By Former Congresswoman Nancy Johnson. Too often, when we talk about innovation, there’s a ‘yes…but’ quality to the discussion.  Yes, we appreciate the concept of developing new medicines and technologies to extend and enhance human life, but we increasingly question whether the cost of innovation is commensurate with the value it delivers.

Logically, if the weight of public and policymaker opinion continues in this direction, that innovation undermines the greater national goal of affordability, then this will inevitably lead to policy actions that reflect this line of thinking.  We’re already seeing this to some degree with the weighty pharmaceutical and device taxes that are part of the new health reform law and the creation of an independent board with the power to slash Medicare reimbursements.  While the intention makes sense, it is not clear this path will yield the intended, and worse, may contribute to unintended and undesirable consequences.

There’s too much at stake, both economically and in terms of societal well-being, to travel far down this path without having an absolute certainty that innovation does, in fact, make health care less affordable.  Do we just take it on faith that innovation drives costs skyward, or is there empirical evidence that says otherwise? 

To be sure, the literature includes a wide range of research on the relationship between innovation, costs, prices, and value.  Like almost every aspect of health care policy and research, this one is layered in complexity.  Sound bites can be misleading, definitions matter, and important findings can be misconstrued for political purposes and philosophical positioning.

So much has been written about the relationship between prescription drugs, costs, and prices. What does the literature say about the drug prices as they relate to health care cost growth?

Last month, Dr. Ernst Berndt of the Massachusetts Institute of Technology and Murray Aitken of IMS Health published the working draft of a paper that makes an important contribution to this debate.  Berndt and Aitken take on one of the widely accepted statements about the relationship between innovation and affordability – that prescription drugs are getting more and more expensive – and ask whether this thesis is supported by available pricing data.

The authors took a look at the Hatch-Waxman Act, the legislation crafted by Congress in 1984 that granted drugmakers a period of market exclusivity on their new products and then promoted consumer access to generic versions of those drugs once that period ended.  Some have suggested that the effects of Hatch-Waxman are tilted too far toward the interests of pharmaceutical companies, as exemplified by the regular reports issued by AARP monitoring drug price increases.   In fact, AARP said the prices for the top 217 branded drugs went up 9.3 percent in 2009 even though the consumer price index declined. (more…)

Ornery Facts

As we work to cover the uninsured, a goal all Americans share, it is key to understand who they are.  Otherwise we will change the law but not achieve the goal. Let’s accurately identify who really needs a new program to provide coverage.

20% are eligible for government programs but are not enrolled. That is almost 10 million people who don’t need a new program; what they need is better outreach by existing programs. Add to that the 19%, or 9 million, that earn more than $75,000. (close to 400% of the FPL for a family of 4) and the 13%, or 6 million, that are eligible for employer coverage (only 5% of whom go uninsured). They don’t really need a new program either. Then there are the 22% who are ineligible because they are here illegally or are in their first five years of legal residence.  That’s 12 million who DO need some type of coverage. So you get some idea of the impossibility of measuring success by “47 million”. (more…)

There are many aspects of our health care system whose continued success we need to assure as we address the great weaknesses of the American health care system. The community health center program provides excellent care for the uninsured and those who rely on publicly-funded programs like Medicaid and Medicare. In many parts of the country the community health centers are leaders in preventative care and the use of health information technology to improve quality of care. It’s a great approach to establishing a broad safety net and we must focus on enhancing and expanding it.

The private market will continue to have a role as well. Our pharmaceutical and biotech industries are responsible for major advances in finding pharmaceuticals to address both cutting-edge needs and rare diseases. Our medical technology industry has developed less intrusive procedures and technological solutions to enormous medical problems. As we seek to eliminate waste and inappropriate care, and as we address the challenges our health system faces, primarily to cover all Americans, improve the quality of care and control costs, we must do so in ways that don’t slow advances in medicine.

Finally, recent government and private sector initiatives to foster public-private collaboration on such issues as information technology, chronic care management, payment reform, access, accountability and patient safety – while they might benefit from careful review – were begun to explore the value of innovative approaches to solving problems and should be retained as we move forward. A fascinating example of such innovations is comparative effectiveness research, on which there is still debate over the most effective and appropriate governance. Consensus must be reached on how to build on the work of AHRQ and others in this critical area of advancing our knowledge about what works and what doesn’t work, so we can target our spending appropriately.