What is Required to Create Disruptive Innovation in Health Care (and why it doesn’t exist presently)
This article, published in the on-line edition of Hospitals & Health Networks, takes a hard look at the missing phenomenon of disruptive innovation within health care. Have a look:
Mr./Ms. CEO…some bad news!
Your legion of six sigma black belts has about as much utility in the battle to transform health care as a conventional army does when fighting ISIS. Incremental change predicated upon statistical models is, of course, a needed skill. But the skill we seem to be lacking in health care is bold innovation.
Bold innovation means separating oneself from the pack and doing the unexpected in your market; convincing your Board to take risks rather than playing it safe (such as the intelligent assumption of risk rather than cash-cowing fee-for-service). It’s about hiring people who aren’t merely custodial administrators…but will constantly challenge the status quo looking for a better solution. And leaders who want to be pushed, and I mean really pushed, in their thinking.
Wake up health care…or you may end up like the Department of Defense — increasingly surrounded by asymmetrical threats, and unprepared to deal with them effectively.
Beyond the caring rhetoric carefully crafted by providers of cancer treatment and therapeutics, there exists a motivation every bit as powerful as saving lives — reaping billions of dollars in profit. That’s what is at stake in the ongoing war on cancer — a war in which important battles have been won, but at a tremendous cost.
As the number of cancer patients grows and their treatments become increasingly expensive, we will find ourselves locked in an unwinnable war of attrition…unless reining-in costs becomes as much of a priority as expanding our medical armamentarium.
How the battlefield changed:
Despite the fact that cancer incidence rates have declined for the most frequently occurring types of the disease, cancer continues to impact 40 percent of all Americans, and it is responsible for 20 percent of all deaths. That translates into 1.66 million newly diagnosed patients annually and nearly 600,000 deaths, according to the National Cancer Institute. Incidence tells only part of the story, however. More importantly, the majority of cancer patients are surviving longer.
There are currently more than 14 million Americans who have survived cancer—a dramatic increase from the 3 million survivors in 1971. While much of this increase is attributable to population growth, improvements in cancer therapies have also played an essential role. As a result, for many patients, cancer has been transformed from a death sentence into a chronic disease that perhaps cannot be cured, but can be controlled for an extended period of time.
The soaring costs of care:
Fifty years ago, direct spending on cancer care equaled $1.3 billion. By 1995, spending had soared to $41.2 billion, and by 2010, it was an estimated $125 billion. That’s an almost 10,000 percent increase in direct spending over fifty years. Add in the indirect costs of care, such as lost productivity, and the numbers almost triple.
Cancer care was not the only part of the nation’s health care bill that rose dramatically over time. In 1950, total health care costs for the U.S. equaled $12.7 billion. By 2012, those costs had risen to $2.6 trillion – a 20,000 percent increase in the span of three generations
Such costs have taken quite a toll. Today, the single greatest cause of personal bankruptcy in America is medical bills. In fact, “The percentage of personal bankruptcies in the United States attributed to health care costs rose from 46.2% in 2001 to 69.1% in 2007.” Such statistics come as no surprise, since patients are bearing an increasing proportion of the cost burden associated with expensive treatments. Medicare beneficiaries who are often on a limited, fixed income are particularly hard hit.
What Lies Ahead:
The estimated cost burden for the coming decades is fuzzy at best. The NIH guesstimates that the direct costs of cancer care could range anywhere from $158 billion to $207 billion. A number of factors are contributing not only to cost escalation, but also to the complexity of forecasting.
We know that the projected level of growth in the 65+ segment of our population—which is the segment most affected by cancer—will result in a virtual tsunami of cancer patients. What we don’t know is how these patients will be treated, or the costs of emerging therapeutic modalities.
Furthermore, with the number of cancer survivors forecast to grow to 19 million by 2024, there will presumably be a dramatic increase in the long-term costs of controlling their disease and maintaining their well-being.
History demonstrates that the cost of cancer does not increase linearly, but rather in a manner reminiscent of Moore’s law—a factor that proves beneficial when describing the growing power of computers, but not the growing costs of care. Nowhere is this more apparent than in the skyrocketing costs of pharmaceutical products.
A Pharmaceutical Gold Rush
The pharmaceutical industry has doubled-down on its investment in cancer therapeutics—a wise move, considering the increased market demand reported by industry monitor, IMS: “The global market for oncology drugs, including those used in supportive care, reached $91 billion in 2013…this compares with $71 billion in 2008 and $37 billion a decade ago.”
With demand soaring and sales burgeoning, much of pharmaceutical research now centers on beating cancer. IMS concluded that, “cancer therapies account for more than 30 percent of all preclinical and phase I clinical development products…”
It’s not just demand that is driving the soaring sales of cancer drug. It’s the manner in which drugs are priced. In the U.S., which accounts for 40 percent of all cancer drug sales, there are no governing rules regarding pricing, beyond what the market will bear. While most consumer products are priced based upon comparative value, the price of cancer therapeutics appears to be plucked from the ether with no relationship to the drug’s relative efficacy or toxicity.
Don’t take my word for it, look at the numbers: According to an article in the Journal of Clinical Oncology, “Of the 12 anticancer drugs approved by the FDA in 2012, only three prolonged survival, two of them by less than 2 months…yet nine were priced at more than $10,000 per month.” One drug, approved for the treatment of pancreatic cancer, was shown to extend survival by a mere 10 days.
According to an article published by the Mayo Clinic, “Last year, ipilimumab (Yervoy; Bristol-Myers Squibb, New York, NY) was approved by the Food and Drug Administration (FDA) for the treatment of metastatic melanoma. The benefit in survival over and above standard treatment was 3.7 months in previously treated patients and 2.1 months in previously untreated patients. The cost: $120,000 for 4 doses.”
It appears that $100,000 per year has been set as the minimum threshold for introducing new cancer therapies. But it is not just the introductory pricing of drugs that is problematic. It is also the price inflation of cancer drugs that is raising costs astronomically. The price of imatinib, a drug used to treat CML (chronic myeloid leukemia) increased from $30,000 to approximately $90,000 over a ten-year period.
Lies, Damn Lies, and Statistics:
The pharmaceutical industry justifies what appears to be morally egregious behavior by explaining that drug costs are primarily driven by research costs. In fact, stating that the cost of bringing a drug to market now exceeds $1 billion has become almost a mantra—but it is patently invalid.
Pharma’s argument regarding the tremendous costs of research was effectively eviscerated in a November 15, 2013 article in the prestigious journal Cancer. Authors Donald Light, Ph.D., and Hagop Kantarjian, M.D., demonstrated that the actual cost probably approaches $125 million or one-eighth of what has been claimed.
You Don’t Have to Sell Drugs to Profit from Cancer:
It’s not just pharma that is profiting from this gold rush. Cash-strapped hospitals and health systems are lining up to ensure that cancer provides a rosy bottom line for their institutions.
Not only are facilities expanding the depth and breadth of cancer services offered, but they are now employing oncologists at an unprecedented rate. Such employment accomplishes multiple objectives: 1) It locks in the physicians who control patient flow in the market, thus locking in market share; 2) it allows the hospitals to increase the costs of the oncologists’ services by billing them as hospital outpatient services; 3) it allows hospitals to capture all the procedural revenue—imaging, radiation, and surgery—associated with these patients; 4) it allows hospitals to increase profits on the resales of cancer drugs using what is known as “340b” pricing.
Numerous other parties stand to profit handsomely from the growth of cancer—including, but not limited to health information technology companies that seek to capitalize on the tremendous data-demands associated with cancer research, medical technology vendors, and even manufacturers of prosthetics.
Re-establishing equilibrium between Patients and Profits:
Until payers realign incentives so that providers are rewarded based upon achieving the most efficient and effective patient outcomes over time, there will be an imbalance between the needs of patients and the pull of profits.
There are specific steps that can be taken today to achieve these objectives, including:
- Physicians must act as fiduciaries for their patients’ health and well-being. As such, they must demand comparative effectiveness data that show the relative value of a cancer drug. Physicians can drive change simply through their prescribing patterns, and they must wield this power appropriately on behalf of their patients. This principle was proven effective when a group of oncologists at Memorial Sloan Kettering refused to prescribe the drug Zaltrap because it was twice as expensive as an alternative drug yet no more effective. The manufacturer bowed to the pressure and cut the price of Zaltrap by 50 percent.
- The FDA can aid these efforts to move from “what the market will bear” pricing to value-based pricing by establishing minimal thresholds for comparative efficacy while also factoring in the comparative toxicity of drugs under consideration. .
- There must be clear and unequivocal prohibitions on any conflicts of interest that allow physicians to profit, beyond their professional fees, for the provision of cancer therapeutics—be it a chemo agent, radiation treatments, or other modalities.
- The Department of Justice must bring greater scrutiny to the acquisition of major oncology groups or other actions that may result in the creation of monopolies or oligopolies in cancer care.
- Congress must reconsider the prohibitions on governmental agencies, such as Center for Medicare and Medicaid Services (CMS), from negotiating prices with pharmaceutical manufacturers.
- As a society, we must struggle with through discussions of what we are willing to expend in order to extend life, while factoring in the patients’ probable quality of life. Discussions of “death panels” must yield to rational, albeit difficult conversations.
The Time to Act is Now:
Health care providers and vendors have proven that they are incapable of being self-regulating. They have also proven that they are subject to the same moral vices as the rest of society, including greed. There needs to be immediate action to stop the profiteering off the backs of cancer patients, while war of attrition, simultaneously using our health care dollars wisely in the quest to conquer cancer.
PLEASE VISIT THE WEB-SITE FOR MY NEW BOOK, After You Hear It’s Cancer: A Guide to Navigating the Difficult Journey Ahead: www.afteryouhearitscancer.com
Dr. James Mirabile was kind enough to have me as a guest on his hour-long radio program on 3/14/15. We discussed some of the key themes found in The Myths of Modern Medicine: The Alarming Truth About American Health Care.
I would invite you to spend a few minutes listen to the podcast…and then I would, as always, welcome your thoughts & comments!
Here is the link:
PS: You can order The Myths of Modern Medicine on Amazon.com.