Brainstorm Health Daily: March 29, 2017

Good morning, Daily readers. It’s good to be back in your email boxes—and much thanks to Sy for keeping this space warm in my absence.

I spent the week in paradise—on a “spring break” vacation with my family—and I can attest with the utmost certainty that it is better to spend a week not thinking about healthcare than thinking about it.

But truth be told, not thinking about healthcare got me thinking of it. And eventually in need of it. That’s because in the midst of a whale-watching, snorkeling, waterfall-exploring, pool-supersliding, beach-bumming island vacation, I had one heck of a toothache. I grimaced with each bite of anything harder than papaya, jumped from my chaise with the babiest baby-sip of colada—but still pushed off calling a dentist until…my wife called one for me. (The one thing worse than having a toothache on vacation, it appears, is vacationing with a spouse who has a toothache.)

She found an amazing dentist and I’m grateful for it. But the long and short of this episode was that the need for healthcare found me. And therein lies a lesson or two for anyone who hopes (in earnest) to reform it.

As we saw in the past few weeks, as Republican party leaders pushed for Trumpcare and then abandoned it, there is a small and determined group of lawmakers who don’t want to “fix” or replace Obamacare, but rather to repeal it outright and then institute a purely free market system in its place. That system, in theory, would let those so inclined buy healthcare (or insurance coverage for healthcare) when—and only when—they want it, and would leave those who don’t want it (or can’t afford it) alone. That’s, after all, how the market for Froot Loops works—and the one for mobile phones and for Supergirl-inspired Halloween tutus for your dog or cat.

There is a certain appeal to such economic liberty. And for four days or so, I myself was a Freedom Caucus’er—dead set against trading an afternoon of precious vacation for one in a Maui strip mall with a jawful of drill.

I lost that intellectual battle not because of the nature of free markets, but rather because of the nature of healthcare itself. Here are two fundamental reasons why:

A medical need—whether it be a tooth infection, pancreatic surgery, chemotherapy, or gunshot wound—is called a “need” for a reason. Dare the thought that you can’t afford a box of Froot Loops or a new iPhone or a tutu for your pet. It’s okay: You can probably live without it. But those who require urgent care will still have the same need for urgent care whether or not they have insurance. In the end, they might storm an emergency room to get it—which is what many without coverage still do (and which we still, collectively, pay for). And if they don’t address the need, they might well die.

As a society, we’re pretty good about recognizing that distinction in other contexts. When your neighbor’s house catches fire, chances are you’d want firefighters to race to the scene to put it out. You’re probably even be okay with the fact that the fire department won’t send your neighbor a bill afterward—and I’m guessing you won’t post a sign on his front lawn saying, “Entitled!” or “Freeloader!” Freedom-loving folks though we are, we treat need differently than want.

Some of that distinction is due to the perception of shared risk, of course. A fire in your neighbor’s house could spread to yours. But then, the same can be said for many infectious diseases.

This market may have unlimited buyers, but sellers are strictly limited by law. There is, apparently, no federal or state law that prohibits a person from selling a tutu for your shih tzu on eBay, or for dressing your pet in one (though one might argue there should be). But our medical systems are thoroughly enveloped in laws and regulations, as well as practices so entrenched by guild or industry convention that they have the force of law.

Start with the obvious: We, as a society, don’t give everyone the keys to the operating room, any more than we let Joe from the mailroom fly a commercial jet—not without many moons of training and a license, that is. So the healthcare market has a bunch of built-in monopolies, depending on the particular service being offered.

Those guild-protected medical providers also have another uncanny market-controlling power: They can demand that you pay (or more commonly, have proof that you can pay through insurance) before they see you—and before you see the bill. So medical consumers are on the hook for payment long before they know what the total cost of the service is, or how well that service was provided. Indeed, those who require a stay in the hospital will almost certainly have to promise to pay for services from providers they may never see—and who can charge pretty much whatever they want. Not many free markets work like that.

Sure, in the euphoria of liberty-cherishing DYI-philia, I could have pulled my own tooth and gargled in Walmart peroxide. But even then, I couldn’t prescribe myself an antibiotic (which, it turns out, I needed). Our prescription drug trade may look like a free market—because sellers have proven over the past several years that they can charge whatever they want. But the government has thousands of rules about which pills and nostrums can be sold to whom, by whom, for what purpose, and when. The barriers to entry for those who want to create and market a new medicine are enormous—which drives up prices on its own.

It would be great, frankly, if healthcare did operate more like a free market. And there are some good ideas out there for how to push it in that direction. For example, Freedom Partners, a group supported by Charles and David Koch, suggested in a recent strategy memo that lawmakers change the current rules to let individuals and businesses purchase insurance plans across state lines, and “foster the creation of a market” for multiyear and even lifetime insurance contracts that would enable people to protect themselves, at least somewhat, from the financial ravages of a serious illness years down the line. At the same time, we should significantly raise the contribution caps on pre-tax health savings accounts and broaden the scope of what they can be used for (including, quite obviously, paying for insurance premiums or membership fees for primary care group plans). And importantly, we should rewrite the current statutes that largely prevent the expansion of telemedicine offerings across state lines. (Here’s some background reading on that.)

As leaders in Congress take up healthcare legislation anew (as they have recently teased they will), they might consider these options—along with the sobering fact that healthcare, as we know it, is a long way from a free-market system now. And any “reforms” that try to instill this ethos by simply changing who pays for insurance and how is likely to be even less embraced by freedom-loving Americans than the flawed system we have now.

Clifton Leaf, Editor in Chief, FORTUNE
@CliftonLeaf
clifton.leaf@fortune.com

DIGITAL HEALTH

The FBI issues a stark warning to health care firms over ransomware. The FBI's cyber task force has issued a private industry notification to health care firms warning that a specific type of IT infrastructure could be especially vulnerable to cybercriminals and ransomware. FTP, or file transfer protocol, servers are common, old-school tools used to share data across health systems. But the fact that they can be accessed remotely and anonymously makes them potential security risks. "While computer security researchers are actively seeking FTP servers in anonymous mode to conduct legitimate research, other individuals are making connections to these servers to compromise [personal health information] and [personally identifiable information] for the purposes of intimidating, harassing, and blackmailing business owners," wrote the FBI in its notice. "Cyber criminals could also use an FTP server in anonymous mode and configured to allow 'write' access to store malicious tools or launch targeted cyber attacks." (FierceHealthcare)

Heart and brain doctors are ahead of the pack on EHR adoption. 2015 survey data collected by the Centers for Disease Control (CDC) highlights which medical professionals are adopting electronic health records - and which are still lagging behind. When it comes to having any sort of electronic records system, cardiovascular disease physicians, neurologists, orthopedic and general surgeons, and general/family practitioners are at the top of the list. But the story changes a bit when you consider the percentage of survey respondents who had a certified electronic records system, defined as one that "meets meaningful use criteria defined by the Department of Health and Human Services." Here, urologists top the list (92.6%), followed by neurologists, orthopedic surgeons, and general practitioners. Heart doctors fall all the way down to an 83.2% adoption rate for certified EHR systems. (Healthcare Dive)

INDICATIONS

Valeant chief Papa needs its stock to shoot up 460%. New Valeant CEO Joseph Papa got a pretty fat paycheck for someone heading up a company that's lost about 67% of its value during his tenure. But in order for the pay package's various options and stock pay to actually materialize, he's going to need to pull off some serious magic: a 460% boom in Valeant's stock over the course of the next three years. That means reaching a market cap of more than $20 billion. The company's market value as of Wednesday? About $3.8 billion. (Fortune)

Sanofi, Regeneron win FDA approval for a potential mega-blockbuster eczema drug. Sanofi and partner Regeneron have snagged a crucial Food and Drug Administration approval for dupilumab, a treatment for persistent atopic dermatitis (aka eczema) that will be marketed under the brand name Dupixent. A few years ago, former Sanofi executive Pascale Witz told me that dupilumab was the pipeline treatment which most excited her, not just for its potential in the massive eczema market, but because it has also shown early clinical promise in wildly different conditions such as asthma and nasal polyps. The fact that analysts have projected that it could eventually ring in more than $3 billion in annual sales doesn't hurt, either. But it's not all smooth sailing going forward. The treatment's high annual list price of $37,000 could be a barrier to patients, and Sanofi also has to grapple with rival Amgen over a potential patent spat. (Fortune)

The first ever treatment for severe multiple sclerosis just got approved. Speaking of key drug approvals - the FDA also approved Roche/Genentech's Ocrevus (ocrelizumab) on Tuesday evening. This is the first ever treatment cleared to treat primary progressive multiple sclerosis (PPMS), which is different from the relapsing remitting variety (RRMS). In RRMS, patients have periods of recovery where their disease symptoms regress; but those with PPMS have "steadily worsening function from the onset of symptoms, often without early relapses or remissions," according to the FDA. Ocrevus can be used to treat both forms of the disease (about 15% of MS patients have the progressive form). The drug's yearly list price is $65,000, which is, believe it or not, actually a cut compared to existing competitors like Biogen's Tysabri.

THE BIG PICTURE

The lawsuit that could determine Obamacare's fate. As I've previously reported, there are a number of administrative and political steps that the Trump administration can take to hobble the Affordable Care Act following the American Health Care Act's demise on the House floor last week. But the nuclear option for the White House and Congress would be to cut off critical subsidies to insurance companies which help lower poorer Americans' out-of-pocket medical costs, such as their deductibles. The House GOP has actually launched a lawsuit against these so-called cost-sharing subsidies, alleging that the Obama administration doled them out without Congressional consent, and has even won a decision in federal court. But that suit has been on ice while Congress was attempting to dismantle the health law. With Trumpcare dead, it's unclear whether or not the suit will continue or whether the Trump administration will seek to end the subsidies, which could in turn lead to a massive insurer exodus from Obamacare marketplaces and widespread coverage losses. So far, HHS Secretary and former Congressman Tom Price has been pretty mum on the suit (ironically, Price has now been on both sides of the legal scuffle, since technically the House GOP is suing him as the HHS Secretary). He declined to answer questions about it during a hearing on Wednesday morning. (Fortune)

Trump's FDA commish nominee has deep financial ties to the health care industry. If he's eventually confirmed by the Senate, Trump FDA Commissioner nominee Dr. Scott Gottlieb could have to recuse himself from decisions involving some 20-odd health care firms. The reason? He's received millions of dollars from a variety of pharmaceutical and biotech companies, including from drug giants GlaxoSmithKline and Bristol-Myers Squibb, for consulting and public speaking. Furthermore, Gottlieb has been involved with venture firms New Enterprise Associates and T.R. Winston & Co., which invest in health care companies, and even acted as chief executive of the biotech Cell Biotherapy. Gottlieb indicated in federal disclosure forms that he would resign any positions in health care and recuse himself from FDA decision on companies with which he's had dealings to avoid conflicts of interest. (New York Times)

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