Serious Healthcare Systems & Technology/Innovation

[Chou Toshio]

So in the midst of this election year, it's no surprise that health care is once again a central topic in American politics. But this thread is about a topic that concerns more than the US.

Now, I'll comment that I'm bringing up this topic without being an expert, and an outsider to health care. I hope that more informed opinions and sources come up in this thread!


The topic is this: Is the fact that the US is a for profit health sector important to the world's medicine?


Now, we all know that in terms of delivered goods and services, as well as the performance in health statistics, the US basically fails terribly compared to other developed countries. We spend exorbitant amounts per capita for medicine in exchange for shorter life spans, and poorer public health. While no one source is perfect, I really like Frontline's documentary comparing the sick around the world:
http://www.pbs.org/wgbh/frontline/film/sickaroundtheworld/

However, this thread is not about the performance of the system, but about contribution to medical/scientific advancement. If there's one thing positive about the healthcare system in the US that gets repeatedly mentioned in the documentary, is the comparative financial soundness of the institutions.

For instance, take the Japanese system, with basically universally set prices for every medicine and service throughout the country-- despite the obvious differences in logistics and demand that would typically demand the guidance of a market-- a lot of Japanese hospitals are perpetually in the red, and would never make it without government support. This price system ultimately means that basically any role in the industry-- doctors, nurses, insurance, farma, everyone is grossly underpaid compared to their US counterparts.

Now don't get me wrong-- I love the fact that as a married man with a kid living in Japan I can pay 17% of my income to cover ALL my fed, local taxes, social security, and health insurance for the whole family while still getting care (and short wait times by the way) that totally stomp on the US's. Can you believe it?? And I don't even have to file a stupid tax return because my company and the tax collection agency take care of all that stuff w/o me filing paper work!! it's incredible!!!!!

But, that's not what this thread is about.

This thread's about the fact that compared to the US, Japan's research output would be laughably small-- even when you account for population (and remember, Japan has half the US's population, making it a relative giant amongst 1st world countries).

I couldn't easily Google sources, but here's a Forbes article about published papers:
http://www.forbes.com/sites/matthew...untries-in-biology-and-medicine/#63efaf64115d

So in that (somewhat old) study, the US alone accounted for 40% of the world's publications.

Furthermore, here's a source on new substance productions:
http://www.xconomy.com/seattle/2014...-excel-in-creating-new-drugs-its-complicated/

Now the author gives us some interesting and well outlined arguments for a more international view of contributions to drug advancement, and why it's hard to just split # of drugs / country (where is the drug made? where is the company run from? where did the scientists come from?), but I think he's trying to ignore the simple fact that the numbers he's working with point at a VERY big contribution from the US-- whether its in brains, investment, or creating environments for research. Taking into account what he's saying with an OR statement, a great percentage of new drugs are developed inside the US (possibly by foreign pharma) or developed by US companies (possibly abroad).

One statement I feel you can pretty safely infer from that OR statement is that the economic incentive created by the US's for-profit health industry is a big driver for drug development.

And it's not just in drugs and research papers-- the IT industry is also having it's own health innovation boom. From every new app and gadget--coming out of Silicon valley, Nor Cal-- to the super doctor that will potentially level the playing field and put every doc at the forefront of healthcare knowledge, IBM Watson (hey, a New Yorker!).

Let's see how quickly "smart" healthcare based around cloud, mobile, AI, and deep analytics gets rolled out into the US market compared to Japan's.


Now it's not fair or true to say that the US is at the forefront of all health tech advancements, but I think it'd be naive to ignore its impact. I think it's also unwise as a world citizenry to ignore the fact that US citizens aren't the only ones to benefit from US consumption. Sure, every tech innovation and drug comes with patents and initial high prices-- but pharma companies aren't about to walk away from profits in new markets (even comparatively lower profits), and Universal Health Care systems excel because they are better at negotiating cheaper prices. Between countries, I'm almost free to do price discrimination as an international company.

My theory: It's POSSIBLE, that as a pharma company, I may be motivated by the big profits to be had in the US, but still be willing to sell at lower prices (and still profit) in other markets. The US consumer's dollar motivates the innovation, but worldwide we all benefit from new medicine and technology.

In the Frontline documentary, they cited that even after implementing universal healthcare, Switzerland still has pharmaceutical companies in the top 10 worldwide. But they also noted that those companies make a third or more of their profits... in the US.

I'm not saying that this is an issue or that there is something that needs addressing. I'm not even informed enough to know if the greater economic data even confirms this theory of mine. This is what I would surmise.

What I would be curious about though, is that if the US were to move to a truly universal health care system similar to other developed countries, would we see a drastic slow down in healthcare advancements? Fewer drugs, less research, fewer start-ups, less investment?

My gut guess (totally not based on data) would be-- yes, but not significantly. We could (and probably would) just patch it up with additional government subsidies spent on health R&D internationally. But I really am not in a position to say.



By the way, it's not like a for-profit health industry is a golden pinnacle of thought, science, and flawless contribution. Outside the aforementioned failing at public health, we got to look at the failings and snake oils produced by plenty of players in the drug and wider health sector (looking at you, largely unregulated "natural" supplements). All the scandal that again comes from the power of wealthy private sector dollars spent on lobbying and campaigning.

We also have to look at fields of study that for profit fails us in-- like antibiotic production. Everyone in the world would agree that we need to keep ahead of bacterial evolution and continue to create new antibiotics in order to maintain modern civilization. Problem is that the best way to get the most good out of a new antibiotic is to use it as LITTLE as possible, and maintain it's effectiveness for as long as possible. Not exactly the consumption practice a for-profit producer wants to hear when it makes a new product.

Obviously, government subsidies are integral in developing/maintaining a health research market/field/system/environment/machine/thingie that "works for all of us." (in a global community) America plays an interesting and unique role in the one we have now.

What should America's role be? What are your thoughts on our country's contributions, and our health industry's influence in the science? Would universal health care in the US have any impact on the world's health advancements?

 

[Cresselia~~]

Ummm... as a former veterinary medicine student... what I know is that the people who do the medical research have nothing to do with doctors / vets/ nurses working in hospitals.

They are separate people.

And, having briefly worked in a pharmaceutica before, the medical research is led mainly by pharmaceuticas, or research labs led by various universities.
That said, it has nothing to do with public hospitals.

Government support on public hospitals have nearly nothing to do with them.

Furthermore, medical advancement is also heavily influenced by other technologies.
Such as the discovery of X-ray and the invention of X-ray scans.

As technology advances, medical things will also advance alongside with technology.

 

[Bughouse]

These are really two separate issues. If you want to change the cost of pharmaceuticals in the United States, you do not need to make the country a single buyer of drugs and set prices. You just need to make legislative updates to Hatch-Waxman, which has been barely touched (or when it has, it has been to expand patent protections) in 30 years.

That said, would this devastate pharmaceutical innovation? No one really knows. It's quite expensive to bring a drug to market through all the FDA testing. But too expensive if patent protections were lower? idk. The pharmaceutical companies, naturally, say yes. Liberal politicians who view it as big pharma picking on the little guy disagree.

The best guess I can make is that drug companies probably do need to make a considerable profit in the US in order to continue innovating because in other countries they make comparatively way less. Effectively, that would mean US citizens are subsidizing the medical care of everyone else in the world.

 

[Chou Toshio]

Ummm... as a former veterinary medicine student... what I know is that the people who do the medical research have nothing to do with doctors / vets/ nurses working in hospitals.

They are separate people.

And, having briefly worked in a pharmaceutica before, the medical research is led mainly by pharmaceuticas, or research labs led by various universities.
That said, it has nothing to do with public hospitals.

Government support on public hospitals have nearly nothing to do with them.

Furthermore, medical advancement is also heavily influenced by other technologies.
Such as the discovery of X-ray and the invention of X-ray scans.

As technology advances, medical things will also advance alongside with technology.

No that's not at all what I was saying.

I may have posted a big block of text, but what it comes down to is this:

US health care existing in a free market leaves much bigger profit margins for drugs, tech, and services than in universal health care markets. Profit margins motivate investment, and investment is pretty important to R&D.

If the US also moved to Universal health care, what will the impact be on the world's health advancements?

 

[Chou Toshio]

Ummm... as a former veterinary medicine student... what I know is that the people who do the medical research have nothing to do with doctors / vets/ nurses working in hospitals.

They are separate people.

And, having briefly worked in a pharmaceutica before, the medical research is led mainly by pharmaceuticas, or research labs led by various universities.
That said, it has nothing to do with public hospitals.

Government support on public hospitals have nearly nothing to do with them.

Furthermore, medical advancement is also heavily influenced by other technologies.
Such as the discovery of X-ray and the invention of X-ray scans.

As technology advances, medical things will also advance alongside with technology.

Sorry for double posting, but didn't want the message of this post to get muddled with the previous one.

I want to point out that, regarding doctors and nurses, you are not looking at the big picture.

Profitability of hospitals and profit margins on services like doctor's care matter to the market as well. They aren't doing the research, but they are consuming the products.

Let's say I have a tech company that makes a health data organization and analytics app, and that patients prefer doctors who are better at storing and utilizing health data. Having my app affects a doctors ability to compete in a market of doctors. The profitability of doctors matters to me, because it directly impacts my profitability-- it affects how much doctors are willing and able to pay for my product.

If I'm only looking at a Universal Health care markets with shared or non-profit insurance, my service might not be recognized/covered, or I would be negotiated to a universal and much lower price point. That's great for the patients, but I might not be so willing to think about developing updates.

As bughouse said, it's easy to think of the US as currently subsidizing health care for the rest of the world.

 

[GatoDelFuego]

I think this is a very interesting question.

When you buy something expensive (a tesla car, cancer treatments, a plane ticket, or other technological advances such as massive amounts of gasoline) you have to remember that there's more than a fat cat executive on the end of the money. One of the biggest problems with cost overruns in the defense sector is you have to pay the actual salaries of the thousands of people working on your project. These are very lucrative, white-collar jobs, because they are not easy. People spend years of their lives getting a chemical or biological engineering degree. The work is difficult, so they need a salary to encourage "smart" (a term that's sort of loose; dedication can be easily subsittuted) people to come work for them.

Of course there are profit margins going on; this is capitalism after all. So how much profit should a company be "allowed" to make? Take Martin Skrelli, raising the price of his drug 1000% to "promote innovation". This is a legitimate argument...if their drug wasn't already working totally fine, if he didn't seem like a wall street stockbroker, if he wasn't involved in corruption charges....because you have to have innovation. Is it possible to control the amount of profit, from an overseeing agency? I don't believe so.

However, from what I know of universal, govt-sponsored healthcare systems (only from what I've heard from some proponents, I am not an expert), the government sets contracts for certain medical services and companies will bid on it. Looking at how government contracts go over usually, this seems like a horrible idea. But when you're talking about a drug that relieves pain, you can't slap a billion-dollar laser sight on the side of it or build a giant factory in a senator's home state to swing the vote. So you will still need to innovate, but if you gamble too high a price on your bid for more profit for your employees, you won't win the contract. So I don't think that the loss of US consumers funding the research would actually impact the world, because the innovation is still going to be mandated. You just need to do it cheaper.

Another reason why I think this would not actually impact the innovation is that healthcare is a public good; a trillion dollars in military exoskeleton research is great, but it will take 40 years to see a consumer variant of this product. For the present, healthcare subsidizing and research benefits the entire country, not just the military or upper-crust companies. This is why people don't mind paying more in taxes to fund this system, because the cost is absorbed across many and you will ALWAYS need some kind of healthcare in your life, rather than slowly having products like cordless drills or velcro work their way into your lives.

I think of it like the cellphone industry; the consumers demand gigabit wireless speeds (5G networks), so if you're the last to upgrade then you'll have no customers. Right now the consumers might demand a cheaper drug but only a select few currently care. If a regulating body says "you are going to have this capability by this date" then the companies are certainly going to pump resources into it, no? The only issue I would see with this system is that if your company doesn't "win" the contracts, then you've lost your investment, and possibly your employees...so to answer this, are there any people with healthcare industry experience in europe/canada? What happens to these companies in an "off year"?

Or maybe my understanding of the universal system is completely wrong. Please let me know.

 

[JALMONT]

While I'm not super informed on the topic, from my limited knowledge of economics, I would guess that the US probably provides a lot of incentives for companies/researchers/universities that are working to develop new drugs. Things like research grants and patents in particular are strong incentives for companies to go out and develop new drugs due to the profit incentive. The reason these things are important is because "discovering" a new drug isn't the same as finding oil or gold or something like that. It's an idea. The good thing about ideas is that ideas are open for everyone to consume and you can't use them up, so everyone can benefit from the discovery of an idea; you don't need to own the "idea" in the same way you need to own a tangible good like oil. But there's a downside to this, and that is that when everyone can use an idea, there's no room for profit (ie a bunch of firms just produce the drug, and companies are forced to price at the cost of the drug, which is good for us, but bad for the firm). The downside is especially important because if there isn't any profit to be made, there's no reason to research the drug, from the firm's perspective. That's where patents and government prizes for research and the like come in.

So because the US healthcare system isn't regulated by the government for the most part, a pharmaceutical being granted a patent for a particular drug is actually quite meaningful in that that company can produce and sell that drug above cost, enabling them to make a profit. I'm not sure about the rest of the world - I assume it's a combination of government picking up the cost of the drugs + no patent protection which enables other companies to come in and produce generic variants of the drug. Competition is naturally bad for a company's bottom line, so it's pretty clear that a company that spent all this money to develop a drug wouldn't want some other company to come in, take their drug away and produce it cheaply at no cost to them. In any case, it definitely helps that the US market then is pretty big, since that's a lot of potential profit, and so companies are more likely to want to go and get patents for drugs in places like the US because of the patents they offer. If the US were to reduce these incentives, then yeah, I would predict that probably companies wouldn't be less likely to spend a huge ton of money on R&D and try and maximize the profit for the drugs they currently have on offer (or try to secure patents in other countries).

I don't know if it's necessarily mandated that companies go out and research these new technologies. I think it's more that the US govt. (and probably other govts) provide very strong monetary incentives for companies to go out and research these new drugs. Otherwise, there's no real reason to research drugs that have limited applicability, or are only relevant in places where these companies can't really turn a profit or even break even. The effect is the US moved away from the current system would depend on if the government further subsidized research. As long as firms' profits aren't affected, I would guess that technology would advance at relatively the same rate. But that would require probably even more money for the govt. to spend assuming they pick up more costs as a result of switching to a universal health care system.

It's a very interesting topic and a good example of why monopolies aren't always necessarily a bad thing. Obviously it sucks that US health care is so much higher compared to the rest of the world, but I do think that as a result it has led to a lot of important medicinal discoveries. Perhaps the US moving to a universal health care system while getting the rest of the world to come together and contribute more to funding new medicinal discoveries (and thus reducing the effect of the rest of the world free riding on the US) is the ideal path, but it's hard to see a path to that.

It's a complicated topic, so hopefully I was able to say something insightful/coherent amidst me rambling on.

 

[Ender]

Speaking as someone in the medical field, let's clear up a few things here first.

1. In many cases, you can't separate the doctors and the researchers. The doctors are the ones being paid by pharmaceutical corporations or device companies to consult on new innovations. They are the ones running the clinical trials. They are the ones whose patients will be in these trials. Many physicians at the large academic centers here in the US are collaborating on some level with pharmaceutical companies and have some role in drug or device development. This is not the "big pharma controls medicine" scare that you see a lot of randos espousing - as long as doctors are conducting themselves ethically and placing the interests of their patients first (which the vast vast majority do), this is not problematic and is actually essential to the development process.

2. Funding for biomedical research in the US comes essentially from two sources: industry spending (~60%) and NIH (i.e. government) funding (~40%). The US accounts for somewhere between 40 and 50% of the world's biomedical research funding.

Now, let's examine what a single payer universal healthcare system would do.

1. It would ensure that all citizens of the US are covered for all conditions
2. Doctors will only have one option for payment - the US government. Whether or not cash only practices could still exist in a single payer healthcare system is debatable and depends on the type of system. In the UK, where a private system exists for those with money in addition to a universal coverage system through the NHS, effectively yes, it would still exist. But let's assume for argument's sake that that doctors would be forced to take US government payment and could not opt out of it and do a cash only practice.
3. Actually, as a corollary to the above, let's look at how doctors are paid now: basically, for each procedure, check up, whatever, there is something called an RVU or relative value unit that is set by a board of doctors who are somehow involved with medicaid, and they set the RVU for each type of procedure. 1 RVU correlates to some amount in dollars and different procedures/etc are reimbursed by medicaid by taking the # of RVUs and multiplying by the dollar conversion factor. For example, a pediatric well check up might be 6 RVUs and a hip replacement surgery might be 80 RVUs. This is why procedural specialties on the whole make more money than non-procedural specialties (in this case, pediatrics vs. orthopedic surgery). Private insurance (aetna, BCBS, etc) will pay a multiplier of the RVU set by medicaid at a rate negotiated by the physician's practice - this tends to always be above the medicaid rate because insurance companies want doctors to take their insurance so that people have a greater incentive to buy their insurance plans rather than a competing company's plan.
4. Now, if we assume that the RVU model remains in play, just that the private insurance industry is dissolved, you would still have discrepancies in salary between different specialties (i.e. the orthopedic surgeon is still going to be making more than the pediatrician).
5. However, if we assume that the RVU model goes away and that physicians are salaried (with bonuses or deductions based on stuff like patient satisfaction or outcomes or readmissions or something, most of which either cannot be adequately measured or has no correlation to what we really care about which is outcome), then you would have more or less the same base pay across all specialties

Now, all we have really looked at right now is how physicians are paid by insurance companies or the government and how that may or may not change if the US adopts a single payer healthcare system. However, we haven't looked into how consultancy fees are incorporated. If we remove consultancy fees and say that pharmaceutical companies cannot pay physicians at all to collaborate, then yes, we would likely see some sort of reduction in innovation. Physicians are extremely busy people and don't work with pharma companies just for fun. Most do it because they see some sort of promise in the innovation that is being presented, but without some sort of pay, it generally won't be worth their time to take time away from the clinical, research, or administrative responsibilities that they already have. So my conclusion here is that, in my overly simplified view, single payer universal coverage that allows consulting fees would not detract from the ability of pharma companies to collaborate with physicians and test their products in clinical trials.

Next, we have to look at how drugs and new technologies are marketed, both to doctors and to patients. Let's say that we have a situation of a brand name drug vs. a generic drug. In this case, the patent on the brand name drug has expired and allowed for a generic version to be created (usually several years after the introduction of the drug). Insurance will generally pay for both, but the copay will be higher for the brand name vs. the generic, and the pharmaceutical company will not make any profit from the generic being used. That's why pharma companies come out with minor variations in drugs all the time that don't actually have any increased effect - they just have to show that it shows that it works for what its labeled for and doesn't hurt the patient. They don't have to establish increased efficacy against a gold standard or anything. Pharma reps then try to push these "new" drugs on doctors to keep their own profits up.

The effect of this depends upon what kind of regulations are put into place regarding brand name vs. generic, payment through insurance for that, and whether a drug has to demonstrate improved efficacy vs. a current standard of care to be marketed (which currently it does not). Regarding this last point specifically, if such a regulation is put into place, drug companies can't even fall back on the "oh it works just as well" because if their product is a dud in the sense that it's not better (even if its not worse), it won't be marketable. While that may improve cost to patients, it also might preclude drug companies taking chances on drug development that might actually be better than the current standard because its hella expensive to get a drug through the many phases of FDA testing (I'm talking billions of dollars and decades of research).

So yes, in this sense, having a highly regulated single payer universal coverage system might stifle growth here. But there are so many variables to consider that you can't say for sure.

Sorry for that wall of text and I'm not really sure I answered the question adequately, but here are the take-home points that I think are relevant to the discussion:

1. Physician reimbursement, the main thing that would change under a single payer system, is not directly tied to drug and device development
2. There are many ways that a highly regulated system would change the ability and will of companies to develop new drugs and devices that could potentially impact research initiative
3. It's impossible to say for sure what would happen without exploring which types of regulation are most likely in a place like the US, given its economic and political philosophies as well as the existing healthcare system and the trends that can be found within it