Better Health: Smart Health Commentary

Featured

Generic Biologic Drugs: What Are They And Will They Save Billions Of Dollars?

June 29th, 2009 by admin in Better Health Network, Health Policy
No Comments »

Much has been made of the recent pressure on the FDA to create a pathway for follow-on biologics. On June 9, 2009, Rep. Henry Waxman, chair of the Energy and Commerce committee, sent a letter to President Obama imploring him to approve a pathway for generic biologics: “I urge the administration to consider what steps can be taken under existing authority to prepare and even begin to use a pathway for generic biologics.”

Six days later, President Obama, in his June 15, 2009 speech to the AMA, followed Waxman’s lead, asking the FDA and industry “to introduce generic biologic drugs into the marketplace.” He continued: “These are drugs used to treat illnesses like anemia. But right now, there is no pathway at the FDA for approving generic versions of these drugs. Creating such a pathway will save us billions of dollars.”

Is this true? Are follow-on biologics, biosimilars, or generic biologics (all names for the same concept) truly the path to healthcare savings? And what are they, anyway? To clear up the confusion, this post aims to explain what biologics are, what generics are, and what the challenges are in the creation of an approval pathway for generic biologics.

What are biologics? How do they differ from traditional small-molecule therapies?

When you think of a drug, you probably think of a pill like Tylenol or Lipitor. You may not be as familiar with biologics, which are attracting a great deal of attention from policymakers and media. Biologics represent a different set of drugs, distinguished by their size, their informational and manufacturing complexity, and their therapeutic advantages.

If you were to look at most drugs under a microsope, you would find that they are actually rather small relative to a typical biologic. Acetaminophen, which is the active ingredient in Tylenol, weighs 150 daltons (a dalton is a unit of atomic mass). Enbrel, on the other hand, which is a top-selling biologic indicated for several autoimmune diseases, weighs 150,000 daltons. To put that thousand-fold difference in visual terms, if Tylenol weighed as much as your mountain bike, then Enbrel would weigh as much as an unfueled 12-passenger private jet. Hence you will often hear people in the pharmaceutical industry refer to “small molecule” drugs and “large molecule” drugs — because these are two truly distinct classes.

Biologics are often designed to closely mimic the body’s own specific natural processes. Because of this higher specificity, biologics tend to bind to drug targets in the body more precisely than do traditional drugs, which may bind to other unintended targets in the body, placing the patient at greater risk of side effects.

On top of it all, there is currently no defined pathway at the FDA for companies to develop generic versions of biologics, so biologic manufacturers retain data exclusivity over their products. Not surprisingly, the therapeutic and market advantages of biologics have caused pharmaceutical companies to focus their efforts on developing or acquiring biologics over small-molecule drugs. In fact, according to a recent forecast, by 2014, seven of the top ten drugs in America will be biologics, including every single one of the top six.

Unfortunately, while biologic therapies provide a great deal of therapeutic benefits, they are also extremely challenging for biopharmaceutical companies to develop and manufacture, because they are composed of entire proteins, carefully grown through recombinant DNA methods which are newer and less practiced than traditional drug chemistry methodologies. A traditional drug is usually derived through a set of chemical reactions. It’s a lot like following a recipe. Synthesizing a biologic, however, is a bit more like cloning a cat. In order to synthesize a biologic, host mammalian cells, usually Chinese hamster ovary cells, must be implanted with a gene that codes for the desired drug. The host cells are maintained in a special bioreactor that is designed to keep the cells alive as they translate, synthesize and excrete the drug. The broth of cells must then be harvested from the cells, modified, purified, and tested. The solution is finally packaged into vials or pre-filled syringes for distribution.

This manufacturing process is unusually challenging to reproduce consistently, even within a company. For example, Johnson & Johnson manufactures epoetin alfa, an anemia therapy, under the name EPREX in Europe. In the late 1990s, J&J changed its manufacturing process for EPREX at the request of the EMEA (the European version of the FDA). The process change caused some patients to develop pure red blood cell aplasia, a serious adverse reaction. Rather than receiving the benefit of the anemia therapy, these patients actually lost their ability to make red blood cells because they produced an antibody (triggered by the faulty EPREX) that inactivated both the EPREX and the body’s natural protein that is essential for red blood cell production. J&J eventually determined the cause of the adverse reaction and corrected it, but only after a lengthy and expensive investigation.

Because of the intense development and manufacturing process, biologics are also significantly more expensive than traditional therapies. Herceptin, an effective treatment for some forms of breast cancer, can cost as much as $48,000 for one year’s worth of treatment. It’s important to keep in mind, however, that virtually every drug company provides programs to help underinsured or uninsured patients get financial assistance in the form of co-pay cards, co-pay grants, or free drug programs. Simply contact the drug manufacturer.

Why have biologics gotten so much attention from healthcare reformers such as Rep. Waxman and President Obama?

The high cost of biologic therapies has attracted attention from both private payers, such as Aetna and UnitedHealthcare, and public payers, such as Medicare, Medicaid, and state health insurance programs. While payers agree that the therapeutic benefits of these treatments are important, they are still anxious to limit their exposure to the high price tags. Most insurers require several other therapeutic steps before allowing a physician to prescribe a biologic therapy.

Wait, what exactly is a generic? And what’s all this talk of bioequivalence?

The Hatch-Waxman Act of 1984 established a pathway for generic versions of small-molecule drugs to be offered to the public. Once the patent ends on a drug, generic drug makers may manufacture and sell the same drug without repeating the research, expensive clinical trials, or marketing efforts conducted by the original patent holder. These savings allow generic manufacturers to sell their versions for a lot less.

In order to gain approval, the maker of the generic must still show bioequivalence to the original drug, called the “reference listed drug” in the generic drug maker’s application. In a bioequivalence study, the reference listed drug is administered to one group of healthy volunteers, and the generic is administered to a second group. The blood concentrations of the active ingredients are measured over time and graphed. If the generic drug’s graph lies between 80% and 125% of the graph of the reference listed drug, then the two are deemed bioequivalent, and the generic drug is approved. Once approved for the market, it may be sold and independently substituted by a pharmacist for the branded medication without telling the physician, assuming the doctor has not expressly forbidden generic substitution. This last permission is referred to as the “interchangeability” of the drug.

Why can’t Congress just duplicate the same approval process used for generic small-molecule drugs?

In theory, Congress could. In practice, however, there are several technical hurdles that remain to be cleared. As discussed above, the processes used to create biologic therapies are extremely sensitive to manufacturing changes, as in the EPREX case. If a generic biologic manufacturer develops its own process, there is a good chance that the quality of the product would differ from that of the reference listed drug. Furthermore, no one has yet confidently measured bioequivalence for a biologic.

Frank Torti, Chief Scientist of the FDA, summarized these issues very well in a September 2008 response to a Congressional inquiry about follow-on biologics:

Because of the variability and complexity of protein molecules, current limitations of analytical methods, and the difficulties in manufacturing a consistent product, it is unlikely that, for most proteins, a manufacturer of a follow-on protein product could demonstrate that its product is identical to an already approved product. Technology is not yet sufficiently advanced to allow this type of comparison for more complex protein products.

All is not lost, though. The FDA could still create a pathway for generic biologic manufacturers to develop “biosimilars,” which are products that are intended to be close to a reference listed drug but cannot be shown to be the same. Because they are not the same, biosimilar manufacturers would likely have to conduct clinical trials to show that their version is safe and effective for human use, and can be manufactured consistently.

What are the realistic cost savings?

Because of the added cost of clinical development, testing, and marketing of a biosimilar product on top of the difficult manufacturing process, and competition, generic biologic pricing is more likely to resemble brand-to-brand biologic competition than the generic-to-brand competition seen in the small-molecule drug marketplace. Therefore, it’s not yet clear how much more affordable a FOB would be for health insurers. Without being able to show that the products are truly identical and therefore interchangeable, physicians are also likely to be reluctant to try what is essentially a “new” drug that does not truly share the established track record of the original drug. Payers and patients may be excited about the lower cost but skeptical of potential safety issues. As a result of these factors, generic biologic manufacturers may ultimately fail to capture enough business to make up for the upfront expenses of clinical testing, as well as the ongoing manufacturing and marketing expenses.

The Federal Trade Commission recently published a report that studied and called out these limitations. The consequences of the market dynamics imply that only two or three companies with large biologics manufacturing capabilities will even bother to get involved in this field, because only those companies will already have the plants and people to compete effectively. Ironically, the FOB manufacturer for a given reference drug will probably be other biologics innovators who already have the manufacturing capabilities but don’t normally compete in that particular market.

What would be some of the other implementation challenges for the government?

For one, CMS would need to decide how to bill and code for the new products, a subtle referendum on how identical the biosimilars will really be. If they give the generic versions the same codes as the originals, interchangeability is easier and the cost savings are more likely to materialize. On the other hand, it’s important for both the FDA and CMS to track adverse events with these new products (an activity known as “pharmacovigilance”), which is easier to do if the codes are different.

Where does the policy debate stand? What are the Eshoo and Waxman proposals?

The current Waxman bill is remarkably similar to the Hatch-Waxman Act of 1984, which was originally designed for small-molecule drugs. It would not require any new clinical trials for generic biologics provided that the generic had a “highly similar molecular structures,” and allows a case-by-case determination on whether or not safety and efficacy data would be required before pharmacies could substitute generics for reference biologics without telling the physician, but the default would be to allow substitution on approval. The Waxman bill allows for five to nine years of data exclusivity for the original patent holder.

The current Eshoo bill would require clinical trials comparing the generic biologic to the reference biologic, unless the FDA waived them. Rather than automatically granting interchangeability upon approval, the FDA would have to publish guidance with data that describe the criteria required for interchangeability. The bill also recognizes the greater challenge in developing biologics by allowing for twelve to fourteen years of data exclusivity.

Can the healthcare system really save billions of dollars with biosimilars?

President Obama’s speech to the AMA suggested that billions of dollars would be saved by the creation of a biosimilars approval pathway. Several others to study the issue have cited fairly conservative numbers. Avalere Health put the federal savings at $3.6 billion over a ten-year period, while the Congressional Budget Office says $6.6 billion. Avalere’s model assumes moderate discounting, several entrants, slow uptake of biosimilars, and a ten-year data exclusivity period. The CBO report scores a bill that resembles the Eshoo option described above, but doesn’t account for some of the market dynamics discussed above and in the FTC report.

Finally, to keep pharmaceutical costs in perspective, policymakers should remember that prescription drugs currently make up only 10% of healthcare costs, while physician services make up 21% and hospital care makes up 31%. The CBO estimate also predicts that follow-on biologics would save $25 billion on national biologics expenditures over ten years. Even if correct, those savings still make up one-half of one percent of all national spending on prescription drugs, which is itself one-tenth of all healthcare spending in the United States.

Which option makes more sense?

Overall, the Eshoo bill appears to do the best job of reflecting the current technical challenges particular to biologic therapies. The need for clinical trials to insure the safety, efficacy and quality of FOBs ought to be non-negotiable. However, given the high cost of becoming a FOB manufacturer, and the small number of likely entrants, the optimal length of data exclusivity is a good open question. Henry Grabowski of Duke University studied the issue and concluded that an ideal breakeven point is 12.9 and 16.2 years, also suggesting that the Eshoo option is the most likely to drive economic growth. The European Union currently allows for biosimilars and permits ten to eleven years of data exclusivity. Let’s hope that policymakers work hard to thoughtfully strike the right balance that maintains both a stream of innovative therapies from scientific pioneers and a structure that wisely manages costs for payors.

Author’s bio:
Jonathan Sheffi is a summer intern in the FDA Office of Biotechnology Products. Before the FDA, Jonathan worked for Amgen, first as a marketing analyst and then as a biopharmaceutical sales rep. He will start at Harvard Business School in the fall of 2009, and is seeking an internship opportunity for the summer of 2010. Follow Jonathan’s blog at http://jonathansheffi.com/ and on Twitter at @sheffi.

Acknowledgments:
Thank you to Val Jones (Better Health), Niko Karvounis (The Century Foundation), and Kimberly Barr (UnitedHealthcare) for their comments and suggestions.

Disclosures:
All included information has been derived only from publicly available sources. This blog post reflects the author’s personal opinions and do not represent the opinion of any other organization or individual.

Happy Talk On Medical Malpractice Reform

June 23rd, 2009 by Shadowfax in Better Health Network, Health Policy, Opinion
No Comments »

*This blog post was originally published at Movin' Meat*

Healthcare Reform: Then (1994) And Now (2009)

May 19th, 2009 by DrRich in Better Health Network, Health Policy
No Comments »

DrRich has been around long enough to remember the sequence of events that accompanied the collapse of healthcare reform under the Clintons in 1993 – 1994.  (Heck, he has been around long enough to remember Nixon’s plans for healthcare reform, which drowned in Watergate.) When President Clinton was inaugurated, everyone agreed that the American healthcare system was in a state of crisis (e.g., spending levels could not be sustained, there were too many uninsured, there was too much waste and inefficiency, etc., etc.), and that the time for fundamental reform had finally arrived. We had a fresh, dynamic, young President with new ideas and with a solid majority in both houses of Congress, and he was armed with polls showing that the people were in favor of fundamental reform.

Accordingly, when Mrs. Clinton put together her working groups to devise a reform plan, she initially had the enthusiastic participation of numerous interest groups within the healthcare industry – notably including the insurance companies, physician groups, and drug and medical device companies.

But when she finally produced her plan – a disturbingly heavy tome filled with frightening details – everybody was horrified with at least some of the stuff they found there. Most of the big interest groups turned on her – most notably, the insurance industry, which then launched the famous Harry and Louise commercials to scare the people about government healthcare. The people, now duly scared, called their congresspersons, who (despite the Democrat majority) ended up sending Mrs. Clinton’s healthcare reform to a crushing and humiliating defeat. And the Republicans were able to capitalize on the “near miss” of the Clinton’s brazen attempt at socialism, and in 1994 ushered in 12 years of a Republican majority in both houses of Congress.

Obviously, for those Republicans and other observers who abhor Mr. Obama’s plans for healthcare reform, it is relatively easy to see parallels between what happened in the early 1990s, and what appears to be shaping up now. Those parallels, and the subsequent ignominious defeat of the Clinton plan, are the only things keeping these sorry individuals from donning sackcloth, heaping ashes upon their heads, and engaging in public self-flagellation.

So, perhaps, for such outsiders the spectacle of the major private healthcare interests this week throwing in with the Obama administration will be seen as one more sign from the gods that the parallels of 1994 are falling into place.

But they are wrong.

There are at least three important differences between the enthusiastic participation of private interests in Mrs. Clinton’s working groups on healthcare reform, and the action taken this week by representatives of insurers, doctors, drug companies, hospitals, and medical device manufacturers to pledge their undying support for President Obama’s efforts at healthcare reform.

First, in 1993 the private interests were powerful and confident. They participated in the process because they felt they could control it. It turned out they were wrong, of course – the only one who has been able to out-maneuver the Clintons is Mr. Obama – and the plan Mrs. Clinton finally produced (despite all the “input” from diverse private interests) really was a blueprint for a full government takeover of healthcare, all spelled out and wrapped with a bow.  But because the private interests were powerful and confident in those days, once they figured out what the Clintons actually had in mind they were able to scuttle healthcare reform entirely.

In contrast, today the private interests have come to the table not out of strength, but out of weakness. They come not as partners in negotiation, but as vanquished foes. They come to Obama as the Carthaginians came to the Romans after the second Punic war, suing for peace, begging for terms, offering massive tribute (in this case, $2 trillion) in exchange for being permitted to eke out a meager survival, at the edge of the desert. (DrRich wonders whether the insurance companies and their friends remember the third Punic war.  Surely they must know that somewhere in Congress is another Cato the Elder, ending every speech with the words, “The insurance industry must be destroyed,” and that at some point their remaining, puny base of operation will be completely sacked, and their mission statements sown with salt.)

Second, whereas Mrs. Clinton was a major policy wonk who reveled in providing a fully-fleshed-out and exquisitely detailed set of plans for healthcare reform – thus giving her foes sufficient ammunition not only to defeat her reform plan, but also to banish the Democratic Party to the wilderness for three election cycles – Mr. Obama is not. His reform plan will be bare-bones – merely an outline, more-or-less a statement of principles. There will be nothing to attack, since there will be no details, and little will be spelled out. (Implementing the plan will be left to unelected bureaucrats and regulators, who are always happy to produce prodigious amounts of undecipherable and self-contradictory detail.) This time, at least prior to its actual implementation, critics of the reform plan will be left trying to attack a phantom.

And third, this time there is no Plan B.

In 1994, once the private interests had scuttled the Clinton healthcare plan, they immediately offered an alternative. They came to us and they said: “Citizens!  We have just now dodged a bullet! Thanks to us insurance companies, doctors, drug companies and other patriots, the frightening socialist machinations of the Clintons have been defeated, and the Evil Ones have been reduced to embracing our agenda of tax reform and welfare reform as if it were their own.  But where does this leave our healthcare system? We stand now between Scylla and Charybdis, between the spectre of socialized healthcare on one hand, and the continued profligacy of traditional fee-for-service on the other, and we cannot survive either.

“But here,” they continued, “is a third way. A painless way, an American way, based on the principles of managed care, open markets, and free enterprise. Let healthcare become a business, like any other business, and let the natural efficiencies of the marketplace find ways to cut costs and improve quality, and with minimal government intervention.”

And thus we were launched into an era of managed care run by HMOs and other similar creatures of the insurance industry. And over the past 15 years, while managed care has utterly failed to produce any of the things it promised, it has not been for a lack of trying. They indeed have tried numerous things to control spending, from the reasonable-sounding to the absurd to the frankly murderous, and despite all their strenuous efforts the healthcare system remains a morass of confusion, waste, and inefficiency, and its costs are many times what they were in 1994.

To say it another way, the private concerns, this time, have shot their wad. They are entirely bereft of ideas. They know not what to do.

And that’s why they have now fully abandoned their old allies, the Republicans (who are off somewhere – one knows not where – muttering to each other about the efficiencies of the marketplace, and wondering why nobody is listening to them). The last thing the insurance industry wants to hear today is that the burden of figuring out how to control healthcare costs belongs to them. They’ve tried everything they know and have failed, and they are desperately seeking terms for surrender.

So there is no Plan B this time. As of this week, the private interests have formally and publicly admitted they don’t have a clue. They’re throwing in with President Obama, despite the fact that they have no leverage with him whatsoever, not because they believe in his reform plans (which have not even been described in their most skeletal form), but because there is no place else for them to go.

And so, the last obstruction to healthcare reform has been removed. The path – the only path – is clear. If we fail to get comprehensive healthcare reform now, it can only be for one reason. It can only be because Mr. Obama and the Democrats, looking down that wide open road, will be unable to avoid seeing where it leads, and will decide that they do not want to be the administration or the party that finally has to begin saying the “R” word in public.

To turn away from healthcare reform now, when the way seems so clear, would be a crushing blow to them, and would likely not be politically survivable. But to go on will likely force them to begin speaking a truth – that rationing is unavoidable – whose name is more taboo than ever was the name of Yahweh. And every high priest of the ruling class knows that even hinting about healthcare rationing is political suicide.

But still, there it is. There is no Plan B.

Talk about Sylla and Charybdis.

*This blog post was originally published at The Covert Rationing Blog*

Who’s Against Comparative Effectiveness Research?

May 15th, 2009 by DrRich in Health Policy
No Comments »

DrRich’s valued colleague R. W. Donnell, who writes Notes From Dr. RW, has responded to a recent post in which DrRich bravely came out in favor of Comparative Effectiveness Research, even at the cost (DrRich asserted) of alienating the majority of the more conservative-leaning components of his readership.

Dr. RW, noting DrRich’s claim that conservatives have laid out a formal policy of opposition to CER, says:

“OK, stop. Where are these people, conservatives or those of any ilk, who have taken a position against CER? Dr. Rich cites groups who are skeptical and very concerned about the new political agenda for CER, not CER itself.”

Dr. RW is, of course, correct. Research that compares the relative effectiveness of medical procedures or treatments is not only inherently a very good thing, but also is a form of research that has a long and proud history.  Healthcare would be an even more dire activity than it is today without the large body of research that guides physicians in making recommendations to their patients when more than one option is available. So yes, comparative effectiveness research is obviously a valuable and time-honored endeavor, and for anyone (conservatives or anyone else) to come out against it would be akin to coming out against babies, or bunnies. (Though, as one whose effort to grow vegetables has been severely challenged each year by a pride of aggressive rabbits, DrRich, as it happens, is indeed against bunnies.)

So, to reiterate, neither conservatives nor anyone else are really against comparative effectiveness research, just as Dr. RW asserts.

What they are against is Comparative Effectiveness Research. They are against a new government bureaucracy that sets the CER agenda, whose stated goal is to create a more efficient and less expensive healthcare system, and that will have the authority to determine what gets reimbursed and what doesn’t.

Dr. RW has made it plain that he is not confused about the following point, but many are: There is a difference between comparative effectiveness research (whose unambiguous goal is to compare the clinical effectiveness among different treatment options, so as to offer physicians objective guidance in making clinical decisions, and which is as unassailable as babies and bunnies), and Comparative Effectiveness Research (which is to be operated by a new government bureaucracy, whose agenda regarding what kind of effectiveness is actually to be compared is intentionally ambiguous).

The ambiguity of CER (as compared to cer) was made clear recently when Peter Orszag testified on behalf of the administration before the Senate Finance Committee. When queried by skeptical Republicans on the ultimate goal of the proposed CER board, Mr. Orszag was evasive. Specifically, when asked by Senator Kyle (R-Arizona) whether the CER board would be empowered to make decisions on which medical services will be reimbursed, Mr. Orszag finally replied, “Not at this point,”  a reply which did not alleviate the suspicions of the minority party.

To state the ambiguity more plainly, it is clear that while the CER board will mainly be concerned about comparing “cost effectiveness” (which is the only way they can potentially achieve their main goal of reducing healthcare costs), the only kind of effectiveness they are willing to discuss publicly is “clinical effectiveness.”

This studied ambiguity allows proponents of the new government plan to paint opponents of the CER board as being against the “babies and bunnies” form of comparative effectiveness research, and thus reveal those nay-sayers as being beneath contempt, unworthy of anyone’s attention. Meanwhile they will be free to advance their real “cost effectiveness” agenda.

DrRich agrees with conservatives that this kind of deceptive ambiguity is indeed contemptible. But really, it is no more contemptible than the thousands of other forms of covert healthcare rationing we see all around us. (Covert rationing inherently relies on ambiguity – saying we’re doing one thing while all the time we’re doing another.)

Having tried to clarify this distinction between cer and CER, DrRich will now repeat that his prior post was not merely to express support for the “babies and bunnies” variety. As Dr. RW points out, everybody is in favor of that kind of comparative effectiveness research.

Rather – and this is where he further jeopardizes his continued tolerance by his conservative readers – DrRich is offering his support to the other kind of CER, the kind described in the stimulus bill, which (though the administration will not say it publicly) will undoubtedly use comparative effectiveness research to perform cost effectiveness calculations, then coerce physicians, through one form of federal subterfuge and intimidation or another, to employ the least expensive therapies.  The government bureaucrats, just as they are doing today but with less muscle, will shout “quality” while enforcing “cost.”

DrRich supports this kind of CER not because it is a good thing – it decidedly is not. He supports it because here is a form of covert rationing that will at last effect everyone, and will be so blatant that after a time even us Americans will no longer be able to ignore it, try as we might.  DrRich believes that relatively soon, we would notice that here is a cadre of unelected bureaucrats rationing our healthcare – determining which of us lives and dies – through some opaque process, and lying to us about it the whole time. He believes this to be the pathway most likely to get the American people to finally face the fact of healthcare rationing, and to goad them into an open debate on the best and least harmful way to accomplish it.

Go ahead. Call him a cock-eyed optimist.

*This blog post was originally published at The Covert Rationing Blog*

Lessons From Abroad: Mandatory Insurance Creates Powerful Health Plan Cartels

March 10th, 2009 by Dr. Val Jones in Health Policy
4 Comments »

I attended a conference entitled, “Lessons From Abroad for Health Reform in the U.S.” at the Kaiser Family Foundation on March 9th in Washington DC. The event was sponsored by the Galen Institute and the International Policy Network, both of whom are politically rightward-leaning non-profit organizations.

I wasn’t sure what to expect from the conference, and assumed that speakers would offer a blend of pluses and minuses culled from Canadian and European healthcare reform experiences. I have to say that the pluses were hard to come by – and that the minuses were so provocative that I have decided to repeat them here for you, and let you make what you will of them.

Switzerland – Lessons About Insurance Mandates

Dr. Alphonse Crespo, an orthopedic surgeon who practices in Lausanne, Switzerland, described what sounded like the utter decimation of a perfectly good healthcare system. He said that in the 1960s Swiss healthcare was decentralized and quality-oriented. The government provided subsidies for health insurance for the poor, and subsidized public hospitals who took care of the poor and/or uninsured at a 50% rate. Overall, according to Dr. Crespo, Swiss healthcare was efficient, effective, and had high patient satisfaction ratings.

In 1994, socialism came into vogue and reformers called for a redistributive model of healthcare, with centralization of infrastructure and electronic medical records systems that would be compatible with those in use by other European countries. Mandatory insurance was introduced, which shifted disproportionate power to third party payors. The payors focused primarily on cost containment measures and profitability, rather than expanding access to quality care. Regional hospitals were forced to merge with larger ones or else shut down. Wait times increased, lengths of stay decreased, and there was an increase in “critical incidents” (i.e. medical errors) by 40%.

In 2002 the health insurers decided that “more doctors result in higher costs” and successfully lobbied for a cap on the total number of physician licenses, so that in order to practice medicine, a physician would need to take over the practice of a retiring physician or one who died.

In 2008, the third party payors attempted to legislate their ability to decide which physicians could practice within the healthcare system, and which would be excluded from coverage. This did not sit well with patients, and they voted for “freedom of choice” in a referendum on the issue. Fortunately, they blocked the insurer move to ban certain physicians from insurance coverage. Unfortunately, the insurers succeeded in forcing a reduction in reimbursement for basic laboratory testing by 20%, thus forcing physicians to close their labs and send samples to a centralized location.  Apparently physicians are planning to strike in Lausanne and Bern next week over this issue.

Dr. Crespo argued that the unforeseen consequence of the move to compulsory insurance was the emergence of a powerful cartel of health insurers without any apparent cost savings, and a measurable decrease in care quality. In fact, Switzerland’s healthcare system rapidly plummeted from 4th place in the Euro Health Consumer Index, to 8th place over the course of a few short years.

He concludes:

“Once cartels have entrenched themselves, there is no easy way to dislodge them. Americans should think twice before opting for compulsory insurance, unless they believe that cartelized and rationed healthcare is really in the best interest of patients.”

**You may view materials from Dr. Crespo’s lecture here.**

In my next post I’ll review what the Canadians had to say about their healthcare system.