Wednesday, June 03, 2009

Saving Money on Volume: Obama Advisor Talks Cost Control With ASCO

Sometimes less is more. At least where healthcare reform and oncology are concerned, bringing volume down is the best path to reducing healthcare costs, according to Obama administration health advisor Ezekiel Emanuel.

Emanuel--an oncologist, a senior advisor in the Office of Management & Budget, and brother of White House Chief of Staff Rahm Emanuel--addressed a rapt audience at the American Society of Clinical Oncology annual meeting in Orlando, Fla. His May 30 presentation featured a polished presentation painting a vivid picture of escalating health care costs in a slide show reminiscent of Al Gore’s “An Inconvenient Truth.”

In this case, the inconvenient truth is not climate change, but the need to contain health care costs. “We cannot – in a responsible, sustainable way – get to universal coverage unless we’re going to take cost control seriously,” Emanuel said.

Emanuel boiled it all down to a simple equation: the combined pressures of price and volume combine for a constant increase in health care costs. That means continued, unsustainable growth unless there is a direct effect on price or volume.

Driving prices down would be great, he said. But for now, at least for Emanuel and for the medical practitioner audience at ASCO, the focus is volume – specifically, reducing unnecessary services. “I go where the money is,” he explained afterwards. Most of the increase in health spending comes from volume, not price, so that’s the appropriate target. “By and large affecting price will have … a relatively small effect" on overall cost trends.

"If you really want to hit the big time and bend the curve so it doesn’t go up exponentially, you’ve got to do volume," Emanuel says. "There’s just no two ways about it."

In oncology especially, the payment system tends to reward utilization rather than encourage evidence-based practice decisons. For instance, Emanuel argues, there should be a reduction in imaging and other screening practices since evidence doesn’t support a distinction in survival with high intensity follow-up.

For biopharma companies concerned about the prospects of price controls, Emanuel's analysis suggests attention will be focused elsewhere. Drugs, though a high value target for public and media attention, just are not a big enough driver of cost to focus on when it comes to generating dramatic reductions in healthcare spending in the U.S. (Emanuel noted the widely accepted estimate that prescription drugs are only 10% of overall healthcare costs.)

That’s not to say there won’t be some push for realizing the gains that can be squeezed out of the pharmaceutical slice of the pie. The savings on price are relatively small "but they are not negligible," he says, estimating that as much as 20%-25% of growth trends are affected by price.

Emanuel stressed generic utilization can make a difference. In cholesterol medicine, he says, 95 percent of patients can get as much benefit from the off-patent simvastatin as from the much more expensive Lipitor brand. Or, he suggested, generic albuterol versus branded asthma inhalers. “There you can make a difference in price.”

Then there is also the issue of utilization of high-priced therapies. Emanuel cited a favorite example--the low level of evidence to support use of Genentech’s Avastin – an argument he makes in his book Health Care Guaranteed. (See “The Avastin Dilemma: Two Personalities and Two Points of View on Cost Effectiveness,” The RPM Report, April 2009).

However, he added, if Avastin were a home run like the benefit from HER2-targeted breast cancer treatment (Genentech’s Herceptin), then it would be worth paying “almost anything.”

It’s a hard sell to think in terms of cost to society when there’s an individual patient looking for their best hope for life, and an especially hard sell in oncology where patient advocacy organizations push hard for access to experimental therapies. But Emanuel doesn't shy away from hard truths, pointing out that all the innovation in oncology still hasn’t cured the disease.

Of the seven years that have been added to overall life expectancy since the 1960s, only two months can be attributed to new cancer treatments, Emanuel says. In contrast, he says, the impact from use of diuretics in hypertension can be measured in years.

For biopharma companies hoping to sell the next Avastin, the notion that health care reform advocates are touting the virtues of diuretics may be the most inconvenient truth of all.

-Mary Jo Laffler (


Anonymous said...

Sounds like rationing to me! I really don't want the government doing a cost benefit anaysis if I'm the one one with cancer and you can be sure he would want the best (and, yes, even experimental) treatment if it was him or his family member.

Also, all this time demonizing pharma and now they admit it is only 10% of the problem and won't get us the savings we need. Way to go...destroy an innovative industry to get your politcal agenda passed.

Anonymous said...

For the previous anonymous post, I would ask how do you intend to pay for a "all you can eat buffet" of healthcare, when we can't even pay for Medicare Part D, borrowed since day one to pay for it, SS will be insolvent in 2047 and Medicare even sooner. What people have to realize is the PARTY is over, we have to pay as we go and payback what we borrowed. That we can't always have everything, and everything has a cost. And that we do not live forever and there are points where it does not make sense to treat. said...

The critical issue in the debate is who pays what and who makes the decisions about medical care.

Patients should have the right of self-determination and not the government. What we are witnessing with the comments by Dr. Emanuel and others in government is the push for more government involvement in medicine. Let government or insurance companies state what will be paid and then let the doctor and patient decide on therapy and determine if the patient is willing to pay more. Americans must avoid expansion of government in medicine and that means defeat of the "public plan". Otherwise we will have rationing and lack of access to critical medicines timely and loss of access to physicians in our hour of need.

Remember: Self-determination and not government determination. Look at Great Britain. The past is prologue to the future.

Donald J. Palmisano, MD, JD