by Niall O’Donnell
One night in 1996 I witnessed the late Leslie Nielsen bring the house down at the Oxford Union with this quote, “There is no crime problem. There is a victim problem. If we could lock up all the victims, the crime problem would be solved.”
Challenging his role as Sergeant Frank Drebin in The Naked Gun movie franchise, his quip possessed a flawless, if somewhat impractical, logic.
Health care and the costs of health care have dominated politics in the U.S. over the last five years. The more I read and hear, the more the logic of Frank Drebin seems to be the perfect solution. Perhaps to solve the health care problem, we simply need to have fewer sick people?
In the meantime, newspaper headlines have been dominated by simplistic attacks on “Big Pharma.” The costs of drugs, the profiteering. The real story is, as always, more complex and more interesting. Prescription drug spending accounts for less than onetenth of the U.S. health care bill ($277.1 billion out of $2,809 billion in 2012), growing at only 2.9 percent compared to the annual growth rate of 4.2 percent of health care spending as a whole. In comparison, hospital costs make up almost one-third of the total bill (almost $900 billion). Even more surprising is the assorted costs associated with private health insurers (e.g. advertising, sales commissions, and other administrative costs) which soaks up almost 6.5 percent of the entire national health care expenditure.1
The pharmaceutical and biotechnology industries have struggled over the last 15 years to industrialize the drug discovery and development process. From a purely financial perspective the results have been poor. “Eroom’s Law”2has taken hold, with dollars being spent for an ever decreasing return-we glance over enviously as our tech colleagues are reveling in the benefits of Moore’s Law.
In addition, the pharmaceutical industry is feeling the full weight of two powerful market forces: generic competition and the increasing power of the prescription benefit manager. Without government intervention, such as capped drug prices or misguided drug importation from Canada schemes, the market ruthlessly operates to reduce the costs of drugs. The recent announcement by Express Scripts, the prescription manager for almost half of Americans, to curtail reimbursement to a host of “me-too” diabetes drugs, powerfully illustrates their growing power and influence.3
As a result, the pharmaceutical industry has dramatically reduced its sales forces and has outsourced much of its research and development to small startup companies. The bottom line is that political and governmental targeting of drug companies will have a minimal effect on health care costs. These costs are relatively small and not increasing rapidly. In addition, market forces are doing an impeccable job of reducing drug costs. It is time to focus on the real issues.
The U.S. health care system is unique. It has evolved in a way that makes it difficult to import foreign solutions. A theoretical U.K. National Health Service implemented in the U.S. could potentially half health care costs, but any politician voting for it would pay a heavy price. The real issue, as Drebin might point out, is that there are just too many sick people in America.
There do appear to be several modest proposals that could have a major impact without causing too much political discomfort. These proposals focus on prevention of illness, and on better treatment of those who are already ill.
Seventy percent of newly graduated American doctors specialize, or choose to focus on one specific element of medicine.4 This is unique in the Organization for Economic Cooperation and Development nations, where the mean level of specialization is around 30 percent.5 Almost by definition you need to be sick to see a specialist. Perhaps a ‘slow-fix’ would be to redress this balance, boosting the levels of General Practitioners (GP) and training them to focus on disease prevention? To encourage an uptick in GPs, why not provide them government subsidized medical insurance, waive medical school debt and even allow early entry into medical school? Consider this “community policing” stubbing out illness at the source.
In the meantime, while we wait for an increase in GPs, let’s help the sickest patients. In a classic report in the New Yorker, we follow Dr. Bremmer in his efforts to target the top 36 patients in Camden, N.J.6 In Camden, 1 percent of patients account for one third of the city’s medical costs (nationally, 5 percent of the U.S. population is responsible for 49 percent of overall health care cost).7 These 36 “super-utilizers” cost $1.2 million per month in hospital bills before intensive intervention, and just over half a million dollars after intensive intervention by primary care professionals, a 56 percent reduction. By focusing resources on the repeat offenders, costs can be rapidly reduced.
When terminally ill cancer patients are offered palliative care, in addition to aggressive oncology therapy, they live longer than patients given access only to aggressive oncology therapy-up to three months longer.8 If achieved during a drug trial, this result would lead to near immediate drug approval and a premium price on the pharmaceutical market. The patients receiving palliative care were happier, had fewer side effects, and the overall costs to the health care system were lower.9 Yet palliative care is almost never offered nor reimbursed. Why not cover palliative care, and give a patient nearing the end a true choice?
The U.S. health care cost problem is not really a health care cost problem – it is a patient health problem. By having more frequent and productive access to GPs, allowing terminal patients to choose the type of end-of-life care they want, and bringing all the resources of the health care system to bear on the “super-utilizers,” we could realize enormous financial and health benefits. And we could stop citizens from becoming Drebin’s “victims” of the U.S. health care system.
Niall O’Donnell (Rady MBA, 2006) is a principal at RiverVest Venture Partners, building high impact health care companies such as Excaliard Pharmaceuticals (acquired by Pfizer, Inc.) and Lumena Pharmaceuticals. He joined RiverVest in 2006 as a Kauffman Fellow. Niall trained in drug discovery and development at Johnson and Johnson, read Natural Sciences at Pembroke College, Oxford, and received a Ph.D. from University of Dundee.
- http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/index.html
- Jack W. Scannell et. al., “Diagnosing the Decline inPharmaceutical R&D Efficiency”, Nature Reviews (Vol. 11 No. 3, March 2012)
- http://www.forbes.com/sites/edsilverman/2013/10/21/bye-bye-co-pay-cards-whyexpress- scripts-is-excluding-dozens-of-drugs/
- Barbara Starfield and George E. Fryer Jr., “The Primary Care Physician Workforce: Ethical and Policy Implications”, Annals of Family Medicine (Vol. 5 No. 6, November/December 2007)
- http://www.huffingtonpost.com/dr-dennis-gottfried/too-many-doctors-buttoo_ b_568703.html
- Jennifer Temel M.D. et. al., “Early Palliative Care for Patients with Metastatic Non-Small Cell Lung Cancer”, The New England Journal of Medicine (Vol. 363, No. 8, August 2010)