Ezra makes a key point that has always been a sticking one for me, as well: a for-profit health care or pharmaceutical corporation does not have an incentive to improve your health. In order to make money, the consumer needs to require more of their service. Big Pharma is better off creating either marginal medicines with desirable side-effects, like ED pills, or medicines that treat symptoms (pain, etc.) instead of causes. Ditto for-profit health care.

Couldn't agree more with your point that innovations in the way that the health system runs will provide far more value to the nation than innovations in new technology, drugs, etc.

Unfortunately, innovations in quality, safety, and efficiency do little to enrich VCs, doctors, or hospitals.

There billions in a cancer drug that works marginally better at extending life a few months...while a hospital system will lose its shirt running a diabetes management program.

Even in government there's a huge difference in funding for the NIH (research on new drugs, therapies, genomics, etc.) vs. AHRQ (comparative effectiveness, health services research, health IT, etc.). NIH is $30-oddB per year while AHRQ is ~$300M...

AHRQ has established a compendium of innovations here:
http://www.innovations.ahrq.gov/

Not that I see awareness and services as exclusive (in fact at their most effective they usually work in tandem,) but just to further support the argument you're making I would say that wider access to services AND greater awareness about risks and lifestyle are both much more effective means of improving overall health than innovation.

And both are so much cheaper. I admit this is an arbitrary number, but I bet that if we dedicated just 20% of the money currently used for innovation and channelled it towards improving awareness and services that the population would be significantly healthier.

Ezra, Ezra, Ezra, don't you know if you get an MBA you don't actually have to know the details of anything? See, all you have to do listen to someone talk about a subject for a few minutes, choose a template, and you have your answer to any question.

Ezra,

This all sounds well and good (I agree with a of it), but let's add a dose of political reality to the picture. The only health care reform that we know right now that will pass, whether its Obama or McCain, is allowing for Medicare bargaining of drug prices. (I actually think the resulting legislation will be more anti-industry with McCain. He's for the legislation himself, and will be willing to give Democrats full carte blanche as a chit to trade for something else he cares about. With Obama, Republicans will make him compromise some.) The "bargaining" will begin immediately. Not based on value, or comparative effectiveness research that won't be available for at least 5-10 years. Its a pure cost-savings, based on purchasing power alone. That sounds great-- but see BBA of 1997. Medicare did the same thing with hospitals. They "bargained" great rates with hospitals then too-- so good that the resulting financial operating model was not feasible for many hospitals, pushing Congress to roll back many of the "discounts" in order to allow hospitals to stay in business in the BBA reform act of 1999. Of course, pharma financials and hospital financials are different-- and a cut in rates to pharma will lead to reductions in R&D in order to maintain profit margins in the short run. The impact of reduced R&D spend won't be seen for 10 years at minimum (standard drug development cycle) so unlike hospital reimbursement, there won't be an immediate feedback mechanism allowing for Medicare to fix its "bargaining" mistakes two years later.

Does this mean that we should never be a look at policy of drug prices? No. But two points. The whole focus on drug prices is 5 to 10 years late-- government will come to the "rescue," right about the time that insurance companies have just started figuring out to put controls on drug spending that society doesn't go crazy about. Ezra points out late stage cancer drugs-- these and other drugs are beginning to have real restrictions placed on them due to their cost and incremental benefit to older therapies. So what's the result? The outlook for most major pharma companies is grim in the next 5-10 years as many blockbusters come off patent, and the biotech industry is right around the breakeven point as a whole. Total drug cost spend is expected to remain relatively flat, just as it has been once you account for the increased access provided for by the recent Medicare drug act. It just seems that the focus on drug prices is made precisely by people who don't understand what's really happening in health care right now. Its a government fix for a problem that already has a decent solution-- something that can't be said for 5 or 10 other major issues in health care.

Which brings me to my standard point that the money is mostly in the hands of physicians and hospitals, and policy doesn't focus there is more about politics (or a poor understanding of a heath care system problems) than actually fixing our system. But I'll bring a little nuance to the point this time, given Ezra's (rightful) focus on value. When acid blocker medications were making billions a years (now most are generic) you could look at that as an increased system cost without knowing more. Of course there is more to the story, the rate of ulcer surgery, once the bread and butter of general surgeons, dropped precipitously-- so the billions in surgery costs moved to pharma costs. Same with diabetes. Better insulin controls helps lower acute events requiring hospitalization, so the billions in hospital spend switches to drug spend. There are other examples here, without even mentioning that even if the value isn't immediately realized during the patent years, the total innovation value is realized once generic. So folks like look at increases in drug spend, but these examples show the fallacy of doing do outside the context of value.

PS Cohn's piece on this is pretty bad. Here's an exercise-- excerpt two sentences with real meat.

PPS As I've written before, there's no need for drug prizes. We have them, they're called profit. There may be a need for more value-based pricing and/or patent reform, but I've heard absolutely no good reason why the left thinks yet another part of the health care system should be nationalized.

for-profit health care or pharmaceutical corporation does not have an incentive to improve your health.

I'm no healthcare industry defender, but this isn't entirely true. At least not in an industry with competition.

If you make a drug that makes me feel better but doesn't cure me, and someone else makes a drug that cures me, I'm going to buy the other drug. Sure, long term, they've lost me as a customer of that drug, but on the other hand, you aren't going to sell anything unless you make your drug cheap and the other is too expensive.

Big Pharma is better off creating either marginal medicines with desirable side-effects, like ED pills, or medicines that treat symptoms (pain, etc.) instead of causes. Ditto for-profit health care.

Right, but only up until the point where someone hits the market with an actual cure. If they're colluding, that's one thing. But if you treat symptoms, and I cure disease, I'm going to sell more drugs. And though I may be harming my long term prospects, I'm harming yours, too, so it doesn't do you any good to make a drug that treats symptoms if my cure is out there.

Same holds true for doctors and hospitals.

Right, but only up until the point where someone hits the market with an actual cure.

Drugs seldom, if ever, cure disease. The exception, of course, are antibiotics. The vast majority of pharmaceutical drugs are treatments, not cures. Actual cures, in pill form, will not be forthcoming for any disease categories outside of bacterial infections.

Ezra said:

This is a tricky argument to make, as people generally like to equate better health with awesomer technology, but developing a slightly better drug for late-stage cancer -- a good, profitable innovation -- will do much less for health than getting the flu vaccine to everyone who needs it, or creating systems so everyone with elevated cardiac risk is on statins. These interventions are low innovation, but actually extremely effective.

Actually, a lot of the real life-saving innovations are in things like the basic processes doctors use when they treat patients, as opposed to magic bullet drugs. See, for example the excellent New Yorker article from last year on the number of lives that could be saved in ICU doctors would follow a simple checklist when inserting lines. These are the kinds of simple innovations that are thoroughly neglected under our current system because there is no incentive for them. Saving lives is no incentive. Making money is the only incentive our current system recognizes.

Drugs seldom, if ever, cure disease. The exception, of course, are antibiotics. The vast majority of pharmaceutical drugs are treatments, not cures. Actual cures, in pill form, will not be forthcoming for any disease categories outside of bacterial infections.

OK, vaccines then.

HIV, malaria and tuberculosis don't have vaccines. Curious that all of those diseases are only dominant health risks in poor counties, no?

Drugs seldom, if ever, cure disease.

Thus the mantra of surgeons: "To cut is to cure."

Though a lot of anti-inflamatory steroids cure various skin conditions and eye-inflammations.

Excellent post, Ezra. Your comments expand upon my initial reaction to Megan's post.

I wish your last paragraph that parses technology vs. health care was more widely appreciated.

I don't post often, but that was me at 5:53PM.

Ezra, you said everything I was about to write in a comment on Megan's piece, before I decided to spare myself the agita. And more. So I'm only chiming in to provide the link to the Atul Gawande piece on checklists that Rob Mac mentioned, because it's a really elegant example of how our lionizing of heroic interventions in health care can cause harm in its neglect of the simplest, least innovative practices.

If I develop a cure for cancer, I'm going to capture 100% of all market share and put everybody else out of business. The profits from that are infinitely higher than splitting hte market 20 ways with a bunch of maintenance drugs that dont cure.

So its a joke to say that cures dont pay as well as "maintenance" treatments and therefore arent pursued by profit-seeking entities.

Some of the problem may flow from our inability to capitalize health. While individuals may value their own health, and the government should value our collective health, there is no line item for it in our accountings. The fact that poor collective health increases operating expenses is never accounted for.

I was reading Lebergott, a labor economist, recently, and he pointed out that the canals in Mississippi and Louisiana were built by poor Irish immigrants, not slaves. Slave owners capitalized their slaves health, and canal work, often through marshes, was unhealthy. It was cheaper to hire free labor than lease slaves. I'm not arguing for bringing back slavery. I'm just arguing that if something drives expenditures, it should appear on some asset-liability balance sheet.

"you can go the conservative route of making health care too expensive to buy so people purchase less of it"

Really is that so healthcare whiz?

Care to name the top 3 states in terms of healthcare cost for us? How about the top 10?

Better yet just average the annual cost for all Liberal ran states and compare to conservtive states for us.

Liberals have F'd up their HC systems leasing to cost almost twice as expensive as conservatives. To claim such as you have displays a complete ignornace of the facts or outright dishonesty.