Payers and Clinical Trial Transparency

It has been a rough month for Big Pharma. Johnson & Johnson settled several Federal cases concerning Risperdal for a whopping $2.2B after the giant unethically and illegally promoted off-label uses for its anti-psychotic drug a decade ago. Among the findings was the news that J&J may have withheld some trial data, which prosecutors tackled in part by requiring the company to sign onto certain compliance programs and trial transparency measures. Meanwhile, Astrazeneca is facing its own trial misconduct issues as the DOJ is now investigating potential data suppression or masking in the major PLATO trial for antiplatelet drug Brilinta (Ticagrelor).

Both ongoing stories come as there is a growing push for transparency in clinical trials led by groups like AllTrials and to an extent even the government through and the Affordable Care Act. While the trial transparency movement seems to be growing and negative pharma publicity only potentiates that push, there are still some additional possibilities that can further the cause.

Now this is purely speculative and there may be a good reason why it has not happened (please share if you have some insight), but payers may just be the key to the lock of getting greater clinical trial transparency. They naturally have an incentive against paying for expensive brand name drugs, especially when there are viable generic alternatives on the market or if the efficacy is not really proven. Withheld data or misleading trial conclusions actually hurt payers’ bottom lines via higher cost, lower return medications. Given the current cost-cutting climate, a change forcing manufacturers to release trial information could improve outcomes while cutting costs in both the short and long terms. Given Express Scripts’ 2014 formulary exclusion of Advair in preference of cheaper, but effective alternatives, a move making more brand name coverage (or preferred tiering) contingent on greater transparency hardly seems like a bad idea.

Funding Education Through Equity

Earlier this week, the Oregon Legislature approved a plan that could pave the way for college students to finance their education by selling equity stakes in their future income. The idea is an intriguing one that has been bounced around before, but has never made it far in the United States, until now (a short stint by Yale in the 60s is the exception).

What makes it so appealing is that it is a glimmer of hope in the depressing enigma that is financing higher education. With both unsubsidized and subsidized Federal loan rates now at 6.8% (and Grad PLUS rates even higher), the student loan burden that comes with an undergraduate degree let alone further education can be daunting. Unfortunately, Federal loans are often the only option that a student has to pay for school nowadays.

Equity financing would allow these students to avoid debt in exchange for a portion of their future income for a set number of years. Proponents of the Oregon plan claim that 3% per year for 20 years would be enough to keep the program afloat. This is likely an optimistic scenario and there are almost certainly going to be additional hurdles to this sort of system working long-term, but this could be a step in the right direction. In the worst case scenario, it ends up being a decent natural experiment.

One of the primary concerns with this sort of program is financial sustainability for the investor- in this case the state of Oregon. Skeptics worry that students who expect to be high earners will not participate if it could mean they end up paying more in tuition when all is said and done. While what is currently on the table does not address this issue, a cap on repayment could help solve such a problem. The cap would still have to be higher than the average tuition rate charged by the school (in order for the program to remain independently sustainable), but could essentially be a way for students to trade the risks associated with uncertainty in future income for some extra money should things work out favorably.

Another issue is on the other end of the earning spectrum with those who might not make much upon graduation (or may not graduate at all). Adverse selection makes this problem especially worrisome. There is no difference for a student in terms of being eligible for this program whether he majors in a field with many jobs, no jobs, lucrative salaries, or low salaries. It is naturally attractive to those looking to study things that will not lead to large future incomes. Low incomes mean less money in, meaning the fund becomes harder to sustain.

Essentially, equity stakes and repayment years that are too low may attract too many borrowers who take out more than they put in, and equity stakes and repayment years that are too high may dissuade those who would put in enough to keep the program afloat. There may be a happy medium between the two, but there are also other options that could help increase the viability of equity funded education. Along with a cap on repayment, making part of the funding a mandatory loan could help strengthen the quality of borrowers. Attaching a loan could also help offset the cost hits from dropouts, etc. if they still have to may back the loan portion of the program. Varying the repayment rate or period based on major or performance could also help reduce costs and risk while also allowing the state to encourage certain degrees which might be in higher demand and have more desirable externalities. In the end, the state may end up having to cover losses associated with this sort of equity funding, but if the positive externality is great enough, it could even make it all worth it.

Overall, the Oregon proposal is far from perfect, but it is a start to something that could potentially be tweaked into a strong working model. It will be interesting to see how it works out.

Financing Scientific Discovery

When it comes to financing research and with the goal of societal benefit in mind, the question often arises of whether private or public funding is optimal. Many argue based on efficiency models that they believe in or the longstanding private sector vs. public sector arguments that are all too common in macroeconomic discussion. When it comes to funding scientific research, there is an especially strong case for utilizing both simultaneously.

To simply put it, private enterprise would be willing and able to gladly pursue the opportunities that we know to be commercially viable while the public sector could look at the riskier, big picture possibilities that might not have apparent commercial application- yet. What makes the process of scientific discovery so intriguing is the relatively strict discipline required in conducting science and the paradoxically complete mystery of what might eventually come out of it. It is that mystery that makes that research which seems to have no economically practical application worth pursuing. After all, it could end up being the next big thing.

We have seen this sort of surprise throughout history with accidental breakthroughs and inventions that resulted from research on something completely different. The Internet is a fantastic example. Lawrence Krauss recently wrote a terrific piece for Slate in which he talks about this issue as he voiced his opposition to a bill that looks to dictate what research can be done based on speculation of its economic viability. As Krauss puts it, you cannot mandate scientific discovery- thinking you can displays a great misunderstanding of the scientific process to begin with.

It might be somewhat discomforting to think that we are in a way funding various research with no idea how it will turn out. But it is not random. The process is far from random- it is quite well refined and through the course of human history has proven to be perhaps the most powerful method of discovery ever. That is the silver lining. That is what makes it all worth it.

Understanding Probability

Election season is a great time to witness the continuing American struggle with probabilities. All too often people will see odds or a prediction for a particular event and when the outcome of lower probability comes true, they will say the prediction was “wrong”. Of course this is an inaccurate conclusion considering there was still a probability for the less likely option to happen. Unfortunately, a lot of the populous does not seem to realize this despite it being useful knowledge well beyond just election forecasts.

Probability is of course everywhere. It is involved in everyone’s lives from determining the potential consequences of our actions to being better informed about taking risks. Understanding it can lead to much better decisions about practically everything if the right information is available. This includes understanding scientific findings, something that will likely be of tremendous growing importance going forward (and already is).

Given the widespread applicability of probability and all the facts and figures out there, a better systemic understanding of probability has the potential to drastically improve outcomes. And once more it is a relatively small cost at the school level to emphasize probability and statistics more than it currently is. American schoolchildren are infamous for their distaste of fractions, but it is time to make sure they not only know how to use them but to apply them by the time they graduate high school. A dedicated statistics class in high school could potentially do the country a lot of good. Furthermore, integrating the meaning of various statistics in other classes from government to biology is easily done and could help reinforce the understanding of probabilities. A simple change that I think is worth the risk to pursue.

This is the third post in a series about relatively simple changes to education curriculums that could have tremendous long-term benefits to the country. See my first idea here and my second here.

Improving Health Literacy

Health literacy, or the ability to understand and act on basic health-related information, is terribly low in the United States (and most of the world). Only 12% of Americans scored proficiently in a national test according to the 2003 National Assessment of Adult Literacy. This has a tremendous impact on the healthcare system and general wellness of the country. It not only leads to poorer health outcomes, but notably raises healthcare costs. Health outcomes worsen as patients misunderstand what providers tell them and do not adequately understand the advice that they are given. Lower health literacy has been linked to lower knowledge of disease states, higher rates of chronic diseases, higher hospitalization rates, and practicing fewer preventive measures for common diseases.

While there is a growing push for providers to improve their effectiveness of communicating with patients, there are still those who slip through the cracks and will likely continue to do so as the reality of an overburdened healthcare system continues. There are, however, other proactive solutions that can be put in place along with improving healthcare communication. One of these, is to implement health literacy coursework in high schools across the country.

A class in which students could be taught about simple nutrition, basic medical terminology,  common diagnostic tests, and explanations on why different patients and drugs have different dosing schedules could really go a long way in my opinion. It would help bridge the knowledge gap that is often so disastrous later in life and it might even lead to positive proactive health decisions early on. It is a relatively low cost solution to a major problem and one that does not take Federal reform, making it something that has to be looked at.

This is the second post in a series about relatively simple changes to education curriculums that could have tremendous long-term benefits to the country. See my first idea here.