Innovation Imperiled

US healthcare needs radical revision, but we can't wipe out innovation in the process.

By | January 1, 2009

Healthcare spending in the United States is unsustainable. It topped $2.3 trillion in 2007—that's $7,600 for every man, woman and child. That wouldn't be quite so hard to swallow if the service was excellent, but it's spotty, especially for the 47 million uninsured. Reform is essential to reduce the financial burden and to make the system more accessible and equitable. The Office of Health Reform, led by Jeanne Lambrew, reporting to Health and Human Services Secretary Tom Daschle, is a welcome start.

But, while everyone would be delighted to return to 1970's healthcare costs, who among us wants to return to 1970's healthcare outcomes? Improvement in diagnostics, prevention, treatment, and professional training has been dramatic. Even though a radical overall is needed, we must support research and invention.

There's a chain of innovation in healthcare—it links basic science to start-up biotechs that develop promising leads to the multinational companies that commercialize the results. For the chain to function, each link must be in good working order. And right now, all of them are showing signs of fatigue.

Biotech is the weakest link, a victim of the economic recession. Industry leaders are begging for government support to prevent collapse. In early December, British biotech bosses called for the creation of a £1 billion government venture capital fund to shore up the sector. A week later their US counterparts petitioned Congress for hundreds of millions of dollars in tax credits to help sustain companies through a capital drought: One third of biotechs are operating on six month's (or less) supply of operating cash.

At press time, neither country had decided to "bail out" the biotech sector. How many effective drugs, diagnostics and devices won't see the light of day for lack of bridging funding? How many jobs will disappear, imaginative small companies destroyed, and genuine healthcare advances lost before action is taken? Biotechnology must have immediate and substantial support from government.

Of course some of the best biotech innovations will be saved through acquisition by the pharma companies. There is an ongoing firesale of biotech gems as a way to salvage something from a desperate situation. Acquisition on the cheap is one of the ways in which big pharma is currently papering over the cracks. As industries go it's as close to recession-proof as you'll find—demand isn't going to go away. The impact of the economic slowdown on pharma stocks has been only half as bad as that on the market as a whole and the global market for pharmaceuticals is predicted to grow 4.5-5.5% in 2009.

But the problems remain—blockbusters going off-patent, disappointing R&D performance, voraciously expensive corporate machines, a major public image crisis, and governments that are increasingly reluctant to pay top price for medicines.

US healthcare reform is likely to hit pharma companies hard, and rightly so. But it has to be done in such a way that doesn't destroy their appetite for genuine innovation. The danger is that a wounded pharma sector will retrench and rehash existing therapies—going after lucrative and easy rather than medically-important targets. So while US President-elect Barack Obama is right to state that a major health care initiative "has to be intimately woven into our overall economic recovery plan," special measures are needed to encourage innovation.

What might be done? One interesting development in the United Kingdom is the new Pharmaceutical Price Regulation Scheme which is in force in January. The arrangement will cut 5% off the price of drugs currently available, and encourage further use of generics. But it also sets price according to the effectiveness of treatments, encouraging companies to launch new products at a low price (to get approval from the governing authority) and increase their margins on the basis of their usefulness. This is one way of encouraging companies to be innovative.

If you have other suggestions to encourage innovation in pharma, I and the Office of Health Reform would be glad to hear them. In the meantime, that office should focus on the major culprits in the healthcare rip-off, including unnecessary treatments, excessive bureaucracy and profiteering by insurers.


Avatar of: IVO JANECKA


Posts: 3

January 26, 2009

I fully agree with your headline that ?US healthcare needs radical revision, but we can't wipe out innovation in the process.? How these two goals, radical revision and innovation, are related, becomes evident from a broad systems science look at the U.S. health care. A recent publication (referenced below) demonstrated that the U.S. has an incomplete system of care which is located at the outer edge of chaos, where disorganized complexity prevails, as plotted by the Dynamic Systems Model. In principle, sustainable innovations do not occur within that zone as they are primarily generated within the inner edge of chaos. The characteristics of each zone are quite distinct as are the pathways of corrective processes. Once U.S. health care embraces systems science principles, innovation will become a natural part of its emergence. \nJanecka IP: Is the U.S. Health Care an Appropriate System? A strategic perspective from systems science. Health Research Policy and Systems 2009, 7:1 \n(Highly Accessed)\n
Avatar of: vetury sitaramam

vetury sitaramam

Posts: 69

January 26, 2009

There are few human activities which are independent of income. Health is definitely not one of them. The system has become very expensive since certain behavioural patterns are taken as a way of life in the USA, which are beyond question or even introspection. To mention a few,\ni. economics of the kind, "there are no free lunches". This is not applicable to car manufacturers?\nii.Every minute of life is life or there is no price on life...which leads to awarding huge damages in litigations bringing in a nation of ambulance chasers one one hand, and huge insurance premia and the ills of managed care on the other.\niii.successful diversion of public attention from economic issues and sheer greed of the medical profession and drug industry(the two really should not be separated) to religious issues like anti-abortion and stem cell research (part of which was echoed in this article).\niv. the psychology of taking medicines ( ever seen the hero in an action movie take a single tablet, he always gulps a 'few' down)as a way of life\nv.The psychology of storing medicines (the bathroom cabinet full of drugs sold by bottles and thrown after expiry date?).\nIf more than a kilogram of paper and plastic waste is dumped in the dust bin after a brief visit to MacDonalds, it is easy to consider what is the extent of wastage in terms of medicines and treatments. \nAfter some thirty years of basic research after a medical degree, I revisited medical practice in India and looked at the economics. The shocking message is that the rural pay twice the amount of the urban population in income matched households (n= 95K!). The only reason, after considerable efforts that we could locate, was the unleashing of practitioners of all shades in rural areas who have a minimum life style to sustain. Other evils are only a derivative of the primary cost to sustain a doctor! I could not have understood what is happening in India without having spent time in the USA and seen things for myself first hand.\nDo we need innovation? Yes, we do. Does the quality of life depend only on how much we spend on the medical profession? No. We need to look back at Ivan Illich and others (Bernanrd's Shaw's Doctors' Dilemma has an excellent preface to this...nothing changed really) and get our value system right. Health reforms and innovation are different things.One cannot replace the other.

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