Back on the Blog Wagon for 2011

Some new themes I'd like to reflect on in the next few weeks:

. The importance of basic science research to high-impact innovation, and its funding prospects in light of contemporary politics and the NIH's new commitment to translational research

. China's role in the future of life science venture creation - the money, the science, and the market are all there, but what about the other critical elements of entrepreneurial ecosystems, such as experienced entrepreneurs and sufficiently venture-friendly IP, regulatory, and economic policies?

. The role and structure of the FDA in a shifting biopharma environment of increased consumer health products and reduced traditional small molecule approvals

Coming soon!

The Sickness Industry

This month's Technology Review has a nice piece ("A Pound of Cure") on the importance of electronic medical records (EMRs) to the future of health care. The article takes the issue beyond the mundane cost/convenience arguments for EMRs, and puts it in the proper context of a future health care system that is preventive, predictive, and, more personalized. Of course, EMR implementation is only a first step toward this end, but the author reminds his readers that this step is yet to be embraced by a trillion dollar 'health' industry that ultimately survives by selling things to sick people, rather than by keeping people healthy.

Today, thirty-five years after Wall Street began phasing out physical stock certificates, when virtually every industry from airlines to zoos employs integrated electronic record-keeping and tracking, the U.S. health care system still stubbornly refuses to adopt technology that could save doctors' offices and hospitals hundreds of billions of dollars (according to Richard Hillestad of the Rand Corporation, Health Affairs (2005)), and facilitate further cost- and life-saving measures by allowing comprehensive data collection and comparative safety/efficacy analysis of existing therapies. Such data, not accessible via our modern dinosaur system, are usually invoked for their policy (e.g., regulatory and reimbursement) implications, but they are less often appreciated for their importance to technology development (see my original post on the role of innovative medical technology, and why it is a powerful tool for the cost-reduction campaign). Simply, when scientists and engineers have more data and a clearer picture of relative effectiveness, they tend to ask better questions to direct better research.

I acknowledge that early detection and prevention are ambitious, complex undertakings, years in the future, and far from automatic once EMRs are in place. But it is difficult to imagine how any such advances can occur without the fundamental first step of radically improving our systematic approach to data collection and management. Perhaps this reality is what will ultimately drive EMR adoption among the nation's leading hospitals and clinics; those institutions that rise to the technical and operational challenges and invest in improved health IT will be rewarded by an elevated status and increased popularity that are likely to follow the federal money and national media spotlight.

Newt's Center for Health Transformation

I started writing this post a few months ago, and just found it in the 'unposted drafts' heap. Why not just put it out there?

Newt Gingrich's recent post on the National Review Online's "The Corner" is a mixture of good intention, fundamental ignorance, and conservative dogma. Gringrich, founder of the Center for Health Transformation, reminds his readers that "bureaucrats have tried health-care reform before without much success," and continues with a vapid, uninspired litany of what our health care system should be: mainly, one in which individuals don't get sick, doctors don't make mistakes, and the government does as little as possible. "Our goal," Gingrich writes, "should be to take back our money from the crooks who defraud the system, rather than taking it from the American taxpayers." Of course preventive and predictive medicine should be maximized, medical errors minimized, and fraud eliminated. Of course health care should be universally accessible, of the highest quality, and free for American citizens. But suggesting that these goals can be accomplished by individuals alone, without government support, demonstrates fundamental lack of understanding of the problem's magnitude and complexity, and an unabashed political dishonesty.

To his credit, Gingrich acknowledges that health information technology is an important part of the health system improvement process. Also admirable is his emphasis on the patient's role in the systemic health care process, an often over-looked component of intervention efficiency assessment and prediction/prevention measures that are crucial to sustainable reform. I suppose Gingrich's Center for Health Transformation is an effort to address these needs without involving "bureaucrats" and "big government." The Center's website lists ambitious "metrics" of success, including "prevention of all medical errors" and "elimination of all preventable diabetes." How such sweeping change of this magnitude is achieved without nation-wide determination of and adherence to data-collection and intervention protocols or guidelines is, I guess, left to individuals and their will power. How individuals without medical educations are expected to make informed decisions about their care, without standardized data that attempt to compare available interventions, isn't addressed by the Center's efforts to "cut out the middle man." How the practice of medicine itself is supposed to progress from an intuitive process, in which error is inevitable, to a more precise, data-driven process, in which error is minimized, is ignored. To sum up Newt's message: it's not realistic for government to play a positive role in health care reform, but the Center for Health Transformation can "prevent all medical errors." Obviously, because politicians are human beings but doctors are gods. Right.

As much as I'm frustrated by the off-hand dismissal of any possibility that government can play a positive role in improving America's health care system, I do appreciate the Center for Health Transformation's emphasis on individual action. While I don't agree that "personal responsibility" to live healthier is the solution to any of the most problematic aspects of the broken U.S. health system (see Atul Gawande's recent New Yorker piece), I do believe that it is only by the united action of citizens that any significant social change can happen.

More on the connections between social activism/disobedience and technological innovation coming soon...

Building Another Strawman: The Impact of Taxes on Entrepreneurship

The Massachusetts Institute of Technology and the Kauffman Foundation announced last week the results of a study, "Entrepreneurial Impact: The Role of MIT," according to which MIT entrepreneurs have created companies that "currently generate hundreds of billions of dollars and hundreds of thousands of jobs to regional economies." A less conservative, global estimate of these companies' annual world sales is estimated at $2 trillion, making the MIT "entrepreneurial ecosystem" the equivalent of the world's 11th-largest economy. Following announcement of this study, the belief that reinforced entrepreneurship will have significant positive impact on the American economy, and will play an important role in leading us out of the current recession, has picked up support in recent articles by Thomas Freidman (NY Times) and Reid Hoffman (Washington Post).

Distribution of federal money to a lightly regulated investment industry isn't likely (and for plenty of good reasons), but the general idea of stimulating entrepreneurship is a good one, and deserves serious consideration. Such efforts address immediate needs by providing jobs, but also put the United States in better position to meet the health care and energy challenges that threaten our future economy and overall well-being. Technological innovation, brought to life by entrepreneurs, is critical for health care cost reduction, expansion of quality care to more Americans, and development of sustainable energy alternatives. The recently announced Recovery and Reinvestment Act commits an impressive amount of money to scientific research and technology infrastructure, which is a great start, but we still need additional support, from government or elsewhere, of nascent ventures stuck in the "funding gap" between academic research and high-quality investment. Along these lines, J&J, Lilly, and other pharmas are partnering with universities and venture investors to build early-stage development programs and "accelerators" to capture technologies typically lost in the "valley of death" between initial scientific publications and progress through the early regulatory stages. Partners HealthCare, an integrated health system non-profit founded by Massachusetts General Hospital and Brigham and Women's Hospital, recently spun out the Partners Innovation Fund to address the same need. Even traditional venture firms recognize the need to readjust investment priorities in light of President Obama's commitment to health care reform (see Psilos Group's Albert Waxman recent post on The Health Care Blog, in which he identifies innovation as a key element of health care reform, and calls for increased action among venture investors in the health care space).

Still others have a different perspective of stimulus efforts, health care reform, and their impact on innovation. James Manzi of the City Journal wrote earlier this week that increased national spending is "bad news for American entrepreneurs." He argues that the increased income taxes needed to recover the expenditures will discourage potential entrepreneurs from kicking their start-ups into action. Manzi reasons that the "rational" entrepreneur will have to foresee higher odds of success in order to make up for the lost pay-off going to increased taxes. Unfortunately for those eager to jump on big government spending amidst economic crisis as anti-capitalist, Manzi's argument simply doesn't apply to any self-respecting entrepreneur. The reality is that entrepreneurs face such steep challenges and low probability of success at the outset of venture creation, especially if their ideas are worth anything, that whether they pay 39% instead of 36% in federal income tax, or 20% instead of 15% in capital gains, is hardly a consideration, and never a deal-breaker. Entrepreneurs start companies to build something new and make a meaningful contribution - this is the only way they succeed at any significant level, and the only way they are eventually financially rewarded for years of hard work with little pay and no guarantees. Arguing that concern over these kinds of tax increases will "squelch" entrepreneurship shows a fundamental misunderstanding of the entrepreneur.

Our health care system relies on public servants and entrepreneurs to work together and realign cost-coverage-quality trade-offs. Our country needs entrepreneurs more than ever to create jobs and stimulate local economies. I believe our entrepreneurs will rise to these challenges. The calls of unmet need have driven American entrepreneurship for over two centuries, and I don't see why our current situation should be an exception. Those "entrepreneurs" who opt to sit on the sidelines and wait for better odds of "success" should consider a career change.

NICE Innovation

England's National Institute for Health and Clinical Excellence (NICE) announced last week that it has commissioned Professor Sir Ian Kennedy to conduct a study on 'valuing innovation.' Evidence for the report will consist of written submissions and information gathered from workshops with interested parties. How 'innovation' and 'value' are defined, measured, and related to each other will be the subjects of the study.

What this study reports should be instructive to the progress of U.S. health care policy for a couple reasons. For one, U.S. health reform efforts require systemic cost reduction and comparative effectiveness assessment of medical interventions in order for universal coverage to be affordable. An inevitable part of these processes is the evaluation of new medical technologies. How their 'value' is defined and measured is tricky business, and likely to upset more interest groups than it pleases. The NICE commission gives us a glimpse of what pitfalls lie ahead.

A second point of interest will be the NICE commission's definition of 'innovation' and assessment of its cost. Medical technology innovation is dominated by the United States, where much more money, researchers, and institutions are committed to the discovery and commercial development of novel diagnostics and therapies than anywhere else in the world. This fundamentally changes how the U.K. and the U.S. value innovation in their respective countries, because the U.K. (along with many other countries) eventually benefit from successful innovations without proportional contribution to the costs of necessary failures. It will be interesting to see if and how this is addressed in the NICE report.

In previous posts, I have argued that health technology innovation is essential for maintenance of and universal access to affordable, quality health care. I hope that innovation value studies such as NICE's, and others surely to follow, will be used to improve the efficiency of innovation, and not to fuel efforts that arrest innovation or limit its utility.

Thoughts on Regional Variation

The Office of Management and Budget's Peter Orszag tells us that the growing costs of our ailing health care system present the greatest long-term threat to the U.S. budget deficit. In the context of on-going economic, energy, and foreign affairs crises, such a claim should be loud enough to wake up the political sideliners and health reform obstructionists who assume or hope our country's health care crisis will somehow fix itself.

For those afraid that cost control necessitates government suffocation of technology innovation and "rationing" of valuable care, today's Health Populi post highlights a recent NEJM article (Fisher et al., 2009;NEJM 360(9):849-852) that promotes a more optimistic view of the road to affordable, universal health care. The study compares vastly different growth rates in per capita Medicare expenditures among U.S. cities with, presumably, equal access to medical technology. Instead of blaming technology for increased cost growth from 1992 to 2006 in cities like Miami, FL (5.0%) and East Long Island, NY (4.0%) versus that in Salem, OR (2.3%), the authors found that regional differences were highly correlated with differences in physician propensity to recommend discretionary services in clinical "gray areas" (e.g., subspecialist referrals for common, low-risk symptoms such as typical gastroesophageal reflux). Because increased expenditure growth from city to city fails to correlate with any measure of improved health, the take-home message of the report is that comparative studies between high-cost, high-growth regions and low-cost, low-growth regions can influence policy that encourages the former to behave more like the latter, without reasonable fear of a subsequent fall in care quality and health.

The regional differences in health care cost efficiency have been noted before - see, for example, 2006 papers by David Cutler ("Making Sense of Medical Technology") and Jonathan Skinner et al. ("Is Technological Change in Medicine Always Worth It?"). However, the important data uncovered by the recent NEJM article indicate that "technology" and "payment systems" are insufficient explanations of regional spending differences, as all populations in the study have access to the same technologies, and are all in the fee-for-service system). What the study does not analyze is correlation of regional spending with other factors, such as prevalence of medical malpractice reports, physician work-load, patient education, or other information that might provide explanations for regional differences in physician behavior. And with these and other unknown cost-of-care determinants comes the necessity of government help.

Individual physician leadership in medical practices, communities, and the broader health care system will go a long way in improving the efficiency of care, but without data-driven guidelines based on comparative cost-efficacy measurements, there can be no unified progress toward improved, affordable care. Physicians and policy makers can work together to assure the right information is collected and properly acted upon. But, ultimately, if we wish to provide sustained, quality, universal care, we need fundamental and comprehensive payment reform through which payers and providers are accountable for costs, but incentivized to keep more patients healthy.

Technology in Health Care: Reconsidering the "Wasteful" and "Unnecessary"

I think it's time for expert and amateur commentators of health care reform to get more specific about "wasteful" and "unnecessary" health care spending. What, exactly, is waste in the context of human care? Where do we find it? How do we extract it from our health system? Medical care is currently too expensive to achieve high-quality, universal care, so there is little doubt among reputable economists and health policy experts that overall cost reduction must accompany efforts to expand coverage and accessibility. Fortunately, the Obama Administration's first steps toward health care reform suggest an understanding that science and technology are not necessarily the sources of "wasteful" or "unnecessary" care, but rather the tools with which we can increase efficiency of care and reduce costs.

Medical technology is often identified as a primary source of overspending in our health care system because it is estimated to have contributed to 50% of recent growth in health care spending. A problem here is that the growth in health care spending has become synonymous with the excessive and the wasteful in health care spending. Economists and other commentators argue that we must cut out unnecessary costs by targeting the drivers of cost growth. This is faulty logic that, if acted upon, could be disastrous. Viewing the progress of innovative technologies under this lens of cost reduction is precisely upside-down. Not only do attempts to control adoption and use of innovative medical technology carry severe, unintended consequences for the overall quality of health care, but incentive-directed technological innovations, directed toward hospital and physician care cost reduction, can substantially reduce overall costs in the near-mid-term, while assuring improved quality in the long-term.

Technological innovation is inseparable from the cost-coverage trade-off in health care because it plays a common role in comprehensive data collection and efficient information consolidation and management; together, these lead to systemic cost control and allow sustainable expansion of coverage. President Obama's early action to invest in the collection and management of health data and information is an important first step in moving medical care to a more efficient, precise process that is better for payer, provider, and patient.