Previously this month, I gave predictions for 2023. Here, I’ll offer some aspirations for the healthcare system in 2023: What I hope to see happen in healthcare and public health (but probably won’t).
An article posted recently by the American Consumer Institute Center for Citizen Research stated: “In time, a more equitable healthcare industry will develop that will not only expand access, but also reduce the steep price of prescription drugs that millions of Americans are currently forced to pay.”
Oh, what wishful thinking. While we’d all like to see a “more equitable healthcare industry” that expands patient access and lowers out-of-pocket expenses on prescription drugs and other healthcare items, I don’t see this happening anytime soon. While the Inflation Reduction Act’s (IRA) drug pricing provisions, for example, do some really good things for patients, such as the $2,000 cap on annual out-of-pocket spending for Medicare Part D beneficiaries, the legislation is extraordinarily limited in scope. It’s just focused on prescription drugs, and is only applicable to Medicare beneficiaries.
Even where the IRA does have an impact in terms of limiting the rising prices of existing drugs, it doesn’t (can’t) hold drug companies accountable for high launch prices of drugs that don’t align with value.* Given the lack of market discipline - which reflects market imperfections at best, failures at worst - feasible ways to align price and value need to be established. But in the U.S. we’re about as far removed from material changes to the alignment of price and value of prescription drugs as we were 10 years ago. We do a lot of talking about it, and very little doing.h
And worse, the IRA essentially reinforces the dubious role of pharmacy benefit manager (PBM) rebates, which often distort and create a wedge between price and value, giving PBMs free rein to obfuscate and perpetuate a dysfunctional drug pricing system.
The ways in which PBMs operate lay the groundwork for numerous warped incentives baked into the U.S. drug channel. Take, for example, the fact that PBMs often prefer the higher list priced (and therefore higher rebate) branded drug or originator biologic over lower-priced generics and biosimilars. It’s Exhibit A, if you will, of a market failure. The Trump Administration tried several times to address this issue, to no avail. Currently, the Biden Administration is pursuing a Federal Trade Commission inquiry into anti-competitive practices by PBMs. This could lead to legal action in the form of fines or other penalties that would prevent or at least dissuade PBMs from erecting barriers to competition. Let’s hope this happens, as the lack of transparency and concomitant anti-competitive practices in drug pricing harm patients.
Access, affordability, and availability of prescription drugs
There’s often enormous hype - sometimes justifiably so - about the dozens of new medications entering the market each year. Pharmaceutical innovation can be fantastic when it comes to, for example, certain cancer and orphan drugs, or Covid-19 vaccines and treatments, for that matter.
Yet, access and affordability are (or become) system-wide problems for many of these innovations, as is availability of certain (usually older and off patent) pharmaceuticals that are public health focused. There isn’t any easy way to scale up production of critical items, such as generic antibiotics, to meet demand. And there remains a limited profit motive to improve the situation, particularly for low-cost medications, such as amoxicillin. Here, the biopharmaceutical ecosystem doesn’t match public health needs.
Referencing the acute and chronic shortages of certain generic medicines, including amoxicillin, Dr. Megan Ranney of Brown University said that “in this country, we continually forget that the profit motive is not sufficient for the public’s health.”
Ranney’s statement doesn’t imply that profits are bad. But, it does mean that across the healthcare system there is market suboptimality which ought to be addressed.
IRA’s very narrow reach
The IRA’s drug pricing provisions only impact one segment of the healthcare sector - prescription drugs - that contributes less to overall healthcare spending than sectors, such as hospital inpatient and outpatient care. It leaves the latter two sectors untouched. And, the IRA has no direct impact on the commercial space, which is still the one that the majority of Americans are part of.
The IRA’s healthcare components also completely ignore numerous salient problems in U.S. healthcare like the mental health system, which is utterly broken. State hospitals’ availability of psychiatric beds has shrunk dramatically in recent years due to drastic budget cuts and staffing shortages. Without adequate inpatient beds for treatment during an acute crisis, as well as follow-up and stabilization, the mental health system is deficient.
It can be a cruel, unjust, and woefully inadequate healthcare system for many patients, and not just in mental health. And practically wherever the system is in disrepair, the government ignores the problem until it can no longer do so because of constituent (patient) pressure, at which point the damage has already been done. Take surprise medical bills, for instance. It took many years for this to even come to the floor of Congress and for something to be done about it.
Just paying medical bills - not just surprise ones - can be a major burden for many American patients. A Kaiser Family Foundation analysis found that among women experiencing problems with paying medical bills in 2021, more than 50% had difficulty paying for necessities like food, heat, or housing.
And, this being the U.S., businesses running so-called “patient financing” schemes aren’t shying away from preying on the vulnerable who have trouble paying their bills. As many Americans are overwhelmed with medical expenses, patient financing has become a multi-billion dollar business, with private equity lined up to cash in when patients and their families can’t pay for care. And so the next scandal is unfolding, which Congress will probably (mostly) avert its eyes to for the time being.
To give another instance of how defective our healthcare system is, and where there is no regulatory mechanism (yet) to rectify the dysfunction, consider health insurer schemes to bilk beneficiaries. UnitedHealth Group looks to “make a lot more money” in 2023 by funneling more of the insurance premiums it collects from beneficiaries toward itself. The conglomerate has become a de facto provider of outpatient care by gobbling up numerous healthcare provider practices. It will now direct (well, require) many of its covered lives to obtain care from entities it owns. This move doesn’t benefit anyone except UnitedHealth. As Bob Herman at Stat News writes, it “allows its left hand to pay its right.”
Perhaps the unfounded belief among many government officials and legislators is that market forces will eventually solve all these problems. But when markets are sub-optimal and siloed into different healthcare sectors that don’t effectively communicate with each other, regulatory intervention is warranted.
For decades, we've been talking about important reforms to the U.S. healthcare system as a whole - including aligning price and value of all healthcare services (not just prescription drugs) and reducing patient out-of-pocket costs - with very few concrete results. Over time, piecemeal changes have happened, to be sure. But these have not been structural or system-wide. Some of this is owes to the inherently sluggish pace of politics in the U.S. Intentionally or otherwise, the U.S. political system is not conducive to systemic and comprehensive change of anything, let alone healthcare. Moreover, a penchant for keeping things as they are is due to entrenched vested and special interests of the various stakeholders that make up the system. But the exigencies of our persistent and troubling life expectancy problem demand that we take a bold perspective which has the patient as its focal point.
About the Author: Joshua Cohen
I'm an independent healthcare analyst with over 22 years of experience analyzing healthcare and pharmaceuticals. Specifically, I analyze the value (costs and benefits) of biologics and pharmaceuticals, patient access to prescription drugs, the regulatory framework for drug development and reimbursement, and ethics with respect to the distribution of healthcare resources. I have over 110 publications in peer-reviewed and trade journals, in addition to newspapers and periodicals. I have also presented my work at numerous trade, industry, and academic conferences. From 1999 to 2017 I was a research associate professor at the Tufts Center for the Study of Drug Development. Prior to my Tufts appointment, I was a post-doctoral fellow at the University of Pennsylvania, and I completed my PhD in economics at the University of Amsterdam. Before pursuing my PhD I was a management consultant at Accenture in The Hague, Netherlands. Currently, I work on freelance basis on a variety of research, teaching, and writing projects