The Troubling Tale of Tamiflu and the Drug Companies

Helen Epstein provides a description of the activities surrounding the recent “swine flu” scare in The New York Review of Books. Her article is aptly titled: Flu Warning: Beware the Drug Companies.



Epstein suggests the drug companies have been preparing for years for the opportunity to take advantage of a threatening new flu virus so they make large amounts of money selling drugs to frightened countries. She also suggests that the drug promoted for these emergencies, Tamiflu, is of unknown value in treating flu victims. It is of unknown value because the drug company that manufactures it has purchased influence and corrupted the drug approval process to such an extent that only it has the data available to evaluate the drug’s efficacy—and it has not released that data..


Here is the tale Epstein tells.

“In February 2009, a spike in influenza cases was detected in hospitals around Mexico City. Mexican government officials sent samples of throat cultures from patients to the US Centers for Disease Control (CDC) and the Canadian National Laboratory in Winnipeg, whose scientists found a new version of the H1N1 influenza virus, named for the type of hemagglutinin and neuraminidase molecules on its surface that enable it to spread within the body.”

The possibility of another flu pandemic such as the deadly on 1918 was suggested in news sources and the flu strain was labeled “swine flu.”

“Panic spread throughout the world. In Mexico schools and offices were closed, flights were canceled, and the country lost $2.2 billion within a few weeks. In the UK, the government’s swine flu website received 2,600 hits per second and crashed soon after it opened; in New York so many people panicked over any flu-like symptom that hospital emergency rooms were swamped with ten times more patients than normal, worsening care for those who really needed it.”

“In China and other countries, border nurses quarantined anyone with a fever seeking to enter the country. Even though direct pig-to-human influenza transmission is exceedingly rare, Egypt ordered the slaughter of all the pigs in Cairo, impoverishing thousands of Christian small-scale farmers. And in Afghanistan, the nation’s only pig was quarantined.”

In June of 2009 the World Health Organization (WHO) issued a statement claiming that “pandemic emergency”—a worldwide epidemic—was underway. This caused governments across the globe to scramble to obtain anti-flu drugs and vaccines—at great price.

“According to J.P. Morgan, up to $10 billion was spent globally on “influenza preparedness” in 2009, including over $4 billion by the US alone.”

And to what effect were this declaration of an emergency and the flood of money bestowed on the drug companies?

“The predicted dire emergency did not occur. In the 2009–2010 “influenza season” about 18,000 people died from the disease worldwide, fewer than in previous years, and the vast majority of victims had serious underlying conditions such as cancer, lung disease, AIDS, or severe obesity, which can impair breathing. Since one influenza strain usually dominates all others during a typical flu season, H1N1 may actually have saved lives by displacing more aggressive viruses.”

Fortunately, some people became suspicious of this whole process.

“In March 2010, a Council of Europe report concluded that the H1N1 virus was known to be mild well before the WHO issued the pandemic “declaration” and expressed concern about the influence of powerful pharmaceutical companies over decision-making at the agency. A draft of the WHO’s response was released in March 2011. It calls for more “transparency” but concludes that “no critic of WHO has produced any direct evidence of commercial influence on decision-making.” Unfortunately, the response does not account for the billions of dollars lost in the panic or for the lives that may have been put at risk by the agency’s hasty medical recommendations.”

When accused of being swayed by drug companies, WHO responds by saying: “You can’t prove it.” That is not exactly a declaration of innocence.


Are there reasons for being concerned about drug company influence? You bet!


In 1999 WHO began encouraging countries to prepare for the possibility of another pandemic by setting up emergency notification and mass vaccination procedures. This is not an unreasonable initiative for WHO, but in their documentation they included an annex.

“However, the document also contained an annex describing a new class of anti-influenza drugs known as “neuraminidase inhibitors” that might help control the pandemic.”

“According to the annex, these drugs, by blocking the action of the neuraminidase protein, prevent the influenza viruses from spreading through the body, reducing the severity of symptoms. The drugs would also protect people who had been exposed to the disease, such as health care workers and relatives of patients, from becoming sick, or so the document suggested. In 1999, the manufacturers of these new drugs were still seeking approval from government regulators including the US Food and Drug Administration, but later editions of the WHO’s influenza pandemic guidance documents urged governments to “stockpile” them, because in an emergency their manufacturers might not have time to produce enough to meet demand.”

Here we have WHO recommending that governments invest large amounts of money in drugs whose utility had yet to be determined.

“When H5N1 “avian flu” broke out again in Asia in 2003, this ‘stockpiling’ recommendation led to a surge in influenza ‘pandemic preparedness’ spending. In 2005–2006, the US and European governments stockpiled nearly $3 billion worth of the most popular neuraminidase inhibitor, known as Tamiflu. At $10–$15 a dose, few developing countries in Africa, Asia, and Latin America would be able to afford Tamiflu, but Margaret Chan, then assistant director-general of the WHO in charge of influenza pandemic coordination, joined by representatives from Hoffman–La Roche, Tamiflu’s Swiss manufacturer, urged Western governments to contribute to a Tamiflu stockpile fund for the developing world.”

It is comforting to know that the drug companies are so concerned with our well being that they are willing to travel the world selling their product.


This drug, Tamiflu, that is being pushed must really be good stuff! Right?

“The active ingredient in Tamiflu was discovered in 1989 by an Australian biotechnology company that licensed it to the British firm GlaxoSmithKline (GSK). The company gave it the trade name Relenza, carried out clinical trials, and submitted the results to the FDA in 1999. The FDA scientific panel that reviewed this evidence was unimpressed; it noted that the drug—a powder for oral inhalation—had little effect on influenza symptoms and seemed to worsen breathing problems in people with asthma. The panel members voted 13–4 against approval, but the agency overruled them and approved the drug anyway. The head of the FDA’s antiviral drug program, Heidi Jolson, justified this decision on the grounds that Relenza might be useful for some patients, and even a weakly effective drug was better than nothing, given the fears then circulating about “avian flu.” Relenza was approved the same year. By the end of 2000, a preliminary investigation suggested that Relenza might have been a factor in twenty-two deaths of influenza patients with asthma or other preexisting lung conditions. Yet the drug remains on the market.”

“Shortly after Relenza’s discovery, the hunt was on for a pill version of the drug that would not carry these respiratory risks. In the early 1990s, researchers at Gilead, a US biotech company, developed one and licensed it to Hoffman–La Roche, which gave it the trade name Tamiflu. Because Relenza had already been approved, the FDA gave Tamiflu “fast-track” status, meaning that the clinical evidence was even less stringently reviewed than Relenza’s was. According to the FDA’s own review documents, the results of the largest Tamiflu trial, involving some 1,500 patients, were never carefully analyzed by the agency, even though its officials knew of the study’s existence.”

The world community is being encouraged to purchase billions of dollars worth of a drug whose active ingredient was deemed by scientists to be not worth allowing in the market place. FDA administrators were “convinced” that this was not the appropriate decision and unleashed it on the populace.


But this new version, Tamiflu, must be better. Right? Studies must have been done to prove its value—right?


Tamiflu has been widely used in Japan since around 2000. Doctors there began to notice adverse reactions in some cases when the drug was used.

“Dr. Rokuro Hama runs the Japan Institute of Pharmacovigilance, an Osaka-based nonprofit group that monitors pharmaceutical product safety. In 2002, shortly after Tamiflu was introduced in Japan, he received a number of case reports of children who had begun behaving strangely within hours of taking it. A fourteen-year-old boy wandered out of his family’s ninth-floor apartment and jumped over an exterior railing to his death; a seventeen-year-old boy ran out of his house onto a nearby freeway, where he was killed by a speeding truck; a thirty-nine-year-old man and two three-year-old boys died suddenly in their sleep.”

“....when Hama studied the cases carefully, he realized that the neurological symptoms differed from those sometimes seen in severe influenza cases; rather, they more closely resembled symptoms associated with overdoses of drugs that suppress the central nervous system, such as Valium.... Hama....estimated that Tamiflu resulted in a fourfold increase in the frequency of hallucinations and other neuropsychiatric side effects in children with influenza.”

The Japanese findings resulted in a desire to relook at the scientific data on Tamiflu by researchers in several countries. What they discovered was that the only research available had been funded by Roche, the manufacturer. After obtaining internal documents from Roche they discovered discrepancies between data presented there and what was published in the open scientific literature.

“In 2008, an article in the journal Drug Safety, signed by a group of Roche authors, claimed that rats and mice, both given a very high dose of Tamiflu, showed no ill effect. But according to documents submitted to the Japanese Ministry of Health, Labor, and Welfare by Chugai, the Japanese Roche subsidiary, the exact same dose of Tamiflu killed more than half of the animals. As they died, the rats exhibited many of the same central nervous system symptoms that Hama had described in his case series on the Japanese children.”

Surely we can rest easy because outright fraud could never make its way into the scientific literature?

“Most medical journals receive half or more of their income from pharmaceutical company advertising and reprint orders, and dozens of others are owned by companies like Wolters Kluwer, a medical publisher that also provides marketing services to the pharmaceutical industry.”

“Some of the Tamiflu articles were composed by “ghostwriters” associated with Adis, a Wolters Kluwer subsidiary that specializes in producing brochures and professional-looking articles for pharmaceutical company clients. This may help explain why some of the authors of the Tamiflu articles....didn’t have the original clinical trial data upon which those articles were based: some of them may never have seen it. The Tamiflu ghostwriters told Deborah Cohen, a BMJ reporter, that neither they nor the named authors on the articles had handled the Tamiflu data themselves—they had just been given the tables and figures by Roche officials and instructed to emphasize both the dangers of influenza and the benefits of Tamiflu in the articles.”

Roche has thus far refused to make enough data available to researchers so that an independent evaluation of its performance could be made. Based on what is currently available

“....in December 2009 the researchers published an article in the British Medical Journal (BMJ) indicating that it was impossible to say whether Tamiflu reduced severe complications from influenza or not.”

At question is the integrity of the process by which government agencies make decisions in this arena.

“The many contradictions in the evidence concerning Tamiflu and Relenza raise questions about the WHO’s decision to declare an influenza “pandemic emergency” in 2009 and promote these drugs to fight it. In May 2009, a month before the pandemic declaration was issued, Roy Anderson, a prominent British epidemiologist and adviser to both the WHO and the UK government, gravely warned a BBC radio audience that only Relenza and Tamiflu would prevent a catastrophe on the scale of the 1918 influenza pandemic. At the time, Anderson was receiving £116,000 per year from GlaxoSmithKline, manufacturer of Relenza. Calls for Anderson to resign from the UK government’s Scientific Advisory Group for Emergencies soon followed. A few months later, Anderson, citing a desire to concentrate on research, stepped down from his post as rector of Imperial College London, but he remains an adviser to both the UK government and the WHO.”

“During the ten years leading up to the pandemic declaration of 2009, scientists associated with the companies that were to profit from the WHO’s ‘pandemic preparedness’ programs, including Roche and GlaxoSmithKline, were involved at virtually every stage of the development of those programs. The companies funded the documents giving guidance on preparing for the influenza pandemic, in which the WHO recommended the stockpiling of Tamiflu and Relenza. Consultants drafted parts of these documents and joined WHO officials in fund-raising for the Tamiflu stockpile. Industry-supported scientists were also on the committee that issued the “pandemic emergency declaration.” That announcement caused developing countries to request assistance from the WHO’s Tamiflu stockpile fund, and these requests contributed to a tripling of the drug’s sales in 2009. By declaring a pandemic and linking the response to Tamiflu stockpiling, the WHO could not have done a better job of promoting Roche’s interests. Until Roche shares more information on Tamiflu with independent researchers, we won’t know whether the agency did so at the expense of the rest of us.”

Money from the drug companies goes to support every area of the medical community—even the government agencies intended to regulate the industry. It is not clear that there is an honest broker left out there. Epstein makes clear the folly of allowing the current system to continue on.

“The FDA also relies increasingly upon fees and other payments from the pharmaceutical companies whose products the agency is supposed to regulate. This could contribute to the growing number of scandals in which the dangers of widely prescribed drugs have been discovered too late. Last year, GlaxoSmithKline’s diabetes drug Avandia was linked to thousands of heart attacks, and earlier in the decade, the company’s antidepressant Paxil was discovered to exacerbate the risk of suicide in young people. Merck’s painkiller Vioxx was also linked to thousands of heart disease deaths. In each case, the scientific literature gave little hint of these dangers. The companies have agreed to pay settlements in class action lawsuits amounting to far less than the profits the drugs earned on the market. These precedents could be creating incentives for reduced vigilance concerning the side effects of prescription drugs in general.”

On the Creation of the Hereafter: Heaven and Hell

One who is raised as a child in a strict religious background can never quite leave that training and indoctrination behind. A little study of history will easily teach one that man created his religion to satisfy his own needs, and what is taught has nothing to do with any ethereal happenings. Nevertheless, one does not emerge cleansed of this childhood experience. The now-nonbeliever is left with a residue of emotion that can generate a range of responses from belligerent atheism to nostalgia. We will discuss two books whose author’s attitudes span much of this range. One focuses on the evil of the man-made concept of hell, while the other suggests benefits to society from the man-made concept of heaven.



In the London Review of Books, James Wood provides a review of the book After Lives: A Guide to Heaven, Hell and Purgatory by John Casey. We will receive the more optimistic assessment from Robert Wright in his book The Evolution of God.


Wood lets us know his arguable point of view with this statement:

“No one believes in eternal punishment any more (except for Islamic fundamentalists and those Christian evangelicals who think Christopher Hitchens will go to hell), but the concept of an afterlife is still hard to throw over.”

Wood describes Casey as the product of a strict Catholic upbringing that left him viewing the Church as a source of “cruelties and illogicalities.”

“His introduction reveals his hand, just because it is not a cool academic preface but a passionate intervention against the idea of hell. He notes that the stronger the belief in personal immortality became, the stronger the terror of hell (as in Islam and Christianity), and he recalls Father Arnall’s horrifying sermon in A Portrait of the Artist as a Young Man. Father Arnall tells his schoolboy audience how the great numbers of the damned will confine the victims, how the walls of this prison are four thousand miles thick, the stench intolerable, and, most famously, how eternity in hell can be imagined as a mountain of sand a million miles high, from which, every million years, a bird removes a single grain.”

Having encountered this sermon at a fairly young and impressionable age I can only wish that if there was a hell it would be reserved for those who prey on young children with such tales.


The concept of an afterlife was not a strong component of pre-Christian cultures, and Casey views its growth in importance as a social negative.

“Until the late book of Daniel, there is little mention in the Hebrew Bible of the afterlife as anything other than Sheol, a dark, cheerless place under the surface of the world.... It was not until around the time of Christ that the Pharisees (but not the Sadducees) became believers in personal immortality, St Paul being their most famous Christian convert.”

“Casey admires the ‘unflinching realism’ of Sheol, precisely because it is ‘the fate we could least hope for’, and thus places the human emphasis on life in this world. I think that what he likes about Mesopotamian religion, about Judaism, and about Homer’s Greece, is that in all these worldviews he sees life pushing away the afterlife, making it small and unimportant, as good health makes sickness seem unlikely: the afterlife, and the whole apparatus of judgment associated with it, falls away into comparative irrelevance, and the emphasis is on cultivating what we have rather than preparing for what we don’t have – practical ethics rather than spiritual hoarding.”

The development of the Christian views on heaven and hell ultimately emanate from Paul. Both Casey and Wright would agree that it was Paul and Paulism that would define Christianity, not the confused and confusing words that were purported to be those of Jesus.

“Paul’s dark novelty was to argue backwards from the death and resurrection of Jesus: we have been saved from death by Christ’s sacrifice and resurrection; therefore we must all have been cursed to death long before Jesus’ decisive intervention....”

“Paul’s other great contribution, probably responsible for more terror and death than any other doctrinal invention in Christianity, is the teaching that we gain entry to heaven not by our deeds but by faith alone; and that God freely chooses whom to reward.”

Here Paul created the image of all humans as by nature “depraved,” and generated the concept of predestination, which would evolve into a deadly form of Christianity when coupled with the invention of eternal damnation.

“Paul is important in the development of the Christian afterlife because, even though he seems not to have believed in the notion of hell, his harsh emphasis on the saved and the unsaved – on the absoluteness of salvation – effectively created the necessity for hell. Where would all the unsaved go? And if they were condemned by original sin, then surely there should be some appropriately morbid punishment? Sure enough, not long after Paul’s writings, the first detailed depictions of the Christian hell appear. In the Apocalypse of Peter, an apocryphal text from perhaps the early second century, the damned, as in Dante, receive bespoke punishments: blasphemers hang by their tongues, adulterers by their genitals and so on.”

It would take the Protestant Reformation and the twisted psyche of John Calvin to take this view to its inevitable conclusion.

“Calvin, absurdly enough,.... espoused a doctrine of total depravity, and ‘double predestination’: ‘God not only determines some souls, before their creation, to eternal bliss but also consigns others, in the unsearchable counsel of his own will, to everlasting torment’.”

Having arrived at this point, let us consider the ramifications. Unless God has chosen you to be one of the few elect, you are “totally depraved” and consigned to hell and there is nothing you can do about it. I think it is safe to say that no one would accept this belief unless they thought they were one of the elect. Therefore, anyone who does not believe as you is totally depraved and has already been condemned by God. There could not be a surer prescription for murder and mayhem.


Luckily for us, murder and mayhem has subsided—in our time—to mere intolerance and discrimination.


Casey seems to believe that

“....meaningful discourse about the afterlife came to an end when people stopped seriously believing in heaven and hell, in the early 19th century.”

That seems a bit of a stretch.


Robert Wright is interested in interpreting Paul and early Christianity in another context. He will end up viewing the creation of heaven and its rewards as a socially useful step.


Like Casey and Wood, Wright attributes the ultimate course and character of the Christian Church to Paul. He describes Paul as a masterful CEO who organized and encouraged and cajoled the followers into a relatively coherent entity. But what did Paul believe about eternal life?

“Paul’s view of the afterlife is the earliest documented Christian view, and it is notable for two things. First, though Jesus, being the son of God, went to heaven shortly after dying, ordinary Christians don’t follow that path. They have to wait for Jesus to return before things get blissful; ‘the dead in Christ will rise’ only when ‘the Lord himself, with a cry of command, with the archangel’s call and with the sound of God’s trumpet, will descend from heaven.’ Second, even then, heaven isn’t where the dead are going; rather, they will live out eternity on earth—the much improved earth of the kingdom of God.”

This view was encouraging to Paul’s followers because they believed, as did Paul, that these events were imminent. But then the years rolled by and Paul died and still nothing happened. These Christians, in order to survive, had to make converts among the gentiles of the Roman Empire. They were placed in the uncomfortable position of having to promise a potential recruit that after he dies his body will go in the ground, but we don’t know what else will happen, and eventually something good will happen, although we don’t know when. A prospective buyer could get a much better offer from other religions.


Christian doctrine had to change in accordance with this new situation. It was necessary to downplay any notion of an eventual earthly kingdom in the distant future and replace it with a concept with instant gratification. The “kingdom of God” would have to be replaced with the current concept of heaven.


Before relegating this change to the annals of chicanery, Wright reminds us of what Paul accomplished as the Christian leader. To him is attributed the moral code that we associate with Christianity today.

“Look at the list of sins he enjoins the Galatians to avoid: ‘Now the works of flesh are obvious: fornication, impurity, licentiousness, idolatry, sorcery, enmities, strife, jealousy, anger, quarrels, dissensions, factions, envy, drunkenness, carousing, and things like these.’ Only two of these—idolatry and sorcery—are about theology. The rest are about workaday social cohesion.”

Antisocial behavior became a sin.

“But if you’re going to start a religion that becomes the most powerful recruiting machine in the history of the world, an appealing message is only half the battle. The message has to not just attract people, but to get them to behave in ways that sustain the religious organization and spread it. For example: it would help if sin is defined so that the avoidance of it sustains the cohesion and growth of the church.”

The crowning step in the development of the Church was to combine Paul’s dictum that those who sinned (according to the Church’s definition) “will not inherit the kingdom of God,” with the interpretation that the last phrase now referred to everlasting life in heaven rather than an earthly empire.

“Christianity would harness this incentive to carry the God of Israel well beyond Israel, into the religious marketplace of the Roman Empire, where he would thrive. The morally contingent afterlife was a major threshold in the history of religion.”

Wright’s contention is that religion was invented by humanity to meet its needs. He sees this response of the early Christians not as a subterfuge but as a necessary modification needed in order to produce a better society—and a better religion. In fact, he believes that the trend of religion, over the long term, is to assist in the formation of ever better versions of society.


I promised some optimism. It would be hard to be more optimistic than Wright.

Medical Costs and Lifestyle Decisions

It is hard to conceive of any fiscal issue more important than that of containing and diminishing healthcare spending. Continuing on the theme that there is good news within bad news, we look at the impact of lifestyle on medical costs.



McKinsey Quarterly contributed an article we reviewed here pointing out that in most countries about 75% of medical costs are devoted to treating patients with a small number of chronic conditions. McKinsey presented results from focused Disease Management Programs (DMPs) indicating that significant cost savings could accrue in the treatment of patients already suffering from these maladies.


An article in the New York Times by Mark Bittman reminds us that many of these expensive diseases are, to a great extent, preventable.

“For the first time in history, lifestyle diseases like diabetes, heart disease, some cancers and others kill more people than communicable ones. Treating these diseases — and futile attempts to ‘cure’ them — costs a fortune, more than one-seventh of our GDP.”

“But they’re preventable, and you prevent them the same way you cause them: lifestyle. A sane diet, along with exercise, meditation and intangibles like love prevent and even reverse disease. A sane diet alone would save us hundreds of billions of dollars and maybe more.”

Using Bittman’s numbers we are talking about $2 trillion being expended on “avoidable” diseases each year.


The American Heart Association chips in with this assessment.

“Cardiovascular disease (CVD) is the leading cause of death in the United States and is responsible for 17% of national health expenditures. As the population ages, these costs are expected to increase substantially.”

“To prepare for future cardiovascular care needs, the American Heart Association developed methodology to project future costs of care for hypertension, coronary heart disease, heart failure, stroke, and all other CVD from 2010 to 2030. This methodology avoided double counting of costs for patients with multiple cardiovascular conditions. By 2030, 40.5% of the US population is projected to have some form of CVD. Between 2010 and 2030, real (2008$) total direct medical costs of CVD are projected to triple, from $273 billion to $818 billion. Real indirect costs (due to lost productivity) for all CVD are estimated to increase from $172 billion in 2010 to $276 billion in 2030, an increase of 61%.”

“These findings indicate CVD prevalence and costs are projected to increase substantially. Effective prevention strategies are needed if we are to limit the growing burden of CVD.”

Here is a similar prediction concerning what is generally referred to as the “diabetes epidemic.”

“More than half of all Americans may develop diabetes or prediabetes by 2020, unless prevention strategies aimed at weight loss and increased physical activity are widely implemented, according to a new analysis.”

To which Bittman adds:

“Similarly, Type 2 diabetes is projected to cost us $500 billion a year come 2020, when half of all Americans will have diabetes or pre-diabetes. Need I remind you that Type 2 diabetes is virtually entirely preventable? Ten billion dollars invested now might save a couple of hundred billion annually 10 years from now. And: hypertension, many cancers, diverticulitis and more are treated by a health care (better termed “disease care”) system that costs us about $2.3 trillion annually now — before costs double and triple.”

The bad news is that healthcare costs and health projections are disastrous. The good news is that these trends can be reversed. By encouraging (imposing?) better lifestyles, eliminating fraud, developing better healthcare delivery structures, and applying more efficient and effective Disease Management Programs, we should be able to make dramatic reductions in healthcare costs. Recall that about half of all these costs come out of government accounts. The potential for savings is enormous.


It would seem to make sense to address our budget deficits by pursuing these approaches to reigning in costs before we consider significant reductions in benefits.

Healthcare: Costs of Chronic Conditions and Disease Management Programs

One should continue to think positive regarding our ability to contain healthcare costs. There have appeared numerous reports of obvious waste and abuse that should be correctable. Today we read about a better way to do things that actually saves money and leads to better medical outcomes. Unfortunately, the example comes from Germany not the US; fortunately, it is a basic, simple process that even we should be able to duplicate.



The McKinsey Quarterly reports on How to design a successful disease management program. The treatment of patients with chronic conditions such as heart disease and diabetes consume most of the healthcare dollar. These patients will also have secondary health problems related to their primary condition. The presumed solution has for many years been disease management programs (DMPs).

“In most developed countries, three-quarters or more of all health care spending is now devoted to patients with chronic conditions, and a large portion of that money is spent only on a small number of diseases.”

“By carefully coordinating the delivery of high-quality care to patients with chronic conditions, the programs are supposed to enhance the patients’ health, reduce hospitalization rates, and lower treatment costs.”

“Unfortunately, initial experience with DMPs was often disappointing. Many of them produced, at best, only modest improvements in health outcomes, and few were able to decrease health care spending. Thus, many payor, provider, and health system executives have questioned whether the programs are worth their cost.”

McKinsey has surveyed some programs that have recently begun to show positive results and attempts to synthesis the attributes of these programs that have made them successful. The intention is to provide guidance to other healthcare systems. Germany and its diabetes program are used as an illustration.


This chart illustrates the extent of the problem caused by chronic conditions and demonstrates the need for more efficient and more effective approaches.

More recent implementations of DMPs have begun to produce the desired results.

“Germany’s diabetes program, for example, has reduced the incidence of some complications and has lowered the overall cost of care by 13 percent. Germany is also achieving good results with its programs for coronary artery disease (CAD) and chronic obstructive pulmonary disease (COPD). Several other countries have also begun to achieve good results with DMPs.”

Germany’s initial experience with DMPs was unsatisfactory and it was necessary to come up with a different approach.

“Germany began giving its public payors extra funding for patients with chronic conditions. However, the size of the extra payments was capped to prevent health care costs from rising uncontrollably. Germany also coupled the increased funding with a requirement that the payors enroll patients with the most common chronic conditions in DMPs.”

“To overcome some of the problems that had hampered earlier DMPs, Germany set minimum standards for them. For example, the programs’ clinical protocols had to be evidence-based, all care was to be coordinated by a single provider (a general practitioner, in most cases), and there had to be clear guidelines for when a referral to a specialist was warranted. In addition, the programs had to be approved by a federal health agency and then run nationwide.”

Germany used diabetes as the first implementation of this method.

“Although the program is only six years old, it has already enrolled more than three million patients and has demonstrated that it markedly improves health care delivery to those patients. For example, the patients are now significantly more likely to have their feet checked regularly by a specialist, as a result of which the incidence of certain types of foot ulcer has plummeted. Preliminary evidence also suggests that the program may be decreasing mortality. Furthermore, patient satisfaction with treatment has risen markedly, and the overall cost of care has decreased; the small increases the program has produced in outpatient and pharmaceutical costs have been more than offset by a drop of more than 25 percent in inpatient costs.”

Investing extra resources in ensuring that patients follow the treatment protocol and take their medications properly generated significant net savings by avoiding many of the serious consequences of the disease.


McKinsey’s guidance as to how to set up an effective DMP is simple. The most relevant advice relative to the US is to make sure that all participants are properly incentivized.

“Few of the early DMPs tried to ensure that all the stakeholders (physicians, patients, and payors) had an incentive to follow the DMP’s protocols. For example, many physicians object to having an outside party attempt to influence their treatment decisions, yet few early DMPs offered them incentives to conform to the program’s care pathways. In our experience, as long as one stakeholder lacks a strong incentive to move in the same direction as the others, a DMP is unlikely to produce good results.”

“Both nonfinancial and financial incentives can be used to align the interests of all stakeholders with the DMP’s protocols. For example, patients can be told that participation in the program can improve their quality of life, decrease the likelihood that their condition will worsen, and make it easier for them to navigate the health system. Where local practices permit, patients can be offered financial incentives, such as a decrease in copayment rates.”

In a bit of encouraging news it was pointed out that the US had already demonstrated the efficacy of the DMP approach in one instance.

“....a DMP for COPD patients conducted by the US Veterans Health Administration has increased patients’ use of appropriate medications and lowered the rate of COPD-related hospitalizations and emergency-department visits.”

It would seem that the Accountable Care Organizations (ACOs) being encouraged by the recent healthcare legislation would provide the appropriate opportunity to implement this approach.


Savings of 13% on the majority of our health costs would be about $250B, about half of which comes from government sources. That ought to make it at least worth a try.

New Life for the United Auto Workers (UAW)?

The United Auto Workers Union (UAW) is preparing for new contract negotiations with what are now known as the “Detroit Three,” as opposed to the “Big Three.” Two articles provide insight into the future prospects for the UAW in general, and into the issues likely to dominate the contract talks. Jim Grossfeld has an article in The American Prospect that focuses more on the “big-picture” issues; Dale Buss has an article on AutoObserver that provides better coverage of the industry-UAW issues.



Grossfeld starts by reminding us of the historic role the UAW played in US history.

“Few today appreciate the impact the UAW once had on American life.”

“During the 1950s and 1960s, the UAW not only won the labor movement's best contracts but, under Reuther's leadership, became a catalyst for the American version of social democracy. The UAW's fingerprints are all over the most important reforms of that era -- from Medicare, to voting rights, to the birth of the environmental movement. At a time when organized labor largely parroted industry opposition to pollution controls, Reuther defied the carmakers and threw the UAW's then-considerable political weight behind the Clean Air Act.”

The UAW has a new leader, Bob King, who seems to believe that the union can turn itself around and regain some of that past glory.

“That's the kind of unionism, and sense of social solidarity, that King seeks to resurrect. The fate of the Auto Workers, he'll tell you, is bound up with the outcome of battles facing other workers both at home and abroad. For him, it's partly an article of faith.”

“This vision is central to King's organizing strategy. Pressure from community leaders, coupled with support from activists in other countries, can give the UAW power beyond its numbers. As King sees it, mobilizing that power is fundamental to any hope his union has of organizing the "transplants": the foreign carmakers whose domestic operations created a parallel, wildly successful, and almost entirely nonunion U.S. auto industry.”

Buss provides us with a graphic that details the decline of the UAW.

Buss also provides this background information:

“Only about one-third of UAW members are auto workers any more. A huge portion of them now are direct state employees, especially in Michigan, including staffers at colleges and universities, and workers at health-care organizations and even casinos.”

King’s goal of organizing the “transplants,” foreign-owned plants, mostly in the anti-union South, is critical to any hopes of growing the size and influence of his union. His ambitious plans have been coupled with an increased willingness to be flexible. He hopes that a dialogue between the union and management at these plants can be established rather than a confrontation.


This approach sounds like so much wishful thinking.

“....these plants offer some of the best-paying manufacturing jobs in the country's most impoverished region. Against that backdrop, managers' warnings that a UAW contract would send the companies packing have had a potent effect on Southern autoworkers.”

The recent changes accepted by the union in the past few years have brought UAW compensation almost down to the level of the transplants. Buss provides this bit of data:

“The sacrifices helped GM achieve an average labor cost of $58.15 an hour last year, just $2 more than Toyota’s cost, according to the Ann Arbor, Mich.-based Center for Automotive Research.”

It is not clear what the UAW can bring to the table to entice workers in these plants to look favorably on a union contract. Both authors point out that it is more likely that the UAW will have to accept more changes in compensation. The entire industry wants to move from a fixed-wage basis to a pay-for-performance model. Such a concept could provide many details to negotiate, and could provide even better long-term compensation for workers. Union members in the past have dwelt on certainty not year-over-year averages. Buss points out that this sort of approach is common in the transplants that King wishes to target.

“....up to 40 percent of the compensation of Japanese production workers is contingent.”

The Detroit Three seem to be priming the autoworkers for the coming negotiations by providing especially generous bonuses this year.

“Any new profit-sharing provisions would have to present the significant potential for larger payback than current programs. Ford soon will pay hourly bonuses averaging $5,000 even under the existing profit-sharing program, while GM’s indicated payout is about $4,300, and Chrysler’s, about $750. Meanwhile, Big Three salaried workers get 10 to 15 percent of their pay in bonuses.”

It would seem that the only way the UAW has to make transplant managers more interested in talking with him is by accepting compensation changes that would bring the union even further in compliance with standards at the nonunion plants. That does not sound like a strong basis for negotiations, but it still might be a good move.

"’If the UAW accepts pay for performance, King will have irreversibly changed the auto industry and maybe much of U.S. manufacturing,’ says one industry observer. ‘He will have shown the transplants that when he talks about changing the UAW, he really means it’."

King’s has a backdoor approach to dealing with the transplants. Many of the parent companies have quite different relationships and benefits with the workers in their home countries. King hopes that forming international alliances will provide a path to gain some leverage in negotiations.

“....King seeks to establish a permanent presence in the transplants' backyards to press the case that battling union organizing is a violation of human rights. "We are going after them with every ounce of energy and resource we have," he pledged, and he is forging ties with an array of potential allies ranging from Chinese union activists to former President Jimmy Carter. The UAW's global campaign will be a costly effort -- but if the UAW is unable to win recognition at the transplants, few think the union will be able to arrest what one industry observer termed its ‘swan dive into oblivion’."

There is yet another new twist in the tale of the Detroit three and the UAW.

“Under the bailout packages for GM and Chrysler, the union’s pension trusts picked up huge chunks of ownership in each company. The UAW stands to gain financially as those stakes are transformed into shares in public stock offerings such as the “new” GM’s $22-billion IPO last fall. The union trust for Chrysler will own about two-thirds of the company’s shares as it goes public again. ‘So if the union strikes a bad deal with Chrysler this time, and it drives the share price down because the stock market perceives it as a bad deal, the union has just hurt itself,’ Harbour said. ‘The union has never been in that position before’.”

It will be interesting to see how this all plays out. The UAW is still an influential voice, and the labor movement in the US could use some rejuvenation. Contract negotiations with the Detroit Three are due to be completed by September of this year.

Europe, Austerity, Folly, and Pain

For about a year Paul Krugman has been taking the lead in refuting the counterintuitive claim that cutting government spending would lead to greater prosperity. The chips seem to be falling into place in support of his contention.

“Early last year, many people on both sides of the Atlantic seized on the idea that less is more — that cutting spending would actually help, not hinder, recovery. There was a paper by Alesina and Ardagna that seemed to provide evidence to that effect, and nothing succeeds like telling people what they want to hear.”

“Since then, the whole intellectual edifice has collapsed. The Alesina et al methodology turns out to be deeply flawed, which should have been obvious from the start (and was, to some of us.) The alleged cases of expansionary austerity have, without exception, turned out to be bad examples, either involving cuts when the economy was booming or situations in which sharp interest rate declines and/or currency depreciations were the actual sources of expansion.”

“But by then expansionary austerity was the official doctrine of the Conservatives in Britain (and also the ECB) and of the GOP here.”

Krugman, almost gleefully, reports on the current state of affairs.

“Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.”

“Portugal's government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.”

“....the interest rate on Irish debt has doubled; Ireland's unemployment rate now stands at 13.5 percent.”

Even the economically conservative magazine, The Economist, is beginning to have doubts. They produced an article with the tag line: The international plan to rescue Greece is instead starting to paralyze it.

“As Portugal this week joined Ireland and Greece in requesting international rescue funds, it would have drawn little comfort from the example in the eastern Mediterranean. The mood in Greece is one of deepening pessimism. A plan drawn up last May to sort out the country’s public finances risks trapping the economy instead.”

“But the real source of gloom is the shorter-term impact of austerity. A year ago the plan forecast that GDP would shrink by 4% in 2010 and 2.5% in 2011. Instead it fell by 4.5% last year and IOBE predicts it will decline by 3.2% in 2011. The unemployment rate has risen from 9% in mid-2009 to 14.2% in the last quarter of 2010, and is expected to average 15.5% this year.”

“The fiscal setbacks have made the markets even more wary of Greek debt. Ten-year government-bond yields have climbed to almost 13%. The credit-rating agencies have recently downgraded Greek sovereign debt still further, from junk to junkier.”

Greece is making some much needed changes in their government and in their economy, but inflicting pain, even necessary pain, in the face of a severe recession may be more than the economy—and the government—can bear.

“The economy is stuck in a vicious circle. If it stays weak, that will undermine the government’s ability to achieve additional fiscal retrenchment; that in turn will cause further loss of confidence on the part of the markets, which will continue to lock the banks out of funding sources. Is there a way out of the trap?”

Unfortunately, they were not able to provide a very convincing answer to their own question.


Europe seems to have been swept up into what might best be described as an economic fad. Let us hope they do not do too much damage to themselves and to the rest of us while they pursue their dubious experiment.

What Our Financial Disaster Has Taught the World

Nancy Birdsall and Francis Fukuyama have provided an article in the journal Foreign Affairs, The Post-Washington Consensus, that summarizes the lessons learned by the international community from the recent financial crisis.



The authors make the interesting point that whereas the Great Depression caused severe counter-reactions to laissez-faire capitalism, the Great Recession generated no such response. They suggest that most of the developing world had already moved on to a more restrained form, and that the countries that suffered the most were those who had not yet learned lessons from past crises. Capitalism itself was not viewed as the defining issue.

“Many in the developing world agreed with Brazilian President Luiz Inácio Lula da Silva when he said, "This is a crisis caused by people, white with blue eyes." If the global financial crisis put any development model on trial, it was the free-market or neoliberal model, which emphasizes a small state, deregulation, private ownership, and low taxes. Few developing countries consider themselves to have fully adopted that model.”

“Indeed, for years before the crisis, they had been distancing themselves from it. The financial crises of the late 1990s in East Asia and Latin America discredited many of the ideas associated with the so-called Washington consensus, particularly that of unalloyed reliance on foreign capital. By 2008, most emerging-market countries had reduced their exposure to the foreign financial markets by accumulating large foreign currency reserves and maintaining regulatory control of their banking systems. These policies provided insulation from global economic volatility and were vindicated by the impressive rebounds in the wake of the recent crisis: the emerging markets have posted much better economic growth numbers than their counterparts in the developed world.”

The developing countries see as a lesson learned that they must move in a direction reminiscent of the social democracy put in place in Europe after the war. This, of course, is the opposite direction from the one Washington has been pushing for the last thirty years.

“What the crisis did, however, was to underscore the instability inherent in capitalist systems -- even ones as developed and sophisticated as the United States. Capitalism is a dynamic process that regularly produces faultless victims who lose their jobs or see their livelihoods threatened. Throughout the crisis and its aftermath, citizens have expected their governments to provide some level of stability in the face of economic uncertainty. This is a lesson that politicians in developing-country democracies are not likely to forget; the consolidation and legitimacy of their fragile democratic systems will depend on their ability to deliver a greater measure of social protection.”

“Thus, the American version of capitalism is, if not in full disrepute, then at least no longer dominant. In the next decade, emerging-market and low-income countries are likely to modify their approach to economic policy further, trading the flexibility and efficiency associated with the free-market model for domestic policies meant to ensure greater resilience in the face of competitive pressures and global economic trauma. They will become less focused on the free flow of capital, more concerned with minimizing social disruption through social safety net programs, and more active in supporting domestic industries. And they will be even less inclined than before to defer to the supposed expertise of the more developed countries, believing -- correctly -- that not only economic but also intellectual power are becoming increasingly evenly distributed.”

The authors buttress this consensus by comparing the post-crisis history of the US and the EU.

“Consider how continental Europe has reacted in comparison to the United States. Until now, with the eurozone crisis, western Europe experienced a far less painful recovery, thanks to its more developed system of automatic countercyclical social spending, including for unemployment insurance. In contrast, the jobless recovery in the United States makes the U.S. model even less attractive to policymakers in the developing world, particularly those who are increasingly subject to political pressure to attend to the needs of the middle class.”

Some of the policies developing countries are expected to follow seem to represent a slight step back from globalization as the US has chosen to experience it. The authors also believe that developing countries have demonstrated, at least to their own satisfaction, that their bureaucrats and technocrats are quite capable of providing an economic guiding hand.

“The third consequence of the crisis has been the rise of a new round of discussions about industrial policy -- a country's strategy to develop specific industrial sectors, traditionally through such support as cheap credit or outright subsidies or through state management of development banks. Such policies were written off as dangerous failures in the 1980s and 1990s for sustaining inefficient insider industries at high fiscal cost. But the crisis and the effective response to it by some countries are likely to bolster the notion that competent technocrats in developing countries are capable of efficiently managing state involvement in the productive sectors. Brazil, for example, used its government-sponsored development bank to direct credit to certain sectors quickly as part of its initial crisis-driven stimulus program, and China did the same thing with its state-run banks.”

While the US seems determined to ignore the lessons of history and to continue to pursue its failed economic and social policies, the authors offer a small degree of hope.

“One of the paradoxical consequences of the 2008-9 financial crisis may thus be that Americans and Britons will finally learn what the East Asians figured out over a decade ago, namely, that open capital markets combined with unregulated financial sectors is a disaster in the waiting.”

The Economist provides an interesting footnote to this discussion with an article titled Capitalism’s Waning Popularity. Some interesting polling data are provided.

This summary is provided.

“RISING debt and lost output are the common measures of the cost of the financial crisis. But a new global opinion poll shows another, perhaps more serious form of damage: falling public support for capitalism. This is most marked in the country that used to epitomise free enterprise. In 2002, 80% of Americans agreed that the world’s best bet was the free-market system. By 2010 that support had fallen to 59%, only a little above the 54% average for the 25 countries polled. Nominally Communist China is now one of the world’s strongest supporters of capitalism, at 68%, up from 66% in 2002. Brazil scores 68% too. Germany squeaks into top place with 69%.”

“Capitalism’s waning fortunes are starkly visible among Americans earning below $20,000. Their support for the free market has dropped from 76% to 44% in just one year. The research was conducted by GlobeScan, a polling firm. Its chairman Doug Miller says American business is “close to losing its social contract” with average families.”

We Want Our Justice Blind; What Happens When It Is Hungry?

The Economist reports on a fascinating study by two Israelis on the statistics derived from observing judges decisions regarding parole applications.

“A paper in the Proceedings of the National Academy of Sciences describes how Shai Danziger of Ben-Gurion University of the Negev and his colleagues followed eight Israeli judges for ten months as they ruled on over 1,000 applications made by prisoners to parole boards. The plaintiffs were asking either to be allowed out on parole or to have the conditions of their incarceration changed. The team found that, at the start of the day, the judges granted around two-thirds of the applications before them. As the hours passed, that number fell sharply (see chart), eventually reaching zero. But clemency returned after each of two daily breaks, during which the judges retired for food. The approval rate shot back up to near its original value, before falling again as the day wore on.”

Does this mean that judges get cranky when they become hungry? Perhaps. The article suggests another explanation that would also explain the data: decision making is difficult and tiring and a judge is less likely to dwell on the subtleties of an issue the longer he has been continually involved in that process.


Whatever the explanation, one has to question whether justice is being served.

“In truth, these results, though disturbing, are unsurprising. Judges may be trained to confine themselves to the legally relevant facts before them. But they are also human, and thus subject to all sorts of cognitive biases which can muddy their judgment. Other fields are familiar with human imperfectibility, and take steps to ameliorate it. Pilots, for instance, are given checklists to follow, partly in order to combat the effects of fatigue. Lorry drivers in the European Union are not allowed to drive for more than four and a half hours without taking a break.”

There must be other occupations where human frailties can inject risk into a process.


If you are scheduled for the last surgery in the day you might want to consider other options.


Any other suggestions out there?

Evolution, Symbiogenesis, and Lynn Margulis

Biologist Lynn Margulis was the interviewee in Discover Magazine this month. She did not disappoint. Her thoughts on evolution were fascinating. For those who believe in evolution but have not quite been able to figure out how evolution took us from single-cell life forms to the magnificent creatures we are today, there is insight to be gained here.



Stephen Jay Gould provides a useful summary of what is known of evolution from the fossil record.


Gould points out that the first evidence of cellular life emerged rather early in the planet’s history

“The oldest rocks sufficiently unaltered to retain cellular fossils—African and Australian sediments dated to 3.5 billion years....Thus, life on earth evolved quickly and is as old as it could be. This fact alone seems to indicate an inevitability, or at least a predictability, for life’s origin from the original chemical constituents of atmosphere and ocean.”

Evidence of multi-celled structures does not appear until about 600 million years ago. Then suddenly(?) about 500 million years ago the earth experienced what is referred to as the Cambrian explosion, a brief period (in terms of millions of years) at the beginning of the Cambrian era when many forms of life developed—most of which died out. The fossil records contained in the Burgess Shale provide some understanding of what was taking place during this period. From Gould again

“....maximal diversity in anatomical forms (not in number of species) is reached rather early in life’s multicellular history. Later times feature extinction of most of these initial experiments and enormous success within surviving lines. This success is measured in the proliferation of species but not in the development of new anatomies. Today we have more species than ever before, although they are restricted to fewer basic anatomies.”

In other words there were millions of anatomical experiments carried out during the Cambrian explosion, but only a few survived.


Again from Gould

“Humans arose, rather, as a fortuitous and contingent outcome of thousands of linked events, any one of which could have occurred differently and sent history on an alternative pathway that would not have led to consciousness...only one member of our chordate phylum, the genus Pikaia, has been found among these earliest fossils. This small and simple swimming creature , showing its allegiance to us by possessing a notochord, or dorsal stiffening rod, is among the rarest fossils of the Burgess Shale, our best preserved Cambrian fauna....Moreover, we do not know why most of the early experiments died, while a few survived to become our modern phyla....no recognized traits unite the victors and the radical alternative must be entertained that each early experiment received little more than the equivalent of a ticket in the largest lottery ever played out on our planet—and that each surviving lineage, including our own phylum of vertebrates, inhabits the earth today more by the luck of the draw than by any predictable struggle for existence.”

If asked to explain evolution one is likely to mumble something about natural selection, survival of the fittest, and genetic mutations. To this Gould would reply:

“Natural selection is an immensely powerful yet beautifully simple theory that has held up remarkably well, under intense and unrelenting scrutiny and testing, for 135 years. In essence, natural selection locates the mechanism of evolutionary change in a "struggle" among organisms for reproductive success, leading to improved fit of populations to changing environments. (Struggle is often a metaphorical description and need not be viewed as overt combat, guns blazing. Tactics for reproductive success include a variety of non-martial activities such as earlier and more frequent mating or better cooperation with partners in raising offspring.) Natural selection is therefore a principle of local adaptation, not of general advance or progress.”

Since the period of the Cambrian explosion, has evolution been producing new life forms or merely variations on old themes? Clearly any theory of evolution must explain the proliferation of life forms produced during this brief period, and the relatively stable evolution afterward.


Lynn Margulis is famous within the scientific community for having recognized that eukaryotic cells, the cells of all living creatures except bacteria, were actually formed from mergers of bacteria, a process that is referred to as symbiogenesis or endosymbiosis. From the Discover article:

“The notion that we are all the children of bacteria seemed outlandish at the time, but it is now widely supported and accepted.”

Margulis says that standard evolution theory cannot explain the fossil history. To create one species from another by a sequence of mutations would require a great deal of time and there would then be evidence of this transformation in fossil histories. She points out that

“The paleontologists Niles Eldredge and Stephen Jay Gould studied lakes in East Africa and on Caribbean islands looking for Darwin’s gradual change from one species of trilobite or snail to another. What they found was lots of back and forth variation in the population and then—whoop—a whole new species. There is no gradualism in the fossil record.”

She would add symbiogenesis to standard Darwinian Theory to arrive at an explanation of the evolutionary data.

“Symbiosis is an ecological phenomenon where one kind of organism lives in physical contact with another. Long-term symbiosis leads to new intracellular structures, new organs and organ systems, and new species as one being incorporates another being that is already good at something else.”

“All living organisms are products of symbiogenesis, without exception. The bacteria are the unit....The living world thrived long before the origin of nucleated organisms [eukaryotic cells]. There were no animals, no plants, no fungi. It was an all-bacterial world—bacteria that have become very good at finding specialized niches."

Her view of symbiogenesis as the driving force behind evolution has not received broad acceptance yet. A summary of the status can be found here.

“While her organelle genesis ideas are widely accepted, symbiotic relationships as a current method of introducing genetic variation is something of a fringe idea. However, examination of the results from the Human Genome Project lends some credence to an endosymbiotic theory of evolution—or at the very least Margulis's endosymbiotic theory is the catalyst for current ideas about the composition of the human genome. Significant portions of the human genome are either bacterial or viral in origin—some clearly ancient insertions, while others are more recent in origin. This strongly supports the idea of symbiotic—and more likely parasitic—relationships being a driving force for genetic change in humans, and likely all organisms.”

Margulis’ theory seems to provide the best chance of explaining the Cambrian explosion and the lack of evidence for gradual transformations to new species. The stabilization of the creation process after the Cambrian era would still have to be explained. Perhaps the panoply of stable and multiplying organisms at some point began to inhibit formation of new species? And the fact that all creatures seem to need to exist in a bath of bacterial cells is certainly suggestive.


Stay tuned—evolution itself is evolving!

Healthcare: More Notes from the Dark Side

There are so many things wrong with our healthcare system that one is almost tempted to feel optimistic: “With all of these easily correctable problems we should be able to cut back costs enormously with little required investment.” We shall see.



Laura Landro has an article in the Wall Street Journal: The Secret to Fighting Hospital Infections. She interviews a Dr. Pronovost.

“Dr. Pronovost's current crusade is preventing deadly bloodstream infections linked to central lines or catheters used in intensive-care units. A pilot project in Michigan showed that participating hospitals reduced rates of infections and death by using a checklist of evidence-based steps to reduce the infections—and by fostering a culture of safety and teamwork.”

When asked about the his goals and the problem he has had getting agreement to use the checklist Pronovost replied:

“The pilot who neglects a checklist before take-off would not be allowed to fly, and most safe industries have transgressions that are firing offenses. … But there hasn't been that kind of accountability in health care.”

“Nurses and pharmacists work for the hospital, which typically has clear lines of authority and procedures for dealing with failure to follow accepted practices. But physicians are often self-employed, have little training in teamwork and, perhaps like all of us, are often overconfident about the quality of care they provide, believing things will go right rather than wrong. Nurses are often reluctant to question them, and hospitals don't pressure physicians about teamwork for fear of jeopardizing the business they bring to the hospital.”

“The Department of Health and Human Services has called for a 50% reduction in central-line bloodstream infections over three years, but in some states only 20% of hospitals have signed up. We know bloodstream infections kill 31,000 people a year in the U.S., almost as many people as who die from breast cancer. While many hospitals have reduced infection rates, some have infection rates that are 10 to 15 times the national average. Some are content to meet the national average, despite evidence that these rates may be reduced by half.”

“What is perhaps most concerning is when I ask nurses, "If you saw a senior physician not comply with the checklist, would you speak up and would the physician comply?" Uniformly, the answer is no.”

And what exactly is this dreaded checklist that is so odious and troublesome that doctors would rather not bother with it?

Sigh...


Cheryl Clark for HealthLeaders Media reports on some findings by the Dartmouth Atlas Project which indicate that the types of treatment that doctors generally provide for certain medical conditions varies dramatically from location to location.

“For example, ‘there is little evidence that surgery is better than non-surgical treatment for chronic or persistent non-specific low back pain in patients who do not also have leg pain.’ Often the pain goes away on its own, yet surgery is risky and often patients are no better – and sometimes worse off – than before.”

“Nevertheless, rates of back surgery vary six-fold, depending on what part of the country a patient happens to reside. For example in Casper WY, surgeons perform 10 surgeries per 1,000 Medicare patients while in Honolulu, the percent is 1.7 and across the U.S., the rate is 4.3.”

“A similar story unfolds with stable angina. Patients so diagnosed have the option to be treated with medications and lifestyle change or with medications, stenting, or surgery.”

“But there is a trade-off. Stenting and surgery carry their own short-term risks, such as stroke, heart attack, and death. Yet in Elyria Ohio, beneficiaries are 10 times more likely to undergo percutaneous coronary intervention than those in Honolulu. And patients in McAllen, TX are four times more likely to undergo a coronary artery bypass graft procedure than those in Pueblo, CO.”

There are a number of conclusions one can draw from these results. Clearly one can assume that the doctors do not know what is the best treatment for certain conditions. That may be non-culpable ignorance, and doctors provide the treatment with which they are familiar.


The Dartmouth report (Improving Patient Decision-Making in Health Care) suggests there other factors at work. They accuse doctors of neglecting to fully inform patients of what all the treatment options are and what the possible consequences might be. The doctor believes he/she knows best and encourages the patient to follow his/her advice. This is referred to as “Doctor Centric Care.”

“....'often these physicians are quite unaware that they practice differently from a quite similar community halfway across the country,' Goodman says.”

“The researchers emphasize they are not suggesting that physicians are just trying to generate income and volume, although that may, in some cases, underpin the rationale behind a more aggressive course of care.”

“Rather, they say, it's about making sure the patient is fully informed of all the pros and cons of every treatment option – surgical and non-surgical—and they are fully informed about the benefits and risks, recovery periods, perforations, risk of stroke and even death from having an invasive procedure versus taking drugs and changing their lifestyle.”

“Here's an example of how doctors aren't correctly informing patients, Barry continues. When a large cohort of Medicare patients who had undergone elective stent procedures for chest pain or stable angina were asked why they had the procedure, ‘three-fourths said, “I did it to prevent a heart attack or to live longer”' But we have randomized trials with tens of thousands of patients that say that's not what stenting is about. It can reduce angina, although patients treated medically can catch up over a couple of years," Barry says.”

“Meanwhile, stenting in and of itself carries risks of generating clots or strokes, heart attacks, and even death.”

“Barry points out that in studies that made sure patients had all information about procedures available for their conditions, they were 20% more likely to make more conservative decisions than their doctors recommended.”

One of the study authors provides an appropriate conclusion.

“....there are two underlying ethical principles at work in the delivery of care. One is the duty of the physician to do what the physician believes is in the best interest for the patient. But the second is to respect that the individual has a right to say what will happen to his or her body. ‘We have an ethical obligation to respect that autonomy ... But we have allowed habit, bias, and financial incentives to creep into this equation’."

Finally, there is a Reuters article by Julie Steenhuysen. A study that appeared in Archives of Internal Medicine indicated that panels of experts assembled to provide treatment guidelines for heart patients often have conflicts of interest.

“Of the nearly 500 people studied, 56 percent reported a conflict of interest. The most common conflicts included being a consultant or serving on a company advisory board, followed by getting a research grant, taking money for serving on a speakers' bureau and owning stock.”

“Even though the experts are disclosing their ties to companies that produce heart drugs and devices, the phenomenon is important because the guidelines they produce are used to help train new doctors, thus can have long-lasting impact on the way patients are treated.”

"’Because they are so important, the process for producing them is also important. They need to be above suspicion,’ said Dr. James Kirkpatrick of the University of Pennsylvania, who worked on the study....”

And the conclusion to be drawn from these findings:

“....the study highlights ‘troubling concerns that must be urgently addressed. If we fail as a profession to police our clinical practice guideline process, the credibility of evidence-based medicine will suffer irreparable harm’."

“....part of the argument for allowing people with conflicts to serve on these panels is that it is difficult to find qualified heart experts who do not have any conflicts.”

Another sigh....

Manufacturing, Services, and the Economy

Michael Spence and Sandile Hlatshwayo have published a paper titled: The Evolving Structure of the American Economy and the Employment Challenge. This article has attracted quite a bit of interest, with at least three articles published in response. The interest in the conclusions is explained not so much by any dramatic results, but by the timing and importance of the problem they address.



The authors divide economic activity into tradable and nontradable categories. Tradable refers to goods or services that can be exported to other countries. They point out that 97.7% of the net job growth between 1990 and 2008 has been in the nontradable category, with the dominant sources having been healthcare and government. With healthcare costs destined to be reigned in, and expanding government deficits, neither of these areas is likely to be able to sustain growth. The tradable sector has produced high-end job growth, but that has been balanced by job losses in the manufacturing sector.


Projecting trends into the future the authors foresee a continuing rise in value of the jobs in the tradable sector, but little net job growth. Meanwhile the value of jobs in the nontradable area will continue to decrease.

“Given the prospect of slowing employment growth in nontradables and rising competitive pressure on tradables, major employment problems in the near future are a certainty. Even if the nontradable sector is able to continue to absorb the growth in the labor force, pressure on wages and salaries will be downward, and consequences for income distribution unavoidable.”

“To create jobs, contain inequality, and reduce the U.S. current-account deficit, the scope of the export sector will need to expand. That will mean restoring and creating U.S. competitiveness in an expanded set of activities via heightened investment in human capital, technology, and hard and soft infrastructure. The challenge is how to do it most effectively.”

The authors consider any kind of protective tariff to be counterproductive. They suggest a few things that can be done to augment the tradable sector and to alleviate the growing income inequality. Included in their list are the standards such as improved infrastructure, and training and education enhancements. Their recommendation that has generated the most interest is this modest suggestion.

“It is probably a good idea to explicitly target some of the public-sector investment at technologies with the potential to expand the scope of the tradable sector and employment. Coinvestment with the private sector, which has relevant knowledge about where these opportunities might be, would make sense. This public investment would have the effect of shifting private incentives so that they are better aligned with social objectives.”

They had the nerve to suggest that the government should actually have an industrial policy and plan. How audacious!


The response from The Economist was to view the notion as having dubious validity. The basic assumption that the nontradables could not carry the employment load was rejected. These charts were provided.

They conclude from these data that the US is merely following a trend that is common to all developed economies. They disagree with the notion that the service sector will not be able to maintain job growth, even though Spence and Hlatshwayo did not actually conclude that, and dismiss any type of industrial policy as unnecessary and likely to fail.

“In fact, it is far from clear whether, and how, such a policy might work. But many would question the need for this sort of industrial policy in the first place. If weak demand keeps American interest rates and the dollar low, the tradable sector is likely to expand without needing a public-policy shove. America remains the world’s largest manufacturer. Both America and Japan roughly doubled manufacturing output between 1980 and 2009; nowhere in the G7 has output declined in absolute terms. Lower-end manufacturing has indeed moved to countries like China, with their masses of cheap labour, but it is not obvious why this pattern of comparative advantage should be resisted.”

“Nor is it clear that global demand for services—tradable or not—is going to slow. As emerging economies become richer, they will want more of all sorts of services, including sophisticated ones where countries like America and Britain retain a comparative advantage. Those who pitch for manufacturing on the ground that it is better at boosting exports often ignore the fact that an increasing number of services are traded, and that rich countries tend to export more of them than they import. America and Britain, for instance, typically run surpluses in services.”

The Economist provides the typical conservative economic point of view. While Spence and Hlatshwayo were concerned that an already intolerable degree of income inequality would continue to grow, The Economist takes no note of that. It is as if the fate of individuals is of no consequence.


On the other end of the spectrum is the response of Ian Fletcher in an article in the San Francisco Chronicle where a leftist viewpoint is provided.

“One thing is for certain already: global trade as we know it will not be here in 10 years. It may even be gone in five. The unsustainable U.S. trade deficit alone assures this.”

“Since the end of the Cold War, and accelerating after adoption of the North American Free Trade Agreement (NAFTA) in 1994, Washington has pursued a globalized American economy made possible by ever-expanding "free" trade agreements, a policy of unconditional economic openness. This is going to be replaced by some kind of managed trade, and hopefully, a kind involving a more protectionist United States.”

“This is not a utopian project. In fact, it was once already achieved, during the long 1790-1945 era of American protectionism. We wandered away from Alexander Hamilton's vision of a relatively self-contained U.S. economy in order to win the Cold War. We threw open our markets to the world as a bribe not to go communist. If we fail to return to a policy of strategic, not unconditional, economic openness, we may lose the next Cold War - to a Confucian authoritarianism no less opposed to the idea of a free society than Marxism, and considerably more efficient.”

Steven Pearlstein provides a more balanced approach in a Washington Post article.

“One response to this dilemma would be to build trade barriers, which Spence, like nearly every other economist, thinks would be a big mistake. But at the same time, he is equally dismissive of free-market cheerleaders who argue that globalization makes everyone better off in the long run — a view, he says, that is not supported by theory or experience. More significantly, it is a view that is increasingly rejected by voters.”

“Instead, Spence argues that what’s needed is a new policy tradeoff that strikes a better balance between the efficiency and overall economic growth that globalization delivers and the inequality of incomes and job opportunities that it creates.”

“In Spence’s view, redistributing income from the winners to the losers of globalization can only get you so far. The bigger challenge, he says, is to find a way to tilt the market incentives so that businesses — in particular, big multinational corporations — are more willing to invest in the physical and human capital necessary to make American workers more productive, rather than simply outsourcing work overseas.”

“There is a name for such “nudges” — it’s called industrial policy — and for the past 30 years it has had something of a bad odor in Washington under Democrats as well as Republicans. Larry Summers, until recently President Obama’s top economic adviser, was an unabashed skeptic and Treasury Secretary Tim Geithner seems to be squarely in that camp as well.”

“There’s no question that sometimes governments get it wrong. There’s also no doubt that governments can get it right, whether it be the lighter touch of European countries such as Germany and Finland or the heavier hand exercised by economic policymakers in China, Korea and Singapore.”

Pearlstein has struck the right note. The US is probably the only country that has not depended on a government-based industrial policy at some time in its past. They can be made to work. And he agrees that the growing income inequality must be addressed.


Spence and Hlatshwayo have produced a long and detailed analysis that must have required a considerable amount of time to produce, and their most recent data are probably at least a year old. Is it so that economists, like generals, are always fighting the last war, not the current one?


What a difference a year can make. Is it possible that globalization, as we have known it, will be limited by its own excesses, and produce some of the positive results we need without having to make difficult and uncertain investments? There may be a perfect storm gathering to force a reversal of some of the production outsourcing that we have experienced. Wages in China are going up and the government recognizes the need for a more balanced economy, while at the same time needing ever expanding imports to accomplish perhaps the most ambitious construction plan in history. Unpredictable transportation costs due to volatility in the petroleum market are beginning to weigh on the minds of many importers. International corporations have recognized the wisdom of manufacturing their products within the market for their products. Japanese auto plants in the US are now struggling because they depended on a steady flow of parts from Asia. Might it now make sense to have a plan B? Having a local source of parts that could provide a back-up and load-leveling capability seems like a prudent business practice. Hardly a day goes by where there is not at least one article reminding us companies are rediscovering that local businesses are accessible, provide faster turnaround, and are more convenient for monitoring quality. Perhaps major changes are already underway. But that is still no excuse for not having a plan.


On a positive note, here is another chart provided by The Economist.

Note that for the first time in the period covered the number of jobs in manufacturing has actually turned upwards. Let us allow ourselves a few brief moments of optimism.

Healthcare Can Be Dangerous

Cheryl Clark on HealthLeaders Media provides us with some eye-popping data in an article informatively titled 1 in 3 Hospitalized Patients Suffers an Adverse Event. She discusses several articles from the April, 2011 issue of Health Affairs which focuses on quality in healthcare.



The article that generated the title described a study of available reporting methods for detecting and tallying serious adverse events in hospitals.

“In one report, researchers who studied three methods to detect serious adverse events conclude that the commonly used method of voluntary reporting and the Agency for Healthcare Research and Quality's Patient Safety Indicators capture only one-tenth of these flaws in care.”

“On the other hand, a newer tool developed by the Institute for Healthcare Improvement, called the Global Trigger Tool, now used by only 2% of hospitals in the U.S., caught all 10.”

“Specifically, the GTT detected 354 adverse events, while the AHRQ system, used by roughly half the hospitals in the U.S., found only 35 and the voluntary method found just four, according to the authors. These adverse events include medication errors, procedural errors and hospital-acquired infections, pulmonary venous thromboembolisms, pressure ulcers, device failures and patient falls.”

"’Overall, adverse events occurred in 33.2% of hospital admissions (range: 29% to 36%) or 91 events per 1,000 patient days,’ says the lead author, David Classen, MD, associate professor of medicine at the University of Utah in Salt Lake City.”

In other words, based on this data, you have a 33% chance, every time you are admitted to a hospital, of being harmed in a manner that is not related to your illness. Clark points out that it could be even worse than this.

“What's even more worrisome is that Classen says the hospitals selected for this study are already ahead of the curve. They already had extensive patient safety programs and are much further along in their patient safety and adverse event detection journey than other hospitals.”

“So there are 10 times more harmful medical errors than we knew about, even at the best hospitals.”

Clark asks the pertinent question: “how can you have an Accountable Care Organization when you don’t know how to account for care?”


Even more bad news is provided. There is another article in Health Affairs that discusses the social cost of adverse medical events. From the abstract:

“Adverse medical events—medical interventions that cause harm or injury to a patient separate from the underlying medical condition—are unfortunately an all-too-frequent occurrence in US hospitals. They may cause as many as 187,000 deaths in hospitals each year, and 6.1 million injuries, both in and out of hospitals. We estimate the annual social cost of these adverse medical events based on what people are willing to pay to avoid such risks in non–health care settings. That social cost ranges from $393 billion to $958 billion, amounts equivalent to 18 percent and 45 percent of total US health care spending in 2006. A possible solution: Patients offered voluntary, no-fault insurance prior to treatment or surgery would be compensated if they suffered an adverse event—regardless of the cause of their misfortune—and providers would have economic incentives to reduce the number of such events.”

So—healthcare providers lure you into these casinos called hospitals and charge a fortune to fix what is already wrong, and then they damage something in the process and charge another fortune to fix that. Such a deal!


Actually, the more horror stories one hears about waste in healthcare, the more optimistic one becomes that costs will be controlled. All we have to do is convince people to stop doing stupid things—and then convince them to stop doing illegal things. How hard can that be?