Health Politics

Like many parts of the pharmaceutical industry (which I will abbreviate as pharma, which is also the name of the pharmaceutical lobby group) many people are at least vaguely uncomfortable with direct to consumer advertising (DTCA), as it highlights the fusion of health care and profit. We all know that Chocolate Frosted Sugar Bombs (R) do not save lives and accept the commercials as pure attempts at consumer manipulation, but we know that pharmaceuticals save and markedly improve lives. Is pharma heroic for taking enormous financial risks to develop drugs even for rare diseases, or are they profitting from the sick and gullible?

This discomfort makes it way into the policy debate about DTCA, but without being articulated well. People opposed to DTCA generally argue that health care costs and spending are increasing fast enough as it is; in fact, after the FDA loosened advertising requirements in 1997 and DTCA began in earnest, by coincidence, health care costs began rising at a faster clip (at about 12% per year, after several years of 6-8%), since this was also when health insurance purchasers began turning away from HMOs to less restrictive plans such as PPOs. Since 1997, consumer advertising spending for drugs has more than doubled, now on the order of $3 billion, as has total spending on drugs, now about $150 billion, and drugs which are advertised most heavily have seen the greatest increases in use. Certainly, not all of these increases can be attributed to DTCA, but even if we attribute only a small fraction to the ads, pharma's advertising dollar has been well-invested.

Some people feel uncomfortable at hearing these figures, perhaps at the great influence advertising has in the societal definition of "health", perhaps at the fact that people are learning health information from a source that stands to profit from convincing people that they are sick, or perhaps because television advertisements shatter that Norman Rockwell doctor image more than an HMO ever could. To some degree, DTCA may only be a reflection of the changing health information marketplace, rather than a cause: consumers cite diverse sources that influence them to talk to their doctor about specific health issues, and these sources are mostly distant from the health care system, such as friends/family (51%), broadcast media (40%), print media (34%), pamphlets in doctor's office (33%), and the Internet (16%). 33% said they were influenced by other doctors, and 17% by their pharmacists.

Attempting to look objectively at the DTCA issue, I can make a few statements.

First, as a society we value advertising when it advocates socially desirable goals, and conceptualize it as "public service" advertising, even if it's paid for by an industry, such as milk advertisements. Prevention of osteoporosis is a socially valuable goal, and all the better if the milk industry rather than a limited government public health budget will pay for advertisements to reach those who might not otherwise know about osteoporosis. People perceive DTCA as helping pharma, but not ordinary people.

Second, as a society, we value health care when it saves lives or improves quality of life. The classic critique of DTCA is that it causes basically healthy people to consume more drugs than they otherwise would: a person, after a bad day, will go to their physician for Prozac.

Pharma and other proponents make the claim that DTCA brings health information to people and brings them to health care where they receive diagnoses for conditions that would otherwise go unnoticed, which is surely a valid point. Any advertising by the companies who make the drugs and equipment for procedures on the lists of quality measures (e.g., HEDIS, AHRQ, JCAHO) would be a public service: for instance, if flu vaccine companies would advertise extensively to the elderly and raise their vaccination rate, they would literally save lives (influenza/pneumonia is consistently one of the top ten causes of death in the US for all age groups). Similarly for any other procedure with universal professional acceptance which is currently being underused.

Given this criterion, advertising for statins (cholesterol lowering drugs of which Lipitor is the most popular) may be socially beneficial; people at risk for heart disease may know their risk status, but not know that statins may help them until they see advertisements. In fact, a recent study showed that even after DTCA increased statin use in a study population by 60%, the new users were judged to need the drugs as much as the pre-DTCA users did. One might think that the type of person who would ask for statins would be a person with marginal need for the drugs, but this study showed that advertising caused people with significant heart disease risks to seek the statins. (R.W. Dubois et al., “Growth in Use of Lipid Lowering Therapies: Are We Targeting the Right Patients?” American Journal of Managed Care 8, no. 10 (2002): 81–86.)

For the drugs advertised with more marginal benefit or advertised with less accurate information, the advantages (if any) are more marginal, both in terms of cost-effectiveness and risk of over-prescribing. The advantages are also extremely difficult to quantify or even describe, especially given the paucity of high-quality data.

First, which drugs are being advertised? While physician detailing covers all drugs, 60% of all DTCA dollars are spent advertising 20 drugs (Rosenthal MB. Berndt ER. Donohue JM. Frank RG. Epstein AM. Promotion of prescription drugs to consumers.NEJM. 346(7):498-505, 2002 Feb 14. ). The classes of drugs with the most advertising investment highlighted by Rosenthal et al were (in order): antihistamines, nasal sprays, cholesterol-lowering drugs, proton pump inhibitors, and antidepressants.

A survey of doctors released today (n=643) on how DTCA has affected their practice reveals a few things that I found surprising. A quarter of visits related to DTCA result in a new diagnosis, of which a substantial fraction (30%) were considered "high priority" (a designation used in MEPS for chronic and high cost conditions such as ischemic heart disease, diabetes, and affective disorders). The survey also shows that the industry is doing well with these advertisements: about 40% of the time that a patient is spurred to see their doctor because of an advertisement they saw, they walk away with a prescription for that drug, although physicians also suggest lifestyle changes (39%), another drug (22%), over the counter drugs (12%), suggest a diagnostic test (9%), or refer to a specialist (6%).

It has also been speculated that DTCA has resulted in more uniformity of drug use than there is in other treatments. Medical treatments have been shown subject to enormous geographic variation which cannot be explained by demography or geographical patterns of disease: on average, there is about a 4-fold difference, with some treatments having a 12-fold difference. Drug prescribing does not have such significant variations with less than a two-fold difference on average, and only a 4-fold difference for controversial treatments. It is speculated that DTCA is responsible for increasing uniformity, although it is still unclear whether this uniformity is appropriate use, or whether we have uniform levels of overuse. There is no causal evidence, but being able to connect two seemingly disparate subjects is something that health policy wonks cry huzzah for.

There is much more information, but not now.

The less publicized part of the new Medicare drug bill is the ability for people to create the Health Savings Accounts that Cato et al have been drooling over for at least the past decade. They seem so sensible --- letting people use their own money to buy day-to-day health care, and let insurance cover only the parts which are true emergencies. Again, it's not so simple. I have a few questions, and again no answers:

1. The true emergencies are covered by catastrophic health insurance, which pays for everything after $N. These insurance policies should, in theory, be inexpensive and have predictable cost, but what is the rate of premium increase for them? I have heard anecdotal accounts of the rate of premium increase being higher than the general health cost inflation of ~12%, which might make HSAs unaffordable in the future.

2. How many catastrophic health insurance policies are true insurance, and how many have caps, such as lifetime maximums of $1 million? Nearly all insurance policies have such caps, but HSAs are claiming to be "true insurance", back end coverage for really bad disasters, rather than front end after a high deductible.

Currently, the fifty states and various territories of the US have different insurance regulations, which is a barrier to the entry of new companies into the states with small insurance markets and irregular regulations, requiring the insurance companies to learn and comply with an entirely new set of rules. In the case of price regulation, the companies may need to conduct entirely new actuarial studies of whether entering the market would be cost effective. The result of this patchwork of regulation is that small insurance markets have few players, which should in theory make health insurance less accessible to individuals and small groups buying insurance on the market.

Three weeks ago, I attended hearings by the House Committee on Financial Services on a proposal which would centralize insurance regulation and lower barriers to entry of new markets. As an aside, the hearings were boring, and filled with unctuous insurance industry lobbyists who paid professional line standers to stand in line for them starting over an hour before the hearings were to begin; worse was the whining from the unfortunates whose line standers didn't arrive in time or didn't arrive period. And No One would share their hand by telling me what they think of the proposal.

The aspect of this proposal which is being discussed is the one above --- making markets more competitive and so hopefully more efficient, which in turn should help the uninsured gain access to insurance --- is an aspect that no one could oppose. A fundamental part of American culture is a hatred of bureaucracy, and the idea of 50 different sets of regulations should make any good American recoil with disgust. If the centralization would be mandatory, effectively repealing state insurance regulations, the question becomes more complicated.

The proposal raises a few questions to me:
1. Do small insurance markets cause uninsurance --- that is, we can't prove causality, but are there more uninsured in small states with unusual regulations than in larger states? This question may not be answerable because small states have different demographic and economic profiles, so we may not be able to compare their rates of uninsured with the size of the insurance market. e.g., if the former states are rural states with few minorities and immigrants, weak unions, and many small companies, and the latter are more urban states with large industry, strong unions, and many minorities and immigrants, there are too many factors correlated with lack of insurance.

2. What, precisely, are these regulations that are barriers to entry?

3. State insurance regulations are generally made for political rather than economic reasons, so some regulations could be well-intentioned, but have negative effects on access for the uninsured. For instance, about five states have regulations that ban catastrophic-only insurance coverage, causing otherwise healthy people to need to choose between being totally uninsured and paying higher premiums for more comprehensive health insurance than they want --- making the market inefficient; on the other hand, such a regulation can be seen as protecting the consumer, who might not realize exactly what their insurance should cover. Can we grossly oversimplify and come up with some assessment of what proportion of state insurance regulations are valuable and which are pernicious?

4. What regulations would be put in place by a federal system, and how would these compare with the current state system? Politically, it sounds like there will be no price controls, for instance: while price controls can be seen as a market inefficiency, they might be protective against a price death spiral.

5. Are any state regulations necessary in order to be responsive to local market conditions? That is, is it possible to create a federal system that manages to apply to all of the insurance markets?

6. What would the effect of this system be on the self-insuring inter-state companies which are currently exempted by ERISA from following state insurance regulations, but tend to voluntarily follow many of them just for good relations with their employees? That is, would this system apply to these companies? Conversely, would these companies change their coverage somehow in reaction?


All of these questions are so general as to be meaningless since they cover such a vast system which, as much as it is studied, probably has more unanswered questions than answered ones. In addition, it's hard to know which of these questions are relevant. e.g., Self-insured companies are currently not involved in these questions of state insurance regulations at all, yet it's hard to imagine that changing the regulation structure wouldn't affect them at all. Nu?

In the continuing decennial cycle, the health care system is now perceived to be in crisis, but when people discuss this crisis they mean different things --- their own insurability (at a reasonable cost) on the individual/small group market, their ability to form a relationship with a doctor who smiles and knows their name, their own rising out-of-pocket costs, health care cost inflation making businesses reluctant to create new jobs, the rate of medical errors, threats to public health such as bioterrorism and previously unknown infectious diseases, inter alia.

Whether or not any of these are actually problems, we are privileged that health policy has again emerged as a key issue at a level of interest perhaps not seen since Wofford's surprise election in 1991. With this interest comes much discussion and coverage. Kaiser does a stupendous job of cataloging and highlighting the daily news in health policy, but I want to talk back to the news and explore the issues at greater depth, leaving the ephemeral issues behind.