Prescribing Profits

By Kim Bellard, November 10, 2010

Marcus Welby pushing more expensive drugs on his patients in order to increase his income?  Impossible to imagine!  Of course, Marcus Welby was a family physician not given to costly treatments, and is now almost entirely unknown to anyone under 50, but one has to wonder what’s become of our health system given what some physicians are doing with their prescribing pads. 

The New York Times recently broke a story that Genetech was giving eye doctors “secret rebates” to use the more expensive Lucentis instead of Avastin to treat age-related macular degeneration (AMD).  Ironically, Avastin is also made by Genetech, and has been used for AMD for several years, although it was not designed or approved to treat that condition.  Lucentis can be more than ten times the cost per dose, the bulk of which is usually paid for by Medicare and private insurance.  However, there is yet no data to suggest that Lucentis is more effective than Avastin; even if equally clinically effective, it certainly would be much less cost-effective at its current pricing.  The rebates can reportedly amount to tens of thousands of dollars for a physician practice each quarter.  The Times quoted one retinal specialist as saying “There’s no way to look at that without calling it bribery.” 

Alas, the influence of financial considerations on prescribing costlier care appears not to be an isolated problem.  In 2006 Mirelle Jacobson and colleagues asked the question “Does Reimbursement Influence Chemotherapy treatment for Cancer treatment” in Health Affairs.  The good news is that reimbursement did not appear to impact the initial decision to administer treatment, but the bad news is that physicians who received more generous reimbursement did, in fact, administer more costly drugs. 

Medicare has attempted to address the cancer treatment reimbursement issue – to neither side’s evident satisfaction – and recently United Healthcare has initiated a program of its own.  It announced a pilot program that pays oncologists for the entire treatment program, regardless of the drugs administered.  It deliberately tries to remove – or at least limit the continued growth of – the portion of the physicians’ income based on profits from chemotherapy drugs.  In its coverage of the program, The New York Times quotes an oncologist as saying “A lot of us want to get out of selling drugs.”  Aetna and several other payers are developing their own programs.

Of course, one doesn’t have to work too hard to find studies demonstrating disturbing impacts of other perverse financial incentives within our fee-for-service system.  For example, studies indicate the clear impact of physician ownership of ambulatory surgical centers on number of surgeries performed (see, for example, Hollingsworth or Mitchell.  Similar results exist for imaging.  Then there is the oft-cited New Yorker article by Atul Gawande on the peculiarly high cost of care in McAllen, Texas.  There are both anti-kickback and self-referral (aka Stark) laws to prevent such apparent abuses or conflicts of interests, but one would have to conclude they are not having quite their intended effects. 

So what’s the big deal?  If patients want to buy services from physicians, why should they – or we – care about how much money those physicians might be making on those services?  Isn’t that capitalism?

Yes and no.  I cling to belief in a market-based structure for our health system, with appropriate protections for low-income and other disadvantaged individuals.  I have no problem with people making money in the health care system, and think it is great when individuals and institutions that achieve better results for their patients get more patients and make more money. 

Unfortunately, our system doesn’t make it easy for that to happen the way one might want it to.  The above examples highlight two key missing pieces that are needed for a truly market-based health care system:

• Performance: for the most part, patients don’t have good information on the efficacy or relative performance of the treatments they are “buying” or on the providers from whom they are receiving them.  They certainly can’t be viewed as making informed decisions.  It’s hard to say who to blame more for not caring more about making such information readily available – patients or health care providers – but there can be no real health care reform without that kind of information, comparing treatment options and providers. 
• Other People’s Money: if consumers want to spend their own money on frivolous or overpriced goods, well, that’s their right in a capitalist economy.  Most health care spending, though, is paid for via public or private insurance, which is a little bit of the patient’s own money and a lot of other people’s money.  As a result, they spend it differently, sort of like a college student using his/her parents’ credit card.  We can’t bend the cost curve unless both patients and health care professionals stop thinking of health care spending as other people’s money. 

Let’s get this straight: I think most physicians are good people trying to do a good job for the patient in a hopelessly complex, fragmented, and frustrating health care system.  Nor would I point the finger (at least not singularly) at health insurance companies, pharmaceutical companies, or hospitals, the entities who are most often cited by the public as the culprits.  It is the structure of the system that is failing us, with the various incentives either explicitly or implicitly built into it that don’t reward the best performance. 

Health plans, include Medicare, are working hard on “pay-for-performance” (“P4P”) programs that reward physicians for appropriate performance, particularly in terms of quality and sometimes cost-effectiveness.  Lester and colleagues studied the impact of both addition and subsequent removal of financial incentives on four clinical indicators.  They found that scores did increase with the incentives, but unfortunately fell again once they were removed.  It’s good that physicians improved their performance given targeted financial incentives, but it is troubling that they reduced that clinically appropriate behavior when no longer paid “extra” for it.  Such programs are certainly a start in the right direction, but at this point are still only a small step.

George Bernard Shaw, writing in a different time and about a different health care system, summed the problem very well: “That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg, is enough to make one despair of political humanity. But that is precisely what we have done. And the more appalling the mutilation, the more the mutilator is paid.” 

It’s a prescription for disaster.