Still, it obviously wouldn�t hurt to bring down the cost of medtech, and we have suggested
before that cheaper pricing would not necessarily hurt (and might, in fact,
enhance) manufacturers� revenue either. Medtronic may have come to a similar
conclusion in drastically re-pricing one of its products.

It wouldn�t hurt, either, to trim the excesses of medtech — especially
scanner — purchases. Health insurers in Western New York have taken action to
stem the proliferation of those
expensive imaging machines. However, in our view the trend to consumerism and
the falling cost of scanners may eventually render such actions moot, when small
practice providers can make a business case for selling scans direct to self-pay
consumers.

Employee contributions may
or may not be the full answer to the US healthcare cost crisis but, said one
analyst, �if you see it as one of the ways to get consumers more engaged and
more informed about what things cost, it will slow down some of the demand.�

We hope that the University of North Carolina has done its homework well in
its assessment of the economic impact of an expensive new cancer hospital to be finished in
2010, and has a Plan B for the facility if a cancer vaccine emerges to dry its
business up. Judging by the developments reported in the Therapeutics
section of this issue, that is not implausible.

A manufacturer’s push to win over-the-counter
status for its home-use defibrillator may or may not succeed immediately,
but is indicative of one force behind the trend to consumer self-care, and it
will inevitably succeed eventually.

There is a clear trend to making prescription drugs available over the counter; it seems to be both a cause
and an effect of the trend to patient self-care.

Profligate spending on medtech is one thing; at least it provides some
healthcare value. But losing an estimated US$85 billion in 2003 to health insurance fraud has zero redeeming
value.

Fraud is so patently unethical it is illegal. The ethics of the
pharmaceutical industry�s profligate lobbying are a matter of debate, but
lobbying is clearly paying profligate dividends, with US government agencies
bending over backwards to protect the industry
from competition.

The ethics and credibility of research reported in major US medical journals continue to
suffer, most recently from failures to disclose ties with pharmaceutical and
other interests.

The stem cell debate in the US
rumbles on, with the line between science and dogma slowly becoming more clearly
drawn. The Bush administration�s attempt to ameliorate its critics on this
issue, by funding two programs to stimulate research on the allowed cell lines,
has been dismissed as window dressing.

Venture capitalists need the US government to get the ball rolling on stem
cell research before they will risk their own money, but they are willing to
risk small sums to help give the California state government the power to
sidestep the Bush administration�s stem cell funding restrictions.

Some healthcare economists increasingly believe there may indeed be viable
solutions to at least some of the United States� health problems, writes
Challenge Magazine editor Jeff Madrick in the New York Times.
Solutions will not be before time, given that:

• 14 going on 18 percent of US GDP goes to health care, versus an average 8
  percent for other advanced nations.
• A study by the Commonwealth Fund of quality of care in specific areas of
  medicine in five nations found that America was superior in only a few and was
  at the bottom for kidney transplants.
• In 2001, the United States had 2.7 doctors per 1,000 people, compared with a
  median of 3.1 in the countries in the OECD countries.
• It has only 2.9 hospital beds per 1,000 people, compared with the OECD median
  of 3.9.
• It is also behind in the actual days spent in a hospital and hospital
  admissions per capita.

Princeton�s Uwe Reinhardt and Johns Hopkins� Peter Hussey and Gerard Anderson
say the higher US health bill is because:

• In a highly fragmented market of thousands of insurance companies and HMOs,
  American doctors and hospitals can and do charge much more,
• Americans usually pay significantly more for drugs, and
• Administration expenses are exorbitant.

Harvard�s Joseph Newhouse attributes the higher hospital costs in part to
their spending on high technology equipment, procedures, and drugs. His Harvard
colleague David Cutler says the price is worth it — that the technologies have
extended lives so greatly that their benefits far outweigh their costs, though
he acknowledges that �a lot of waste remains,� as Madrick puts it, in Medicare
spending and on he under-utilization of some technologies such as beta-blockers,
drugs that reduce the probability of a follow-up heart attack.

�These economists,� says Madrick, �want both the public and private sectors
to adopt a market solution of sorts that calls for getting the financial
incentives right� through pay-for-performance programs, although there is a risk
that �might encourage doctors and hospitals to treat only patients likely to do
well,� and that performance standards �may limit doctors and hospitals too much,
just as teachers complain that standardized tests limit them.�

Reference: Madrick, Jeff (2004). “Studies Look at
Health Care in the U.S.” New York Times, July 8.

Med Tech Costs

Medtronic has changed the pricing of its Internet-based CareLink
patient management system, which monitors and transmit data from implanted
cardiac rhythm devices. Instead of charging physicians an annual US$210 fee per
patient, Medtronic now charges $30 per transmission, which equates to an average
annual per-patient payment of about $90. Medtronic�s aim is to gain market share
before its competitors catch up, according to Sam Black writing for the
Minneapolis/St. Paul Business Journal.

After two years on the market, more than 10,000 patients use CareLink
to link with physicians at about half of the 400 major clinics that implant
heart defibrillators. The system reduces follow-up time for physicians, who
would otherwise need to see the patients more often.

Reference: Black, Sam (2004). “Medtronic
cuts price of CareLink system to expand usage.” Business Journal
(Minneapolis/St. Paul), July 16.

Paying for Health Technology

In response to the high and growing number of diagnostic services sprouting
in the Western New York region, insurers who cover the area formed a sort-of
certificate of need committee to advise insurers whether they should reimburse
providers who plan to buy MRI, PET/CT, and other expensive machines.

�Gone unchecked,� writes Annemarie Franczyk in Business First of
Buffalo, �the situation could worsen: According to a 2003 study by the Blue
Cross and Blue Shield Association, diagnostic imaging costs in the United States
are expected to total nearly $100 billion annually by 2005, up from $75 billion
in 2000.�

Reference: Franczyk, Annemarie (2004). “Panel
pans proposal for more gear.” Business First of Buffalo, July 9.

Healthcare Costs/Self-care Trend

A professor of health care systems at Cornell says that when consumers are
routinely paying US$20-50 for a prescription, they �are going to scale back� on
their healthcare spending. In 2003, employers made significant cuts in health
insurance benefits. While underlying costs were up 13-14 percent, employers kept
their increases to 10 percent, meaning they cut benefits that would have
amounted to an additional 3 to 4 percent of total health costs. Deductibles are
rising, too.

Employee contributions may or may not be the full answer to the US healthcare
cost crisis but, said one analyst, �if you see it as one of the ways to get
consumers more engaged and more informed about what things cost, it will slow
down some of the demand.�

Reference: Unknown (2004). “Employers Step up
Enlistment of Employees in Battle against Health Care Costs.”
Knowledge@Wharton Newsletter, July 14-27.

Capital Investment

The University of North Carolina Health Care System has received state
approval to build a US$180 million cancer hospital where a tuberculosis
sanitarium used to be, to be ready in 2009. UNCHCS predicts substantial job
creation to justify state funding.

Reference: Fisher, Jean P. (2004). “Cancer
center’s pluses touted: Better care, yes; also, many jobs.” News &
Observer, July 20.

De-prescriptioning

Philips Medical Systems has applied to the US Food and Drug Administration
for over-the-counter status for its US$2,000 HeartStart home
defibrillator, currently only available via prescription. A National Institutes
of Health study of 7,000 people is testing whether at-home defibrillators are as
effective as defibrillators in public facilities at saving lives, given that a
patient’s collapse at home is less likely to be noticed, and that relatives (if
nearby) may be more likely to panic and waste time messing with the defibrilator
when the time could have been better spent dialling 911 or administering CPR.
The latter, a doctor told the AP’s Lauran Neergaard, is “far and away going to
save more lives than putting defibrillators in everybody’s bathroom. If they
were free, I would say fantastic, go pick one up. But the overwhelming
likelihood is it would never be used.” The NIH study results aren’t due for
several more years.

The American Heart Association, says Neergaard, is “cautiously backing
over-the-counter sales.”

Reference: Neergaard, Lauran (2004). “Co. Wants
Non – Prescription Defibrillators.” Associated Press via New York Times,
July 20.

Patient Self Care: OTC Drugs

Many allergy, heartburn, and other drugs can now be bought over-the-counter
without a prescription, and drug makers are pushing to sell cholesterol drugs
directly to consumers, too, writes Eve Tahmincioglu in the New York
Times. (We noted last month that the British government is making statin
drugs available OTC in the UK.) It makes for greater convenience for the
consumer and may be less costly for the unsinsured, but it may also add to costs
for those with prescription drug benefits because most insurers won�t pay for
OTC drugs. The easy access to OTC drugs by untrained consumers also increases
the risk of harmful drug interactions.

The director of the US Food and Drug Administration�s over-the-counter drug
division told Tahmincioglu that “A lot of this is based on changes in society,”
he said. “There is more emphasis, for whatever reason, on self-care.”

Reference: Tahmincioglu, Eve (2004). “Over
the Counter, Yes, but Out of the Insurance Plan.” New York Times, July 4.

Fraud and Corruption

The Blue Cross and Blue Shield Association estimates that US$85 billion —
five percent of the $1.7 trillion spent on health care in the US in 2003 — was
lost to health insurance fraud that year. Fraud ranges from individual doctors
improperly prescribing drugs, performing unnecessary surgeries, billing for
services never provided, and billing for a more expensive service than the one
performed, to state health insurance programs that overpay millions of dollars
to private contractors, not necessarily by mistake.

Reference: Maltin, Vanessa (2004). “Fraud
plagues U.S. health care.” Atlanta Journal-Constitution, July 13.

Reference: Copelin, Laylan (2004). “State’s
troubles with CHIP mirror Medicaid billing scandal.” Austin American
Stateman, July 13.

Pharmaceutical Ethics

The pharmaceutical industry has repeatedly violated federal law by failing to
disclose the existence of large numbers of its clinical trials to a government
database, according to the Food and Drug Administration. The FDA acknowledges it
has not enforced the law, and says he lawdoes not spell out penalties or
explicitly give the agency authority to crack down on violators, though it is
now re-examining whether it has the power to step in.

The patient advocacy group that fought the hardest to create the law
predicted it would never be enforced, because �the full force of the drug
industry will stop it. They don’t want you to know about clinical trials that
fail. They are afraid what it will do to their stock price. A lot of trials are
for drugs already on the market, and it would ruin their sales if the news got
out.”

A Pharmaceutical Research and Manufacturers of America (PhRMA) official said
he had heard that companies are now fully complying with the law, but an FDA
official contradicted him. Some companies have boasted to stockholders of having
many ongoing studies in the pipeline but not listed any with the registry.

A deputy editor of the Journal of the American Medical Association has called
on physicians who conduct trials for companies to “examine their consciences”
before agreeing to let trials be kept secret, and said: “We give pharmaceutical
companies a lot of tax advantages and a whole lot of support in the Congress and
a good business environment and patent protection. They owe us more
information.”

Meanwhile, the FDA has rejected generic-drug makers� petitions asking it to
limit “authorized generics” deals in which the branded company licenses its drug
to a selected generics maker to undermine a rival generics maker that plans to
copy the drug. They argued that the deals were illegal and would result in fewer
generics getting to market in a timely way. The FDA sided with Pfizer and
Johnson & Johnson, who argued the deals helped the consumer because more
competition meant lower prices. (Lower drug prices� hmm� now that would be a
novel idea!)

US trade negotiators are also supporting US big pharma by using the threat of
trade sanctions to prevent competition from foreign copycats. Critics say this
keeps prices too high for the world�s poor. Big pharma says some pharmas provide
low or no-cost drugs for AIDS and other life-threatening diseases to developing
countries. The counter-claim is that that is not working — that less than ten
percent of the nearly 40 million people with HIV or AIDS have access to modern
HIV/AIDS drugs.

Reference: Vedantam, Shankar (2004). “Drugmakers
Prefer Silence On Test Data: Firms Violate U.S. Law By Not Registering
Trials.” Washington Post, July 6.

Reference: Abboud, Leila (2004). “FDA
Declines to Curb a Tactic Of Drug Firms Against Generics.” Wall Street
Journal, July 6.

Reference: Chase, Marilyn and Sarah Lueck (2004).
“In New
Trade Pacts, U.S. Seeks To Limit Reach of Generic Drugs.” Wall Street
Journal, July 6.

Professional Ethics

A report by the Center for Science in the Public Interest notes that four
leading US medical and scientific journals recently published studies that
failed to disclose the authors’ financial conflicts of interest, despite having
policies covering conflict-of-interest disclosures, writes Arhad O�Connor in the
New York Times. In 13 of 163 articles that had no disclosure statements
for the major authors, at least one of the authors did not reveal ties to
companies that stood to profit from the research or other information that could
have influenced the findings.

Reference: O’Connor, Arhad (2004). “Report Finds
Ethical Conflicts in Journals.” New York Times, July 13.

Stem Cell Debate

In answer to criticisms of its restrictions on federal funding for embryonic
stem cell research, the Bush administration has announced two programs to foster
research using the handful of aging cell lines the President approved:

1. A National Embryonic Stem Cell Bank to nurture samples from the allowed
cell lines and make them available to researchers for �several hundred dollars�
— much less than the up-to-US$5,000 per shipment some researchers pay today.

2. Three “centers of excellence” teaming physicians with biologists to
conduct translational research.

The executive vice medical dean at the University of California, San
Francisco, a leading center of stem-cell research, called the programs �window
dressing. . . . The call for more cell lines is not simply that scientists want
more of the same. . . . The fundamental questions we need to ask come partly
from what we learn by deriving them.” Other high-profile scientists critical of
the Bush policy on ESCs include the president of the Juvenile Diabetes Research
Foundation.

At a Senate hearing in July, several witnesses testified about their
successful treatment for spinal cord injury and Parkinson’s disease using adult
(not the controversial embryonic) stem cells. But critics were quick to point
out that embryonic stem cells have even more therapeutic potential than adult
cells. Even a successful adult-stem-cell researcher urged for a change in Bush’s
policy, and criticized a bill sponsored by Republican senator Brownback that
would outlaw therapeutic cloning, stating that it would �overrule good science
and medicine and ban some kinds of biomedical research and therapies for the
first time in American history� and that �those in a position of advice or
authority who participate in the banning or enforced delays of biomedical
research that could lead to the saving of lives and the amelioration of
suffering are directly and morally responsible for the lives made worse or lost
due the ban.”

One scientific witness, Jean D. Peduzzi-Nelson, who testified that adult stem
cells were a better choice than embryonic stem cells because they are more
controllable and less likely to form tumors, admitted, when pressed, to a
pro-life bias.

Reference: Unknown (2004). “Deposit Your
Stem-Cell Hopes Here.” Associated Press via Wired News, July 14.

Reference: Philipkoski, Kristen (2004). “Senator Pushes
Adult Stem Cells.” Wired News, July 15.

States May Support Stem Cell Research

Venture capital for stem cell research in the US is about as measly as
federal funding for it, reports Kristen Philipkoski in Wired. The fact
that venture capitalists are contributing to state initiatives, such as the
California Stem Cell Initiative, to bypass the Bush administration’s funding
restrictions is a sign that venture capital would like to get into the game
provided that the government would do its bit as well. Kleiner, Perkins,
Caufield & Byers has donated $500,000 to help the California Stem Cell
Initiative pass the November ballot. It would raise $295 million per year in
bonds, for ten years, to fund stem cell research in California. Philipkoski
lists other contributions amounting to almost $2 million. The amount of the
California initiative makes Rep. Gary Ackerman’s proposed “Ronald Reagan
Memorial Stem Cell Research Act,” which would provide $87 million in federal
funds for stem cell research, look anemic.

Reference: Philipkoski, Kristen (2004). “Stem-Cell Cash on
a Winding Road.” Wired News, July 23.