health care costs
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
“Health is Priceless:”
A recent article in the New York Times stated that pharmaceutical companies are employing a new rationale to justify the seemingly irrationally, exorbitant prices being charged for pharmaceuticals: “Health is priceless.” While true, many people afflicted with dire conditions live under profound financial constraints…and thus cannot afford “priceless” drugs.
It’s All About Returns:
The article then goes on to quote Steve, Francesco, a pharmaceutical consultant, as stating: “To understand drug pricing you have to shed your sense of value as a consumer and as a noble human being. You have to put on the lens of the health care industry, where what you’re doing is looking for opportunities to maximize return.”
Gilead: A Poster Child for Profiteering:
Mr. Francesco is dead on the money: The level of returns are obvious…raising the price of some pharmaceutical stocks to stratospheric levels. Gilead Science is a poster-child for profiting from arguably exorbitant drug pricing. According to the most recent edition of Barron’s (4/28/14), “On Tuesday, the biotechnology giant reported a profit of $2.2 billion, tripling its profit of a year ago. That’s thanks to the runaway success of its hepatitis C drug Sovaldi, which had sales of $2.3 billion during the first quarter, making it one of the most successful drug launches ever.”
Up and up it goes, where it stops nobody knows. If you own the stock, perhaps you should hold-on, for Barron’s states that “Analysts expect Gilead to earn $10.1 billion in 2014, up from $3.1 billion last year…” And Gilead is not the outlier – they are rapidly becoming the norm in a pharmaceutical industry unfettered by any type of logic, ethic, or regulation relative to pricing.
Sarepta Poised to Profit:
Sarepta Therapeutics is yet another example. The FDA has put their drug, Eteplirsen, for treating Duchenne muscular dystrophy on the fast track for review and approval. According to another article in Barron’s (4/24/14), “Baird analyst Brian Skorney, who lifted his price target to $53 from $35, wrote that the situation is “commercially ideal” because “the patient population is readily identified, the unmet medical need is high, the treatment is likely to be lifelong, and the market will be insensitive to price. Eteplirsen could cost up to $500,000 a year per patient.”
Life is precious…the market is insensitive to price…and pharmaceutical companies are capitalizing on these facts at level never before seen in history!
A Sad Commentary on our Values:
While I thank god for the medical breakthroughs we are experiencing today, I feel great reproach for the executives within pharma who are profiteering in such a shameless manner. Is the only way to win in this game is by owning their stocks? I hope not.
What if I told you that there was a panacea to our nation’s health care crisis? Would you burst into laughter, stop reading, or simply conclude that I could not possibly understand the complexity of issues underlying our health system’s dysfunction? After all, everyone knows that there are no silver bullets in real life.
Yet, that’s exactly what I am going to propose – there is a panacea, we are simply choosing not embrace it. Before describing the cure, let’s define the illness.
In the most basic of terms, the U.S. spends far more than any other nation on health care services, yet “enjoys” some of the worst health outcomes. We live shorter lives, have ridiculously high rates of infant mortality, and succumb to a plethora of chronic, yet preventable diseases. Here are a few, quick stats:
“In 2005, nearly half of all adults – 133 million – had at least one chronic illness. In 2009-2010, more than one third (35.7%) of U.S. adults were obese, and 8.3% had diabetes. In 2005-2008, over 30 percent had high blood pressure.”
“Health care spending represented 17.9% of our gross domestic product (GDP) in 2010, and is expected to reach 20 percent by 2020. Three quarters of these costs go to treat chronic diseases, which in many cases are preventable.”
“According to the IOM’s 2012 report…an estimated 80 percent of cases of heart disease and of type-2 diabetes, and 40 percent of cases of cancer, could be prevented by implementing public health interventions that increase physical activity and healthy eating and help reduce tobacco-use and excessive alcohol use.”
We Stand to Save as much as $1.1 trillion annually:
According to a research published by the American Public Health Association, “By investing in prevention and treatment of the most common chronic diseases, the U.S. could decrease treatment costs by $218 billion per year and reduce the economic impact of disease by $1.1 trillion annually.”
Jim Fries’ Contribution:
These are not stunning, new revelations. The July 17, 1980, issue of the New England Journal of Medicine featured a landmark article by Jim Fries, a professor of medicine at Stanford University. The article became one of the most frequently cited scientific references in the emerging field of wellness. Fries focused on the impact of chronic disease, which he described as follows: “Chronic illness now is responsible for more than 80 percent of all deaths and for an even higher fraction of cases of total disability.”
The power of Fries’ article, however, lies in his conclusion: “Disability and lowered quality of life due to the most prevalent chronic diseases are thus inescapably linked with eventual mortality. These chronic diseases are approached most effectively with a strategy of “postponement” rather than cure. If the rate of progression is decreased, then the date of passage through the clinical threshold is postponed; if sufficiently postponed, the symptomatic threshold may not be crossed during a lifetime, and the disease is “prevented.”
Fries is stating that, while we cannot escape the human condition, by taking care of ourselves, we can stay vital, active, and healthy until the very twilight of our life. We can “compress morbidity” – thus reducing the disease burden, costs, and impact on our quality of life.
A Pittance of an Investment in Wellness:
So what level of investment are we making in prevention/wellness? “In 2009, U.S. public health pending amounted to $76.2 billion – only 3.1 percent of the nation’s overall healthcare expenditures of $2.5 trillion.” Granted, the Affordable Care Act (ACA) provides additional funding for prevention/public health initiatives– but a few more billion dollars, though significant, pales by comparison to our burgeoning health care tab that now exceeds $2.8 trillion.
Perhaps even more significantly, ACA may have stifled many embryonic efforts by providers to implement more robust wellness offerings. Like deer in headlights, most providers are responding to ACA by trying to eviscerate costs – not expand wellness programs for which there is little to no direct reimbursement.
Hospitals and the Wellness Sham:
Furthermore, while hospitals and health systems may preach wellness, few offer comprehensive services designed to improve your health and well-being. Rather, they pay lip-service to this essential component of health care – viewing wellness more as a marketing opportunity than a true effort to do everything in their power to minimize unnecessary and costly utilization of their medical services.
There’s no surprise here, since the dominant reimbursement mechanism, fee for service, rewards the provision of medical services – not maximization of the health of a defined population. As a result, we pay a very dear price.
From Sick-care System to a Positive Health System:
It is possible to shift from a sick-care system that doles out interventions to manage the burden of chronic illness to a positive health system, focused on wellness/well-being system, that minimizes unnecessary utilization by focusing on population health. However, it would require tremendous will on the part of numerous constituents to achieve such a powerful transformation.
Far short of transformational change, there are nonetheless small seeds of hope in the form of new, evolving reimbursement and delivery models, such as ACOs and medical homes that stress population health management. Unfortunately, the pace of adoption is glacial. For providers who have been burned in the past by assuming risk for a defined population, there’s little enthusiasm for doing so again.
Our Role in Changing the System:
More than three decades ago, Jim Fries gave us one of the keys to healing American health care…a silver bullet. The question is whether we have the fortitude to change the health care paradigm, as well as accept the personal, stewardship responsibility for our health that is essential to success. If so, there’s a role for each of us to play:
Consumers/patients: We need to understand what it means to be prudent stewards of our health, and the health of our families. It is essential that we understand the role lifestyle choices make in determining our health, and how we might combat risk-factors that imperil our future. For many of us, we will need to have access to resources that will aid in this journey – particularly if we are socio-economically challenged, and thus find lifestyle change all the more difficult. As has been well-demonstrated, the social determinants of health play a profound role in wellness and well-being.
Providers: Health care executives need to take the moral high-ground and do the right things for the communities they serve. One place to begin is with the development of a strategic wellness plan illustrating how wellness initiatives can be integrated into the very fabric of your hospital or health system’s care model. Once developed and implemented, you can then reasonably assert that you do everything possible to minimize unnecessary consumption of health care resources while maximizing the health and well-being of your patients.
Insurers/Payers: There needs to be an unremitting pressure to partner more fully with providers on the assumption of risk for the health and well-being of a defined population…thus accelerating the demise of fee-for-service medicine, and its replacement with a reimbursement mechanism that rewards wellness.
Employers: There needs to be broader adoption and implementation of wellness programs that incorporate proven mechanisms for elevating the health and well-being of an employed population. Such programs will likely involve potent incentives for lifestyle modification by those employees at risk. Expect the providers within your network to make two promises: 1) They will do everything in their power to help keep your employees healthy and out of their health system; 2) when medical care is needed, they will provide the highest value care as measured by agreed upon standards of quality, safety, and costs.
Government: There needs to be dramatically increased spending on proven prevention programs that can be administered at a local, state, or federal level. Furthermore, there need to be greater rewards under governmental reimbursement programs for those providers who embrace risk and demonstrate their ability to reduce the morbidity of a defined population.
Out on a Limb:
Panacea, silver bullet, and transformational change – these are powerful, almost Pollyanna-ish words to use in a serious article about health system change. Yet I’m convinced that this change represents our path to salvation, if we are willing to make the arduous journey.
A blog will never do justice to a proper articulation of the wellness argument, but hopefully it is a start. I welcome your thoughts!
When my friends ask me to translate the 2,000+ pages of legislation constituting the Affordable Care Act (ACA), aka Obamacare, into a sound-byte, I stammer and stutter looking for where to begin. In the end, I tell them about the Good, the Bad, and the Ugly.
The good news is that ACA eliminates some reprehensible insurance practices of the past. No longer are people uninsurable due to pre-existing conditions. Gone, too, are lifetime limits covering insured, health care expenditures. Plus, subsidies/stipends and new qualifications for Medicaid should make it far easier for tens of millions of Americans to access the system (assuming we have an adequate supply of physicians). Achieving this level of expanded access is a major accomplishment. The only problem is that it is widening the funnel to let more people into a highly dysfunctional health care system.
What’s “bad” about Obamacare is its fundamental failure to address the core dysfunction rife within American medicine. The American health care system is astonishingly expensive, remarkably variable in quality, and incapable of stemming the rising tide of chronic illness in our population. Greed is endemic in medicine, and the prices charged for health care services are incomprehensible to consumers.
Journalists are now latching onto the issue of cost, as illustrated in a New York Times article entitled: “How to Charge $546 for Six Liters of Saltwater,” as well as in Steven Brill’s comprehensive exposé, “Bitter Pill,” that appeared earlier this year in Time Magazine. These articles are likely to resonate increasingly with consumers who have to pony-up hard-earned dollars to cover higher deductibles and co-pays.
The “ugly” of Obamacare is the way we, as a society, have responded to the new law. Yes, it is fundamentally flawed, but it does contain meaningful social reform. We need to see it for what it is – not through the distorted lens of political polarization. We can then have an intelligent discussion about what problems Obamacare will solve; what new problems it may create; and what additional reformation needs to occur to stem the rising cost of health care while improving its quality, safety, and accessibility.
If ever there was a time for an objective debate about the next steps in reforming our $2.7 trillion health care system, it is now!
Please let me know your thoughts via e-mail: email@example.com