Goodman on Drugs

There is a new book out on pharmaceuticals with a chapter by yours truly.  Is it the chapter worth reading?

That depends on how much you already know.  What follows is a list of seven deadly sins.  In each case the sin has one of two causes.  See if you can identify them:

  • Not long ago, millions of Americans who did not even have arthritis were taking such arthritic pain relief medicines as Vioxx and Bextra and Celebrex when less-risky, less-expensive over-the-counter remedies would have been more appropriate.
  • While Americans over-consume some drugs, such as Ritalin and antibiotics (and, in the latter case, degrade the effectiveness of the drugs for society as a whole), we under-consume other drugs. In fact, for such conditions as diabetes, hypertension, asthma, obesity and high cholesterol, our use of effective drug therapies appears to be a small fraction of what it should be.
  • While there has been a rising chorus of complaints in recent years over the high cost of prescription drugs, the vast majority of patients overpay for their drugs – in part because they fail to employ shopping techniques they routinely use when they purchase other goods and services and in part because they do not even know about therapeutic or generic substitutes.
  • Whereas lawyers and other professionals routinely communicate with their clients by phone and by email, it is very rare for physicians to communicate with patients that way – even for routine prescriptions.
  • Whereas the computer is ubiquitous in our society and studies show that electronic medical records systems have the capacity to improve quality and greatly reduce medical errors (including 200,000 adverse drug events annually), no more than one in five physicians or one in four hospitals have such systems.
  • Despite the fact that many new drug therapies are less expensive and more effective than competing (doctor and hospital) therapies, many patients do not utilize them.
  • Whereas lawyers routinely advertise in search of former Vioxx users who can serve as plaintiffs in lawsuits against drug manufacturers, doctors and doctor groups almost never advertise to attract patients with arthritis or, for that matter, any other chronic illness.

All of these sins are the direct result of the fundamental way we pay for drugs and/or the way we pay doctors.  That is, we buy drugs in a way that is different from the way we buy other products and we compensate physicians in ways that are different from the way we pay for other professional services.  Those differences create problems in the medical marketplace that do not arise in other markets.

So why do we adopt payment systems that produce such bad results?  In each of the seven cases, mistakes embedded in the payment mechanisms reflect a failure to understand the economics of time.  If you can explain how that works for all seven cases, there is probably not much more you can learn from me.  If not, read the chapter.

These issues go way beyond the market for drugs, by the way.  Understanding the economics of time is the key to understanding what's wrong with health care systems all over the world.

I'll return to this subject in the future.

Have a great day,


Comments (5)

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  1. Andy Chasin says:

    What do you think of Value Based Insurance Design—charging lower co-pays for high value medication like for heart disease and diabetes which you point out that many people under-consume? Pitney Bowes did the early test of this and showed you can save money and lower costs. We’ve been working on something over here, but were not sure if you knew about the issue or had a position.
    Thanks for the info.

  2. George Beachamp says:

    As is your gift, you have hit upon a universal that helps lift the fog of apparently indecipherable and largely self-inflicted chaos in the so-called health care industry. I take it your trenchant analysis brings us to an understanding of the productive value of time in the “pharmaceutical space.” I proffer for your consideration a second necessity–competence–that coupled with time, in a substrate of energy, approaches sufficiency. I have been on a protracted analytical journey concerning competence in medical care, which encompasses both technical and moral capacities. Such capacities, collectively competence, are required for all parties. They link like central and peripheral neurology to build social capital and reduce friction for productive outcomes in medicine. This may be too terse to bring understandable meaning. And I may have missed your point and need to read the chapter…

    Thanks for “listening.”

  3. Chris Ewin says:

    Therefore, physicians have to change the business model in their own marketplace…..
    Regards, C

  4. David Hogberg says:

    That’s a fantastic title! Ha!

  5. Nick says:

    Very interesting!