About Kristi Park

Today Barack Obama announced his new Secretary of Health and Human Services, former Senate majority leader Tom Daschle. With his cabinet appointee at his side, the president-elect promised health insurance reform within his first year in office. It’s a promise that, if kept, would create substantial changes in the health care sector.

But the efforts to implement universal health insurance aren’t the only reforms health-related industries may face when a new government comes into power in January. Representative Henry Waxman, a Democrat from California and the soon-to-be chairman of the House Energy and Commerce Committee, has indicated his intention to tackle the issue of direct-to-consumer pharmaceutical advertising — that is, the barrage of TV ads peddling Viagra or trying to convince you that you have restless legs syndrome — once he takes the gavel.

In a move to preempt Congressional action, the pharmaceutical lobbying group PhRMA has issued its own new “rules” for prescription drug advertising. They include guidelines for using celebrity endorsers and actors posing as doctors, as well as suggestions for providing phone numbers for reporting bad reactions to their drugs. The terms “guidelines” and “suggestions” are apt, however: PhRMA has absolutely no power to enforce the rules and little interest in policing its members. The group’s sole means of punishment consists in the publishing of a periodic report of violators.

Not surprisingly, Waxman’s plans for regulating drug ads go a bit farther. Among other things, the congressman would like to impose two-year bans on commercial advertising for some new drugs, arguing that the early years are when most advertising takes place, thus “increas[ing] the number of consumers exposed to safety risks of new products long before those risks are truly understood.” That’s a far cry from PhRMA’s polite request that companies tell you when an actor isn’t really a doctor but just plays one on TV. And something tells me Waxman would like something stronger than a “shame-on-you” report as a means of bending drug companies to his will.

The New York Times has an interesting piece about the difficulty of shutting down bad hospitals, taking as its example University Hospital in Syracuse, New York. The hospital, which is owned by SUNY Upstate Medical University, has had its quality issues over the years, with low ratings from HealthGrades and numerous instances of preventable medical errors.

The article enumerates the reasons bad hospitals rarely get shuttered: There’s no federal agency overseeing hospital quality, they are major employers in any given community, etc. And it focuses particularly on the situation in New York — with its exceptionally expensive and bloated hospital system — where attempts to improve University Hospital by merging it with another Syracuse facility (Crouse Hospital) have failed.

The story used to frame the discussion, of a woman who has undergone some 20 surgeries to treat incontinence and has ended up worse than ever because of medical errors, is heartbreaking. And for me, it’s yet another example of how the attitude we’ve taken to health care — namely, that access to decent care is not a fundamental right — has contributed to a patchwork system of health care delivery and oversight that serves our citizens badly.

As President-Elect Obama prepares to take office in January, new research has added a weapon to his health care reform arsenal. A report, just published by the journal Health Affairs, supports Obama’s contention that Medicare Advantage — a program that allows private insurers to offer Medicare-funded health plans — is wasteful and ineffective. Obama has pledged to make cuts to the program, a move that would have serious implications for many private insurers.

Among other things, the Health Affairs report finds evidence that Medicare Advantage plans are considerably more expensive for the government and don’t improve health outcomes for senior citizens or produce efficiencies that lower health care costs.

Nearly a quarter of all Medicare beneficiaries belong to private Medicare plans, a number that has grown enormously since the Medicare Modernization Act of 2003 gave incentives to private insurers to expand access to such plans. The theory behind Medicare Advantage, popular with Republican lawmakers, is that private insurers can more efficiently provide coverage, thus lowering costs for seniors and the government.

The problem is, that hasn’t happened.  The federal government pays about 13% more for each Medicare Advantage enrollee than it does for an enrollee in traditional government-run Medicare. MA participants may receive additional benefits from their private plan — like fitness club memberships and vision benefits — but non-MA seniors and taxpayers are the ones who foot the bill for those extras.

In the last presidential debate, Obama called the extra money going to private MA insurers “a giveaway.” And it’s true that the expansion of Medicare Advantage has been a boon for many private insurers, which have enrolled millions of retirees when other new customers were hard to come by. UnitedHealth, Humana, and Kaiser Foundation Health Plan are the largest providers of private Medicare plans, though Humana might be hit the hardest by any cuts to the program. The company has grown its Medicare Advantage business aggressively and now depends on it for more than 40% of revenues. WellCare Health Plans and HealthSpring are also mightily beholden to Medicare Advantage members.

Needless to say, those companies aren’t going to be happy with cuts to Medicare Advantage, though there are other parts of Obama’s health care reform agenda — namely, the expansion of health coverage to more than 45 million uninsured Americans — that might soften the blow. Still, I wouldn’t expect them to give up their government paychecks without a fight.

Max Baucus sure doesn’t waste any time. While Sarah Palin is still returning her $150,000 wardrobe and President-Elect Obama is measuring the White House drapes, the Democratic senator from Montana made a play for leadership on health care reform with a policy paper outlining his plan to revamp the health care system and provide coverage for all Americans.

Perhaps not surprisingly, his plan is similar, though not identical, to Obama’s. Among other things it would:

• Expand Medicaid and SCHIP coverage
• Temporarily allow those over 55 to buy into Medicare
• Create a national marketplace called the Health Insurance Exchange, where individuals and small firms could buy health coverage; private insurers and a public program modeled on Medicare would compete for customers
• Require employers to either cover their workers or pay into a health care fund
• Give individuals and small businesses subsidies to get health insurance, and
• Require that every person have health insurance.

That last bullet point — the controversial mandate for everybody to buy in — was a key point of contention between Obama and his Democratic rival Hillary Clinton during the primaries. Obama’s plan didn’t include a mandate for adults to buy coverage. Baucus’ plan does, and, as Maggie Mahar points out, it’s for a good reason.

The reason is that the Baucus plan forbids insurance companies to deny coverage or hike premiums on people with pre-existing conditions. Without a mandate, the young and healthy would likely opt out of getting coverage, but insurers would still be forced to cover the sick, who use a lot more expensive health care. It’s not viable for insurers to do that and remain profitable. Hence, the mandate.

Whether health care reform ends up looking anything like Baucus’ blueprint remains to be seen, of course. Numerous other voices will have to be heard. And, as Baucus himself admitted in a press conference yesterday, it would take several years for all his proposals to take effect, even if Congress and the new president were to act on Obama’s first day in office. Nevertheless it’s heartening to see movement on systematic health reform after years of stop-gaps and indifference. I, for one, am looking forward to the debate ahead.

As cash-strapped consumers these days are trading in Neiman Marcus for the discount stores, big pharmaceutical companies flush with cash are looking to spend some of that money on bargain-bin acquisitions. Several drugmaking giants have indicated their intentions to use the economic downturn to snap up smaller developers at cheap prices, especially tiny biotech companies that are struggling to find investors. Novo Nordisk and AstraZeneca both said last week that they’re slowing down their share buyback programs to focus on acquisitions. GlaxoSmithKline (GSK) made a similar announcement earlier in October.

On Big Pharma’s side, the logic behind these moves is apparent: Pharmaceutical companies are rich, with US companies alone sitting on something like $113 billion in cash. On the other hand, their pipelines have dried up and the massive amounts they’re spending on R&D just aren’t paying off. BusinessWeek sums it up thusly:

The industry burned through a record $59 billion in research and development money in 2007, according to the Pharmaceutical Research & Manufacturers of America. It has spent $213 billion since 2004, making it among the most profligate industries when it comes to R&D. The payoff for society was supposed to be a steady flow of products that would improve people’s lives and reduce the government’s health-care expenses. Instead, drug research productivity has been declining. Last year only 19 new drugs were approved in the U.S., and few of them were true breakthroughs.

The pharmaceutical industry has long looked to biotech and smaller traditional drug developers to liven up its own internal research efforts (see the AstraZeneca/MedImmune deal, for one such instance) but the urgency around consolidation has been ratcheted up by the current economic crisis, which is hurting biotech firms more than most.

Always a risky proposition, biotechs are having a tougher time than ever getting investors to bet on them. Virtually nobody can go public these days (Phenomix just withdrew its IPO in October), and private investment has declined sharply. As a result, biotech companies are folding (AtheroGenics), cutting back on their development programs (Maxygen), or — much to the delight of those cash-rich drugmaking giants — selling out cheaply. Avalon Pharmaceuticals, a struggling cancer drug developer, did just that when it agreed to sell itself to Clinical Data for $10 million in stock. Others — like GSK, AstraZeneca, and Novo Nordisk — are anxiously awaiting their chance to make just as good a deal.