Medical Innovation is expensive

Megan McArdle has some strong opinions on how high drug prices have managed to help drive medical innovation:

Drug development is essentially a giant international collective-action problem. The U.S. has kept it from being a total disaster because we don’t have good centralized control of our insurance market, and our political system is pretty disorganized and easy to lobby. If that changes -- and maybe we just changed it! -- we’ll knock down the prices of drugs to near the marginal cost using government fiat, and I expect that innovation in this sector will grind to a halt. Stuff will still be coming out of academic labs, but no one is going to take those promising targets and turn them into actual drugs.

and

There are some promising alternatives. The main two that have been suggested are prizes and having the U.S. government get into the business of developing actual drugs, rather than just funding basic research. I’m in favor of trying both of these approaches. But so far, prizes have not proved themselves as ways to fund what is essentially commercial product development -- at least, not at the same level that patents do. Nor has the government. As we’ve just seen from the government’s attempt to develop a Travelocity-like site for health insurance, there are reasons to think that government might not be very good at that sort of thing. I don’t mean to slur the government -- governments absolutely have developed drugs in the past. But these are not the majority, and government processes often make it hard to do things that companies do easily.

Now I don't want to knock pharmaceutical companies.  A lot of good work is done by these companies.  On the other hand, medical costs in the United States are really, really high.  And the National Institutes of Health has proven itself as a really effective model of targeted and efficient medical research.  Now it is true that the cost of doing this would not be trivial.  Randomized controlled trials are extremely expensive and crucial to ensuring that only safe medications reach the open market. 

So this would be expensive.  But I am unclear as to whether it would be more expensive than the current model of drug development.  And these subsidies could go to many of the same companies that develop drugs now.  I think that this conversation would be much better informed with some actual calculations as to cost/benefit.  This is a bit outside of my expertise, but I see it as a key step to really advancing the conversation. 

Oregon and Medicaid

The new Oregon Medicaid study is coming out at a very bad time for me to comment.  But I want to direct you to the Incidental Economist which is doing a banner job of clarifying why it was hard to get good evidence directly on health outcomes from the study.  Further comments are here. 

One thing to note on health outcomes (poached from the comments at TIE) is:

In the case of total cholesterol the rate was reduced by 17% (from 14.1% to 11.7%). If that kind of drop is not detectable by the study then I think it is a problem.

Or this one:

 HgbA1C drops from 5.1% to 4.2%.

I think that this is too harsh, but it does point out that many of the changes were clinically significant but that the study (for a lot of reasons due to enrollment and short follow-up) is not really able to give precise estimates.   Remember, only 25% of the people offered Medicaid took it, so the adherence rate is a lot lower than what we normally think of in an RCT and so the intention to treat estimate is a poor measure of the associations among those who enrolled. 

Kevin Drum discusses this more here. Pay special attention to the PDF at the bottom of the post.

Different visions of Health Care

One question that has been pretty persistently part of US public health efforts has been a fundamental disagreement about the role of government in health care. This shows up in all sorts of interesting places but has new entered the debt ceiling negotiations. From Paul Krugman:

It turns out that in the final stages of the debt negotiations, Republicans suddenly added a new demand — a trigger that would end up eliminating the individual mandate in health care reform.

This is telling, in a couple of ways.

First, the health care mandate has nothing to do with debt and deficits. So this is naked blackmail: the GOP is trying to use the threat of financial catastrophe to impose its policy vision, even in areas that have nothing to do with the issue at hand, a vision that it lacks the votes to enact through normal legislation.

Second, this is a demand Obama can’t accept, unless he plans on changing his party registration. Health reform doesn’t work without a mandate (remember the primary? Maybe better not to). And if health reform is undermined, Obama will have achieved nothing. So by adding this demand, Republicans were in effect saying no deal . . .

The alternative interpretation is that there is a large segment of the US population that would rather freedom to choose health care than efficient health care. The focus on individual decisions over public well being has implications on a whole host of medical decisions affecting issues like: disease management, fraudulent medications, antibiotic resistance and so forth.

It is hard to see a clear road forward when there is a legitimate difference in such basic questions of health care organization.