Government – Page 7 – artdiamondblog.com

Health Insurance Firms Tell Regulators Surgery Prices Are Lower than What They Actually Charge, Undermining Price Transparency

Insurance firms that negotiate low prices with hospitals will be viewed more favorably by regulators, legislators, and the public. So they have a substantial incentive to inaccurately report prices as lower than they are. For true transparency, prices would need to be reported by those with no incentive to fudge the figures. Would that be hospitals, doctors, Consumer Reports, or academic economists?

(p. A11) How much does a new hip cost in New York? The answer isn’t at all clear, despite Gov. Andrew Cuomo’s efforts to improve price transparency. . . .

. . . Michael Frank, a 52-year-old Westchester County executive . . . had his left hip replaced in 2015. The Manhattan hospital charged roughly $140,000. The insurance company paid a discounted rate of about $76,000, . . .

. . .

After hearing his story, I told Mr. Frank what I thought was an odd twist: I’d recently had two hips replaced, six months apart, at the same hospital that had treated him.

. . .

Eventually I learned that the hospital had charged $175,000 for my right hip and $180,000 for the left. The insurance company had paid discounted rates of $75,000 and $77,000.

. . .

In 2009, New York’s then-attorney general, Andrew Cuomo, announced the creation of a nonprofit organization called FAIR Health. Its mandate is to provide consumers accurate pricing information for all kinds of medical services.

I found the FAIR Health website and queried its database. It reported that the out-of-network price for a hip replacement in Manhattan was $72,656, close to what Mr. Frank’s and my insurance companies had paid. The problem: We were both in-network, and FAIR Health estimated that cost as only $29,162.

Something didn’t make sense, so I called FAIR Health. “Maybe you had complications,” the spokesperson suggested. Happily, I hadn’t. I was discharged from the hospital each time in under 24 hours, with no issues and no need for a home health aide. How many data points did FAIR Health use to calculate its price estimate? I was told “4,500 in Manhattan over the last six months.” Who submitted these prices? “The insurance companies.”

. . . Rather than relying on insurers, it might be more effective if FAIR Health collected pricing information directly from hospitals and doctors. That way the data would be less susceptible to selective reporting or massaging. That’s what happened in the early 2000s, when class-action lawsuits revealed the main pricing database was being manipulated to the advantage of insurance companies.

For the full commentary see:

Steve Cohen. “You Can’t Put a Price on a Hip Replacement, and That’s a Problem.” The Wall Street Journal (Saturday, July 14, 2018 [sic]): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date July 13, 2018 [sic], and has the title “Heard on the Street; New Biden Law Won’t Kill Drug Cures. It Will Reshape Them.” In the next to last paragraph quoted above, the second quoted sentence appears in the online, but not the print, version of the commentary.)

The So-Called “Inflation Reduction Act” Reduces Incentives to Develop Small Molecule Drugs and Drugs for Seniors

A recent blog entry suggested that the so-called “Inflation Reduction Act” “creates an incentive for Pharma firms to develop many middling drugs rather than a couple of blockbuster drugs.” In the passages quoted below from a different David Wainer commentary, he suggests that the Act also incentivizes pharma firms to reallocate development funds away from drugs for seniors and away from biologics. He assumes that the reallocation is “unintended” rather than based on the government believing that seniors matter less than others, or that biologics deserve more funding than the previous semi-free market allocated to biologics.

(p. B14) . . . the Inflation Reduction Act, . . . requires the federal government to negotiate prices for some drugs. Merck Chief Executive Officer Robert Davis was just one of many to warn it will be “highly chilling on future innovation.”

The 274-page legislation passed in 2022 doesn’t look likely to be a massive damper on innovation, but it will surely have an impact on how capital is allocated. When companies look at their R&D budgets, they will have to consider the law’s ramifications.

. . .

. . ., there is no arguing with the fact that the bill is reshaping many incentives drug companies face. For example, critics of the law point out that it eliminates the incentive to conduct additional research once a drug has been approved—a common strategy to extend patent protection for a drug—because prices are negotiated after nine years for small-molecule drugs and 13 years for biologics. As Kirsten Axelsen, a visiting scholar at the American Enterprise Institute explains, many oncology medications are first approved for severely ill patients and over time those drugs are tested for patients in earlier stages of the disease.

“Thanks to that, we’re now able to hold back the progression of cancer so that many of the major cancers have five-year survival rates of longer than 90%,” says Ms. Axelsen, who is also a policy adviser to law firm DLA Piper.

. . .

The law . . . could shift investment toward drugs that target the general population and away from seniors. That is because it only empowers Medicare to negotiate prices, leaving the commercial market wide open.

. . .

Perhaps the most serious concern is that the law picks winners and losers by favoring biologic drugs over small molecules, which face price reductions four years sooner than their larger molecule counterparts.

Small molecule drugs are chemically derived and simpler to make and can usually be taken orally by patients. These drugs—think medicine cabinet essentials like aspirin or statins—dominated the pharmaceutical industry during the 20th century. Biologics, therapies that are extracted from living organisms, are usually given through an injection and, because of their higher price tags, make up the bulk of today’s top-selling drugs. While biologics are at the cutting edge of medicine, discoveries of new small-molecule drugs continue to be made.

Eli Lilly’s CEO, David Ricks, noted in a recent earnings call that “it sends a signal to investors” that small molecules “aren’t wanted and are worth a lot less.” That could tip the scales toward more development in biologics, a likely unintended consequence of the law.

MIT’s Professor Lo says that is like effectively creating a tax on small molecules, or a subsidy for larger ones.

For the full commentary see:

Wainer, David. “Heard on the Street; Drug Industry’s Secret Weapon: ‘Guided Missiles’.” The Wall Street Journal (Saturday, Jan. 7, 2023 [sic]): B14.

(Note: ellipses added.)

(Note: the online version of the commentary has the date January 6, 2023 [sic], and has the title “Heard on the Street; New Biden Law Won’t Kill Drug Cures. It Will Reshape Them.” In the next to last paragraph quoted above, the second quoted sentence appears in the online, but not the print, version of the commentary.)

Regulations Discourage Search for Magic Bullet Cures

The so-called “Inflation Reduction Act” mandates that several of the biggest blockbuster drugs must have prices negotiated between Medicare and Pharma firms. As the commentary quoted below suggests, this creates an incentive for Pharma firms to develop many middling drugs rather than a couple of blockbuster drugs. Paul Ehrlich’s “magic bullet” may be impossible, but we will never know if no-one is trying to discover it.creates an

(p. B10) A true home run in the drug industry is when a company develops a mega-blockbuster that transforms its finances for years.

But with Medicare trying to bring costs down by targeting the industry’s most expensive drugs, a portfolio of medium-size moneymakers that can keep your name off the U.S. government’s naughty list can be a wise strategy.

That is at least one reason why big pharma is investing heavily in biotech companies developing antibody-drug conjugates. Known as ADCs, these treatments work like a guided missile by pairing antibodies with toxic agents to fight cancer. In short, they enable a more targeted form of chemotherapy that goes straight into the cancer cells while minimizing harm to healthy cells.

. . .

One reason most ADCs aren’t likely to become mega-blockbusters like Keytruda, a cancer immunotherapy that has earned 35 approvals across 16 types of cancer, is that they aren’t one-size-fits-all drugs. Instead, they are designed to target a specific protein that is expressed on the surface of a cancer cell. That means that each drug is made with an antibody targeting a subset of cancer. There are more than 100 ADCs being tested in humans by pharma and biotech companies.

For the full commentary see:

David Wainer. “Heard on the Street; Drug Industry’s Secret Weapon: ‘Guided Missiles’.” The Wall Street Journal (Friday, Oct. 27, 2023 [sic]): B10.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date October 26, 2023 [sic], and has the title “Heard on the Street; ‘Guided Missile Drugs’ Could Be Big Pharma’s Secret Weapon.”)

Medicare Bureaucrats Let Pretty in Pink Boutique Defraud Taxpayers

Fraudsters are scamming the Medicare bureaucracy out of billions of taxpayer dollars. How boldly audacious the fraudsters are. They don’t even bother to give their fraudulent catheter supply firm a plausible name. Pretty in Pink Boutique? Are the fraudsters high, are they stupid, or do they take malicious pleasure in seeing how far they can go and still get away with it? And who is working for the Medicare bureaucracy? Are they simply bitter because they work for a bureaucracy that neither rewards competent hard work, nor punishes incompetent dereliction of duty? Does anyone in the government know the meaning of the phrase “due diligence”? Does anyone care? Congress creates the incentives and constraints and so is more responsible than the bureaucrats. The article quoted below gives one more example of why we flourish when free enterprise grows and government shrinks.

Yes I take this personally–my identity was stolen by fraudsters borrowing government Covid money in my name for an alleged potato farm. Of course the truth is more complicated than my rant implies. Bureaucrats can be conscientious and entrepreneurs can be corrupt. But I do believe that the incentives and constraints of government bureaucracy encourage corruption, or at least lethargic inertia. And the incentives and constraints of free enterprise encourage conscientious hard work and innovative dynamism.

(p. A1) Linda Hennis was checking her Medicare statement in January [2024] when she noticed something strange: It said a company she had never heard of had been paid about $12,000 for sending her 2,000 urinary catheters.

But she had never needed, or received, any catheters.

Ms. Hennis, a retired nurse who lives in a suburb of Chicago, noticed that the company selling the plastic tubes was called Pretty in Pink Boutique, and it was based in Texas. “There’s a mistake here,” Ms. Hennis recalled thinking.

She is among more than 450,000 Medicare beneficiaries whose accounts were billed for urinary catheters in 2023, up from about 50,000 in previous years, according to a new report produced by the National Association of Accountable Care Organizations, an advocacy group that represents hundreds of health care systems across the country. The report used a federal database of Medicare claims that is available to researchers.

The massive uptick in billing for catheters included $2 billion charged by seven high-volume suppliers, according to that analysis, potentially accounting for nearly one-fifth of all Medicare spending on medical supplies in 2023. Doctors, state insurance de-(p. A15)partments and health care groups around the country said the spike in claims for catheters that were never delivered suggested a far-reaching Medicare scam.

. . .

Catheters and other medical supplies are frequent targets of billing schemes. Last April [2023], the federal government brought criminal charges against 18 defendants who had submitted bills for nonexistent coronavirus tests and other pandemic-related services. And in 2019, the Department of Justice said it had broken up an international fraud ring involving more than $1 billion in phony billing for back and knee braces.

. . .

Patients and doctors who have been reporting mysterious catheter claims to Medicare for months say they are frustrated by a lack of communication from the government about whether billions of dollars have been lost to an ongoing billing scam.

One of the advocacy group’s members, Dr. Bob Rauner, runs a large network of doctors in Nebraska. In an interview, he said his patients had been collectively billed nearly $2 million in 2023 for phantom catheters. (He tracks such spending because his organization gets bonus payments from Medicare when patients have good health outcomes with low overall medical spending.)

. . .

The vast majority of the suspicious claims identified by the new analysis came from seven companies, many of which have shared executives, according to public documents and the advocacy group’s report. Only one of the businesses had a working phone number, and it did not return a request for comment. The other numbers were either disconnected, went to different businesses or, in one case, went to a previous owner.

Pretty in Pink Boutique is registered with Medicare to a street address of a house in El Paso. Its phone number goes to an auto body shop called West Texas Body and Paint, where an employee who answered a call from a reporter said the shop receives “calls all day, every day” from Medicare enrollees concerned about fraudulent bills.

Pamela Ludwig runs an unrelated business in Nashville that is also called Pretty in Pink Boutique. She has received so many catheter complaints that she added a page to her website explaining that her business was not part of any scam.

“I have people calling me, cussing, screaming,” Ms. Ludwig said. “They feel violated.”

For the full story see:

Sarah Kliff and Katie Thomas. “Billions in Claims for Catheters Suggest Medicare Billing Scam.” The New York Times (Saturday, February 10, 2024): A1 & A15.

(Note: ellipses, and bracketed years, added.)

(Note: the online version of the story has the date Feb. 9, 2024, and has the title “Staggering Rise in Catheter Bills Suggests Medicare Scam.”)

Patients Who Benefit From a Drug in a Clinical Trial, Should Not Be Banned by the F.D.A. From Continuing the Drug After the Trial Ends

Especially for a fatal disease for which there is no known cure, like A.L.S., patients in a clinical trial who benefit from an experimental drug should not be banned by the F.D.A. from continuing to take the drug after the trial ends. Such a ban violates the liberty of free citizens. Such regulators appear arrogant and unsympathetic. If the regulator, or someone the regulator loves, had A.L.S., would the regulator discover a sense of urgency?

(p. A17) It’s hard to process what the doctor is saying: You have a disease that will rapidly paralyze you until it eventually suffocates you to death. But you are one of the lucky ones: You qualify for a clinical trial of a promising experimental drug. There is a 30% to 50% chance of receiving a placebo instead of the experimental therapy. . . . Still, you are grateful to qualify for the trial; most patients don’t.

Fortunately, the trial has a design that is friendly to patients, and so six months later, after the randomized portion is complete, all patients may receive the real drug as part of what’s called an “open label extension.” Without this, you may only get the placebo. And the access to the real drug may end once the trial is complete, even if it was helping you.

My husband, Mike Cimbura, was one of the 36 participants who received the drug NurOwn in a Phase 2 clinical trial for amyotrophic lateral sclerosis. Mike regained some function, but he was able to get only one dose before the trial ended. Mike and I fought for continued access to treatment and to improve an archaic regulatory pathway. He died waiting for change in 2019.

. . .

. . . patients need a more flexible regulatory process moving with urgency to help find treatments and cures for this deadly disease.

For the full commentary see:

Nicole Cimbura. “A Slow FDA Is Denying ALS Patients Their Only Hope.” The Wall Street Journal (Tuesday, April 27, 2021 [sic]): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 26, 2021 [sic], and has the same title as the print version.)

Effective Therapies Will Remain Banned When F.D.A. Mandates Costly Evidence of Long-Term Clinical Benefits, Rather than Frugal Evidence of Short-Term Biomarkers

How many therapies that would have cured diseases, or extended lives, or limited side effects or pain, are not available because their champions cannot afford the often astronomical costs of Phase 1, Phase 2, and Phase 3 clinical trials? Nobel-Prize-winning economist Milton Friedman favored eliminating the F.D.A., but as a more politically palatable step-in-the-right-direction, favored limiting F.D.A. mandates to approving safety through Phase 1 and Phase 2 clinical trials (and no longer mandating proving efficacy through Phase 3 clinical trials, which usually cost much more than Phase 1 and Phase 2 clinical trials, combined). Perhaps an even more politically palatable, but tinier, step-in-the-right-direction is proposed in the commentary quoted below. This modest step would allow in Phase 3 clinical trials the use of less costly biomarker “surrogate end-points” in place of far more costly clinical end-points, such as years of added life. In the case discussed in the article quoted below, the surrogate end-point was the percent of arginine in the patient’s blood.

(p. A17) Discovering treatments for rare diseases is a daunting task. Recruiting even a few dozen people for a clinical trial requires doctors and drug companies to identify a large share of the patient population. And since the market for such therapies is necessarily small, it’s nearly impossible to attract investment. So when news emerged about Aeglea BioTherapeutics’ ARG1-D therapy pegzilarginase, we could hardly believe it. Pegzilarginase is an enzyme engineered to lower the body’s levels of arginine. The randomized placebo-controlled study of pegzilarginase included 32 patients with ARG1-D.

The results speak for themselves. The amount of arginine present in blood plasma declined by 80% for patients on pegzilarginase. After only six months, 90.5% of patients who received pegzilarginase had normal arginine levels, and this was sustained over time. The data also suggested progressive improvements in motor function compared with a placebo. And most patients tolerated the therapy quite well.

These numbers were jaw-dropping. Which is why the FDA’s decision is incomprehensible.

The FDA even refused to look at Aeglea’s data. Instead, the agency demanded that the firm compile additional data suggesting pegzilarginase will produce a clinical benefit in addition to eliminating excess arginine. But for ARG1-D and other rare diseases, measuring clinical outcomes can take years, while measuring biomarkers likely to produce clinical benefits can take weeks.

. . .

Evaluating clinical benefits could force sick patients to remain in placebo groups for months. That the FDA would put its rigid rules before the convincing data we already have is unethical. If the FDA doesn’t correct its error soon, patients with ARG1-D will lose their best chance at full, productive lives.

For the full commentary see:

Stephen Cederbaum and Emil Kakkis. “The FDA’s See-No-Data Approach.” The Wall Street Journal (Wednesday, Sept. 27, 2023 [sic]): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date September 26, 2023 [sic], and has the same title as the print version.)

Medicare Rewards Health Insurers for Overestimating Future Prescription-Drug Costs

I believe that the perverse incentives that Medicare creates for insurers, as described in the 2019 article quoted below, still exist. But I need to confirm my belief.

(p. A1) Each June, health insurers send the government detailed cost forecasts for providing prescription-drug benefits to more than 40 million people on Medicare.

No one expects the estimates to be spot on. After all, it is a tall order to predict the exact drug spending for the following year of the thousands of members in each plan.

However, year after year, most of those estimates have turned out to be wrong in the particular way that, thanks to Medicare’s arcane payment rules, results in more revenue for the health insurers, a Wall Street Journal investigation has found. As a consequence, the insurers kept $9.1 billion more in taxpayer funds than they would have had their estimates been accurate from 2006 to 2015, according to Medicare data obtained by the Journal.

Those payments have largely been hidden from view since Medicare’s prescription-drug program was launched more than a decade ago, and are an example of how the secrecy of the $3.5 trillion U.S. health-care system promotes and obscures higher spending.

Medicare’s prescription-drug benefit, called Part D, was designed to help hold down drug costs by having insurers manage the coverage efficiently. Instead, Part D spending has accelerated (p. A12) faster than all other components of Medicare in recent years, rising 49% from $62.9 billion in 2010 to $93.8 billion in 2017. Medicare experts say the program’s design is contributing to that increase. Total spending for Part D from 2006 to 2015 was about $652 billion.

The cornerstone of Part D is a system in which private insurers such as CVS Health Corp., UnitedHealth Group Inc. and Humana Inc. submit “bids” estimating how much it will cost them to provide the benefit. The bids include their own profits and administrative costs for each plan. Then Medicare uses the estimates to make monthly payments to the plans.

After the year ends, Medicare compares the plans’ bids to the actual spending. If the insurer overestimated its costs, it pockets a chunk of the extra money it received from Medicare—sometimes all of it—and this can often translate into more profit for the insurer, in addition to the profit built into the approved bid. If the extra money is greater than 5% of the insurer’s original bid, it has to pay some of it back to Medicare.

For instance, in 2015, insurers overestimated costs by about $2.2 billion, and kept about $1.06 billion of it after paying back $1.1 billion to the government, according to the data reviewed by the Journal.

. . .

If those big insurers were aiming to submit accurate bids, the probability that they would have overestimated costs so frequently and by such a large amount is less than one in one million, according to a statistical analysis done for the Journal by researchers at Memorial Sloan Kettering Cancer Center, who study pharmaceutical pricing and reimbursement.

Insurance companies use heaps of data to predict future spending. If truly unpredictable events were blowing up their statistical models, the proportion of overestimates to underestimates would be closer to 50/50, says Peter Bach, director of Sloan Kettering’s Center for Health Policy and Outcomes, which conducted the statistical analysis.

“Even expert dart throwers don’t hit the bull’s-eye every time. But their misses are spread around in every direction,” says Dr. Bach. “If they start missing in one particular direction over and over they are doing it on purpose.”

For the full story see:

Joseph Walker and Christopher Weaver. “Medicare Overpaid Insurers Billions.” The Wall Street Journal (Saturday, Jan. 5, 2019 [sic]): A1 & A12.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jan. 4, 2019 [sic], and has the title “The $9 Billion Upcharge: How Insurers Kept Extra Cash from Medicare.”)

When a Therapy Fails in a Clinical Trial, Is That the Fault of the Therapy or of the Trial?

When a proposed therapy fails in a clinical trial is that because the therapy can’t work, or is it because the trial itself was flawed? It is far from written in stone how a clinical trial should be set up. Should the therapy be given by pill or intravenously? In what doses? How often, for how long? At what stage of the disease? Because Stage 3 clinical trials are so expensive and difficult to implement, some therapies may have only one shot to succeed. How many therapies that could have helped some people, will never do so, because the researchers had bad luck, or less skill, in implementing the trial? This problem could be reduced the regulatory mandate to requiring only the Stage 1 and Stage 2 clinical trials, that mainly establish safety (as opposed to the much-more-expensive Stage 3 that mainly establishes efficacy). That way researchers who lacked the deep pockets of the researchers discussed in the article quoted below, could still more often afford multiple shots at designing a trial that would succeed at identifying what therapy, applied to which patients, in what modalities, might cure them, or at least lengthen their lives, or reduce their symptoms. Some of the greatest advances in medicine occurred in an environment of quick trial and error, as when medicine has to be precticed on the battlefield of war, or when Emil Freireich improvised new ingredients for his chemo cocktail to cure some children of childhood leukemia or when Freireich’s protégé Vincent DaVita did the same to cure some adults of Hodgkin’s lymphoma. Ideally I would eliminate all mandates, both to enhance liberty, and to speed trial-and-error therapies. But here I suggest eliminating only Stage 3 clinical trials, not because I think that is ideal, but (following Milton Freidman) because I suspect that policy reform may be the best that is politically feasible. We would maximize trial and error adjustments by eliminating all mandated clinical trials. In the vast majority of decisions in life we make judgements without the benefit of a clinical trial. And such judgements usually are effective and improve with experience. [Gary Klein persuasively makes this point through a multitude of examples, in his tour de force Sources of Power.] What is done in life generally, can also be done in medicine in particular, bringing us more cures, faster.

(p. D4) “There is no reason why cancer vaccines would not work if given at the earliest stage,” said Sachet A. Shukla, who directs a cancer vaccine program at MD Anderson Cancer Center. “Cancer vaccines,” he added, “are an idea whose time has come.” (Dr. Shukla owns stock in companies developing cancer vaccines.)

That view is a far cry from where the field was a decade ago, when researchers had all but given up. Studies that would have seemed like a pipe dream are now underway.

“People would have said this is insane,” said Dr. Susan Domchek, the principal investigator of a breast cancer vaccine study at the University of Pennsylvania.

. . .

“We had this trial, 63 patients, Stage 4 cancer. They had failed all therapies,” Dr. Finn said.

. . .

In their initial studies, it became clear to Dr. Finn and her colleagues that the cancers were too far advanced for immunizations to work. After all, she notes, with the exception of rabies, no one vaccinates against an infectious disease in people who are already infected.

“I said, ‘I don’t want to do that again,’” Dr. Finn said. “It is not the vaccines. We have to look at different patients.”

Now, she and her colleague at Pittsburgh, Dr. Robert Schoen, a gastroenterologist, are trying to prevent precancerous colon polyps with a vaccine. But intercepting cancer can be tricky.

They focused on people whose colonoscopies had detected advanced polyps — lumps that can grow in the colon, but only a minority of which turn into cancer. The goal, Dr. Schoen said, was for the vaccine to stimulate the immune system to prevent new polyps.

It worked in mice.

“I said, ‘OK, this is great,’” Dr. Schoen recalled.

But a recently completed study of 102 people at six medical centers randomly assigned to receive the preventive vaccine or a placebo had a different result. All had advanced colon polyps, giving them three times the risk of developing cancer in the next 15 years compared to people with no polyps.

Only a quarter of those who got the vaccine developed an immune response, and there was no significant reduction in the rate of polyp recurrences in the vaccinated group.

“We need to work on getting a better vaccine,” Dr. Schoen said.

. . .

Dr. Domchek said she can envision a future in which people will have blood tests to find cancer cells so early that they do not show up in scans or standard tests.

“To paint a grand future,” she said, “if we knew the tests predicted cancer we could say, ‘Here’s your vaccine.’”

For the full story see:

Gina Kolata. “New Hopes for a Cancer Vaccine.” The New York Times (Tuesday, Oct. 11, 2022 [sic]): D4.

(Note: ellipses added.)

(Note: the online version of the story has the date Oct. 10, 2022 [sic], and has the title “After Giving Up on Cancer Vaccines, Doctors Start to Find Hope.” Where the wording of the versions differs, the passages quoted above follow the online version.)

Gary Klein’s main book that I praise in my initial comments is:

Klein, Gary A. Sources of Power: How People Make Decisions. 20th Anniversary ed. Cambridge, MA: The MIT Press, 2017.

Medical Mergers Can Reduce Competition and Raise Prices When Government Aids Incumbents or Fetters Entrepreneurs

The story quoted below gives useful evidence that in the recent past hospital mergers have generally resulted in higher prices. But the story is incomplete, creating the misleading impression that government antitrust action is clearly needed. My hypothesis: mergers can increase efficiency and lower patient prices, but only tend to do so when hospitals are constrained by the real or potential entry of entrepreneurial health providers. Unfortunately entry is currently very limited, often by government actions. Often new hospitals must acquire a certificate of need before they are allowed to exist.

Often, incumbent hospitals successfully object to those certificates. Federal subsidies differentially go to large incumbent hospitals. Federal Covid-relief funds went to large incumbent hospitals that used much of the funds to buy up other hospitals. Less directly, enormous government regulation creates a differential burden on the small new entrant that likely cannot afford the huge specialized staff to successfully navigate the voluminous opaque regulations.

If we want lower prices, government should allow mergers, but also stop creating constraints that discourage entry. Government should especially reduce the regulations that discourage medical entrepreneurship.

(p. D4) The nation’s hospitals have been merging at a rapid pace for a decade, forming powerful organizations that influence nearly every health care decision consumers make.

The hospitals have argued that consolidation benefits consumers with cheaper prices from coordinated services and other savings.

But an analysis conducted for The New York Times shows the opposite to be true in many cases. The mergers have essentially banished competition and raised prices for hospital admissions in most cases, according to an examination of 25 metropolitan areas with the highest rate of consolidation from 2010 through 2013, a peak period for mergers.

The analysis showed that the price of an average hospital stay soared, with prices in most areas going up between 11 percent and 54 percent in the years afterward, according to researchers from the Nicholas C. Petris Center at the University of California, Berkeley.

The new research confirms growing skepticism among consumer health groups and lawmakers about the enormous clout of the hospital groups. While most political attention has focused on increased drug prices and the Affordable Care Act, state and federal officials are beginning to look more closely at how hospital mergers are affecting spiraling health care costs.

During the Obama years, the mergers received nearly universal approval from antitrust agencies, with the Federal Trade Commission moving to block only a small fraction of deals. State officials generally looked the other way.

President Trump issued an executive order last year calling for more competition, saying his administration would focus on “limiting excessive consolidation (p. B1) throughout the health care system.” In September [2018], Congress asked the Medicare advisory board to study the trend.

. . .

Prices rise even more steeply when these large hospital systems buy doctors’ groups, according to Richard Scheffler, director of the Petris Center.

“It’s much more powerful when they already have a very large market share,” said Mr. Scheffler, who recently published a study on the issue in Health Affairs. “The impact is just enormous.”

For the full story see:

Reed Abelson. “When Hospitals Merge, Patients Often Pay More.” The New York Times (Wednesday, November 14, 2018 [sic]): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “When Hospitals Merge to Save Money, Patients Often Pay More.” Where the wording of the versions differs, the passages quoted above follow the online version.)

The article co-authored by Scheffler and mentioned above

Scheffler, Richard M., Daniel R. Arnold, and Christopher M. Whaley. “Consolidation Trends in California’s Health Care System: Impacts on Aca Premiums and Outpatient Visit Prices.” Health Affairs 37, no. 9 (Sept. 2018): 1409-16.

Government Gave “40 Years of Seriously Incorrect Advice” on Trans Fats

The government’s advice often turns out to be wrong. That is an added argument for not giving the government the power to enforce its advice through mandatory regulations. (“Added” to the fundamental argument based the right to free choice.)

[In May 2021 Nicholas Wade, the author of the review quoted below, showed enormous courage in being one of the first few to risk cancelation by presenting a cogent case that Covid leaked from a Wuhan lab.]

(p. C9) Rachel Carson rightly complained in “Silent Spring” that farmers were sloshing far too many harmful pesticides into the environment. But she took aim at the wrong one. DDT, a mild and enormously effective pesticide, helped rid the United States of malaria and its benefits, if more discriminately pursued, could have outweighed its costs.

The overstrict verdict against DDT is an instance of the harms that can ensue when scientific evidence is ignored. This and other cases described by Paul A. Offit in “Pandora’s Lab: Seven Stories of Science Gone Wrong” raise provocative questions about the reasons that science is misused in modern society.

. . .

Another case of medical advice based on insufficient data is that of dietary fat. As Dr. Offit tells the story, in the 1970s the government advised cutting down on fat consumption. In the 1980s the message changed. Unsaturated fats were good; only saturated fats were bad: Eat margarine, not butter. But then it turned out that unsaturated fats came in two forms, known to chemists as “cis” and “trans,” and that “trans fats” were appallingly active promoters of heart disease. Margarine and hydrogenated vegetable cooking oils, whose use had been encouraged, were rich in trans fats. After 40 years of seriously incorrect advice, trans fats were mostly eliminated from the American diet only in 2012.

. . .

Besides his overconfidence in the checking mechanisms of science, Dr. Offit goes too easy on the motives of those who abuse science. Environmentalists, for instance, are interested in achieving political results, not in distracting scientific caveats and uncertainties, which they do their best to suppress. It is their propensity to take everything to excess that leads to obscurantist positions, such as irrational fear of genetically modified crops.

For the full review see:

Nicholas Wade. “A Little Knowledge.” The Wall Street Journal (Saturday, April 8, 2017 [sic]): C9.

(Note: ellipses added.)

(Note: the online version of the review was updated April 7, 2017 [sic], and has the same title as the print version.)

The book under review is:

Offit, Paul A. Pandora’s Lab: Seven Stories of Science Gone Wrong. Washington, D.C.: National Geographic, 2017.

When the Highly Restrictive Enrollment Criteria for Clinical Trials Steal Hope from the Innocently Desperate, It “Just Feels Unjust”

Muscular dystrophy is sometimes called “Duchenne.” The full name of the disease is “Duchenne muscular dystrophy.” When I was a student at Monroe elementary school a classmate named Frank Goldsberry played on the basketball team. In high school he was in a wheel chair with muscular dystrophy. When the high school principle, Howard Crouch, proposed to do away with the academic honor of valedictorian on the ground that there was some arbitrariness in who received it, I argued that to do would be to diminish the honor given to academic achievement. Crouch relented. It turned out that our valedictorian was Frank Goldsberry. He died a few years later in his early 20s. Frank’s father told my mother that Frank was grateful to me for speaking up. Howard Crouch had a point, but I am glad that after working hard under dire circumstances, Frank received the award.

The F.D.A. should stop mandating randomized double-blind clinical trials (RCTs) so that those who have muscular dystrophy can seek any therapy that they, their parents, and their physicians believe has promise. Not everyone will be cured, but we will learn what works through a Bayesian process of trial and error. More parents and boys will be allowed to hold on to hope.

(p. D1) Lucas was 5 before his parents, Bill and Marci Barton of Grand Haven, Mich., finally got an explanation for his difficulties standing up or climbing stairs. The diagnosis: muscular dystrophy.

Mr. Barton turned to Google.

“The first thing I read was, ‘no cure, in a wheelchair in their teens, pass in their 20s,” Mr. Barton said. “I stopped. I couldn’t read any more. I couldn’t handle it.”

Then he found a reason to hope. For the first time ever, there are clinical trials — nearly two dozen — testing treatments that might actually stop the disease.

The problem, as Mr. Barton soon discovered, is that the enrollment criteria are so restrictive that very few children qualify. As a result, families like the Bartons often are turned away.

. . .

Ryan and Brooke Saalman know how hard it can be to know what to do. “We did a lot of praying,” said Ms. Saalman, mother of two boys with Duchenne in Columbus, Ga.

They decided to enroll their oldest son, Jacob, 6, in a trial of a highly experimental drug.

. . .

. . . they discovered that gene therapy may be irreversible. And if it didn’t work, Ja-(p. D3)cob would be ineligible for an even more promising approach in the future: gene editing, to snip out the deadly mutation that causes Duchenne, an effort now in preclinical development.

. . .

The Bartons found out about a gene-therapy trial at Nationwide Children’s Hospital in Columbus, Ohio, testing a treatment by Sarepta Therapeutics.

They watched a miraculous video of a little boy struggling to walk up a flight of stairs before treatment — and then doing it easily afterward.

“This was what we were hoping for,” Mr. Barton said.

Lucas was the right age, and he seemed to qualify. But testing showed that he carries antibodies to the virus used to deliver the treatment. It would not work for him.

The Bartons were drained, devastated. And for now, there is no other trial that Lucas qualifies for.

“I had my put my hopes into this,” Mr. Barton said. “It was the miracle.”

Dr. Jeffrey Bigelow, a neurologist, and his wife, Alexis Bigelow, of Millcreek, Utah, hoped against hope that their son Henri, 8, would qualify for the only gene therapy trial that will accept boys his age.

Then the Bigelows found out that enrollees of Henri’s age have to be able to lie down and then stand up with their hands at their sides in less than 10 seconds.

It took Henri 10 seconds to do that last spring, when he was evaluated for another trial. Now it would probably take him 20 seconds, his father said.

“It feels like Henri is being punished for losing the ability to stand up from the ground too soon,” Dr. Bigelow said.

He also worries about older boys with Duchenne who are lucky enough to still walk. They are shut out from the trial because they are not yet in wheelchairs. And other trials won’t accept boys that old.

“These are boys who, like Henri, desperately need the treatment, and if they don’t get it in the next one to two years, likely will be confined to a wheelchair, to never walk again,” Dr. Bigelow said.

“This just feels unjust.”

For the full story see:

Gina Kolata. “One Shot To Qualify For Hope.” The New York Times (Tuesday, March 26, 2019 [sic]): D1 & D3.

(Note: ellipses added.)

(Note: the online version of the story has the date March 25, 2019 [sic], and has the title “For Many Boys With Duchenne Muscular Dystrophy, Bright Hope Lies Just Beyond Reach.”)