Archive: April, 2011
Medicare is going broke. Everyone agrees. Spending is rising at almost 8% a year, and the annual budget is now over half a trillion dollars. The program’s cost has more than doubled over the past 10 years.
How did we get to this point? Is Medicare yet another example of government inefficiency? What can we learn from the private sector about how to run it right?
The answer is nothing. When it comes to spending, the private sector is no different. If anything, Medicare does a slightly better job of controlling costs.
A few statistics tell the story.
Last week the pharmaceutical industry's largest supplier of retrospective marketing data, IMS Health, presented its annual scorecard for 2010. While sales growth during a recession year was respectable and pharma's margins remain the envy of all legitimate businesses, a perusal of some details raises its share of worries.
For starters, last year's 2.3% sales growth was pharma's second-lowest, top line expansion in 55 years. The lowest sales growth during those decades came in 2008, meaning that in two of the last three years, pharma's sales growth lagged well behind the historical pattern. The reasons behind this comparatively slow sales growth generate concerns among those CEOs in the industry who devote themselves to matters beyond their own personal fortunes and leisure pursuits.
Pharma sales grew more slowly last year than usual, partly as a result of industry fundamentals and partly because of the overall economy. Relative to internal factors, 2010 was similar to the past several years in that the industry launched fewer new products to drive revenue growth. Without new brands to command premium prices, older drugs eventually lose patent protection and become available as low-cost generics. Last year US patients filled 78% of all their retail prescriptions with generic medications, up from 63% in 2006. Moreover, many of the new drugs that did launch last year were either for rare disorders or, more commonly, they did not confer sufficiently better outcomes to prompt coverage by insurers and use by physicians in place of generics. As a result, average spending per new branded product fell from $114 million in 2006 to $62 million in 2010.
The continuing loss of patent exclusivity on current big-sellers also slowed pharma's revenue growth. Even when the top seller in a therapeutic category retains its patent protection, patent loss by the number two competitor can still hurt number one's sales. This is exactly what happened when the patent expired on the number two statin in 2006, Merck's Zocor. Sales of the top-selling statin, Pfizer's Lipitor, slowly started to decline. As the patent on Lipitor, the world's top-selling medication, will expire late this year, to be followed next year by expiry on the number two prescription drug, Plavix, patent loss will remain a deterrent to industry sales growth for a while longer.
Earlier this month, the US Food and Drug Administration warned the public about a rare blood disorder associated with benzocaine, available widely in over-the-counter (OTC) local anesthetic sprays, gels, creams and liquids. Local anesthetics numb pain when applied to the skin or mucous membranes. The FDA advisory has implications for health professionals and consumers alike, especially parents of children less than two years of age since the disorder occurs disproportionally in babies.
The disorder, known as methemoglobinemia (pronunciation here), reduces the ability of blood to carry oxygen into body tissues. In the most severe cases, it can result in death. The FDA advisory noted that people who develop methemoglobinemia may experience pale, gray or blue colored skin, lips, and nail beds; shortness of breath; fatigue; confusion; headache; lightheadedness; and rapid heart rate. Symptoms usually appear within minutes to one or two hours after using benzocaine gels or liquids.
In a review of data from FDA’s adverse event reporting system, FDA discovered that cases occurred mainly in children aged two years or younger who were treated with benzocaine gel for teething. This is probably related to the fact that detoxifying enzyme systems in infants aren’t fully developed. The Agency said they are particularly concerned about the use of OTC benzocaine products in this age group because of the difficulty that parents may have in recognizing the signs and symptoms of methemoglobinemia when using these products at home. Symptoms of methemoglobinemia may not always be evident or attributed to the condition.
Our Institute began warning about methemoglobinemia from local anesthetics nearly 15 years ago and we published a specific warning about benzocaine in 2002. Subsequently, we published a review of 132 cases we identified in FDA’s adverse event reporting system database, including 107 serious adverse events and 2 deaths.
Habits that wreak havoc with your health — eating too much sugar, getting too little sleep — can be hard to break, and other people often can’t help all that much.
Addiction is even tougher.
Abuse of prescription drugs, particularly highly addictive painkillers, has soared over the last decade, devastating some towns and leading the Obama administration last week to announce a national campaign against them at all levels of government. Prescription-drug overdoses now exceed those during the epidemics of cocaine in the 1980s and of black-tar heroin in the 1970s combined, according to federal officials.
If there is a silver lining, it might be this: You can help.
The last thing President Obama needs is more opposition on health care. Especially from his own party, let alone from its liberal wing. But that is the latest twist in his political travails.
Several Democratic members of Congress plan to challenge the foundation of his Medicare cost-control plan. That foundation is the Independent Payment Advisory Board (IPAB) created under the health reform law. Obama’s plan would empower it to impose cuts if spending rises faster than a target rate and Congress fails to act.
A prominent Philadelphia Democrat is helping to lead the charge. Rep. Allyson Y. Schwartz (D., Pa.) has co-sponsored a bill to repeal IPAB entirely.
The new opposition comes at a sensitive time. Obama released his Medicare plan last week to counter a Republican proposal that would move all seniors into private insurance coverage. He is just starting to build momentum for his alternative.
The principal purposes of pharma's business staff functions have remained intact for generations. Marketing research, for example, assesses the attitudes and needs of customers to inform tactical planning for products. Competitive intelligence seeks to learn the thinking and planning at other companies that market competing products. The respective assignments in departments devoted to forecasting, pricing, payor insights, sales analysis, pharmacoeconomics and several other areas all make useful contributions to business operations.
Those historic assignments may have to change into the pursuit of a common goal because pharma's basic mission as an industry appears in doubt.
The defining purpose of the prescription pharmaceutical industry has always consisted of discovering new molecular entities to advance the various standards of medical care. If the new therapeutic brands launched by pharma cannot substantially advance the capabilities of curative medicine, then the industry has little reason to exist - payors and customers will invariably choose cheaper generics that create the same outcomes.
Generics already account for 78 percent of all prescriptions filled in the U.S. Yet pharma's ability to fulfill their basic mission has declined steadily over the past several years. In 1991, the Food and Drug Administration approved 30 new compounds for sale in the U.S. By 1996, the number had grown to more than 50. Yet over the next 14 years the number of approvals declined steadily, so that last year the FDA approved only 20 new drugs. In short, the connection between Big Pharma and drug development has become increasingly tenuous.
Antibiotics are a group of medicines used to treat infections caused by bacteria. For example, doctors prescribe antibiotics to treat a child with strep throat, which is caused by bacteria known as streptococcus. Antibiotics do not work against diseases caused by viruses. Using antibiotics indiscriminately only helps them to become ineffective over time.
Lately, hospitals have been seeing several strains of bacteria that are increasingly resistant to the usual antibiotic treatments. What’s really scary is that some of these bacteria are proving resistant to nearly all currently available antibiotics, creating dire situations for some patients in other countries and even here in the U.S. Last month, data released by the Los Angeles County Department of Public Health identified numerous cases of potentially dangerous drug-resistant bacteria known as carbapenem-resistant Klebsiella pneumoniae, or CRKP, at several health care facilities in Southern California.
It’s important to recognize that most sore throats, coughs, colds, and influenza (flu) cases are caused by viruses, so using antibiotics will not cure the infection and will not keep other people from catching the virus. They also won’t help a help a person feel better but, instead, may cause unnecessary, harmful side effects.
Misuse of antibiotics has led to the worldwide problem known as “antibiotic resistance.” As bacteria are increasingly exposed to antibiotics, some of them mutate into stronger forms that are resistant to the drugs. Antibiotics that had been used to attack the disease no longer work, and the bacteria spread more easily to other people. They also cause longer, more complicated illnesses, and more deaths.
President Obama thinks he can save Medicare from spiraling costs. Can he succeed?
His approach contrasts starkly with the one that Congressman Paul Ryan (R., Wis.) proposed last week. But, as it turns out, the two are surprisingly similar in an important way.
Obama would leave the basic structure of Medicare intact. Its foundation would remain as government insurance with free choice of providers and broad coverage of most medical services.
The plan attacks costs in a number of ways. More modest elements include efforts to reduce hospital errors. These could save $50 billion over 10 years, not to mention their value as a lifesaver for thousands of people. Measures to encourage greater use of generics would nudge down drug costs. Aggressive recovery of overpayments from Medicare Advantage plans would add some savings, as well.
Many pharma CEOs think of themselves as either oracles or rock stars. Those in the former group give vent to blatantly self-serving ideas that they label as bold approaches to health care reform. The second bunch seeks even more publicity, but they do so in the manner of celebrities. Their promotional announcements emphasize putatively "courageous" or "boldly innovative" plans they're pursuing for their companies, along with their personal habits and histories.
In this regard it's probably sensible to give Novartis CEO, Joe Jiminez, the benefit of the doubt and assume he's not necessarily enamored with himself but that, instead, he relied on his PR consultants to impress investors by sitting for an interview with the Wall Street Journal.
Some of the approaches Mr. Jiminez sketched for his company are matters of longstanding practice and conventional wisdom across the industry, although their usefulness remains open to question. His stated preference for "bolt-on" acquisitions falls within this category. The reference here is to companies he can buy for $1 billion or less that won't require any alteration to Norvartis' current business operations. Basically, such moves couldn't hurt, as wags in the investment community might put it, but the likelihood that such acquisitions can appreciably reverse pharma's long slide in share prices appears slight. Pharma is inherently a high-risk industry, so by placing enough bets on enough bolt-ons, a company may hit the jackpot, although the odds are long.
Another of Mr. Jiminez's conventional ideas involves "value-based pricing." This involves a scheme whereby a pharma company prices its drugs on the basis of a retrospective assessment of patient outcomes versus alternatives. Here the idea is not only conventional but seeks to make a virtue out of necessity, because many countries in Europe and elsewhere demand that if premium priced brands fail to show better results than cheaper generics, the companies must rebate a healthy chunk of the cost differentials.
Late last month, the Alabama Department of Public Health (ADPH) and the federal Centers for Disease Control and Prevention (CDC) reported infection outbreaks at 6 Alabama hospitals that left 9 people dead and 10 others injured. This tragedy should have major implications for FDA and state pharmacy boards throughout the country.
Health officials confirmed this past week that the outbreak was caused by nutritional IV solutions (known as parenteral nutrition or PN) provided by a single compounding pharmacy and contaminated with bacteria known as Serratia marcescens. Samples of the organism matched the bacteria found in the 19 infected patients. Officials found that bacteria on a faucet used to rinse a mixing container and stirrer and in the amino acid powder used to make PN somehow passed through a sterilization filter and got into the PN solutions.
Any type of sterile compounding activities must be undertaken with great care and in compliance with relevant standards. In this case the prevailing standard is found in United States Pharmacopeia (USP) Chapter <797>, Pharmaceutical Compounding: Sterile Preparations. The chapter describes a network of systems and processes “to prevent patient harm and fatality from microbial contamination (nonsterility), excessive bacterial endotoxins, large content errors in the strength of correct ingredients, and incorrect ingredients in compounded sterile preparations.”
In the past, most sterile compounding was completed in-house in hospital pharmacies. However, this trend has shifted over the years as many pharmacies have found it too difficult or too costly to meet all the requirements of the USP standard, which was most recently revised in 2008. A recent survey conducted by Pharmacy Purchasing & Products showed that 66% of pharmacies now outsource at least some portion of their sterile compounding.