Over the next few years, drug makers are likely to face many new challenges, including government approved importation of cheaper drugs,  Medicare negotiating for lower prices, stricter regulations of direct-to-consumer advertising, and (hopefully) a more robust FDA under the Obama Administration. With so many changes afoot, Big Pharma will have to evolve or suffer the consequences. Even drug executives see the need for a restructuring of the industry. Earlier this month, the head of pharmaceuticals at Roche told reporters that the “marginally-different-and-market-it-like-hell model [of prescription drugs] is over.” But if that’s true, then what new model will take its place—and will it be any less troubling?

Winds of Change

One of the biggest indicators that change is on the horizon is the fact that spending on prescription drugs isn’t what it used to be. In fact, according to a recent Health Affairs article authored by Murray Aitken of the consulting firm IMS Health, Ernst Berndy of MIT’s Sloan school and David Cutler of Harvard, sales are beginning to level off. Though “U.S. spending on prescription drugs grew 9.9 percent annually between 1997 and 2007,” since 2003 “growth rates have declined rapidly”—to their slowest since 1974—“and in 2007 spending grew but 1.6 percent” after growing by 8.5 percent in 2006—the first decline in spending growth on record.

A major reason behind the slow-down is that drug makers are simply running out of new drugs to sell. Aitken et al. note that, “according to the FDA, between 1999 and 2001 the average total number of…new product approvals was about thirty-five per year, whereas between 2005 and 2007 this number fell to about twenty.” And as time goes on, newer drugs comprise a smaller share of drug sales: “Products introduced within the prior five years accounted for 34 percent of total drug sales in 1999” but “that share has declined steadily since then, to just 19 percent of total sales in 2007.”

Fewer new drugs mean fewer new patents, which limits drug makers’ ability to keep revenues high through monopolistic pricing. Over time, the value of brand-name drugs on the cusp of losing their patents—and thus becoming vulnerable to competition from cheaper generics—has almost doubled, “from an average of about $9 billion per year between 2002 and 2005 to about $16 billion in 2006-07.” Health Affairs points out that “the list of drugs losing patent protection in recent years has been substantial: Norvasc (value: $2.6 billion), Lotrel ($1.5 billion), and Flonase ($1.2 billion). Moreover, drugs likely to come off patent protection soon include Cozaar in 2010; Lipitor, Plavix, and Seroquel in 2011; and Diovan, Viagra, and Evista in 2012.

When drug makers lose blockbusters—that is, drugs with sales of $1 billion or more—they take a big hit. A 2004 BusinessWeek article cited a Boston Consulting Group study which estimated that “80% of growth for the 10 biggest drug makers during the last decade came from the eight or so blockbusters a year launched during the 1990s.” Aitken et al. note that “spending on blockbusters increased from about 12 percent of all sales in 1996 to almost half of all sales in 2006, accounting for three-quarters of prescription drug spending growth over the same time period.” Unfortunately for drug companies, blockbusters are on the decline: “in 2007, for the first time, the number of billion-dollar products fell—from fifty-two to forty-eight—and their share of all sales also fell slightly, to 44 percent.” More bad news for pharma: “As more blockbusters go off patent and fewer new ones are developed, the share of sales attributable to blockbuster molecules will likely decline still further.” In other words, drug companies need to find a new cash cow. But where to look?

Toward Specialization

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When President-elect Obama outlined his economic stimulus package earlier this month, he emphasized the need to invest in the healthcare system’s infrastructure by pushing for electronic health records (EHR), nationwide:   “We will make sure that every doctor’s office and hospital in this country is using cutting edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year.”

On the face of it, I like the proposal because Obama is talking about spending money on something concrete, something that we definitely need, and something that, over time, should make U.S. healthcare safer and more effective.  At the end of the day, we’ll have something to point to that is just as substantial as a safe bridge and that, over the long term, should add to the health and the wealth of the nation.  If done right, the pay-off would be better, more efficient care for years to come. And here’s the bonus: a roll-out of healthcare IT would provide jobs for all of the people needed to design the technology and train healthcare providers.  

Still, this is an ambitious undertaking. And there are questions to be asked. So I began asking them. Some of the answers were eye-opening.

Why Don’t We Already Have HealthCare IT?

After all, we spend hand-over-fist in most areas of healthcare: why not here?

The problem is that the physicians and hospitals who the government expected to invest in electronic health records are least likely to benefit financially.  For example, if electronic medical records reduce the number of redundant tests, the insurer and/or the patient enjoy the financial benefit: the physician does not. In fact, if the physician does the tests in his own office, he loses money every time he doesn’t need to repeat a test.  Over time,  health care providers might realize savings from EHRs, but experience suggests that it would take at least ten years.

Since insurers would be the first to enjoy savings from more efficient care, it would make sense for them to provide the initial funding for Health IT. But so far, relatively few for-profit insurers have stepped up to the plate. 

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Last month, voters in Washington State voted 58% to 42% to allow physician-assisted death (PAD) for terminally ill patients, making it the second state after Oregon to allow such a practice. In a recent New England Journal of Medicine article covering this development, Dr. Robert Steinbrook notes that Washington’s “Death and Dignity Act…permits…[adult] state residents…with an illness expected to lead to death within 6 months to request and receive a prescription for a lethal dose of a medication that they may self-administer in order to end their life.”

The law, which will take effect on March 4, 2009, is based closely on the Oregon PAD law, which has been in effect since October 1997. Steinbrook points out that Oregon’s legalization of PAD has had some interesting effects—or rather, non-effects—on the number of patients who have exercised their “right to die.” Between 1998 and 2007, “physicians wrote a total of 541 prescriptions for lethal doses of medications…and 341 people died as a result of taking the medications. Thirteen patients who had received prescriptions were alive at the end of 2007, and the rest of [the 541 people] who received prescriptions ultimately died of their underlying disease.”

These are not huge numbers: 341 people over nine years comes out to about 38 terminally ill people per year seeking to end their lives. In other words, PAD has not turned out to be a slippery slope toward mass suicide. In fact, most Oregonians who sought PAD between ’98 and ’07 belonged to a relatively predictable demographic: they were old (median age of 69), suffering from terminal cancer (81.5%), and were enrolled in hospice programs (86%).

This last point is particularly interesting. Steinbrook suggests that a shift toward hospice care within the medical community may be associated with an increase in PAD because hospice care tends to “address many of the key reasons why patients request assistance in dying — such as loss of autonomy, dignity, and the ability to care for themselves in a home environment.” Certainly a growth in hospice care doesn’t necessarily mean that more patients will seek out PAD. But given what we’ve seen in Oregon—and hospice care’s focus on making patients comfortable with the fact that they are dying—a growth in hospice care could very well put more people in a position to do just that.

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Randy Schubring of the Mayo Clinic’s Health Policy Center will be hosting a health care  discussion Friday, Dec. 26, at 7 in Minneapolis. Here is his invitation:

President-elect Obama has made it clear that health care reform is one of his top priorities. That's why the Obama-Biden Transition is asking people to give their own thoughts and ideas for how to fix the system at Health Care Community Discussions all across the country.  I just signed up to host a Community Discussion, and I thought you might want to come. Here are the details:

Date and time: Friday, Dec. 26, 7 p.m.

Location: 2530 East 34th Street #108
Minneapolis, MN

Hope you can make it!

Randy Schubring | Mayo Clinic Health Policy Center |  507-293-0966 | schubring.randy@mayo.edu
Mayo Clinic | 200 First Street SW | Rochester, MN 55905 | http://www.mayoclinic.org/healthpolicycenter/

Scroll down to  “HealthBeat Readers, Let’s Get Involved” to find out how you can host a health care discussion in your city.

The Dallas Morning News has done a wonderful series on end-of-life care. Thanks to 
Annie for pointing it out.

Here are excerpts from part one, written by Lee Hancock, describing an encounter at a Baylor University Medical School ICU unit between Ms. Patel, a palliative care team nurse, and Dr. Edward Taylor, a 36-year-old trauma surgeon.

Like a palliative care doctor, Patel had been specially trained to help patients who may be dying—and their families—confront excruciating questions about how much care they want.   These specialists also are trained to manage pain, a fine art that too many U.S. hospitals do not practice. Finally, palliative care specialists help other doctors and nurses face the fact that they may be losing a patient.
In this case, Hancock explains: “The middle-aged accident victim had been stranded there for weeks, in a high-tech limbo.”

" ‘He looks a mess,’" Ms. Patel told the surgeon. ‘It doesn't seem like we're going to make him better.’

“‘I don't know if we can say that,’ Dr. Taylor said, looking down at the tiny, Indian-born nurse.

“Ms. Patel's gray scrubs would fit a fourth-grader, but her vibrance and her striking British accent drew outsized attention. She was a legend throughout the medical center, where she had worked since coming from England in 1990…

“Dr. Taylor, 36, called in Ms. Patel that Thursday morning because his patient was the sickest in the unit. But the man's relatives didn't seem to get it. In the twilight zone of the ICU, it was hard for bewildered families to grasp that using more drugs and devices wasn't always the best way to show love.

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                           This Thursday, December 18 in New York

Let’s take blogging and reading blogs to another level: let’s try to translate it into communicating with our government.

 President-Elect Obama and Senator Tom Daschle, the new administration’s point-man on health care reform, say that they want healthcare reform that comes “from the ground up.” This is why they are asking Americans to “give us your ideas and input” during this holiday season.

Here is the invitation from the Office of the President-Elect  “Sign up to lead a Health Care Community Discussion in your home, community center, or even a local coffee shop, anytime from December 15th to 31st. (http://change.gov/page/s/hcdiscussion) Senator Tom Daschle, the leader of the Transition's Health Policy Team, will choose some discussions to attend in person.”  

 I’m hoping that HealthBeat readers of all political persuasions in cities around the country will decide to step up to the challenge. If you’re interested in hosting a discussion, sign up at (http://change.gov/page/s/hcdiscussion     and e-mail me at Mahar@tcf.org.  I’ll post your invitation here on HealthBeat so that people in your area can attend. (When you sign up at change.gov, you might want to let them know you’re a HealthBeat reader, and part of the HealthBeat Network.)

NYC HealthBeat reader Dr. Brad Flansbaum at Lenox Hill Hospital in Manhattan already has decided to host a conference at Lenox Hill this Thursday, December 18, from 6:30 to 8:30 p.m.

I’ll  be there, and Brad and I will put our heads together to create a few bullet points for the discussion. But we’re counting on you to drive the conversation. 

The incoming administration has signaled that it is very interested in hearing from informed constituents. Our opinion WILL make a difference.

 Here’s Brad’s invitation to everyone in the NYC area:

Hi All,

President-elect Obama has made it clear that health care reform is one of his top priorities. That's why the Obama-Biden Transition is asking people to give their own thoughts and ideas for how to fix the system at Health Care Community Discussions all across the country.

We have arranged to host a Community Discussion, and we want your voice heard.  Here are the details:

Date and time: Thursday, 12/18 at 6:30 to 8:30.
Location: 130 Black Hall, ER entrance, SW corner of Lexington and E. 77^th Street, and follow signs to Weisner Conference Center.

[BEF1] 
Hope you can make it.”

*****************************************************************

Please let me know if you’re interested in attending the NYC event by e-mailing me at mahar@tcf.org. (We’re just trying to get an idea of how many people will be coming.)

If  you’re in another city and want to host a discussion, send your invitation to the same address—mahar@tcf.org so that I can post it on HealthBeat.  Just remember, you have to host the discussion sometime between December 15  and December 31.

The Wall Street Journal has some of the best health care reporting of any major newspaper, yet its editorial page is often filled with shrill, misleading nonsense—particularly when it comes to health care. Unfortunately, this week some of the rhetoric of the WSJ’s opinion section seems to have leaked into its reporting: on Tuesday, the paper ran a piece warning that “too much information about drug safety—disseminated through media, online alerts from consumer watchdog groups and even by the Food and Drug Administration itself—might overwhelm patients and raise undue alarm.” Essentially, the article suggests that, when it comes to prescription drugs, the less we know, the better.

The story’s author, Shirley Wang, provides little evidence that America is too concerned about drug safety. As evidence to support her argument, she offers a Pfizer survey of 300 medical professionals which “found that 89% of respondents were at least somewhat concerned that patients might stop their medications if potentially negative safety information was released to the public too early.”

I’m not entirely sure why this is news. Of course a drug company is going to release a survey that hints at the dangers of excessive regulation and oversight. And of course doctors are going to be “somewhat concerned” about the science behind drug risks; I’d wager that just as many are “somewhat concerned” about the science behind reputed drug benefits as well. Good doctors will always be concerned about the integrity of data that will affect the behavior and health of their patients. Pfizer’s survey doesn’t tell me anything I don’t already know; nor is it proof that doctors think our health care system in fact does release negative safety information too early

Unfortunately, the rest of Wang’s article is just as speculative. For example, she notes that in 2004 the FDA “required a so-called black-box warning label—the agency's toughest—on antidepressants to caution about the increased risk of suicidal thoughts and behaviors among teenage patients.” Following the re-labeling, “the number of prescriptions for the drugs decreased” and “the rate of teenage suicides went up.” This would be scary except for the fact that it “isn’t clear” whether or not “the higher suicide rate is linked to the lower number of prescriptions.”

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Recently, a somewhat starry-eyed op-ed in the New York Times suggested that a $100 billion annual investment in universal healthcare is just the medicine that our economy needs. The goal, declared Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology: “covering every American.”

It is an appealing proposition. But let me suggest that we cannot blindly invest billions in an already bloated healthcare system. We need to think through where we want the reform dollars to go.  Which sectors of a $2.3 trillion health care economy should we stimulate to insure that patients receive the safest, most effective care at a price that they can afford?

For example, should we try to create more jobs for those making diagnostic scanning equipment?

Probably not.  As Health Beat recently reported, we’re already experiencing what some call an “epidemic of diagnostic imaging.” In too many cases, patients don’t benefit.  Across the board, 20 to 50 percent of high-tech diagnostic imaging fails to provide information that improves patient diagnosis and treatment.  In some cases, false positives lead to unneeded biopsies and surgeries that harm patients.  Recent research suggests that an explosion of MRI scans for breast cancer is leading to unnecessary mastectomies. In other words, women lose a breast for no good reason.

So while GE might like more business making diagnostic imaging equipment, all of the medical research suggests that we already have more MRI units than we need, and that they are being overused. (Keep in mind, the goal of health care is not to create jobs: it is to improve the nation’s health.)

But if we simply open the door and tell insurers we’ll provide subsidies for health care for all, we can be sure that a nice chunk of the $100 billion that we invest annually will buy more testing equipment and more tests. Insurers will continue to pay for unnecessary testing because it is popular among many patients (who believe, falsely, that it provides benefits without risks) and some physicians (diagnostic imaging can be very lucrative.)  If insurers say “no” to a popular procedure, they risk losing market share.  If they say “yes” they can pass the cost along in the form of higher premiums, and taxpayers, in turn, will have to find the money to fund higher subsidies.

The problem is this: too many proposals for health care reform focus solely on universal access and run the risk of sending good money after bad. The question we need to ask is: “access to what”?

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“Companies are concerned about how their balance sheets are going to look after two down quarters last year, the events of Sept. 11 and the big increases we've been seeing in health care costs,” the U.S. Chamber of Commerce’s Kate Sullivan told the New York Times in 2002. Reading the tea leaves, Sullivan pointed out that “employers are looking at any way they can to shave off some of those costs”—and that one of their biggest targets were company-sponsored health benefits for retired employees.

Today, six years later, the article's headline—“Retiree Health Benefits Dwindle Amid Recession"—should appear in bold type on the front page of the Times.. In many ways 2002 was part of the good old days, before another half-dozen years of health care inflation culminating in our current, brutal recession. If businesses felt inclined to spend less on retirees’ health benefits back then, today they are even more likely to cut back. .

Indeed, in a recent survey, the Commonwealth Fund found that 53 percent of private employers plan on increasing retirees’ shares of their health care premiums over the next two years. Forty-three percent say they will be increasing cost-sharing for drugs; 19 percent intend to drop retiree benefits for new hires, and 20 percent of companies plan to drop company-sponsored health benefits for active workers or existing Medicare-age retirees. In other words, employers are trying to lighten their load.

Retiree health care is a  particularly tempting target because it stands at the center of corporate America’s  most expensive benefits. In November, the Employee Benefits Research Institute (EBRI) reported that, by 2007, retirement benefits accounted for 47.7 percent of the total spending for benefits, while health benefits had increased to 42.8 percent of total benefit spending. Other benefits” (unemployment insurance, life insurance, and workers’ compensation) accounted for just 9.5 percent of companies’ benefit expenses.

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The following tidbit was buried within the Kaiser Daily Health Policy Report a few days ago: “Fewer Patients Using Health Care Provider Quality Ratings Web Sites To Make Decisions.” The headline could just have easily read: “More Bad News for Consumer-Driven Medicine.”

One of the most persistent dogmas of the consumerist crowd is that patients are eager to comparison shop for health care—and that, if they aren’t doing so today, it’s only because they don’t have the necessary information. Supposedly, if we had more resources like the website Carol.com—which allows providers to list their services in a comparative “marketplace of care”—then consumers would empower themselves with information and make rational choices on the cost and quality of care.

But according to an October survey from Kaiser, people just don’t comparison shop for health care. In fact, only one in seven (14 percent) of Americans “say they have seen and used information comparing the quality among different health insurance plans, doctors, or hospitals in the past year.” At the same time, 30 percent of Americans say that they came across comparative quality information over the course of this year—which means less than half of patients who come across comparative data on health care providers actually use it. 

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