Fasten seat belts

We have entered into an unknown new world: drug prices -for innovative drugs- are on track to disappear. The NHS has agreed a cap on expenditure for a hepatitis C (sofobusvir) new drug in €125m without disclosing the unit price. Some people may consider it an opaque strategy in times that politicians claim transparency.
In my opinion, such a situation allows to understand better that the pharmaceutical market for innovative drugs is mostly a monopsony (one buyer) in a monopoly (one seller), it is not a competitive market - and this is what I have always considered. Therefore, resource allocation is the result of a bargaining between both parties, and the unit price is irrelevant. The buyer wants to maximize health,  the seller is maximizing income, this is exactly the struggle.
The key question is: How much is NHS willing to pay for better health?. As far as  the budget is limited, the number of treatments times the price is not the right way to proceed to maximize health under constrained resources.
Any government has to set priorities for expenditure according to expected health value created. This information should be public. In any case, when a new drug is available the government should clearly define which benefits are cancelled and which are acceptable. A responsible minister can't  agree new expenditures without any budget.
Therefore, innovative pharmaceutical market is not really a market -right now is clear- and governments should set priorities according to resources available -right now is also clear that they haven't done it-.
Fasten seat belts, we are entering into trying times without any political compass-gps. Citizens are expecting something different. I still remember when Victor Fuchs told long time ago: usually health economists discuss incremental cost-effectiveness in limited marginal terms, the real issue appears when such an amount is enormous. The case of hepatitis C is the example of such a situation, and only health policy and deliberative democracy are the tools to confront it. Unfortunately, this was not the strategy applied nearby.

PS. Catalonia in contention, at Harvard Political Review. Must read, if you are interested on what's going on. Otherwise, try Bloomberg op-ed or LAtimes.

PS. Reading Francesc-Marc Alvaro op-ed I always learn something.

PS. Rating catalans' well-being by OECD.

Ricard Molina. Muntaner-Velódromo. Galeria Barnadas

Bundled payments, update

While I was reading the HA blog I  thought that the word innovation is like a joker, when somebody has a real concern about potential income in the future, any change may harm innovation. The current situation in US of bundled payments is still embryonic and biased towards certain services. Bundled payments need to be holistic, not partial in order to deliver clear results. Otherwise, incentives in non-regulated areas increase. Maybe those that are concerned with innovation will move towards such areas...

Fines, settlements and reputation

Reputation Capital: Building and Maintaining Trust in the 21st Century

In the last decade there has been a proliferation of cases of fraudulent marketing practices and bribery in pharmaceutical industry. In the case of US you may check the details at Propublica. In EU we don't have a similar summary (as far as I know). The latest case in EU involves 6 companies and fines of €427m . In China, the latest case is about $500m fines for bribery. This case was started by an anonymous whistleblower.
While it is no surprise that pharmaceutical industry reputation is weak, corporate social responsibility is still supported by the firms. I can't understand why. In the page 347 of this book you'll find a chapter on this issue: "Is there no prescription? Reputation in the pharmaceutical industry". It says:

If the pharmaceutical industry does not present itself in an active and self-confident way, it cannot expect the situation to improve. For, apart from itself, it has no other advocates

Behavioral Forensics: Why Good People Do Bad Things

A.B.C.'s of Behavioral Forensics: Applying Psychology to Financial Fraud Prevention and Detection

The fraudsters paradigm explained in one book: the bad Apple (rogue executive), the bad Bushel (groups that collude and behave like gangs), and the bad Crop (representing organization-wide or even societally-sanctioned cultures that are toxic and corrosive). As far as fraud and corruption is a nowadays critical issue, understanding what to do about it, is required.
A remarkable statement from the book:

Being curious is indispensable, and asking the right questions is the only way to get to the bottom of things. Once fraudsters realize that they are not dealing with fools, they are usually smart enough to back off. The potential fraud is then nipped in the bud or successfully foiled. The power of asking the right question increases logarithmically as one moves up the organization; indeed, the most important omission is the unasked question.

 Didier Lourenço at Galeria Barnadas                        

Unwarranted variations, what's next?

Geographic Variations in Health CareWhat Do We Know and What Can Be Done to Improve Health System Performance?

We all know that there are unwarranted variations in health care. Unfortunately we haven't the same analysis about the drivers and its impact on health outcomes for such variations. OECD has just released a report on this topic, and suggests the following:

Eight types of policies might be envisaged:
• Public reporting on geographical variations, in order to raise questions among stakeholders and prompt actions, particularly in “outlier” regions.
• Setting targets at the regional level can support public reporting and help promoting  appropriate use.
• The re-allocation of resources to increase (or reduce) supply of resources (e.g., beds, doctors) in regions with low (or high) utilisation rates.
• Establishment and implementation of clinical guidelines in order to promote greater consistency in clinical practice.
• Provider-level reporting and feedback to improve clinical practice and discourage unnecessary provision of health services.
• Changes in payment systems to promote higher (or lower) use when there is high suspicion of underuse (or overuse).
• The measurement of health outcomes, to promote greater consistency in clinical practice that ensures improved patient outcomes.
• The utilisation of decision aids for patients, to promote more informed decisions about benefits and risks of various interventions, and to better respond to patient preferences.

These proposals fall short in my opinion. After a decade of publishing information on variations, public reporting has not raised deep questions for "stakeholders", at least as far as I know. Incentives have not changed substantially in order to reduce differences in utilization. Current payment systems require a redefinition from scratch in order to take into account such issues. Any citizen should be concerned about the results of the report. Something should be done.

PS. By the way, regarding OECD recommendations, they have not explained clearly what Wennberg suggested: shared decision making

PS. Bad journalism at LV. Why CAC doesn't care about complaints on written press.

Ferrando at Galeria Barnadas

How newcomers become bureaucrats?

Becoming Bureaucrats Socialization at the Front Lines of Government Service

It is quite surprising how public service management usually is considered from a reductionist perspective. Some people think that if we understand the rules and incentives that underlie in public service, then we can understand its performance. The constraints to change the factors that drive performance are well known and it seems that nothing can be done to surpass inertia.
A new book provides fresh air on this issue. It argues that:

Bureacratic behavior follows a logic of appropriateness (LOA). This decision-making theory, developed by James March and Johan Olsen, suggests that organizational behavior is associated with norms that individuals develop about what constitutes appropriate, exemplary behavior

A key message:

The traditional understanding that bureacracies change people may be true but beside the point. More important , in this account, is how bureacracies find people and how people find them.

I still don't understand why most physicians-nurses-... in NHS must be civil servants. I have said that many times and nobody has been able to find an argument. In my opinion this is one of the pieces that reflects an outdated system without the possibility to break its inertia.

Outsourcing boards of directors?

BOARDS-R-US:RECONCEPTUALIZING CORPORATE BOARDS

A comment in The Economist suggests a new approach: outsourcing boards of directors. Such a strategy would be justified to solve the current widespread and deep-rooted problems. They provide some examples and we all know some disfunctions. However, such proposal is open to dispute and the conflicts of interest that may arise may not compensate the professional approach of such "firms". On the other hand something should be done and may be this is an interesting approach for publicly owned firms as far as they are not exposed to market competition. Health care could be an example of a sector to experiment and to improve providers' governance.
The original article is in Stanford Law Review.