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Why Healthcare Policy Matters

May 26, 2017

This essay appears in today's edition of the Fortune Brainstorm Health Daily. Get it delivered straight to your inbox.

I read two long documents this week. Both were well worth the investment of time.

The first was the current cover story of Bloomberg Businessweek (which, in fairness, isn’t really all that long, compared with the typical Fortune feature). And this story, entitled “When the Patient is a Gold Mine: The Trouble with Rare-Disease Drugs,” is one that I wish we’d had in Fortune instead.

The three BW authors (Benjamin Elgin, Doni Bloomfield, and Caroline Chen) take us inside the aggressive—and, at times, even combative—sales practices that helped turn a drug that treats a relatively small number of people into a blockbuster.

The medicine, developed by a New Haven biotech firm named Alexion, is called Soliris and it’s important to note that it genuinely helps many of those who have one of two rare and often fatal blood disorders—paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic-uremic syndrome (aHUS).

The medicine, report BW’s writers, cost $850 million to develop and took 15 years to bring to market. And much of the reason its creators felt confident enough to invest all that time, money, and effort—given the small number of patients who might eventually use the medicine—can be traced to the Orphan Drug Act, a 1983 federal law that gave those who develop meds for uncommon diseases longer periods of marketing exclusivity and other financial incentives. That act rebalanced the scales of risk and reward and, in turn, has led to a flourishing of new medicines for millions of people who suffer from rare diseases. Indeed, say the BW authors, “orphan drugs accounted for a disproportionate share, 41 percent, of all medications brought to market in 2014”—with global sales, by one estimate, expected to reach $209 billion by 2022, roughly twice what they are now.

A happy story of well-crafted policy leading to life-changing results, you say? Well, um, not quite. You see that Orphan Drug Act (and a confluence of other factors as well, both regulatory and economic) helped set the stage for the Wild West marketplace we have now, in which gun-slinging drug makers can charge into town and charge whatever the heck they want for their wares. Soliris’s price can run as high as $700,000 a year, with the drug accounting for the bulk of Alexion’s $3 billion in 2016 sales. (“The average U.S. patient on an orphan drug last year relied on a $136,000 therapy, a figure that’s climbed 38 percent since 2010,” say the authors.)

But the drug’s price isn’t the scariest revelation in the BW article. Rather, it’s the no-holds-barred sales practices that Alexion allegedly engaged in—which, in some cases, reportedly led to salespeople bullying doctors into prescribing the drug for patients even when the efficacy of the treatment was unclear. (Alexion has largely replaced the management team that was responsible for these overly aggressive sales tactics. The new CEO has also appointed a head of culture, BW reports, “to redefine the culture in the organization with a big emphasis on integrity, trust and compliance.”)

That brings me, at long last, to the second long document I read this week: the May 24 cost estimate by the Congressional Budget Office and Joint Committee on Taxation of H.R. 1628, the American Health Care Act of 2017. And, again, I encourage Daily readers to relax at the beach/pool/backyard this weekend with this 41-page thriller.

If you’re too nervous or margaritafied to read the whole thing, the invariably wise and poetic Timothy Jost at Health Affairs has distilled the CBO/JCT’s take on Trumpcare into a lovely haiku:

Decreases in Savings And Uninsured,

Potential Instability

For States With Waivers.

The CBO found that a sobering one-sixth of the U.S. population would likely live in states that availed themselves of AHCA rules that let them ignore provisions that now protect people with pre-existing conditions.

“Premiums would vary significantly according to health status and the types of benefits provided, and less healthy people would face extremely high premiums…” said the report. “Over time, it would become more difficult for less healthy people (including people with preexisting medical conditions) in those states to purchase insurance because their premiums would continue to increase rapidly.”

To cite one scary example, the actuaries at the nonpartisan CBO project that the net annual health insurance premiums for a 64-year-old of modest means could rise from $1,700 to $13,600—or perhaps as high as $16,100 (a 847% increase), depending on the state of residence.

Which brings me at long, LONG last to what connects the BW cover story and the CBO “Take cover!” report. And that, my friends, is that policy matters.

The battle over healthcare reform may look and sound as if it’s a war on the periphery of daily life, but it is core to it.

Policy matters.

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