September 1, 2016
U.S. Healthcare Actually Isn’t Broken
by Dan Munro
No, the system is designed to be this messed up. So many people profit from the mess, and they hope the complexity will prevent hard questions.
The header image was part of an article by Bloomberg that was written more than two years ago (May 2014). The data itself goes back nine years. Mylan’s price gouging was front and center recently, this week, but the gouging issue has been percolating for years. It has erupted before, and it will erupt again. Everyone’s squawking, and legislators are “looking into it,” but it won’t be solved this year — or even this election cycle. Here’s why:
Mylan’s pricing controversy with EpiPen is the same controversy that plagues much of U.S. healthcare. As a country — and as individuals — we don’t like it when there’s a BIG, obvious imbalance between the cost of healthcare and the need for it at scale, especially for kids. Our indignation is righteous.
The EpiPen delivers about $1 of a drug (epinephrine) easily and quickly to avoid a life-threatening condition (anaphylactic shock). The company that manufactures the EpiPen (Mylan) has raised the price dramatically through the years, especially relative to the cost of either the drug or the delivery mechanism. We can’t really claim ignorance here; EpiPen is one of the drugs from that Bloomberg chart in the header. As hard as it may be to believe, the reason for all the increases isn’t complex or complicated at all, it’s simple. Mylan raise prices because it can — and the EpiPen is a BIG moneymaker for the company.
But the EpiPen controversy isn’t unique to Mylan. It’s the exact same controversy in that Bloomberg chart and the one sparked by Martin Shkreli last year (with the drug Daraprim). Shkreli was my pick for the No. 1 quote in my Top Ten Healthcare Quotes for 2015:
I probably would have raised the price higher … is probably what I would have done. I think healthcare prices are inelastic. I could have raised it [Daraprim] higher and made more profit for our shareholders, which is my primary duty — and again — no one wants to say it, no one’s proud of it — but you know this is a capitalist society, capitalist system and capitalist rules, and my investors expect me to maximize profits.
Not surprisingly — Shkreli was publicly supportive of Mylan’s pricing increases. However, Ralph Nader referred to Mylan as “greed on steroids.”
See also: EpiPen Pricing: It’s the System, Stupid
Valeant Pharmaceuticals is another company like Mylan and Turing, and they, too, have generated similar controversies through the years with their price increases.
The pattern is well-documented and easy to see.
But there’s a really hard truth to these hemorrhoidal flare-ups of price gouging. We resent it, but not enough to understand it, and that’s a big problem. There’s also a collective problem in trying to make real, substantive changes.
Real change is difficult — and it requires a deeper understanding. We need to go beyond the headlines and understand how drug pricing fits into our whole healthcare system design. All too often, we simply throw up our hands and falsely conclude that our healthcare “system” is broken. The hard truth that we must face head-on is that it really isn’t.
We think it’s “broken” because we don’t understand the evolutionary design of our healthcare system. There’s an urgent immediacy to our culture that makes history too long, too boring, too difficult — but it always bites us. As the author Michael Crichton said:
If you don’t know history, then you don’t know anything. You are a leaf that doesn’t know it is part of a tree.
In fact, there’s another quote — by another author — that I like to use to highlight our specific challenge with that deeper understanding of our healthcare system.
On the release of his book Flash Boys, author Michael Lewis was interviewed by Steve Kroft on “60 Minutes,” and a quote from that interview was both the inspiration and influence for my book Casino Healthcare:
If it wasn’t complicated, it wouldn’t be allowed to happen. The complexity disguises what’s happening. If it’s so complicated that you can’t understand it — then you can’t question it.
What Lewis was referencing was high-speed trading on Wall Street, but the quote could just as easily be applied to all of U.S. healthcare. In fact, it’s tailor-made. Our healthcare system has become so complicated that we can’t understand it. But that complexity is also by design as a way to avoid the hard questions.
See also: Our Real Problem With Drug Pricing
We desperately want someone — or something — to just fix healthcare. We thought Obamacare might do so — and some truly believed it could — but Obamacare is really just a single step out of our healthcare wilderness, the same wilderness we’ve been wandering around in for decades. At different times we’re angry, lost, confused, frustrated and hurt — and it winds up being more of a ghoulish nightmare than a wilderness.
But the hard truth in this wilderness is that in our Casino Healthcare (including big-side stories like EpiPen), all the players are complicit. Payers, providers, pharma, politicians and suppliers are all aligned to a primary objective: their objective. These objectives are unique to them individually, but they’re the same collectively. It’s the for-profit business of revenue, stock price, shareholders, risk capital and campaign contributions. Safety, quality and equality in our system are secondary objectives, even though there are many that push hard for the full attention they deserve (myself included).
Mylan is simply doing what for-profit companies are legally required and expected to do : work in the best interests of their board, their investors, their stockholders — and, yes — themselves. Like her or not, the CEO of Mylan is doing exactly what she is paid (very well) to do. If she were fired tomorrow, any replacement would simply dial back the pricing to avoid the heat and slowly ratchet it back up when our anger and frustration moved on. It always moves on.
We don’t like to hear it, but we’re complicit, too, just in a different way. We’re complicit in our ignorance because we don’t dig deeper, we don’t understand the whole design, and the media flare-ups do die down. Valeant, Turing and now Mylan are like accidents on the freeway. We slow down, we’re stunned and aghast at the horror — and then we move on.
See also: How Quote Data Can Optimize Pricing
So, no, the EpiPen story isn’t rare or all that different. It’s not just a delivery mechanism for epinephrine, it’s an important lens into the whole healthcare debate. It just happens to be the latest in a long line of stories that will continue to repeat until we make systemic changes to the way U.S. healthcare is designed. We can make those changes. We should make those changes, but the first step for all of us is to understand that the system we have — now running at $3.4 trillion per year, more than $10,000 per capita — isn’t broken at all. It was designed this way, and we just need a whole new design. Not a partial one, not just around the edges, but at the core — one that’s not optimized for revenue and profits but one that’s optimized for patient safety, quality and, yes, real equality first.