Posts made in November, 2011

Wanted: A New Definition For Healthcare Innovation

Posted on Wednesday, November 30, 2011

Since the death of Steve Jobs, many writers have tried to define and then apply his business lessons to other companies.  But in our small world, much of the Jobsian commentary has focused on the futility of applying the Apple magic to healthcare. Matt Herper, for example, wrote a thoughtful column in Fortune but ended up concluding that while “hospitals could use someone to stitch all the gadgets together, and make it all perfect… there simply may be too much going on for this to happen.” But we see at least one aspect of Apple’s success differently – and believe it applies very much to healthcare.  For me, the central issue is how product developers choose to define innovation. On the drug side, at least, there’s a myopic view of what’s novel –and it’s focused on new compounds, preferably those that work by a different mechanism of action. Thing is, from a customer point of view, new compounds are more often inventions than innovations. In the healthcare sector, product makers tend to ignore the vast realm of innovation (operational or service) that makes things work better, and thus result in widespread adoption. Steve Jobs, after all, didn’t invent the smart phone concept. His associates designed an elegant, multi-functional device...

Learn More

Reimbursement as Environment

Posted on Monday, November 28, 2011

Who controls reimbursement? Talk to a drug company, or most pharmaceutical analysts, and the answer is payers.  Talk to payers and the answer is far more complicated – and not one where they claim overall control of the process. The fact is reimbursement doesn’t come down to a decision; it’s an environment.  And like any environment, its effects have multiple causes. I don’t pretend to fully understand why sales of Dendreon’s prostate cancer therapy, Provenge, have so dramatically underperformed the company’s, analysts’ and even some payers’ expectations.  But while plenty of people think that insurers simply choked on the $93,000 price and set up huge obstacles to its reimbursement, that’s not really true (roughly 90% of commercial plans actually pay for it without restrictions any more severe than those imposed on the more expensive and far more successful Yervoy).  Instead, at least one of the problems is that urologists, the primary prescribers of the drug, aren’t used to the buy-and bill-model, particularly when it’s employed for very expensive drugs.  At a time when physician budgets themselves are stretched, owning those costs – even for a short period of time – makes a doctor look hard at the value provided by the medicine. Meantime, in the summer of 2010 CMS...

Learn More

Healthcare’s Topeka Problem

Posted on Tuesday, November 22, 2011

You might have heard that, for about a month, domestic abusers in Topeka roamed free. Not because the community encourages wife-beaters.  But because it couldn’t afford to prosecute them.  County DAs, dealing with a 10% budget cut, said they didn’t have the money to go after misdemeanors, including domestic abuse.  So they sent the cases over to Topeka city prosecutors, who, suffering under similar economics, likewise claimed they couldn’t afford to prosecute under the local Topeka law.   In an attempt  to push the cases back on the county, the city council repealed the law and its jails freed 18 domestic-abuse suspects, at least one of whom went on to beat again. If you’ve got a finite pot of prosecutorial money, what do you prosecute? Domestic abuse or, say, drunk driving? And if you’ve got a finite pot of health care money, what do you fund?  Cancer therapy or hip replacements? Just like Topeka’s city councilors, health plan administrators are going to start deciding who gets health care and who doesn’t.  Think about the poor schmoes who have to run Medicaid plans — and somehow have to figure out, when the Feds start cutting back, whether to use this year’s budget money for the new Hep C protease inhibitor...

Learn More

At the Shadowy Intersection of Payers and Product Companies

Posted on Tuesday, November 22, 2011

I suppose it’s understandable, given the history. Payers don’t trust the cost-effectiveness information pharma and device companies provide them about their products. (It does always somehow prove the supplier’s economic value.)  Manufacturers, for their part, figure that whatever decision a payer makes, it’s always going to be driven by short-term economics. In fairness, it often is. This mutual distrust isn’t particularly problematic when a healthcare economy has plenty of room for growth.  Generally, both groups still get paid, and thus rewarded by their different investor bases. Problem is, the healthcare economy isn’t healthy – at least not in the markets that have historically delivered the greatest value to drug and device makers, i.e.  Europe and the U.S.   And right now device companies and pharma are increasingly not getting paid. For example, with more than 80 new drugs launched since 2008, I count maybe half-a-dozen unqualified commercial successes among them, and four of those with therapy prices greater than $40,000 per year (Zytiga, Yervoy, Zelboraf and Incivek).   Other important, innovative drugs haven’t been commercial disasters – like Pradaxa or Gilenya – but certainly less explosively successful than analysts and sponsors had counted on.  And then there is the long list of innovative and me-too offerings that have simply...

Learn More