care, an enormous burden on American consumers, isn’t necessarily a unique feature of our mix of private health insurance and public programs. In principle, we could spend just as much, or more, under any other configuration of health care coverage, including a single-payer program. We spend a great deal right now through the Medicare program — often held out as a model for universal single-payer.

Despite the fact that traditional Medicare is an entirely public insurance program, there’s an enormous market for innovative types of care for older Americans. That’s because we are willing to spend a lot for it, not because of what kind of entity is doing the spending (government vs. private insurers).

In fact, some question whether the innovation incentive offered by the health care market is too strong. Spending less and skipping the marginal innovation is a rational choice. Spending differently to encourage different forms of innovation is another approach.

“We have a health care system with all sorts of perverse incentives, many of which do little good for patients,” said Dr. Ashish Jha, director of the Harvard Global Health Institute and the other expert panelist who favored the U.S. over France, along with Mr. Garthwaite. “If we could orient the system toward measuring and incentivizing meaningfully better health outcomes, we would have more innovations that are worth paying for.”

Naturally, the innovation rewarded by the American health care system doesn’t stay in the U.S. It’s enjoyed worldwide, even though other countries pay a lot less for it. So it’s also reasonable to debate whether it’s fair for the United States to be the world’s subsidizer of health care innovation. This is a different debate than whether and how the country’s health care system should be redesigned. We can stifle or stimulate innovation regardless of how we obtain insurance and deliver care.

“We have confused the issue of how we pay for care — market-based, Medicare for all, or something else — with how we spur innovation,” Dr. Jha said. “In doing so, we have made it harder to engage in the far more important debate: how we develop new tests and treatments for our neediest patients in ways that improve lives and don’t bankrupt our nation.”

With Spotlight on Obamacare, Public’s Opinion of Drugmakers Softens

Consumer perceptions of several major pharmaceutical companies have softened in recent months amid an industry push to counter public uproar over high drug prices, Morning Consult Brand Intelligence data show.

Large drugmakers this spring have seen a decline in the the percentage of Americans who view them unfavorably, according to weekly national surveys of thousands of U.S. adults.

The Pharmaceutical Research and Manufacturers of America, the industry’s largest trade group, took action in January to revamp its public image by rolling out a multiyear ad campaign that promotes breakthrough medicines. The drug lobby, which consistently outspends other industries in an effort to exert influence on Capitol Hill, spent $245 million last year, an increase of more than $18 million since 2013, according to the Center for Responsive Politics.

The shift in public opinion has occurred amid GOP efforts to overhaul the nation’s health insurance system and the high-profile battle over the Affordable Care Act. The White House has prioritized replacing the 2010 ACA over lowering drug prices, though newly installed Food and Drug Administration Commissioner Scott Gottlieb announced last month that his agency is looking for ways to reduce some costs to consumers.

Since the House GOP health care legislative effort began in earnest in March, some of the most unpopular drugmakers have seen declines in the percentage of Americans who view them unfavorably. Still, favorability rankings for drugmakers have not improved significantly.

Some of the most-liked drugmakers include Johnson & Johnson and Bayer — the most well-known drug manufacturers among U.S. consumers.

Results are based on online surveys, with a nationally representative sample of adults, that ask participants if they have a favorable or unfavorable impression of certain companies.

Pfizer, which last year killed a proposed $160 billion merger with Allergan after the Obama administration announced new rules on tax inversions, had the highest unfavorability percentage among drugmakers tracked in March, at 29 percent. As of June 5, that figure had fallen to 12 percent.

Another drugmaker – Bristol-Myers Squibb – saw its unfavorability decline 13 percentage points during the same time period, from 23 percent in March to 10 percent in June. Merck had its unfavorable views peak at 25 percent in March before falling to 12 percent in June.

12 superbugs that pose the greatest danger to human health


The World Health Organization has released a list of 12 antibiotic-resistant superbugs that pose the greatest danger to human health.

The purpose of the list of “priority pathogens,” according to WHO, is to promote continued research and development of drugs that can be used to treat patients with these resistant infections.

The agency has divided the list according to the urgent need for new antibiotics. The bacteria considered the most critical pose a particular threat to hospitalized patients who may require blood catheters or ventilators. These bacteria, which can cause severe and deadly infections, such as bloodstream infections and pneumonia, are also resistant to drugs designed as a last line of defense for patients.

“This list is a new tool to ensure R&D responds to urgent public health needs,” Marie-Paule Kieny, Ph.D., assistant director-general for health systems and innovation at the WHO, said in an announcement. “Antibiotic resistance is growing, and we are fast running out of treatment options. If we leave it to market forces alone, the new antibiotics we most urgently need are not going to be developed in time.”

Three bacteria resistant to carbapenem, an antibiotic that often treats bacteria that are resistant to other drugs, are listed as critical. Six bacteria are ranked as high-priority and the final three are listed as medium-priority. Bacteria listed as high- or medium-priority are increasingly becoming resistant to different antibiotics and are producing hard-to-treat strains of common conditions, such as gonorrhea and salmonella.

One of the three critical bacteria, carbapenem-resistant Enterobacteriaceae, or CRE, resulted in the death of a Nevada woman last year, and estimates suggest the infection may be more widespread than previously thought.

Global health experts have increasingly warned that superbugs are poised to be a significant threat to patient health. In the next decades, drug-resistant infections could kill more people than cancer. Providers can do their part by focusing on antibiotic stewardship. National healthcare organizations, including the Centers for Medicare & Medicaid Services, have offered guidelines.

Here is the complete list compiled by WHO:

Drug industry unveils massive new campaign to counter criticism

Under withering public criticism, the drug industry is doubling down on its arguments that the debate over drug prices is distorted, rolling out a multimillion-dollar ad campaign to repair its reputation and defend the value its medications provide.

The industry’s major lobbying group here, the Pharmaceutical Research and Manufacturers of America, unveiled the campaign on Monday. Officials said they would spend in the “high” tens of millions of dollars every year for the next four to five years, rehabilitating their image in the wake of former industry executive Martin Shkreli and the political backlash to rising prices.

“Less hoodie, more lab coats” is how PhRMA President and CEO Stephen Ubl described the advertising campaign in a briefing with reporters. (Shkreli, not missing an opportunity for publicity, responded with a hastily produced website detailing how double-digit price increases are hardly unique to companies outside PhRMA’s membership.)

The campaign, branded “GoBoldly,” sounds like a more aggressive version of the industry’s previous image-making campaign, “From Hopes to Cures.” It will emphasize that biopharmaceutical companies develop breakthrough medications that save lives and that they can be the answer to the problem of health care costs, rather than the cause.

The first television ad being released as part of the new campaign is being called “Do Not Go Gentle.” It blends Dylan Thomas’s famous poem with images of goggled scientists peering through microscopes and patients heading into treatment.

The PR campaign will be paired with a series of events intended to remake the public debate, from one about drug prices to one about medical breakthroughs and the value that novel medications provide by saving costs in the long run. The industry believes its preferred policies — value-based contracts and a modernized Food and Drug Administration — can fix the cost problem better than more direct price controls that drug makers view as their greatest threat.

“We have a great story to tell and we’re going to do a better job telling it,” Ubl said.

That is a promise, though, that industry officials have been making for more than a year. What Monday’s announcement made clear is that they are prepared to spend huge sums of money to fulfill it.

Trust in Healthcare: Warning Signs For Pharma

Trust in Healthcare: Warning Signs For Pharma


The 2016 Edelman TRUST BAROMETER shares disturbing news about a widening gap in trust in all major institutions between the informed public and mass population. While trust is generally rising among more educated, affluent audiences, trust levels have barely moved since the Great Recession in the remaining 85 percent representing the mass population in the 16th year of our survey of more than 33,000 respondents.

The story for the healthcare industry is a cautionary tale and one that bears watching. At a global level, and using general population (informed public plus mass population) findings* with 28 countries surveyed, healthcare is near the bottom with a trust score of 61, just ahead of Telecommunications, Energy and Financial Services. In the U.S. it is tied for second to last with the automotive industry, and is doing just a little better than Financial Services, which although in last place has experienced a remarkable rebound in trust since the financial crisis.

Digging deeper into the industries that collectively represent healthcare and perceptions of the general population, there are warning signs for the pharmaceutical industry in particular. Consider this: while the moves may be small, trust has increased at a global level in four of the five health subsectors – Hospitals/Clinics, Consumer Health, Biotech and even Health Insurers, who were lower ranked among this peer set last year. Only trust in Pharmaceuticals has declined. And in the U.S., trust has increased in only two of the five subsectors, with both Pharmaceuticals and Biotechnology declining by two points and Consumer Health remaining flat.

Put another way, global trust in those on the front lines of delivering care or on the shelf delivering value to consumers is on the rise, while trust in the research-based companies that deliver the innovation through these channels is declining. If these trends continue, we’ll experience a growing trust gap between those who do the innovating and those who deliver on innovation, in addition to the gap already evident between the informed public and mass population. Lesser trust in pharma and biotech companies carries with it broad implications for the ability to attract and keep employees, license to operate in the larger health and business ecosystem, and greater support for regulations that may threaten a license to lead.

Some takeaways for healthcare companies in general:

VIDEO: Healthcare Economist & Futurist Dr. Bill McGivney

VIDEO: Healthcare Economist & Futurist Dr. Bill McGivney

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