Elisabeth Rosenthal has produced an eye-opening polemic: An American Sickness: How Healthcare Became Big Business and How You Can Take It Back. No matter how
corrupt and dysfunctional you might believe the medical industry to be, she
provides you with enough examples of unrestricted greed to convince you that
things are even worse than you thought.
Doctors, hospitals, insurers, device makers, pharmaceutical companies,
even charities—none are spared. In her
view, medicine has become a type of protection racket, a form of “medical
extortion”—“pays us what we want or you will be harmed.”
“Faced with
disease, we are all potential victims of medical extortion. The alarming statistics are incontrovertible
and well known: the United States spends nearly one-fifth of its gross domestic
product on healthcare, more than $3 trillion per year, about equivalent to the
entire economy of France. For that, the
U.S. health system generally delivers worse health outcomes than any other
developed country, all of which spend on average about half what we do per
person.”
Faced with disease, we encounter
a system that makes no sense; one the providers of the medical services
scarcely understand themselves.
“Imagine
if you paid for an airplane ticket and then got separate and inscrutable bills
from the airline, the pilot, the co-pilot, and the flight attendants. That’s how the healthcare market works. In no other industry do prices for a product
vary by a factor of ten depending on where it is purchased.”
Our system seems to consist of a
number of actors, all of which are trying to work the system in such a way as
to maximize their profit and increase the cost to the patient and to the nation
as a whole. Rosenthal provides numerous
examples of outrageous charges that are created in the relentless pursuit of
ever-greater revenue. Many are
expected. Financial chicanery on the
part of hospitals, drug companies, and device manufacturers has received some
notoriety from press coverage in the past.
More distressing are the cases of individual doctors who cleverly
pursued options that allowed them to extract enormous sums from the system
while contributing very little. Perhaps
most distressing was Rosenthal’s claim that even well-known charitable
organizations have fallen victim to this quest for ever-greater revenues.
“No one
player created the mess that is the $3 trillion American medical system in
2017. People in every sector of medicine
are feeding at the trough: insurers, hospitals, doctors, manufacturers,
politicians, regulators, charities, and more.
People in sectors that have nothing to do with health—banking, real
estate and tech—have also somehow found a way to extort cash from the patients.”
Do charities really deserve to
be included among that list of transgressors?
Rosenthal claims that a decision by the Cystic Fibrosis
Foundation (CFF) to fund a small pharmaceutical company on a high-risk,
high-payoff drug development has caused many charities to rethink their
spending plans. The CFF investment
turned out to be wildly successful for both cystic fibrosis sufferers and the
CFF itself.
“The mindset and mission of many
disease foundations underwent a sea change in 2014, when the Cystic Fibrosis Foundation
(CFF) received a $3.3 billion windfall as the result of its decision to invest
over the years in a small Massachusetts biotech firm. A total of $150 million invested in Vertex
Pharmaceuticals ultimately helped produce Kalydeco, the first blockbuster drug
against cystic fibrosis (CF), which was approved by the FDA in 2012. Two years later, the foundation sold its
rights to drug royalties to a venture capital firm and received over $3 billion
in an instant, about 30 times the amount the foundation had typically raised in
a year.”
“Suddenly foundations had an
enticing new business model: ‘venture philanthropy’; that is, investing money
in drug, device, and biotech companies with the expectation of financial return.”
Such a model worked well for those suffering from cystic
fibrosis, why would it not work well in other instances? Rosenthal points out that, in general, drug
and device makers are high-revenue outfits that will always welcome investments,
but will not alter their basic objective, which is to make as much money as
possible from their products. Charitable
foundations are supposed to be representing the interests of disease sufferers,
a task that includes protecting them from financial harm. How can a foundation possibly promote the need
for lower costs for patients when they are pursuing a financial strategy that
demands that new products be priced as high as possible?
To illustrate this conflict of interest, Rosenthal
discusses the history of diabetes research and treatment.
“After Frederick Banting and his
colleagues discovered and isolated insulin in the early 1920s, they licensed
the patent for only a dollar as a ‘gift to humanity.’ Type 1 diabetes, which previously killed
children only months after onset, was suddenly transformed into a chronic
disease. To this day insulin is the alpha
and omega of type 1 diabetes treatment.”
The initial goal of charitable foundations formed early
in the twentieth century was the support of basic research into cures.
“The March of Dimes, focused on
polio, raised money from hundreds of thousands of donors who paid much of the
cost of developing both the Salk and Sabbin vaccines. The foundation never sought to make money
from either inoculation. After World War
II the Cystic Fibrosis Foundation (established in 1955) supported the
scientists who identified the defective gene for that disorder. The National Multiple Sclerosis Society
(founded in 1946) funded the Columbia University scientist who discovered the
abnormal spinal fluid proteins associated with the disease. The Juvenile Diabetes Research Foundation
(JDRF) was founded in 1970 by the patients of diabetic children to promote
research into a cure….”
Note the intended focus for JDRF on a cure for type 1
diabetes. For-profit corporations wish
to treat everything and cure nothing.
There is no money to be made in curing things. That is what universities and government
agencies do. Yet JDRF has made a
conscious decision to begin switching its focus from working with academics to
working with corporations.
“In late 2013 JDRF announced
that it was ‘going the equity route,’ joining with PureTech Ventures, a for-profit
venture capital firm, to create a fund to fuel new diabetes start-ups.”
The logic JDRF uses to justify that change is that the
increased revenue from funding advances in diabetes treatments will allow it to
fund even more advances in treatments.
That might fly if advances in treatments were still contributing to
improved lives for the patients. Carolyn
Y. Johnson discusses the impact of commercial development on diabetes sufferers
in a Washington Post article: Why treating diabetes keeps getting more expensive.
The intent of the discoverers of insulin to make it a “gift
to humanity” has not worked out so well.
Pharmaceutical companies have managed to come up with new versions of
the drug which allow them to gain new patents and continue to increase the
cost.
The original source of insulin was extraction from
animals, a relatively expensive and inefficient process that occasionally was
accompanied by side effects. Yet the
cost to diabetics was minimal.
“Irl Hirsch remembers when
insulin cost 75 cents a vial. The 58-year-old doctor has used insulin for more
than half a century and knows firsthand that pricing and access weren’t an
issue for much of that time.”
“Drugstore ads from the 1960s
published in The Washington Post advertised insulin for as little as 84 cents a
vial — less than a bottle of Breck shampoo, three bags of Halloween candy bars
or a can of Suave hair spray. The most expensive version listed in the ad was
less than $2 a vial.”
Drug companies eventually produced microbes that could reproduce
exactly the insulin produced by humans, a much more efficient process that held
the promise of unlimited supply and ever cheaper costs.
“The modern age of insulin
innovation kicked off with Eli Lilly’s introduction of Humulin, in 1982. Using
genetic engineering, biologists figured out a way to modify bacteria into tiny,
specialized factories that could create insulin that matches the kind the human
body produces. Allergic reactions became rare as more people used the newer
version.”
“Humulin could be created in vats instead of harvested from cows or pigs, and it relieved doctors’ worries that the looming diabetes epidemic would cause a shortage.”
“Humulin could be created in vats instead of harvested from cows or pigs, and it relieved doctors’ worries that the looming diabetes epidemic would cause a shortage.”
But lowering costs is not a viable business model in our
medical system. Rather, it makes more sense to continually tweak the product
being sold in order to maintain patent protection and to justify continuous
price increases.
“A version of insulin that
carried a list price of $17 a vial in 1997 is priced at $138 today. Another
that launched two decades ago with a sticker price of $21 a vial has been
increased to $255.”
Developments have made life for those with diabetes
simpler and more comfortable, but definitely not cheaper. Many patients are shielded from this price
rise by insurance plans. Costs rise and
show up in premium increases but direct payment is relatively stable. It is those who are not insured, or those who
are on Medicare, that notice the enormous growth in list prices.
The critical question is: “Are the new developments worth
the cost to patients?” Unless one works
in the pharmaceutical industry, the answer seems to be no.
“’I don’t think it takes a cynic
such as myself to see most of these drugs are being developed to preserve
patent protection,’ said David Nathan, a Harvard Medical School professor. ‘The
truth is they are marginally different, and the clinical benefits of them over
the older drugs have been zero’.”
In Rosenthal’s view, JDRF has bought into a scheme
whereby ever more advances will add to cost but will only marginally improve
the lives of those it was created to protect.
And furthermore, it is putting those it represents at increased
financial risk, clearly not what its founders had in mind.
Rosenthal compares JDRF’s excitement about new and more
expensive products with its lack of interest in potential cures. Dr. Denise Faustman, a professor at Harvard Medical School, has been searching for a
cure for type 1 diabetes for years. She
discovered a possible pathway that makes use of BCG, a long-used and thus generic
vaccine against tuberculosis.
“Dr. Faustman discovered that
BCG was powerful enough to reverse type 1 diabetes in genetically predisposed
mice. More exciting still, she found
that mice with diabetes of long duration would start producing insulin once
again after treatment with BCG. The
results were heralded as thrilling and widely circulated when published in
2001, but further testing was obviously needed with human trials.”
But who would fund clinical testing of a potential
diabetes cure? The pharmaceutical
industry had no interest because there was no way to make a profit. Surprisingly, and disturbingly to Rosenthal,
the JDRF has shown no interest in supporting Faustman’s work. Could it be that big-time medical
philanthropies have business plans and organizations that need to be protected
from cures as well?
Faustman has been able to push along her work with the
help of donations, mainly from the Iacocca Foundation, and has managed to
conclude a phase 1 study on the use of BCG that was approved by the FDA. She is currently trying to gather about $25 million needed to move to a phase 2 clinical study. That amount of money
is nothing within the vast consumption in the medical industry.
Rosenthal was moved to install this “economic rule” in
second place on her list “Economic Rules of the Dysfunctional Medical Market.”
“A lifetime of treatment is
preferable to a cure.”
She also included this quote by a JDRF critic.
“’If the March of Dimes was
operating according to today’s foundation models, we’d have iron lungs in five
different colors controlled by iPhone apps, but we wouldn’t have a cheap polio
vaccine,’ said Dr. Michael Brownlee, the Anita and Jack Salz Chair in Diabetes
Research Emeritus at the Albert Einstein College of Medicine…”
The interested reader might find the following articles
informative:
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