The Cost of New Pharmaceutical Agents

Today’s Managing Health Care Costs Indicator is $7.24

The Wall Street Journal has an article in Monday's paper entitled “Hurdles Multiply for Latest Drugs.”  It points out that there is more market pressure from health plans and governmental payers against new expensive brand name drugs. This is especially true for new agents for indications for which there are already generic medications.  WSJ points out that new agent sales (first 2 years) were $11.8 billion in 2005, but only $4.3 billion in 2010.

The article sites a new AstraZeneca medication, ticagrelor, sold in the US under the brand name Brilinta.  This is a new anticlotting agent for those at risk for blockage of coronary artery stents.  In the US, it would like be used instead of  Plavix (clopiogrel). 

Plavix is scheduled to become available generically in 2012.   In the US, it still costs over $6 per day, but in Europe generic versions are already available for 24 cents a day.   The price of Brilinta is $7.24 per day.

The New England Journal published some evidence that Brilinta is better than Plavix – a manufacturer-sponsored study that showed substantially lower rates of  rates of death.

At 12 months, the primary end point — a composite of death from vascular causes, myocardial infarction, or stroke — had occurred in 9.8% of patients receiving ticagrelor as compared with 11.7% of those receiving clopidogrel (hazard ratio, 0.84; 95% confidence interval [CI], 0.77 to 0.92; P<0.001).

As I’ve discussed before, early trials tend to show very positive results, which often fade considerably  with larger trials performed in more different settings

Here’s the conundrum.   It makes sense to approve ticagrelor based on the evidence.   It even makes sense for this medication to be 20% more expensive than brand name Plavix now– since there is some evidence that it’s better.  However, it won’t make sense in a year for this medication to be 30 times more expensive than generic clopidogrel. 

On approach is to pay for “value.”  For instance,Germany has a reference based pricing system for pharmaceuticals that would lower the price of a new agent in its second year if it proves no better than existing therapy.   However, that’s government price control – which we are loathe to accept in the US.

The US approach is to allow the pharmaceutical company to set its price, and ask health plans to control costs.  The health plans will try to negotiate lower prices for preferred formulary status, which is difficult because there is no competitor to AstraZeneca for this medication. The health plans will likely eventually either increase premiums to account for this new medication,  charge patients substantially more for this medicine, keep it off the formulary altogether, or require prior authorization for its use.

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CMS Actuary Projects Future Health Care Growth

Today’s Managing Health Care Costs Indicator is 19.8%

Click to enlarge.  Source

Health Affairs published the 2011 CMS Actuary projections of health care cost growth over the next ten years, and there are some important observations.   As the report points out, these are projections – and the model has to make a series of assumptions, many of which are dependent upon the overall economy, changes in legislation and regulation, and provider reactions to payment reform.

Some of the conclusions:

·        The total spending on health care will almost double between 2008 to 2020, from $2.4 trillion to $4.6 trillion. 

·        Health care overall will increase at a rate about 1% faster than GDP growth.

·        Health care now represents 17.6% of the GDP, and will grow to 19.8% of the GDP by 2020.

·        The portion of health care expenditures that are government payments will approach 50% during this time period, and the federal portion of direct health care expenditures will increase from 27% to 31% 

·        Medicare increases due to aging population are substantially dampened by payment cuts of the Affordable Care Act

·        Eliminating the (unimaginable) SGR 29.4% physician payment cut scheduled for January 1, 2012  would mean that the Medicare increase would jump from 1.7% (substantially below GDP growth) to 6.6% next year.  The SGR elimination is not factored into the chart above – but it has the same impact on projections with or without the Affordable Care Act.

·        The impact of the Affordable Care Act is negligible until 2014, when there is a one-year bump in medical inflation due to the large number of Americans who will receive insurance

·        There are many “winners” in the 2014 payment bump:

·        Prescription drug spending would increase by 10.7%, more than double the increase without the ACA

·        Physicians (8.9% bump, about 1/3 increase)

·        Hospitals (7.2%, just a 1% increase, since many of the newly-insured are healthier than those who were habitually uninsured.

The total cost of increase in coverage is relatively modest, although I suspect both supporters and opponents of the Affordable Care Act will cite this study to support their point of view.   The pressure to constrain future growth in health care costs will continue unabated.

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Health Cost Increases Down

Today’s Managing Health Care Costs Indicator is 1.39

The Wall Street Journal calls growth in health care expenditures “sluggish,” and the Boston Globe  and others  report on multiple hospital layoffs and threatened closings.  The head of the Mass Taxpayer’s Alliance pointed out that health care expenditure growth is way down in Massachusetts – and cautions against overly-aggressive new cost control measures that could threaten the state’s medical, biotech, and pharma segments.

Sounds like we should be declaring victory.

But not so fast. 

There is growing evidence that health care growth is tightly correlated with GDP growth.   As a country becomes richer, its health care costs go up.  In the US, the correlation is 1.39. This means that health care costs have increased exponentially by a factor of 10^1.39 consistently, whether health care costs increases appeared out of control or restrained.  

The corollary is that when a country stagnates, health care growth lags.  Further, when a country frankly loses wealth, health care spending can collapse.

Austin Frakt has pointed to new research showing the correlation between wealth changes and health care cost changes in the US.  Dylan Matthews, who blogs with Ezra Klein at the Washington Post, has posted a series of correlations for different countries   that show that the correlation between health care cost increases and increasing GDP (or aggregate national wealth) appears to hold everywhere it is studied.  Rates of health care cost increases vary – but the correlation does not.

What this means to me is that we should not assume that the current slowing of health care cost increases means that we’ve come up with the right approach to controlling health care costs.  When (if?) growth returns to the economy, we’ll likely see an uptick in health care cost inflation absent new efforts at health care cost containment.  Efforts to constrain health care cost increases are clearly swimming against a powerful economic current of tight association between GDP increase and health care cost increases. 

Frakt suggests we should focus our efforts on getting better quality or quantity of life from health care, since cost increases appear almost inexorable.

I believe we need to keep seeking approaches, whether they are in public health, provider payment, network contracting, or medical management, to be sure we’re purchasing better value in health care.  Perhaps I'm an optimist - but I think the correlation number might have been higher than 1.39 if there weren't so many impressive if imperfect efforts to 'bend the cost curve.'  We should also continue to seek cost savings when the economy is rocky, as demand for elective care is lower, and extra capacity can lead to lower unit prices.  The imperative to control health care inflation will increase when the economy is on the mend.

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Generic Medications Make Prevention More Cost-Effective

Today’s Managing Health Care Costs Indicator is 98%

 Click to enlarge. Source 

Prevention saves lives – but it’s often stated that preventing disease can save money.   It’s intuitive – a mammogram costs far less than treatment of metastatic breast cancer, and a statin medication costs far less than bypass surgery or a stroke.

However, there are historically few medical interventions that are cost saving.  Childhood vaccinations save more money than they cost.  Preventing medical errors can certainly improve care and lower cost, although this is an internal quality improvement as opposed to a new medical procedure. 

But most prevention efforts can improve health care quality and lengthen life – but often at a considerable cost.

Researchers in this month’s Health Affairs reanalyze earlier research on cost-effectiveness, substituting current generic prices for the brand name prices used in past years when there were fewer effective generic medications available.

The good news – the cost per quality adjusted life year in this new analysis goes down between 58% and 98%.   Although the title of the article implies cost-saving, there are no “negative” costs for Quality Adjusted Life Years (QALYs);  a QALY can be purchased in some instances for as little $1022.

Further good news is that there are a number of “blockbuster” drugs going generic in the next few years.

Click to enlarge. Source above. See also article in today's Boston Globe. 

There are still challenges, though.  Many states have less effective laws promoting generic use, leading to higher use of more expensive brand name medicines when they offer little incremental benefit.   Many physicians still object to generic drugs, although laws limiting and/or disclosing pharmaceutical company gifts might change this over time.  Patients aren’t sure, either, and the different colors and shapes of generic medicines diminish their acceptability. 

We need to push hard for the most cost-effective approaches, so that we can better use our limited health care dollars.  This article shows the importance of promoting use of generic medications.

Past relevant  Managing Health Care Cost Posts:

Cost savings with generics, March, 2011

Senators Try to Undermine Generic Bioequivalents  January, 2011

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Public Health Spending Saves Lives

Today’s Managing Health Care Costs Indicator is 5%

Click to enlarge; * statistically significant  Source 

This week, Health Affairs  e-published research correlating higher local spending on public health with lower mortality.  The article points out that the US spends less than 5% of health care costs on pubic health initiatives, less than we spend on administrative overhead in health benefit claims.

Public health spending, which can include anti-smoking education, childhood and influenza vaccines, and sexually transmitted disease and prenatal education, increased in about 2/3 of communities from 1993 to 2005, and decreased in the remaining communities studied.   

From the article:

Communities with larger increases in public health spending experienced larger reductions in mortality from leading preventable causes of death over a thirteen-year period. This relationship was consistent across several different mortality measures, and it persisted after accounting for differences in demographic and socioeconomic characteristics, medical resources, and unobserved community characteristics that jointly influence spending and health. These findings are consistent with recent time-series studies estimating that, nationally, as much as 50 percent of the gains in life expectancy experienced in the United States since 1950 are attributable to public health attention to diet, tobacco exposure, and other measures

This study validates one of the elements of the Affordable Care Act, which includes an additional $15 billion in public health spending.  It also suggests that improving health of communities can lengthen life, and perhaps lower medical claims costs.

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IOM Birth Control Decision: No Increased Medical Costs

Today’s Managing Health Care Costs Indicator is Zero

This week’s recommendation by the Institute of Medicine that birth control should be covered by health plans without patient cost-sharing is bound to cause political fireworks.  Groups that oppose abortion will object because some forms of birth control (IUDs and ‘morning after’ pills) interfere with uterine implantation after conception.  Religious groups will object that mandating that they cover birth control violates their religious doctrine.  Those who believe that patients should pay at least something for services to be sure they value them appropriately will object to birth control having no cost share at all.

I expect we’ll also hear complaints that this is an unfunded mandate – and one more way that health care costs will be increased by the Affordable Care Act.

However, these potential complaints appear to be unfounded. 

The HR consulting firm Mercer did a study in 2000 that showed that medical claims costs went down when employers covered contraceptives.  That’s because pregnancies and abortions are expensive – and oral contraceptive pills are not.  This study was done when many commonly-used birth control pills had not yet gone generic.    

The Washington Business Group on Health (now the National Business Group on Health) also did a study in 2001 suggesting that the direct and indirect cost of plans that did not cover contraception was 15-17% higher than plans that did.   This is because of short term disability claims due to pregnancy.

The federal government’s Office of Personnel Management found no increase in total cost of the federal Employee Health Benefit Plan when it started to cover birth control in 1999. 

These studies have all been cited extensively by those advocating for the IOM to recommend full coverage of birth control, including the National Women’s Law Center and the Guttmacher Institute.

Most mandates do increase the cost of health care.  Covering birth control, though, does not appear to raise overall medical claims cost.

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The Gang of Six and Health Care

Today’s Managing Health Care Costs Indicator is  Six

The “Gang of Six,” Chambliss (R-GA)Coburn (R-OK), Conrad (D-ND), Crapo (R-ID), Durbin (D-IL), Senators Warner (D-VA), presented their comprehensive plan to raise the debt ceiling, overhaul the  tax code, and balance the budget.   The group has only published an executive summary  –and there is a lot about health care in this proposed arrangement.

• The Sustainable Growth Revenue (SGR)  mandatory cuts of physician fee schedules are eliminated.  This costs $300 million, and is a nod to reality since the SGR has been legislatively eliminated every year since the first cuts would have been implemented.
• An additional $200 million in health care spending would be identified – including reducing waste, fraud and abuse, while “maintain[ing] the essential health care services that the poor and elderly rely on.” It sounds to me like this means that Medicare cuts won’t be in the form of higher patient premiums or cost sharing , although others disagree.   No one is in favor of fraud, although rooting it out is pretty hard in practice.    
• The CLASS (Community Living Assistance Service and Supports) Act is repealed.  This doesn’t save any money over the next decade, when workers would voluntarily contribute and have little opportunity to get benefits. There’s been little employer interest in participation, though, and it would be hard to make this insurance program actuarially stable. If premiums for CLASS were expensive, only those who bet they would need it would participate.  If premiums were inexpensive, it would be hard to cover the bill’s costs.  Therefore, over a 20-year time horizon this repeal does save money. It could also increase Medicaid costs, since that state-federal program picks up much of the cost of those who are not able to stay in the community and move to nursing homes.
• The Congressional committees overseeing health, education, labor and pensions would have to identify an additional $70 billion in savings
• The proposal would require the President and Congress to take unspecified action if federal health care costs per beneficiary increased by more than GDP growth plus 1%.   This language is especially important – because it allows for increased federal spending for the aging of the population and for increased Medicaid enrollment.  It’s also similar to the SGR formula – in that the remedy for increased cost growth is unspecified.
• Unspecified federal savings from malpractice reform are included in the proposal.  Malpractice savings to the federal government from tort reform are likely to be low –but lack of tort reform was a notable omission in the Affordable Care Act. 

The lack of specificity of the plan makes it more likely to gain support – and this does appear to me to include substantial “gives” on all sides.

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Nash Equilibrium Returns: Industry Support for the Affordable Care Act Unravels

Today’s Managing Health Care Costs Indicator is $100 billion

One of the unheralded successes of the health care reform effort was to gain the support, or at least acquiescence, of major stakeholders who had opposed health care reform for decades. I called this the “Coalition of the Willing” at the time, after the various countries that not-so-willingly joined the American forces in Iraq in the George W. Bush administration.   Ultimately, the Affordable Care Act was supported by drug companies, the hospital and the physician lobby, medical device manufacturers, and health care unions. 

This broke a long-time “Nash Equilibrium,” where in a multiparty “game,” each party can see the others’ equilibrium strategy – and no player has enough to gain by changing strategy unilaterally.  It’s not easy to overcome the inertia of a Nash Equilibrium, and I was skeptical that the Obama administration could do this.

The agreements forged to support health care reform in spring, 2010, though, are fraying.

Politico  reported on Friday that the trade group representing brand pharmaceutical companies is lobbying fiercely to avoid having to offer Medicaid-style discounts to patients who are “dually eligible” for both Medicare and Medicaid.   Before Medicare Part D was enacted, Medicaid was the primary payer for these patients, who tend to be severely disabled or nursing home residents. 

However, Medicare Part D forced pharmas to take (low) Medicaid prices for drugs for this group of patients.  Part D was a giant pharma giveaway – enough that the Republican who managed the legislation, Billy Tauzin, became the head of the Pharmaceutical Research and Manufacturers of America (PhRMA) within months of the bill’s passage.  Current deficit reduction plans might eliminate the extra income from the dually eligible, which could lower the deficit between $50-100 billion over ten years.

The pharmaceutical industry came to the bargaining table for health care reform early, and agreed to chip in $80 billion in “savings”  for discounted brand name pharmaceuticals to senior citizens in the “donut hole” where Medicare Part D does not cover prescriptions.  However, its members were angry enough that Billy Tauzin left his position shortly after health care reform passed.

The medical device industry  also regrets its agreement to industry taxes, and is trumpeting that this element of health care reform could cost jobs and decrease innovation. 

The Wall Street Journal reported Monday that Democrats are furious at the hospital lobby, including local 1199, for its adds decrying suggested additional cuts in hospital payment as part of deficit reduction.  The hospital industry had agreed to substantial decreases in future pay increases as part of the Affordable Care Act, and it was fighting for more.

The American Medical Association supported the Affordable Care Act – but predicated its support elimination of the SGR, which caps total professional spending and would lead to a fee cut of over a quarter if not legislatively overridden at the end of this year.  The SGR remains – and the AMA’s top executive, James Maves, also headed for the door after health care reform passed.  There have been angry volleys from the AMA over recent MedPAC and HHS suggestions about how to change professional fees.

Nash equilibriums are very stable – breaking such a stalemate requires a compelling case that things will be much worse for stakeholders if they don’t agree to change.   That compelling case existed in early 2010 – but recent sniping leaves many in industry convinced that they could return to the pre-Affordable Care Act environment.   The costs of that system are unsustainable, but the pain of the savings to make the ACA work are daunting.  Industry will only support health care reform with a strong signal that the pre-ACA days will not return. That signal is not coming from Washington now. 

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Dueling Estimates of Cost Saving From New Massachusetts Blue Cross Global Payment Contract

Today’s Managing Health Care Costs Indicator is $15.51. 

Or Maybe it’s -$70.20

Click to enlarge

The New England Journal of Medicine published an financial assessment of the first year of the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract last night. It’s been making the headlines for showing that groups in this contract, which includes provider responsibility for overall financial costs, had lower overall increase in medical claims spending than groups that were not in this contract.

The headlines have been clear.  “It saves money”  You have to read well into the coverage  to see that this isn’t accurate.

The authors of the NEJM article are very clear that the AQC did not save money in the first year, which is consistent with last month’s report from the Massachusetts Attorney General.  In fact, the authors state:

Total BCBS payments to AQC groups, including bonuses for quality, are likely to have exceeded the estimated savings in year 1.

The combination of bonuses for being below budget (~3%) and bonuses for achieving quality thresholds (3-5%) and extra BCBSMA administrative costs (0-2%) made the AQC groups substantially more expensive than non-AQC groups.  The AG report showed clearly that early adopter AQC groups had surprisingly high total costs in the Blue Cross plan – probably because of these additional expenses.  (The $70.20 above is multiplying the AG medical inflation differential by the calculated quarterly cost from the NEJM article referenced above)

Another surprise is that in the medical claims costs, we aren’t seeing evidence of better quality of care such as fewer admissions or emergency department visits. Utilization changes are not different between AQC and non-AQC groups. Rather, the AQC groups referred patients to less expensive providers – so the lower claims cost was entirely from lower unit costs.   

Note also that the analysis excluded pharmacy. The AQC groups might well have had higher pharmacy costs, since the physicians received bonuses based on hitting some quality measures that require prescription medications.

It’s not a surprise that BCBSMA had to pay a lot to entice groups to join this capitated program – and no one should have expected lower costs in year one .  I’m hopeful that over time this program will yield lower costs – because physicians in a global payment arrangement figure out how to save resources.  

However, the AQC is like many other medical management interventions in that right now BCBSMA can only claim that its AQC has improved quality – not that it has lowered cost.  

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Individualized Evidence Based Medicine

Today’s Managing Health Care Costs Indicator is  $340,000

The early July Annals of Internal Medicine  has a fascinating simulation which suggests that there isn’t a single “rule” about who should get mammograms.  This isn’t surprising; we’ve been thinking about individualized medicine for some time. But this throws into doubt much of the quality reporting we’ve been putting in place over the last 20 years – we’re going to have to go way beyond the percentage of women between 50 and 65 who got a mammogram each year to determine if a provider group is delivering  the best possible care!

For starters, this simulation shows that annual mammography is so costly that it costs more than $340,000 per quality adjusted life year to perform annual mammography instead of biennial for all women at any level of risk.  Annual mammograms would not be recommended for any women by value-based purchasing guidelines.

Click to enlarge.  Source 

But this is not all about costs –the rate of false positives is strikingly high.  And false positives don’t just cost money – they take an enormous emotional toll on women and their families.  This simulation considered the potential negative quality of life for the brief period of time between a false positive screening mammogram and a negative biopsy – and even if that is very small, it still has a big impact on the “value” of mammographic screening.

Click to enlarge. Density by BI-RAD methodology (see article for details)

The value of mammography is highly dependent upon two well-accepted factors:  family history and previous biopsy. Breast density is such an important risk factor for breast cancer that this alone could be a reason to recommend different screening intervals.

This is a simulation study – performed with robust sensitivity analysis – and the accompanying editorial warns that we should not change our current mammography practice based on this paper alone. The simulation assumed we would do a screening mammogram to determine breast density at the beginning of each 10 year period, and required a host of assumptions any of which could be disputed.

This paper elegantly demonstrates that we need to start thinking about evidence based therapy based on highly individualized considerations. These considerations will involve genetics, previous medical history, and individual patient preference. It’s going to be harder to effectively develop evidence-based insurance plans – since what is medically necessary for me is different than what is medically necessary for you based on criteria not likely to be found in claims  It will also be harder to effectively practice medicine without decision algorithms built into electronic medical records. Neither a simple rule nor a physician’s intuition will be adequate to give us the best medical care.

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One Image: American Medicine Believes in Accretive, Not Disruptive, Innovation

Click to Enlarge  Source 

The current issue of Annals of Internal Medicine  has a great article on individualization of mammography recommendations -more on that in the next few days.

There is another article demonstrating that an inexpensive ultrasound machine that fits in a pocket is almost as good at certain measurements of heart anatomy as a conventional ultrasound machine - which would frequently generate a health care bill of $1500.

When I saw the abstract, I thought that Clay Christensen's predictions about disruptive innovation in health care were finally coming to pass - and we were going to use technology that was a little bit inferior to existing technology, but perfectly adequate for many indications - and save big bucks. This could be the cardiac imaging equivalent of the personal computer going up against mainframe computers!

Alas, this was not to be. The authors position the pocket echocardiograph to replace not the expensive conventional echocardiogram, but instead to replace the lowly stethoscope.  They don't want this to replace a $1500 scan, but instead to replace a low-tech device whose use is currently bundled into other cognitive services.  

While other industries produce more value with disruptive innovation, in medicine we use technology only to further escalate the medical arms race.  I think of this as accretive innovation.

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Oregon Medicaid Lottery Shows Benefit of Insurance

Today’s Managing Health Care Costs Indicator is 89,824

Click to enlarge.  Source 

Oregon realized it had resources to add about 10,000 beneficiaries to the Medicaid roles in 2008, and decided to hold a lottery to determine who would be awarded this Medicaid insurance.    89,824 Oregonians were eligible, 29.664 were randomized to be able to apply for Medicaid, and about 1/3 actually qualified.  (Reasons for not qualifying included not completing the paperwork or having income that was too high.).

Researchers at Harvard used this natural experiment to see what the impact of winning this Medicaid lottery really meant.   This natural experiment is ideal to determine the effect of gaining potential Medicaid eligibility – because the 30,000 who won the lottery (experimental group)  were randomly chosen, making it unlikely that they were significantly different than those who did not win the lottery (control group).

This is an especially important study because of the randomization, and because the researchers surveyed the experimental and control groups, and also looked at medical claims and credit reports to determine financial impact of insurance availability.

All of the conclusions are on an “intention to treat” basis – so that those who won the lottery but didn’t qualify for Medicaid are included in the “experimental” group. While this is necessary to make the “experimental: and “control” groups comparable, this approach likely  understates the effect of actually getting Medicaid because only 1/3 of the “experimental” group actually qualified for Medicaid.

What the researchers found

1)     People who won the lottery more care.  They don’t have fewer emergency department visits, they have more inpatient stays and outpatient visits.  It’s likely that there was some “pent up demand” from previous care foregone

2)     People who won the lottery have less life-changing medical debt. They are less likely to borrow money, and less likely to have a collection agency chasing them for medical debt.

3)     People who won the lottery get more preventive care

4)     People who won the lottery are more likely to report their health is good, and less likely to be depressed

The good news is that 16 million more Americans should be getting access to Medicaid as part of the Affordable Care Act.  There are, of course, two pieces of bad news.  Many states are chopping their current Medicaid programs, decreasing both eligibility and provider reimbursement.  Further, states are trying to wriggle out of their previous promises to expand Medicaid eligibility. Finally, many optimists though that having more people insured would lower medical costs – reasoning  that people could get treated early preventing high costs from detection of late stage disease.   The Oregon natural experiment is short – so it’s possible that this will become evident in the future. It’s unlikely though.   

Access to health insurance improves health and decreases financial stress.  It doesn’t save money. 

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CMS 2012 Draft Payment Rules: Automatic Triggers Cause Huge MD Fee Cut

Today’s Managing Health Care Costs Indicator is $330 billion

The Centers for Medicare and Medicaid Services issued its draft 2012 payment rules yesterday. The  payment rules give modest increases to ambulatory facility fees, tie ambulatory surgery fees to quality reporting, and make some much-needed changes in imaging reimbursement.  

The headline is that these draft payment rules cut physician fees by almost a third, as required by the sustainable growth rate formula.   This is the automatic trigger that has been overridden by Congress every year (or more) since 2002.   Just about no one thinks this is a good idea.  Physician payment increases in Medicare have been substantially less than those offered by other payers, and in some communities it's hard to find a physician taking new Medicare patients.  

Click to Enlarge  Ginsburg, New England Journal 12/10 

The cost of physician services keeps on going up, and no efforts to lower utilization have worked - so the blunt instrument of threatened massive payment cuts continues to hang over physicians' heads.  The 10 year cost of eliminating the SGR payment cuts would be $330 billion.  

There's a lot of talk in Washington about establishing automatic triggers to prevent the government from overspending.   The SGR is an example of such an automatic trigger that has been in place for some time, through Democratic and Republican administrations and Congressional majorities.   We've proven in health care already that these triggers only work if they make sense and there is enormous political will to support them.  A singular problem with the SGR is that cutting physician unit payments is not an especially effective way to lower overall health care costs.

There has been an enormous amount of lobbying to reverse these cuts over the past decade.  We should expect a similar response to future cuts in government spending triggered automatically, especially those that don't make political or economic sense.

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Screening CTs for Lung Cancer

Today’s Managing Health Care Cost Indicator is $674,000

Last week’s New England Journal of Medicine  reported a landmark study showing that screening low-dose CT scans really can save lives in people at high risk for lung cancer. 

The study is unequivocal – those who got screening CT scans were substantially less likely to die of lung cancer. Further, all-cause mortality was lower – even though a few people with CT scan screening died of exploratory surgery when they were found not to have cancer.

This study enrolled only smokers or ex-smokers with at least 30 pack years of smoking history, and excluded those who had signs or symptoms of cancer already, such as weight loss or coughing up blood.   It was peformed by the National Cancer Institute, and did not have funding from either companies that manufacture scanners or from tobacco companies.

The authors don’t recommend that all smokers and ex-smokers start getting annual CT scans.   Even with low dose scans, some cases of cancer are likely to result from massive screening – especially breast cancer in women. 

The level of “false positives,” abnormal CT scans that did not represent lung cancer, was stunningly high.  Over a quarter of study participants were found to have a scan suspicious for cancer in years one and two, and almost one in six in year three.  Only 1 in 20 abnormal CT scans suspicious of cancer actually showed a cancer. The control group received annual chest radiographs, and the CT scan group had a total of 119 excess cancers found – out of  18,146 suspiciously abnormal scans over the three year screening cycle.  That’s an increased case finding rate of 0.66% for the CT group compared to the radiography group.

Here’s the big public policy problem.   This study included 3 CT scans (at annual intervals) for just under 27,000 patients. At $1000 per scan, that would be a cost of over $80 million for the scans alone.  The cost of workup of all those false positives was substantially more.    The cost of just scans per incremental cancer found would have been $673, 664! ($80 million divided by 119) 

This study shows clearly why screening is unlikely to save dollars in the health care system.  The study took a group of high risk individuals – and even in this group, the false positive rate was quite high, and the cost per additional case found was very high.   

From a public policy perspective, we have to either

1)     Get scans that cost $100, rather than $1000.  We’ll need major disruptive innovation to allow that.

2)     Develop a more specific screening test, without losing sensitivity – so there won’t be 19 false positives for every true positive

3)     Develop less invasive followup tests to minimize the cost of pursuing the many abnormal tests

Of course, the best approach is to continue to levy high taxes on cigarettes, reinvigorate counter-marketing, and make cigarettes difficult for teenagers to obtain.  

Screening for lung cancer is not nearly as good as preventing lung cancer – and screening is far, far more expensive.

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