Part 2. Healthcare 2020 America by Guest blogger Bruce Gingles of Cook Medical

The incessant criticism of America's health cost and outcomes/quality is partly legitimate in that we do spend the most and on certain metrics like infant mortality and life expectancy we rank below the top and in some cases, well below.  A recent and very credible study in JAMA found that America's healthcare utilization across several major disease categories mimics that of other developed nations.  

Two costs distinguished the US from other countries.  The first is that our physicians make a lot more money than physicians in other countries and second, breakthrough drug classes (primarily biologics indicated for cancer) are more expensive than most "small molecule" drugs and the price borne by US patients and payers is higher than other countries (1, 2).  It's not clear whether the US has the political will to reform our medical workforce and the prerequisite undergraduate and graduate medical education system in order to produce less expensive yet highly competent labor units.  The average debt at medical school graduation in the US is just under $200K.  That money has to be paid back somehow and the task falls to wages.  We could reduce/eliminate from the curriculum those classes that do not logically increase technical skills like French, art history, geography, astronomy, poli sci, and perhaps even economics.  Dispensing with these credit hours would not harm a physician's ability to accurately diagnose and skillfully treat any disease.  Also, miracle-working specialists like transplant surgeons, trauma surgeons, oncologists and many others, spend months at a time on "shopping" rotations during med school to help to help narrow their residency selection.  Since they only choose one, all the services on which they served before matching were wasted.  Specialty rotations during med school could be eliminated without compromising physician quality and this would save a lot of money and time. 

To the less expensive but more volatile issue of high drug costs, here are the facts.  Drugs represent about 12-13% of total US health spending.  Devices and diagnostics account for about 5-6%, bringing the total for "stuff" to nearly 19%.  Device and diagnostics costs as a percentage of the total have been stable for decades but drug costs began rising unusually rapidly about 10-12 years ago.   These increases were mostly the result of a) new biologic classes of drugs which are very expensive to manufacture when compared to small molecules and b) the development of drugs for rare or orphan indications.  Virtually all new drugs require the same level of testing and pre-market regulatory validation to earn market approval.  This is expensive and time consuming (3).  With the exception of rare, expedited review "breakthrough"  drugs, most run the full obstacle course.  A market feature enjoyed by the pharmaceutical industry which is not shared by device or diagnostic companies is that by federal law, drug manufacturers set market prices and these prices cannot be negotiated by Medicare or other federal payers.  That artifact allows pharma considerable pricing leeway but its not clear that this policy has been detrimental to America's health or R&D dominance.  The facts of the case are that we struggle to survive high drug prices until patents expire, at which point the market nearly instantly converts to the generic equivalent.  About 80% of all prescriptions in the US are generic (4).  Generic drugs reduce prices by about 85% (5).

American per capita GDP is the highest of all major economies.  We're rich and we spend part of our wealth on healthcare, including drugs.  Gilead Sciences paid $11B for the Sovaldi/Harvoni patents alone.  This drug class cures Hepatitis C in about 12 weeks with no known side effects. For affected patients, it's practically a miracle.  The addressable population is small, only a few million (up from the original estimate of 350,000) so the costs have to be amortized over many fewer patients than Lipitor or Nexium.   Our health system and the world's had a mild episode of sticker shock when Sovaldi launched at $87,000 per patient.  Never mind that there was virtually unanimous opinion among health economists that at $87K it was much less expensive for much better outcomes than the prevailing standard of care comprising frequent hospital admissions and palliative care.  The main point is that Americans pay more than other countries for the same patented drugs because we can.  

People who are smart enough to know better insist on arguing that because Canada, France, Uruguay or Somalia pay less, the true market price should be the lowest amount paid.  In reality, and from the manufacturer's perspective, the amount earned can be calculated by multiplying the total number of doses sold times the average selling price (ASP) of each prescription dispensed.   What matters is not the lowest or highest but the average.  Hypothetically, the US pays $50/dose for 5 million patients and Portugal pays $15/dose for 800,000 patients, and so forth.  It's easy math.  In exchange for our higher ability/willingness to pay, we get earlier access to life saving drugs while many countries must wait years for the generic version to become available.  In this way, we are also the proverbial guinea pig since side effects may not manifest for years.  Thalidomide is one scandalous example.  An obvious truth is that pharma is highly incentivized to sell more, not fewer, drug doses.  Pricing one's product above the market's ability to pay is not a winning business strategy and even dull pharma execs get that.  With only a few years to repay investors before patented drugs go generic, the pressure is on to move as much inventory as possible.  Scaling R&D/clinical trial quantities to global production volumes results in miniscule cost/dose.  

It is instructive that each year Forbes and Fortune publish a list of the 1) largest and 2) the most profitable US companies.  Pharma's greed should be on stark display.  In reality, pharma rarely breaks the top 10 and it's uncommon to find more than one or two in the top 25.  Most of the profligate profit hyperbole is urban myth.  

See link https://urldefense.proofpoint.com/v2/url?u=https-3A__fortune.com_fortune500_2019_search_&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=ywhyoMtGnPnoQUiqWpOa2UCZ9kmUVs20yyFIjGmc7o4&e=

America is by far the most heterogeneous of the world's societies.  Diverse cultural preferences often dictate care delivery and consumer models.  Try explaining vaccine phobia to an educated person, especially those with kids in crowded public schools.  We are also blessed/burdened with many personal freedoms.  It's our birthright to consume junk food and pizza in excess and if we want to Darwin ourselves out of the gene pool, that's our right.  The government's and private sector's best efforts to the contrary notwithstanding.  Modern medicine performs many miracles but our health quality and life expectancy also require individual compliance.  The harmonious relationship between excess and affluence is a proud and long-established tradition.  So what if we chop less firewood than the Norwegians or walk fewer kilometers each day than the French?  We make and consume better bourbon and we should be proud of that.   If some of our bourbon and legal pot is enjoyed by pregnant teenagers, is that really a healthcare problem?  We are now celebrating the excellent reflexes and marksmanship of Texas worshippers willing to exchange gunfire with nefarious congregants.  That's Constitutional policy, not healthcare.  Healthcare is the number of trauma survivors discharged from the operating room after the event.  In that expertise, we remain the envy of the world. 

1. https://urldefense.proofpoint.com/v2/url?u=https-3A__www.modernhealthcare.com_article_20180407_NEWS_180409939_why-2Ddoes-2Dthe-2Du-2Ds-2Dspend-2Dso-2Dmuch-2Dmore-2Don-2Dhealthcare-2Dit-2Ds-2Dthe-2Dprices&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=4WPYXWJGoTB62Exz80R9TZ2KDVnOdy3gtkvTm7wxIg8&e=

2. https://urldefense.proofpoint.com/v2/url?u=https-3A__jamanetwork.com_journals_jama_article-2Dabstract_2674671&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=Ho7GIKupP6ukEqr5NGuJ1vyndUJXaIguFMZO3aVK0Vw&e= 

3. https://urldefense.proofpoint.com/v2/url?u=https-3A__www.semanticscholar.org_paper_Diagnosing-2Dthe-2Ddecline-2Din-2Dpharmaceutical-2DR-2526D-2DScannell-2DBlanckley_ef4416cc5e8f9e0776bf85be25d0f8e2b71102fb&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=XPYgz5CqYch--uwxWuQMtie4KgUw_L7s-Cnjfda4sSA&e=

4. https://urldefense.proofpoint.com/v2/url?u=https-3A__www.webmd.com_healthy-2Daging_qa_what-2Dpercentage-2Dof-2Dprescription-2Ddrugs-2Dsold-2Dare-2Dgenerics&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=kmCoGj92rGDLX1afflUsCscOWoKrNnxnf6uC7ho4JSI&e=

5. https://urldefense.proofpoint.com/v2/url?u=https-3A__www.fda.gov_drugs_generic-2Ddrugs_generic-2Ddrug-2Dfacts&d=DwIGaQ&c=gpuSFaNGsjdDda5BI0ZeaEm2nP8Ww9_P8WSpnwHlazk&r=c41eNeyCP0n0ZxEdK6bUadBufWBOO4fixD8Ce2We3sE&m=Q_MvFoU5gWyoySwj2Bg-rk4dfS9Y7yumJh1lD_Zmbj8&s=EG2DbD8Rjn_29ICUISMcw1_PixeAkd8wPcp9BwbO-0I&e=