Mostly in these Doc Gumshoe pieces I try to keep my focus on what the physicians and researchers and pharmaceutical outfits are doing to try to treat, or at least manage, all these diseases, ailments, and conditions that affect our lives. But other issues keep thrusting themselves into the picture, especially the cost factor. In the most recent Doc Gumshoe pronouncement, I looked into a new proposed treatment for a disease of genetic origin that is responsible for about 20% of all instances of childhood blindness. The treatment is indeed promising. One little fact that I mentioned is that a one-time treatment for both eyes was estimated to cost about $850,000.
I also discussed the surgical treatment for Parkinsonism, which called for creating pluripotent stem cells from the patients’ own skin cells and then implanting these stem cells into the patients’ brains, and which would also be enormously expensive, at least until generating those stem cells became more routine. That is, of course, normal for any novel medical treatment. New drugs, new surgeries, new treatment options, will always be considerably more expensive than the established drugs and the commonly practiced procedures.
The most expensive drugs today in the US
Topping the list is Zolgensma (onasemnogene abeparvovec-xioi, from Novartis), at $2,125,000 for a one-time treatment. It is approved for spinal muscular atrophy, a previously incurable disease caused by a missing or defective gene labeled SMN1. A number of experts have suggested that despite its astronomical price, Zolgensma is a cost-effective treatment, because it can actually cure a once-incurable disease, thereby eliminating the costs of lifetime care. Children who have been treated with this drug show no further signs of the disease.
Myalept (metreleptin, from Aegerion, developed by AstraZeneca) comes in second at $855,678 per year, which in terms of price is well behind Zolgensma. However, the $855,678 sticker price is based on a monthly estimated cost of $71,306.48 per month, so a lifetime of treatment could mount up considerably. It is used to treat leptin deficiency in patients with generalized lipodystrophy, a condition of abnormal fat distribution in the body. Patients self-administer Myalept once a day. It is the only drug available to treat this condition.
Luxturna (voretigene neparvovec, from Spark Therapeutics) is number three on the list, at $850,000. Like Zolgensma, it is a form of gene therapy. Luxturna addresses an inherited form of retinal dystrophy, a condition that can cause complete blindness. Patients should require just one dose of Luxturna per eye, at $425,000 per vial.
Folotyn (pralatrexate, from Acrotech) stands at number four on the list, with an annual cost of $745,785. It is used to treat peripheral T-cell lymphoma, a rare form of blood cancer which is sometimes fatal. It is administered by health care professionals, and patients usually are given 45 vials of the drug annually.
Soliris (eculizumab, from Alexion) occupies the fifth slot on the list. The estimated annual cost is $678,392 per year. As we can tell from the name, it is a monoclonal antibody, and it binds and disables proteins in the blood that can destroy red blood cells in some persons. It is used to treat adults with paroxysmal nocturnal hemoglobinurea and also to treat hemolytic uremic syndrome and myasthenia gravis. Alexion is also planning to start a phase 2 study of Soliris as a treatment for COVID-19 very shortly.
Blincyto (blinatumomab, from Amgen) is in sixth place in the ranking of the most expensive drugs, at an annual list price of $672,968. It is used to treat a rare form of acute lymphoblastic leukemia, which is a cancer of the blood and bone marrow. The treatment is administered in cycles, starting with the induction phase, which aims at reducing the number of cancer cells. The succeeding treatment cycles foster the growth of new, healthy cells. Patients need different amounts of the medication during each phase, but will typically use about 168 vials per year at the current list price per vial of $4,005.76.
Ravicti (glycerol phenylbutyrate, from Horizon Therapeutics) occupies seventh place on the list, at an annual list price of $664,092. It is used to treat urea cycle disorders, which can result in dangerously high levels of ammonia in the blood. It is approved for anyone over two months of age.
Lumizyme (algoglucosidase alpha, from Sanofi/Gemzyme) comes in at eighth place in the ranking, at an annual list price of $643,243. It is a drug that replaces an enzyme, alpha glucosidase, which is missing or deficient in persons with Pompe disease. Pompe disease is a genetic disorder resulting in a build-up of a complex sugar (glycogen) in the body’s cells, and a significant reduction in life expectancy.
Actimmune (interferon gamma 1b, from Horizon Therapeutics) is in ninth place on the list, at an annual list price of $633,325. It is indicated for reducing the frequency and severity of serious infections associated with chronic granulomatous disease, and for delaying time to disease progression in patients with severe, malignant osteopetrosis. This is a rare bone disease in which the bones become harder, more brittle, and prone to fracture.
Takhzyro (lanadelumab flyo, from Takeda) is in tenth place on the list, at an annual list price of $591,035. It is used to treat hereditary angioedema, which causes recurrent episodes of severe swelling in the limbs, face, intestinal tract, and airways.
Those list prices are not chiseled in granite. In several cases, they were arrived at by calculating how many units of the medication a patient would be likely to need, and then multiplying by the unit list price. Some patients are going to need more units and some fewer. As I indicated, some of the drugs purport to be definitive, one-time treatments, but some others may need to be continued year after year.
Another factor that muddies the waters is that almost all pharmaceutical companies have special compassionate use programs to help patients “afford” these highly expensive drugs.
So it’s not clear from the estimated list prices who it is that shells out these large sums. In most cases, it’s surely not the patient alone. Third-party payers, whether health insurers or government, likely shoulder a major part of the burden. But regardless of exactly where the money comes from, the impact of these exceedingly high costs is transmitted throughout the entire health-care economy, and, indeed, throughout the general domestic economy.
And the most expensive medical procedures
A similar situation exists with regard to medical procedures. Here are the ten most expensive surgeries in the United States, based on current information.
The most expensive are heart transplants, currently costing $1,664,800. About 3,000 heart transplants are performed in the U. S. every year. In addition to the surgery itself, the total cost reflects the lengthy hospital stay – close to two months – as well as the cost of procuring the replacement heart.
Second on the list are double lung transplants, costing $1,295,900. These are the last resort for patients whose lungs have failed all other treatment forms. Recently, a patient with COVID-19 received a double lung transplant and is currently stable.
Intestine transplants, at $1,240,700, are third on the list. In contrast with heart and lung transplants, intestine transplants are done with live intestinal tissue from a donor. The cause is usually an intestinal disease or tumor, resulting in dead intestinal tissue. Sometimes intestinal disease is linked with failure of other organs such as the liver, in which case the additional $400,000 cost of a liver transplant must be borne.
Donor bone marrow transplants, at $1,071,700, are number four on the list. These, termed allogeneic bone marrow transplants, in contrast with bone marrow transplants using the patient’s own bone marrow, tend to be somewhat risky, since patients need scrupulous after-care to guard against rejection of the transfer.
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Single lung transplants, at $929,600, are number five on the list. In terms of the procedure and the procurement of the replacement lung, this surgery is much the same as a double lung transplant, except (of course) that only one lung needs to be procured and replaced.
Liver transplants, at $878,400, are sixth on the list. Some of the same issues apply as with heart and lung transplants, that is, procuring a replacement organ. The procedure is risky. Liver damage resulting in the need for a transplant is sometimes the result of drug or alcohol abuse.
Autologous bone marrow transplants, at $471,600, come in at number seven on the list. “Autologous” means that the patient’s own bone marrow is used in the procedure. This makes it less risky, and less expensive, because it is not necessary to find a donor.
Kidney transplants, at $442,500, are eighth on the list. In kidney transplants, the old kidney is not removed. The surgeon attaches the kidney at a different location, leaving the old kidney in place. Kidney donors are frequently living family members or friends, since it is possible to survive in good health with only one functioning kidney.
Pancreas transplants, at $408,800, are number nine on the list. These are frequently done in combination with kidney transplants. Usual recipients are patients whose type 1 diabetes or kidney failure has progressed to the state of damage to the pancreas.
Cornea transplants, at a mere $32,500, are tenth on the list. This is a much simpler procedure than the previous nine. The patient is not anaesthetized and does not need hospitalization, which greatly reduces the cost of this procedure.
As with the most expensive drugs, these most expensive surgeries are not frequently performed. The overall cost of these procedures is due to several factors. Of course, the surgeon’s fee and the fees of other attendants at the surgery are an important part, but several other factors also have a major impact on the cost. These include procurement of the replacement organ, whether hearts, lungs, livers, or others. Another factor that has a huge impact on the total cost is the hospital stay itself, during which the patient’s recovery from a high-risk procedure is closely monitored.
Again, very seldom is the patient responsible for the entire cost of the procedure. Of course, there are many instances when a patient, having experienced what might seem to be a routine procedure that required a hospital stay of even a few days, is presented with a catastrophically high bill. And, again of course, many such patients have no way of paying these bills. Such bills, along with the sometimes huge amounts that are covered by private or government insurance, add to the overall cost of health care in the US, whether or not an individual patient pays.
For example, a 70-year old man in Seattle was recently discharged from a hospital after 62 days of treatment for COVID-19. At his release, he was presented with a bill for $1,122,501.04. The patient’s out-of-pocket costs after insurance are $6,000, which he may not have to pay because the stimulus package approved by Congress in May included $100 billion for hospitals and insurance providers to account for the costs of the pandemic. Nonetheless, the total million-plus bill is also added to the overall cost of health care in the US.
A major driver of drug costs
The actual cost of manufacturing most drugs is not especially high. Some drugs are obviously more expensive to manufacture than others, but it’s not the cost of the physical drug itself that drives the price through the roof. The research that goes into drug development is clearly a significant driver of cost. However, the most expensive part of the process is the series of clinical trials that verify whether the drug does what it’s supposed to do, particularly with regard to efficacy and safety. It is not simply a matter of meeting regulatory requirements for drug approval, whether by the FDA or another entity. It is an absolutely necessary part of answering the essential questions about a substance that humans are supposed somehow to ingest in order to treat, control, or prevent a disease or condition that affects them in a negative way.
This entails obtaining definitive answers to a number of questions. In discussions regarding the necessary testing of drugs before they are introduced to the market, the usual shorthand way of describing the questions the clinical trials are meant to answer is to categorize these questions as having to do with safety and efficacy. However, each of those terms covers a lot of territory. Regarding safety, of course it’s necessary to determine whether the candidate drug might cause a severe harm – death, disability, a consequential disease.
It’s also necessary to evaluate whether the benefit conferred by this candidate drug outweighs any negative effects caused by the drug. For example, if a drug were found that would reliably and quickly stop an incipient heart attack, but the drug also caused a transient episode of severe itching, it might be deemed that the benefit outweighed the negative effects. However, if it was a drug that managed hay fever, the itching episode would likely be enough to discourage its use.
And it’s also necessary to evaluate the benefits of any drug in individuals who vary by age, gender, race, pre-existing conditions, exposure to other drugs, and other factors. This makes the recruiting of trial participants complicated and expensive.
After a candidate drug has been shown in the laboratory and also in laboratory animals to be at least potentially effective, the first human trials would be in healthy volunteers. Researchers would be trying to determine such elementary (and vital) information as the correct dose, the time it takes for the drug to reach its maximum concentration in the blood, the drug’s half-life, the route of elimination, and other such essentials. Later clinical trials would attempt to establish the “proof of concept,” meaning verification that the presumed mechanism of action of the drug actually works in a live human subject. For example, it has been shown in laboratory tests that the calcium ion channel conveys the signal that causes arterial contraction, therefore a calcium channel blocker should reduce arterial contraction and be useful in treating hypertension. It’s a leap from testing that premise in the laboratory to employing it in a drug for humans with high blood pressure. Clinical trials are necessary to prove such concepts.
As the clinical trials progress, subjects with the actual medical conditions that the candidate drug is intended to treat must be recruited for the trials. If the disease or condition is one for which available treatments are non-existent or linked with severe side effects, recruitment of trial subjects is relatively simple. People are willing to take a chance on an experimental treatment if the alternative is no treatment at all. But if there are available treatment options that have a relatively decent reputation, subjects are not so forthcoming.
In cases such as that, it has often been necessary to conduct clinical trials in parts of the planet where medical treatment is not so easily available. There, a person’s choice might be to take part in a clinical trial, recognizing that he/she might not receive the active drug, but instead be part of the placebo group. The alternative to enrolling in a clinical trial might be no treatment at all. Even the placebo group in the clinical trial receives some medical attention.
Finally, there needs to be at least one large clinical trial whose patient population bears some resemblance to the population that would be treated with the candidate drug. This is difficult particularly in the case of drugs that are intended for use in rare diseases. Regulatory authorities give such clinical trials a certain amount of leeway; it is sometimes enough for the drug to demonstrate efficacy in just a few subjects with the rare disease. At the other extreme, if the drug is meant for use in a condition that affects a considerable fraction of the population, and for which there already exist treatment options, it may be necessary in some way for the candidate drug to demonstrate at least some advantage over existing treatment options. A head-to-head trial, in which the candidate drug is directly compared with the established treatment, is clearly risky. The candidate drug might lose. Pharmaceutical companies go to considerable lengths to avoid that outcome, such as conducting trials that are similar to the trials that were used to get regulatory approval for established drugs, in their hope that the results for the candidate drug could be interpreted as superior to the established drug, at least in some regard, e.g., similar efficacy results, but fewer adverse events.
All of this, as must be obvious, costs a considerable amount of money. According to a 2016 paper in the Journal of Health Economics (Di Masi JA. 2016;47:20-23) the cost of bringing a new drug to market in the US was about $2.6 billion (billion with a B!) in 2013 dollars. Post-approval R & D brings that cost to about $2.9 billion. That figure is in so-called “capitalized” dollars, meaning that it takes into account the development costs of drugs that never make it to market. And, over a ten-year span, only about 12% of candidate drugs received FDA approval.
Regardless of who pays the bill, these costs are added to the overall cost of health care. Private health insurance gets more expensive, and the Medicare and Medicaid costs just get added to the deficit.
And that’s not all.
Some other practices that add to health-care costs
One of these is nicknamed the “Florida Shuffle.” It was described in detail in a New Yorker piece by Colton Wooten that was published on 21 October 2019. Wooten is a “recovered” drug abuser, and he recounts his sojourn in Florida in harrowing detail. He arrived in Florida in February of 2017, heading for an addiction treatment center, where he would spend the next 45 days. He was 24 years old, and he had been a drug abuser for eight years, abusing not only the standard prescription opioids, but also heroin and cocaine.
He describes his next few months as follows:
“… I moved between recovery and relapse, cycling through the Twelve Steps, then going off in search of drugs. I would walk out of group therapy in a huff, and then, days later, check into another detox for whatever length of time insurance would cover. After inpatient rehab, I’d move into sober housing and re-enroll in an outpatient program at a nearby clinic. As long as I was insured, I didn’t have to touch money. There’s a name for this peripatetic life style: clinicians, clients, and local officials call it the Florida Shuffle.”
Palm Beach County, in South Florida, was praised in the NY Times as “the epicenter of the country’s largest and most vibrant recovery community.” This concentration of Twelve Step treatment programs, residential rehab facilities, outpatient facilities, and recovery residences – the so-called “sober homes” – got its start in 1967 in response to the growing problem of substance abuse. The substances abused at that time were alcohol, cocaine, barbiturates, and amphetamines. It was said that in those early years, the substance abusers who followed this model did really well. According to Wooten, “they would make new friends, find low-stress recovery jobs, waiting tables in diners, folding jeans at the mall, or answering phones at a call center, and subscribe to the Twelve Steps. Eventually, having survived their addiction into adulthood, many of them would return home.”
That was then.
Treating (for want of a better word) substance abusers who are seeking, somehow, to get away from the habit that has crippled them has become an industry in Florida. Between 1986 and the present, the number of treatment facilities in the US of any kind for substance abusers has doubled, from about 7,000 to more than 15,000. And in the same period, the revenues for this industry have risen from about $9 billion to more than $50 billion. In Palm Beach County, revenue from addiction treatment rivals Florida’s most profitable enterprises such as tourism and real estate.
A major part of this boom is due to the provision in the Affordable Care Act that prohibits limiting access to treatment on the basis of a pre-existing condition. While drug addiction itself is not considered a pre-existing condition, relapse after treatment is considered a pre-existing condition. Therefore, the back-and-forth traffic from treatment to rehab to “sober homes” and then, after the almost inevitable relapse, back to treatment, is required to be covered by insurance. Thus, the entire “Florida shuffle” is largely financed by insurance, and the huge costs add to the health-care cost deficit that affects the entire payer universe.
I do not take it upon myself to cast aspersions on the operators of this huge, inefficient, and profitable system. There is no currently validated protocol for resolving drug addiction. Certainly, many – perhaps most – of the workers who deal on a daily basis with drug addicts are sincere in their desire to help the abusers shed the burden of addiction and set their lives on a new course. At the same time, the operators of these facilities have evidently realized that they’re onto a good thing.
What, if anything, can be done?
Let’s start with some insurance basics. Consider the cost of insuring your home. Those annual charges, even over a span of fifty years, do not begin to add up to what the insurance company would have to shell out if your house burned to the ground. A few years ago, our insurance company quickly and easily paid for extensive damage to our house caused by ice dams, which sent water cascading out of our bedroom ceiling and also wrecked the bedroom floor. The damage amounted, as I recall, to a sum equal to about three years of insurance premiums. The insurance company is still making money from us. But they need that money to cover their payments when somebody else’s house burns to the ground.
I don’t think many home owners make a calculated decision not to carry insurance, based on the premise that their house is exceedingly unlikely to burn to the ground, and that the costs of minor damage don’t make insurance worthwhile. After all, if they stashed an amount equal to their annual insurance premium in the bank, they would likely have more than enough to cover the probable damage to their house over time. While that’s probably true, most people have the sense to understand that the ultimate reason for insurance is to cover the costs that they would not be able to afford, if the worst happened. We buy insurance in the hopes that we’ll never need it.
One would think that the same thing might apply to medical insurance. Many people, however, delay buying health insurance until they begin to feel that they’re going to need it pretty soon. The Affordable Care Act tried to address that situation by imposing a fine, in the form of additional tax, on persons without health insurance. The ACA also extended Medicaid coverage to many low-income people and also provided subsidies for many persons. The total number of uninsured in the US dropped from about 46.5 million in 2010 to below 27 million in 2016. However, for the past few years, the number of uninsured has changed direction, increasing by about half a million per year.
Paying for the medical treatment of the uninsured is a huge weight on the health-care system as a whole. The effect of being uninsured on an individual’s health starts at the most basic level – routine health maintenance procedures that are relatively inexpensive, but can become immensely consequential if they are ignored. Blood pressure monitoring, keeping an eye on blood sugar and cholesterol levels, regular tests for breast, prostate, colon, and other cancers – to the person with health insurance, these are routine appointments for which they have to find the time, but whose costs are of little consequence. In contrast, the millions of uninsured largely ignore those routine tests, as well as much other routine health care. However, they cannot ignore serious, life-threatening diseases. Some individuals only seek medical insurance when a serious condition is staring them in the face. At that point, even if they succeed in getting health insurance, their premiums don’t begin to cover their treatment costs. Thus, in many cases the costs of care for these diseases is absorbed by the health-care system itself.
I like to recount the story of a woman in Boston who presented herself to the emergency department of an excellent hospital about four times a year with her legs so swollen that she could no longer do her work, which was cleaning people’s houses. As it happened, a resident physician noticed that she kept coming back to the hospital for treatment of her swollen legs on an emergency basis, and checked to see what the costs of this treatment amounted to. He was shocked to find that the figure was something on the order of a quarter of a million dollars per year (this was in the 1980s – it would be much higher today), which the hospital absorbed. He arranged with the hospital that she should undergo treatment for the condition which caused the swelling – congestive heart failure, an eminently manageable, although serious illness. She began the course of treatment and then came into the hospital periodically on an out-patient basis. The swelling episodes stopped, the woman was in much better overall health, and the hospital saved money.
It’s likely that the woman’s cardiac condition could have been prevented from progressing to congestive heart failure if she had had health insurance of some sort and had at least occasionally seen a primary care provider. The kind of cost savings that the Boston hospital realized by instituting regular management of her condition could be translated to the entire health-care system in the US.
Another possible avenue to improve health quality and lower costs
A recent study in Circulation attempted to analyze the potential effects of taxing sugary soft drinks (Lee Y, Circulation 6/22/20). The analysis, which of course will be challenged by the soft drink industry, was to my mind amazing. Several taxation strategies were examined. One was a tax based on the volume of a sugary beverage; another was a flat tax based on the total amount of added sugar in a given drink. The former method was estimated to prevent 850,000 cardiovascular events and 269,000 cases of diabetes, as well as reducing health-care costs by more than $53 billion. The later method, based on absolute sugar content, was estimated to prevent 550,000 diabetes cases and save $105 billion in health care costs. These estimated benefits were as of a projected 10-year follow-up. The adverse effects of sugary soda pop consumption were thought to affect Hispanics, blacks, and younger persons disproportionately.
A tentative conclusion
It’s abundantly clear that most of the parties in the health care field have a powerful profit motive. That isn’t going to go away. But the existence of a profit motive does not automatically mean that the whole enterprise is inefficient. The pharmaceutical companies need to find a way to cover the overall costs of clinical trials, which are monumental. But we can’t do away with clinical trials in the name of reduced costs. If we didn’t have clinical trials to back up the efficacy and safety of drugs, what – or whom – would we rely on? Doctor Oz? The President of the US? An eminent scientist who happens to be on the board of the pharmaceutical company?
It does seem clear that many of the most expensive drugs and procedures would be necessary much less frequently if more people had good quality primary care. I’m not talking here about those diseases and conditions that are due to rare genetic variations; early intervention is not likely to make much difference in those. But it’s certainly much cheaper to prevent a person from developing advanced diabetes or congestive heart failure than it is to treat the multiple conditions that accompany untreated diseases in the final stages.
It’s a certainty that if more people had health insurance, there would be more people seeking care. Initially, it’s likely that many of those currently uninsured person would require fairly advanced, and therefore expensive medical care, because this is a population that has typically only sought health care for conditions that have progressed beyond the scope of much primary care. Thus, initially, at least, providing health insurance for an expanded population would cost more money.
But eventually (and in my opinion, before very long, perhaps five years) the balance would shift, as more of the previously uninsured population sought out primary care providers and received the same preventive care treatment that today’s insured population routinely receives. Then we would see significant reductions in the incidence of those advanced, late-stage diseases and conditions, and a concomitant reduction in total health-care costs, including drugs, procedures, and hospital stays.
A very brief summary would be: more comprehensive primary care would result in less need for advanced care. That would result in a significant reduction in the total cost of health care to the community as a whole.
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You noticed perhaps that there was no mention of the current pandemic in this epistle. That doesn’t mean Doc Gumshoe hasn’t been paying attention to the events and doings on that front. From time to time I’ll bring you bits of news you may have missed or ignored. Thanks, best to all, and stay well. Michael Jorrin (aka Doc Gumshoe)
[ed. note: Michael Jorrin is a longtime medical writer (not a doctor), who I dubbed “Doc Gumshoe” many years ago — he writes health and medicine-focused columns for our readers a couple times a month, and though he does not generally cover investment ideas he has agreed to our trading restrictions. You can find his past columns here.]