US Healthcare

The Painful Effects of Healthcare Reform

May 12, 2010
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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.

Comparative Effectiveness and Obamacare

May 4, 2010
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President Barack Obama’s political mantra on healthcare reform has comparative effectiveness research forming a substantial part of his strategy.  In 2009′s economic stimulus plan, Congress approved $1.1 billion for comparative effectiveness research.  This has been further bolstered through the Healthcare Reform Bill, passed on 23 March, by the establishment of a dedicated comparative effectiveness research (CER) institute – armed with a $500 million annual budget.

The passing of this legislation has naturally caused a huge amount of debate – with both those supporting and opposing the move clamouring for attention.  Whilst some welcome the introduction of comparative effectiveness as the healthcare cost-saving opportunity that Obama purports, opponents, however, worry about its implications with regards to issues such as quality of care and insurance-coverage decisions.  

Whichever side you find yourself on one thing is clear – the implications of Obama’s CER institute will be far-reaching and will have a significant impact.  Comparative effectiveness will be at the heart of major healthcare decisions, whether you are a pharmaceutical supplier, healthcare provider or an insurer – or indeed any other kind of business in the healthcare arena.

So with comparative effectiveness very firmly in the spotlight and destined to stay there for some time, can you honestly say that your business understands the basic concepts that have suddenly become so critical in the US healthcare market place? You may – but do your non-health economist colleagues?  And ask yourself, what could be the implications if they DON’T understand these concepts?

Rx Communications has been active in the field of health economics (HE) and CER for many years, and as such, is regarded as an expert in the field of HE and CER awareness and training.

The latest in our published series is :

Introduction to Comparative Effectiveness


Evidence Based Medicine

This short 60 pp  guide explains these concepts in basic terms, covering the objectives of CER and providing a  rapid read  and understandable reference that you may like to pass to your colleagues.

Read an excerpt of the booklet ‘Introduction to Comparative Effectiveness and Evidence Based Medicine’ to determine if this content is right for your organisation.

This booklet is packed with useful definitions, implications and examples. Information is clearly laid out in sections and tables and will give your colleagues a better understanding of your function and the likely implications of CER on your drug and device development activities.

The book also explores other relevant issues in CER such as study methodologies and their application in CER, the role and application of evidence based medicine and how to evaluate comparative effectiveness studies. ‘Comparative Effectiveness and Evidence Based Medicine’ is available to buy here at £15.99 (plus shipping).

The book is available for content and appearance customization incorporating your company’s branding, corporate vocabulary as well as product and device case studies and examples A fully annotated presentation, is also available can be used as a ‘train the trainer’ tool or directly with delegates during training sessions.

For more details about ‘Introduction to Comparative Effectiveness and Evidence Based Medicine’ please do contact Kinza Sutton on +44 1352 706199 or Alternatively, click here to buy a copy online.

A UK perspective: how can the US have reform without rational debate?

Oct 27, 2009
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By Sian Claire Owen

Historically, the issue of US healthcare reform has always been a political hot potato. And in the recent rounds, as the argument intensifies, the notion of ‘rational debate’ seems to have been thrown out of the window and replaced with scare tactics, in the mainstream media at least.

In particular, the UK healthcare system (the National Health Service, or NHS) recently came under heavy criticism by the anti-reform lobby.

In the US a series of high-profile, anti-reform TV adverts targeted the NHS to highlight the ‘horrors’ of socialised medicine. These adverts paint the NHS as an archaic, almost medieval structure plagued with ‘death panels’, endless waiting lists and the refusal of vital medicines, with patient choice denied in the face of stifling Government bureaucracy.

Although the NHS is far from perfect, these adverts – produced by Creative Response Concepts, the same PR firm responsible for the ‘Swiftboat Veterans for Truth’ campaign that sunk John Kerry’s presidential bid in 2004 – hardly ring true.

Fittingly, Senator John Kerry recently called for these lies to be exposed, and last week an open letter addressed to Senator Kerry and signed by some of the leading NHS healthcare professionals was published in the British Medical Journal in answer to that call.

Dr Jacky Davis, co-chair of the NHS Consultants Association is one of the co-authors. She explains that she was moved to write the letter not only to refute the lies, but also because she believes that the American public deserve an honest debate focusing on the real issues, rather than hyperbole drummed up by opposition factions.

Davis, whose husband is American, says: “The US healthcare system can be described as ‘islands of excellence in a sea of misery’. For those with appropriate coverage the care is excellent, but for those with no insurance or who are denied care because of pre-existing conditions, their situation is dire.”

“Obama needs to be allowed to take this issue on,” she adds. “We feel strongly that the US needs a fair debate.”

Dragging the NHS into the equation could muddy the already murky waters even further. As Davis says: “We can’t tell the Americans how to run their health services, but they do deserve a good debate. Currently this strategy [of using scare tactics about the NHS] is playing into people’s lack of knowledge. It’s quite disgraceful.”

So what will this letter, signed by more than 100 leading NHS professionals, achieve? As Davis says: “We haven’t had a political response yet. I don’t know whether they will acknowledge it.” And true to form representatives of Senator Kerry were unavailable for comment.

“But the take home message is that the NHS delivers care to everybody for half the money they spend in the US,” she adds. “In the US there’s a huge vested interest behind the campaign. You can see how much money is made in profits.”

Of note, NHS Consultants Association is, according to its web site, an organisation formed in 1976, “by consultants with a strong commitment to the NHS and its founding principles… [it] believes in planning and cooperation rather than market forces and commercial competition for healthcare.” Dr Davis is also a member of the BMA Council and is co-founder of the Keep Our NHS Public campaign group.

‘You say HTA, I say CER’: international perspectives on evidence-based health policy

Aug 17, 2009
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By Mary Gabb

Terms such as ‘evidence-based health policy’, ‘comparative effectiveness research’ (CER) and ‘health technology assessment’ (HTA) are no longer restricted to discussions among health economists – they have become household topics.

But are people defining them differently? Or are we all unwittingly speaking the same language? After all, George Bernard Shaw once described America and England as two countries separated by a common language. For health economists (or any other interested persons) seeking to understand healthcare systems outside their own country, there are several, recently available resources:

The Milbank Quarterly recently published an article (Chalkidou K et al. 2009;87(2)) analysing CER and evidence-based health policy in four countries: Britain, France, Australia and Germany. The authors, who are employed by each of the four countries’ HTA/CER entities, as well as the Center for Medical Technology Policy in the USA, interviewed key stakeholders in CER entities in each country, as well as reviewed the agencies’ web sites and legal framework documents. This article was designed to provide a ‘lessons learned’ summary for the USA as it works to develop its own CER, from other Western countries that use HTA/CER in their decision making.

Using 10 core attributes that capture the main aspects of the four HTA/CER agencies, Chalkidou et al concluded that while each country’s HTA/CER entity has developed HTA/CER unique to its own health system, each has adopted a core set of desirable procedural principles to ensure that the HTA/CER is relevant to each country’s healthcare system.

Overall, some of the key lessons learned are:

  • HTA/CER should be a demand-driven entity (ie, relevant to its stakeholders and not merely an academic pursuit);
  • Negative press coverage and intense controversy are par for the course (and indeed indicate that the HTA/CER entity is fulfilling its role); and
  • The three ingredients for success are strong political endorsement, early engagement of stakeholders, and commitment to evidence-based practices to gain professional approval.

For a more academic discussion of differences in HTA, check out Claude Le Pen’s editorial in the European Journal of Health Economics (2009;10;121-123), in which he compares the philosophical differences in social contracts underlying Britain’s NHS and France’s Sécurité Sociale.

An interview with Dr Naoki Ikegami in Expert Review of Pharmacoeconomics & Outcomes Research (2009;9(3):201-204) provides some insights into the Japanese healthcare system, especially in comparison with the UK’s NHS and NICE.  Dr Ikegami is Professor and Chair of the Department of Health Policy and Management at Keio University School of Medicine. However, he offers international expertise to his perspective as he received a Master of Arts degree in health services studies with Distinction from Leeds University and was a visiting professor at the University of Pennsvlania’s Wharton School of Business and Medical School.

Shishkin and Vlassov discuss the need for modernisation of Russia’s healthcare system in the British Medical Journal (BMJ 2009;338:b2132). They describe the recent reforms as Russia transitioned to a market economy and the proposed reforms through 2020.

Finally, the ISPOR (International Society for Pharmacoeconomics and Outcome Research) website provides a detailed description of many countries’ health care systems (the Global Health Care Systems Road Map), including processes for pricing and reimbursement, and health technology assessment (HTA, referred to as comparative effectiveness research [CER] in the USA).

The website also provides access to papers from a special issue of Value in Health — Health Technology Assessment in Evidence-Based Health Care Reimbursement Decisions Around the World: Lessons Learned (June 2009;12(s2):S1 – S53).

Greenflint, the sister company to Rx Communications Ltd, understands the challenge faced by health economists in helping people to understand what comparative effectiveness research and evidence-based medicine really are – in language that people who are not directly involved with these disciplines can readily understand.

Our booklet, Comparative Effectiveness and Evidence-based Medicine, doesn’t come from a health policy approach, however. We take a more practical standpoint, by helping the reader understand how and when these methods are applied, and their uses, limitations and applications to healthcare provision. In addition, we’ve designed the content so that you can add your own company examples and perspectives into the text to make it relevant to your own audience.

If you would like to see a copy of this booklet, please go to our website or contact either Steve Handley or Ruth Whittington at Rx Communications Ltd for more information.

Using a worldview of healthcare to understand policy within

Aug 17, 2009
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Overhauling the American health insurance system – a Herculean task to be sure, and the debate rages on through the summer months. I have my own strong opinions on this topic, but I am a bit surprised by the vehement response it has evoked among my fellow citizens.

We see daily images of angry citizens at ‘town hall meetings’ with their congressmen, senators, and President Obama, venting their disagreement with a ‘public option’ plan (ie, a proposed government-run insurance plan that would compete with private insurers) and their anger over confusion or lack of information regarding the details (there are five versions of healthcare reform in consideration by Congress), as well as the staggering price tag that accompanies any discussion of healthcare.

The need for controlling healthcare costs is not unique to the USA, however. Britain’s National Heath Service is facing a £15 billion (US$24 billion) shortfall in the coming years; France’s Assurance Maladie is expecting a shortfall of €9.4 billion ($13.5 billion) this year, and €15 billion in 2010, or roughly 10% of its budget.

And debate over healthcare costs is not a new topic. Indeed, the founding premise of many national/government-run/single-payer healthcare systems is the goal of cost control while providing a basic level of care for all citizens. The million (or trillion)-dollar question is, how do we accomplish that? The answer may lie somewhere between private and public payers, may vary with each country, and may change – out of necessity – over time depending on economic realities and political zeitgeist.

This week we highlight a collection of recently published resources for health economists who want to learn about healthcare systems in other countries. One of the great advantages of this Information Age and our shrinking world is the possibility of avoiding the proverbial reinvented wheel.

Medical bankruptcy in the USA: the data behind the headlines

Jun 13, 2009
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By Mary Gabb, HOC editor

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.

Universal healthcare in the US? Not yet, but probably soon

Jan 3, 2009
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Mary Gabb (

160With President-elect Obama’s proposed plan to reform the US healthcare system, this will be the closest the US has gotten to universal health coverage. We provide a snapshot of the Obama healthcare plan and highlight some of the criticisms it has received from health economists.

The Obama plan mandates affordable, accessible health coverage for every person and attempts to control healthcare spending. To achieve the former, the Obama plan eliminates the concept of “pre-existing conditions.” Every American can purchase health insurance regardless of current medical conditions or previous medical history, by choosing from any of the following options:

  • For low-income earners, expansion of Medicaid and subsidies to purchase insurance for those who do not qualify for Medicaid
  • “Pay or play” mandates requiring larger businesses to provide meaningful health insurance to their employees or pay a tax; small businesses would be exempt from this mandate and smaller firms would receive tax credits to help pay for health insurance (“small(er)” has not yet been defined)
  • Comprehensive public health insurance modelled after the plan currently available to all federal employees
  • For individuals who choose (or are forced) to buy personal insurance, the creation of a National Health Insurance Exchange, in which heavily-regulated private policies would be offered at group rates
  • Expansion of the State Children’s Health Insurance Program (SCHIP) to cover all children.

The Obama plan will seek to reduce costs by:

  • Focusing on preventive medicine and requiring the use of proven disease management programs
  • Improving health technology (namely, requiring use of standardised electronic medical records)
  • Creating an independent organisation for assessing and comparing cost-effectiveness of drugs, devices, and diagnostic tests, modelled after the National Centre for Clinical Health and Excellence (NICE) in the UK.
  • Easy access to primary care, with a focus on coordinated team care
  • Payment systems that reward health outcomes rather than volume of services provided.

Several health economists have criticised the Obama plan. Among their criticisms, from an economics point of view:

  • What exactly will this new healthcare system cost? Some have suggested $2 trillion over 10 years.
  • The tax rate on businesses that do not participate is undefined – if its too low companies would have every incentive to cash out of the plans they offer and pay the tax instead.
  • As noted by Victor R. Fuchs, PhD1, every dollar spent on healthcare – no matter how inefficiently – is used to provide income to tens of thousands of people providing health insurance or healthcare (ie, telephone and computer operators, claims payers, insurance sales people, actuaries, benefit managers, consultants, etc). Can this already dire economy absorb those job losses?
  • Ultimately, the US government will control all healthcare, because, as noted by the WSJ editors, federal officials will run “not only the new plan but also the ‘market’ in which it ‘competes’ with private programs – like playing both umpire and one of the teams on the field.”

From the healthcare point of view, the Obama plan may create more problems than it solves:

  • Payment based on outcomes depends in large part on adherent patients. Like merit-based pay for teachers, this can be unfair to those professionals who do their best but are at the mercy of a small fraction of irresponsible people that they serve.
  • With the cost-effectiveness agency, will providers and insurers incorporate the assessments into everyday practice?
  • This plan, which eases the US into universal coverage by working with the current system, does not eliminate the paperwork and bureaucratic headaches for doctors already dealing with multiple insurance plans.
  • Perhaps most frustrating, as expressed by Joseph R. Antos, PhD2, “[Obama's] plan would reorganize the health-insurance market but not change the basic financial incentives in the system that drive up spending.”

The US Congress will determine how much of his plan is implemented; only time will tell if it is successful.

Defining the healthcare debate in the US

May 24, 2008
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By Mary Gabb (

125Nowadays, healthcare is hotly debated, and not just for US presidential candidates. Virtually every western country is now grappling with the challenge of how to pay for healthcare for its citizens. The US has garnered much attention in this debate, as it is the only western country that does not have universal healthcare coverage, yet it spends 16% of its GDP on healthcare with equivalent (and in some cases, poorer) outcomes.

Part of the debate centres on whether healthcare is a basic human right: is the US morally wrong for not providing universal coverage or simply shooting itself in the collective foot because sick people ultimately cost society even more money? But there is another, more concrete aspect to the healthcare debate – cost. Who is going to pay for it?

Most of the increasing costs in healthcare in recent years are from technological advances, yet the debate often points directly to the pharmaceutical industry. It is not illegal for pharmaceutical manufacturers to make profits. It is not illegal for them to make big profits. So, why does it bother some people so much, for example, when we hear reports that pharma spends more of its budget on advertising than R&D?

It bothers them because it is not possible to discuss healthcare in strictly dollars and cents (or pounds and pence), as we do with other government programmes, such as maintaining roads or postal services, or even programmes that affect us more personally, such as education and pensions. Healthcare is so personal because it affects our very survival. We have a deeply vested interest in its outcomes. And discussing healthcare rationing or cuts to funding tests our survival instincts, because our very existence is at stake. Hence, we come to view it as a right.

Moreover, in an effort to quantify cost-benefit discussions of healthcare, we demand scientifically-rigorous proof that the interventions work – evidence-based medicine (EBM). But medicine is not an exact science and EBM disregards the art of medicine – the side of medicine that takes into account the individual patient and his/her personal life story and circumstances. Evidence-based medicine tries to apply a one-size-fits-all solution to every single human being, the most complex creatures on this planet.

Governments, healthcare providers, insurers, and patients all turn to health economists for answers to these complex questions, and health economists have tried to balance the moral argument of a basic human right and the strictly economic argument of monetary value with concepts such as human capital and quality-adjusted life year.

In the end, healthcare is neither a basic human right nor a strictly cost issue; it lies somewhere in the middle. For societies that can afford a universal healthcare plan, it should be provided. The question for the US is, with a $9.5 trillion debt and no end in the foreseeable future to a costly war, can we afford it? And if we can, it should not be a standardised federal programme. Rather, it should be state-run programme, so that EBM can be adapted to more local needs.

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