A call for a political prescription to tackle obesity

A political prescription is needed to treat obesity
Why Nudge?

Unless there is harm to others, the government cannot exercise power over people. This is the John Stuart Mill's "Harm principle", sometimes called the Liberty Principle. And governments have taken as given that individuals always take decisions in a rational way, fulfilling their preferences. As Cass Sunstein says in his last book "Why Nudge?", such a principle "raises serious doubts about many laws and regulations. Sometimes power is exercised over people in large part to promote their own good, finally people are note entirely sovereign over their body and minds". He argues in favour of paternalism in certain circumstances. We have already explained such details formerly in this blog.
Today I would like to suggest a reading to you, an excellent editorial in the Canadian Medical Association Journal. It is a call for action on obesity and specifically on food policy and taxation on sugar-sweetened beverages.

Our current approach to obesity relies on the assumption that people have choices, often fail to make the right ones, and should be educated and helped to make better choices. This view is simplistic and clearly absurd, given the continued rise in the prevalence of obesity in countries that have been tackling the problem for decades. Are millions of people really choosing to be overweight?

People are not as free to choose as we would like to believe. Neurobiological desires for sweet and high-fat foods gave humans a survival advantage in a world where food was scarce and every calorie counted. Where food is inexpensive and easily available, biological processes related to eating can mirror addiction and will lead to our destruction. We need to change our approach. We need incentives beyond educational messages. Strategies that include individual interventions,  school-based nutrition and activity interventions, incentives for active commuting and changes to the built environment should continue; however, we also need robust ways to restrict portion sizes and reduce the sale of sugar-sweetened beverages and other high-calorie, nutrient-poor food products. Our government needs to consider taxation as a tool to combat the consumption of these addictive foods and beverages, just as it regulates the sale of alcohol and tobacco products for the purposes of population health.

In USA, Berkeley is the first city that will intoduce the soda-tax after a recent ballot. Berkeley’s Measure D proposed imposing a 1-cent-per-ounce general tax on sugar-sweetened beverages and sweeteners used to flavor drinks. The measure will not dedicate funding to a specific cause and did not require only a majority of the vote.
I still remember how a similar measure was discarded some years ago in our country. The times to reconsider the introduction of a soda tax are coming.

Drug pricing 101 (2)

The New Drug Reimbursement Game. A Regulator’s Guide to Playing and Winning

In my former post I was backing a complete review of current drug pricing regulation. Any official that has to perform this task needs some fresh ideas and knowledge and this is precisely what a new book provides. In The New Drug Reimbursement Game by Brita A.K. Pekarsky you'll find the economic foundations for a new drug pricing regulation.
The basic argument:

Higher prices today mean increased economic rent for the pharmaceutical industry (Pharma) otherwise firms would not lobby for them. It is in Pharma’s interest to protect and seek these economic rents. Whether higher prices and more R&D today increase future health remains an empirical question. If higher prices also mean a higher net present value of the population’s health, then it is in the institution’s interest to increase prices. Given the institution’s objectives, the most effective strategy Pharma can use to protect these rents is “the Threat”: lowering prices is against the interest of health funders because it will reduce a population’s future health.

Therefore,

 The regulator’s challenge is to answer the following question:
• “How should rational institutions respond to the Threat?” (A rational response is one that is consistent with a given institution’s stated objective function, whatever this may be.)
This introduction places this research question in the context of current evidence and research, by addressing the following three questions.
• Is it plausible that the Threat exists and that it influences the price of new drugs?
• Is there rigorous empirical evidence that suggests that lower drug prices will result in reduced future health?
• Are economists in agreement as to the value of a decision threshold for new  drugs that accommodates characteristics of the health budget such as allocative and technical inefficiency?

And the conclusion:

When the Institution buys this new drug, it buys the health effects from this drug and the health benefits from future innovation. This is not the case with other health programmes. Therefore, unless the Institution pays a premium for the health effects from the new drug, the population will be worse off because innovation will be suboptimal and the future drug will not be produced.

Unfortunately, when you get to the end you'll miss any consideration about what innovation means. If you look at recent patterns of effectiveness of new drugs, you'll see that the value of innovation is under scrutiny, and most drugs would not pass the test. In my opinion, the regulator has to send signals about the value of health improvement in certain diseases and pharmaceutical companies should focus R+D on such fields and avoid others.
Therefore, a new companion to this book should be written. This is only a regulator's guide to play, but not to win. Take it only as a starting point.

PS. Just FYI, you'll not find the term "Budget impact analysis"  in the book, a close term Programme budgeting marginal analysis PBMA is what you'll find. It is suggested a price effectiveness analysis as a previous requirement for any PBMA, otherwise it makes no sense. This approach seems quite different to  yesterday's news.

Thomas Piketty speech at UPF Oct 2014, it starts at min 8:10. My post, last May.

Drug pricing 101

In his book "Reinventing the bazaar. A natural history of markets", John McMillan says:

Market design consists of the mechanisms that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting; and the market’s culture, its self-regulating norms, codes, and conventions governing behavior. While the design does not control what happens in the market—as already noted, free decision-making is key— it shapes and supports the process of transacting.

If we look at the pharmaceutical market, there are unique features. The government role is at the same time the "market designer" and mostly the monopsonist. The price setting mechanism relies on multiple regulations that evolve according to circumstances. For example, since 2012 there has been no information about patented drug prices accepted for public funding. It sounds quite weird in a moment that everybody is proud of boosting transparency. The debates over the new pricing decree are still more strange. The current mess was explained some months ago in this op-ed. The uncertainty now also embraces pharma-distribution, pharmacists complain about the system.
Such a pricing system is explained in  this presentation (details about pricing in p.6). As far as it is unsatisfactory for everybody, it needs to be rebuilt. My suggestion is that there is a need to start from scratch. John McMillan would say that we have to look for a clever market designer to reinvent drug pricing as soon as possible.

Is this the end, my friend?

The last 25 years of publicly funded health care have been marked by the unique ownership structure known as consortium. Consortia allowed a joint venture between ancient non-profit hospitals created by civil society and the public administration. The underlying rationale for such an ownership structure is strictly related to capital investment demand. Since non-profit foundations could not raise enough funds to fulfill new techonology and population health needs, the public sector funded new investments and participated in the boards of directors.
These sounds quite normal, it is a historic evolution and has a clear and common sense argument. However, public sector has not been able to include depreciation and replacement costs in the tariff and this has created greater need for resources.
Unfortunately, those consortia that had management autonomy and public administration in the boards are now being dispossessed from its original owners -the non-profit foundations- and being converted into public organizations.
This is a clear social plundering commited by the spanish Parliament in a recent law. You may have more details in this article (check p.46).
Is this the end? I think so, unless there is a clear mandate to change current regulation. Its impact maybe enormous: disappearing boards of directors, employees converted into "de facto" civil servants and its equivalent remuneration, and the most important: there is no reverse gear.
It is worrying how politicians can accept such a loss of dynamic efficiency before their very eyes. It is unacceptable that social created capital can be plungered this way. Politicians can stop the end of consortia, they should stop it.

PS. Two years ago I was blogging on the same topic. Unfortunately all the alerts were neglected.

PS. Must read, on ebola by I. Hernández.

I've already said that

It is really saddening to explain the same thing again and again. Seventeen years ago I explained the regulatory mess of parallel trade of drugs in Europe. I did it in an article in Información comercial española (unfortunately not available on internet). Two years ago, I insisted on the same disaster in this post.
Now you can see how mafia style practices of well known drug distribution companies were applied, have a look a this news. Surprisingly (!), there is no specific crime in the penal code for such practices.
I said that arbitragists were accumulating impressive amounts of money with international parallel trade and refusing to supply drugs to local pharmacies.It is quite astonishing that it took so long to understand it for justice. Is there anybody doing something to prevent such practices in the future? Where are politicians? On vacation again?.

PS. The government should cancel the license to these drug distribution firms immediately and ban any possibility of a new license in future. This can be done easily without waiting for any european directive.

PS. WSJ: What Catalonia's independence vote means

Fasten seat belts (4)

The times for drug prescription following prioritisation have arrived. Hepatitis C drugs have paved the way for such a move.There were some informal attempts for certain medicines and it was decided by clinical committees (i.e. for rare diseases), but now it has changed. The government has decided who has to get what and when, this is absolutely new. Have a look at this draft of strategic therapy for Hepatitis C treatment.
Any physician asking for hepatitis C drugs will have to explain the compliance with the criteria and ask for approval.
I said some weeks ago that a new paradigm in drug pricing was starting, right now I have to say that drug prescription priorisation by rules is the new trending topic, at least in our neighbourghood. Wether this prioritisation is based by cost-effectiveness criteria remains to be seen.

On NICE and QALYs

It is quite relevant what's going on with value based pricing by NICE. Recent documents are raising greater controversy and a blog post asks if this is the end of the proposal. Today I suggest you have a look at James Raftery contribution to understand the moment (at least in the UK). No politician is interested in such issues.