The Painful Effects of Healthcare Reform

I last wrote a couple of weeks ago about Obama’s vision of comparative effectiveness and the healthcare reform bill.  Since that report, the end of April saw a raft of first quarter financial results issued by pharmaceutical manufacturers.  Whilst some reported fairly buoyant figures, these were offset by one common theme; the emerging financial impact of this landmark change in US legislation.

Over time, the healthcare reform bill is expected to have a positive impact on the pharmaceutical companies, as the coverage of health insurance increases across the US population, thus increasing demand for their products.  However, this is not expected to come on-stream until at least 2014.

Although the healthcare reform bill was only passed at the end of March many pharmaceutical companies have revised their 2010 financial outlook downwards – and the blame has been firmly placed on the doorstep of the new legislation.

Lilly, as an example, ranked 11 amongst the pharmaceuticals in terms of turnover in 2009, reported “as a result of the new legislation, Lilly will incur substantial costs” in their 2010 1st quarter earnings reports.  Lilly expect these “substantial costs” to be in excess of $435 million during 2010 – which represents approximately 2% of 2009 turnover.  The company expects this negative impact to worsen to between $600m – $700m in 2011 – highlighting the further pain to come.

Another large US based pharma, Merck, anticipates that healthcare reform will adversely impact 2010 revenues by $170 million, rising to $300 – 350 million in 2011.

The world’s largest pharmaceutical company, Johnson & Johnson, estimates that the impact from the legislation will reduce sales by $400 – $500 million for the year, which represents less than 1% of 2009 turnover. Due to Johnson & Johnson’s diversified nature of the business, the impact is not as significant as in some of its competitors.

Whilst these three businesses reflect what is happening in the larger manufacturers, it demonstrates what is happening across the pharmaceutical industry.  The large companies appear to be able to accommodate the loss in revenue, but how the smaller companies will cope with the reduction in revenue remains to be seen.

At the heart of the healthcare reform bill lies Obama’s vision of the role comparative effectiveness will play in sculpting the landscape of the future healthcare markets.

The financial losses discussed in this article clearly demonstrate the critical importance of comparative effectiveness across the board.  This concept is not something that can be dismissed and swept under the carpet!  All players in the healthcare industry – whether they be the drug suppliers, the healthcare providers or the insurers – must have a firm grasp on the basic concepts and language of comparative effectiveness as it WILL influence every pricing, marketing and purchasing decision the company makes.  And it is not enough that only a selected few individuals within businesses hold this knowledge, cross-company training is vital.

Kinza Sutton

Help your colleagues understand the basic concepts of comparative effectivness with Rx’s quick and easy to read booklet Introduction to Comparative Effectiveness and Evidence Based medicine. Visit Amazon to buy online today.

Medical bankruptcy in the USA: the data behind the headlines

As President Obama continues his push for major healthcare insurance reform in the US, a recent study in the American Journal of Medicine on medical bankruptcy is grabbing headlines.

The headlines read something akin to, ‘Medical costs contribute to more than 60% of US bankruptcies’ – a startling statistic, indeed. The study, published by Dr. David Himmelstein, a primary care physician and professor of medicine at Harvard Medical School, and 3 other authors, does report that illness or medical bills contributed to 62.1% of all bankruptcies in 2007 in the US. Three fourths of those with ‘medical bankruptcy’ had health insurance and 92% had medical debts over US$5000 or more than 10% of pretax family income.

As always, the devil is in the detail. The headlines do not tell the entire story from the study.

Disclosure of potential conflict of interest — It first should be noted that two of the four study authors are co-founders of Physicians for a National Health Program (PNHP), a “single-issue organization [claiming more than 16,000 members] advocating a universal, comprehensive single-payer national health program [in the USA].” Moreover, another co-author (Elizabeth Warren, JD) is the chair of the Congressional Oversight Panel for the Troubled Assets Relief Program (TARP) – the US government’s financial bailout program. At least some of the authors have an agenda to promote.

Defining medical bankruptcy — The authors defined persons as being medically bankrupt if any of the following applied:

• illness or medical bills were cited as a reason for bankruptcy (although not necessarily the reason);
• medical bills totaled more than US$5000 or more than 10% of pretax family income;
• the debtor(s) lost at least 2 weeks of work-related income due to illness/injury; or,
• the debtor(s) mortgaged a home to pay medical bills.

With the exception of mortgaging a home to pay medical bills (5.7% of all bankruptcies who were recent homeowners), these are rather loose definitions of medical bankruptcy. They also do not address the role of personal responsibility in saving for medical or other emergencies. As Dr Himmelstein readily concedes (in a phone interview), ‘Well, most Americans don’t have much in the way of savings.’

Distinguishing medical bills from cost of illness — Such liberal bankruptcy definitions also blur the lines between the truly debilitating effects of underinsurance or lack of insurance, and the simple cost of illness due to lost wages (which health insurance does not address), although 95% of lost-income debtors also had ‘high medical bills’ (presumably more than the US$5000/10% of income threshold) and almost all health insurance in the US is obtained through employment. In this study, 70% had health insurance at the time of bankruptcy filing.

In the published article, the data are broken down by cause of bankruptcy, but these specific figures and analyses are rarely reported in the general news media. In fact, the data are used by the media and Dr Himmelstein to promote a single-payer health insurance system in the US. As Dr Himmelstein noted in our interview, ‘Other people can reach different conclusions [based on the data]…You can quibble around the edges. Is it half of all bankruptcies that are caused by medical problems or is it two thirds? …We think 62% is probably the best estimate, but other people are free to use our data to reach different conclusions. But even if it’s only 50%, that’s still an indicator of a huge problem.’

Health economists should be aware of these studies as select data are quoted and referenced in the news media and by politicians. Irrespective of whether medical bankruptcies are increasing or whether single-payer health insurance is the correct path for Americans, the discussion should be clear about the data supporting a particular argument.

Welcome to our new look HOC!

Why HOC online?

Well,  you told us you all want HOC to be more accessible,  and we also found out that you don’t just like to read, but want to write articles and comments as well.  This was great news for us, so we have tried to make this as easy as possible for you.

As well as the same great content and informative articles, we are adding extra options so now you can:

• Create a PDF of any article you choose (TBC)
• Categorize articles for easier search and subscription, so that you only get the ones you want
• Make the most of your own research papers by writing an editorial/synopsis of your latest publication,  with a link to the published paper
• Write your own articles for discussion in readers corner (TBC)
• Advertise for health economics staff

Development Safety Update Reports (DSURs): simplifying periodic safety reporting

The US Food and Drug Administration (FDA) in August proposed a new guideline asking the sponsors of clinical trials to submit annual development safety update reports (DSURs). The guideline, titled “E2F Development Safety Update Report,” is in draft form and describes the format, content, and timing of a DSUR. It specifies that a DSUR update the status of the clinical trial, summarise the sponsor’s understanding and management of identified and potential risks, describe new safety concerns that could affect the protection of trial subjects, and examine whether the information collected in the previous year accords with current knowledge of the product’s safety.

DSURs would be required for investigational drugs, including biologicals, with or without marketing approval, and whether or not the clinical trials are being conducted by commercial or non-commercial sponsors. A DSUR would have to be submitted within 60 days of the DSUR data lock-point, determined by the date of the sponsor’s first authorisation to conduct a clinical trial in any country (the “Development International Birth Date”).

The guideline instructs sponsors to focus on data from interventional trials. However, it also advises the inclusion of other findings that may have a bearing on the safety of trial subjects. Such information could include findings of non-clinical trials, as well as clinical trials conducted by the sponsor’s development partners and non-interventional or compassionate-use studies.

The FDA draft guideline matches one developed by the International Conference on Harmonisation (ICH).

Will DSURs create more work for the sponsors of clinical trials? Apparently not, at least in the long run. First, the guideline follows a standard format that has been developed for submission in the three ICH regulatory regions (the United States , the European Union, and Japan ). A report produced in accordance with the guideline could be submitted simultaneously in all three regions. Second, the DSUR would replace some reports that are currently required, such as the IND Annual Report. For already marketed products, some of the information required for the DSUR may be provided in the periodic safety update report (PSUR), on which the DSUR is patterned.

The draft guideline may be obtained online at www.regulations.gov or www.fda.gov/cber/guidelines.htm. The FDA has solicited comment on the draft. To be useful, comments should be submitted by 3 November 2008.

Using PowerPoint effectively

While I’m not among those, such as that august journal The Lancet, who believe that PowerPoint corrupts and absolute PowerPoint corrupts absolutely, I do think that far too many presentations using that technique actually misuse it – and abuse audiences in the process.

The Lancet went as far as to invite its readers “to imagine a world with almost no pronouns or punctuation. A world where any complex thought has to be broken down into seven-word chunks … and where it’s hard to accommodate full English sentences so that meaning may be obscured.”

In his wonderfully capricious website, Edward Tufte goes a step further by rendering the Gettysburg Address, one of the most graceful pieces of expository prose in the English language, in PowerPoint with depressingly Bowdlerian results.

According to Andy Goodman, author of Why Bad Presentations Happen to Good Causes, “More and more presentations include meaningless numbers, acronyms that nobody recognises, and unintelligible sentence fragments.” Not only that, but I have witnessed myriad occasions when speakers freeze at the lectern when their technology refuses to function.

But it doesn’t have to be like that. Here are some pointers for using PowerPoint powerfully:

• Put only enough information on each graphic to clarify one major idea;

• Make sure that information is clearly discernible in the back row of your conference room;

• Use graphics only where they help you to explain your point;

• Avoid using tables and graphs from published articles as they don’t usually lend themselves to PowerPoint;

• Make sure that the data are accurate, legible, comprehensible, interesting, and memorable;

• Keep it simple; some of the graphics I’ve seen look like train timetables;

• Give the audience time to absorb what’s on the graphic presentation;

• Don’t simply read from the graphic; it should serve as a trigger for your talking points; and

• Finally, do a dry run, to see that everything’s audible, visible, and meaningful.