Finding value for drug pricing

The relevance of value in establishing the positioning of medicines is the new normal for pharmaceutical marketing. Pharmaceutical companies have customers who are highly constrained by whether healthcare system funding is sustainable long term. Remember, payers think epidemiologically and in multiple years of costed care so industry needs to assess how that can be understood for product value. The pharmaceutical industry is constrained by its ability to generate revenues from medicines sales to cover the costs of research and development.

These two collide in the decision making process to adopt, or not, a medicine. The payers broadly have to balance the sustainability of their budgets with a potentially innovative medicine that will improve care outcomes. The pharmaceutical companies have to construct the value case to demonstrate these care outcomes. That probably means at least two things among many;

  1. Stop pricing drugs by the pill or pack, and start pricing valued outcomes for a defined set of patients over a number of treatment years, and
  2. Forget about trying to ‘time’ the market for product launch. The right time is set by payer budget cycles and their drug investment and disinvestment decisions. And, oh yes, the evidence.

By the way, my approach does differ from the journey model of Ed Schoonveld in important respects, by identifying the structured, and gated, decision processes involved; that why medicines aren’t sold, but bought.

Let’s first look at the colliding priorities. The diagram shows that payers are concerned with the value of a medicine in minimising treatment risk for the treated population. A company is seeking the value of the medicine by maximising the size of the treatment population that they believe benefits. As you grow the treatable population beyond the evidence, risk rises; for payers, reducing that risk is addressed through evidence.

This is a collision of notions of ‘uncertainty’ in decision making and folks on the industry side should be used to requests for more evidence and novel access arrangements such as conditional reimbursement with evidence generation, and so on. As in any model of competing interests seeking a common price, the intersection of these two notions of uncertainty is defined by a price at which both parties will agree the price pays for the uncertainty it quantifies (i.e. it quantifies uncertainty in a certain way). The intersect quantifies risk, and sets the size of the treatment population that can benefit for that price.

The resulting curve may be thought of the ‘community effectiveness curve‘ depicting the optimal balancing of risk for the treatment community and a proxy for price agreement along that curve. This, by the way, is a better way to identify price corridors for people who still think that way.

This structured process is what this article is about.

Here is the gated decision process for payer decision making. While payers may not formally see themselves going through this in a linear way, they are thinking these thoughts, in this order.

From the payer perspective, information needs to be specific to the decision gate and having the wrong information at the wrong time (e.g. the right information at the wrong gate) will just frustrate folks and probably irritate decision makers.

The diagram is read left to right, and a ‘yes’ answer to a question is needed in order to move through the gate. Getting a ‘no’ means the information supplied failed to make the case.

The following is a quick tour of the underlying logic. By the way, I call this a gated process as there are criteria for satisfying the conditions for passing through the gate; it is, I believe, unhelpful to decision making to characterise them as hurdles, as this suggests they are imposed to make life difficult. They are, actually, simply the structure of decision making.

Looking at this from a behavioural perspective, i.e. psychology informing decision making, each gate means this:

  • To get through the first gate, the payer is confronted with existing treatment options and asks why do I need another, or why change? Unfamiliarity may also be at work, with novel treatment benefits that lack comparators. Evidence of unmet need might be helpful along with good epidemiology to demonstrate the possibility of better outcomes.
  • Satisfied that a new therapy may be warranted, there is the question of risk and benefit compared to current treatment. While a new therapy might be indicated (yours?), the associated risk may be unacceptable compared to not using it. The benefits really do have to hold under increased uncertainty for a payer to agree to increased treatment risk. I suggest this is where discussion of standards of care begin to be quantified, having been introduced at the first gate. Payers often are not as aware as they should be on the current standards of care evidence in misdiagnosis, medical error and patient dissatisfaction.
  • Then having agreed that this uncertainty and its associated risk are acceptable, we are confronted with the cost and efficacy issue. Now we are beginning to price that risk. Good analysis of the costs of care and mis-care are useful, again because payers are not often aware of whole system costs (i.e. the costs of a treatment pathway) either because they are using using a fee schedule linked to DRG type classification or haven’t proofed their capitation models.
  • Success in pricing that risk moves to the question of the medicine in the context of total treatment costs and whether the treatment costs themselves for the patient population can be managed or will the scaling of the costs overwhelm the system for this treatment population versus all other options. Companies may see themselves as just suppliers of medicines for a price, and not a partner in the total system. But understanding the cost drivers along the whole treatment pathway, not just the costs a new medicine may drive, becomes an important element in final value pricing. If you have a medicine that reduces associated costs, or avoids certain costs (think the Triple Aim, here), then the determinants of value are much clearer. It may be that a biomarker is a value-add from one perspective but only if it reduces medical error and misdiagnosis, without increasing costs, so precision patient identification becomes important. If you’ve got this far, though, you’ll have already shown you can demarcate the treatment population, including the responder subset with a degree of precision.
  • Finally, the payer thinks about the future and whether there will be new medicines coming along that might address the same treatment population, alter risk differently, improve outcomes, avoid costs, with better patient adherence, and so on. Given, broadly, a medicine is alone in its treatment class for months, rather than years, payers may choose to delay decision making or consider options you’ve ignored that may trade off future costs and present priorities. This may be where a payer will be thinking disinvestment or product substitution and the determinants of that are critical in this final phase. Here’s a scenario: Why might a particular medicine not be a preferred medicine on a hospital formulary? The answer is simple: don’t have production problems where supply cannot be guaranteed. The lesson is that this is where the long game gets played out.

For those of you who read Kahneman’s “Thinking Fast and Slow”, or similar, there are decisional heuristics at work here. And across that gated process, you are contending not just with highly structured evidence informed quantitative information, but also how humans can be influenced by how human’s think they think. This has a raft of factors such as confirmation bias, hyperbolic discounting, choice overload, loss aversion, endowment effect, anchoring, mental accounting and social proof. It will pay to be attentive to when you present what information and the frame of mind decision makers are in. The reason this is important is that that regulators and payers in different countries, hospitals or regions can make different decisions from the same evidence, so something else is going on.

And so, a comment on pricing. To short-circuit this challenging gated process, it is common simply to cut the price, i.e. discount. Discounting is a quick win trick that only works if payers are trying to reduce present costs, which they all are. However, payers with their eye on the future are more likely to be interested in pricing arrangements that address uncertainty over time and so will be amendable to arrangements such as coverage with evidence development or outcomes guarantee. If they are focused on whole system issues, they will be interested in care pathway (cohort/whole system) pricing for instance. If, though, the future costs are a priority, think about capitation arrangements, or simple price/volume but be mindful that this last is like selling products door-to-door in the 1950’s.

I happen to think care pathway pricing of carefully demarcated patient populations with costs taken over say 5 years is a better pricing model for both parties. Value can be demonstrated on both sides along with evidence of such things as improved adherence (to reduce waste by non-responders) or diagnostic decision support aids to address misdiagnosis and sources of medical error or reduce time to the correct diagnosis, in the case of rare diseases for instance.

This article is designed to emphasise product value determination under conditions of uncertainty to arrive at a sustainable long-term relationship.

Decision making and machine learning

The AI agenda is for me all about augmenting human reasoning; what I call cognology (cognitive focus) to distinguish from technology (physical focus). This is the core challenge to work flow and adoption.

Here are some thoughts on the application of John Boyd’s OODA decision making from military decision making to healthcare decision making.

Boyd developed OODA to characterise decision making by fighter pilots who must react quickly. Success lay in cycling through this more quickly than the opponent.

OODA means: Observe, Orient (interpret), Decide (from options), Act. The faster a person can work through that process (reason) is evidence of quicker decision making and interpretation of evidence. 

Artificial Intelligence has a role in each of these steps. It becomes quite important to know where to focus AI capabilities, what operational benefits flow from that and indeed what the wider impact of AI in clinical reasoning might be.

At root, that means being clear about what aspect of human reasoning is being addressed by AI and where in the decision making process.

What we’re seeing with AI and which is what has caused the most concern for critics is the risk that AI’s significant augmentation of human reasoning along the OODA process could in the end replace humans. My view is that we need to know where the AI augments and how, and where the AI replaces and why.

A worrisome example is AI in combat, with autonomous/semi-autonomous drones, the former having the capability of acting without human intervention: humans are ”out of the loop”. Healthcare, too, offers the potential for clinicians to be “out of the loop” and in the absence of adoption of augmented reasoning by clinicians, the AI could dominate by default.

Boyd’s model looks like this:

The AI computational models are very good at dealing with the complexity illustrated of decision making. I’d suggest much AI is still at the first two O’s: computational modelling of tumours, for instance and suggesting where highest risk lies. We are beginning to see the D being addressed when clinicians are presented with treatment options (such as referral of a patient with a hitherto unknown diagnosis for genetic testing as not referring was the default clinical decision — this is related to work I’m involved with on patient finding and undiagnosed rare conditions). Much AI has helped with OOD. It is the A that is the coming challenge and which has the potential to take humans ‘out of the loop’ and allow the AI determine actions, e.g. automatically having the patient referred.

The reason this matters is that clinical processes involve prediction about what health outcomes will be obtained from what treatment intervention. Here’s an example: AI is outperforming clinicians in diagnosis (using ROC figures). The prediction models I’m working with for identification of patients with rare diseases operate at an ROC of about 0.9 and when clinicians review the output as part of augmenting reasoning, the AI’s ROC jumps to over 0.97, suggesting almost certainty of a rare disease diagnosis. At present, patients with rare diseases experience an average of 7 years to a correct first diagnosis and may see as many as 20 different clinicians on that journey. AI cuts that to ‘hours’ and fewer wasted clinical encounters. This means the OODA cycle becomes more precise and much quicker from the patient’s perspective.

Mixed economy of healthcare is more intelligent than a supertanker

From the UK Guardian: private healthcare providers.

The research on comparative performance of for profit and not for profit healthcare providers is well developed, so it is surprising to see such a weak quality assessment about private providers in the NHS.

The NHS is a very difficult customer for a number of reasons, primarily the glass box of public scrutiny and politics. But many countries successfully navigate public scrutiny of providers in general. So what is the story behind this newspaper article?

  1. It is true that many private providers have handed back their contracts to the NHS usually because either they didn’t do their sums properly, or found the environment more challenging than they expected. But a significant number of NHS providers are in substantial financial trouble, too, and they can’t hand back their contracts, but instead get a state bail-out. This is hardly a level playing field of course, but indicates that the financial regimes for public and private providers is different and that the commissioners may be unable to purchase care services from a mixed economy of providers.
  2. Private providers are often accused of not providing the highest standards of care. This is an interesting problem as virtually all the doctors on private contracts work the bulk of their time in the NHS and all belong to their Royal Colleges and the GMC regulates doctors, not just NHS doctors. It is worth being reminded that the NHS employs 57% or so of all registered nurses, while 37% work in private settings and an additional 7% in nursing homes. As well, the public sector is not the major employer of pharmacists and nutritionists, and the list goes on. Are these health professionals agreeing to work in less well-run and managed private facilities or do they believe they are providing a higher personal standard of care.
  3. Yes, the private hospitals are free-riders on the training system for health professionals as they don’t participate in that system, but there is no reason they couldn’t. They also don’t have emergency facilities, which is pointed to as evidence of poorer standards of care as a patient in trouble would need to be transferred to an NHS provider. But in the NHS, A&Es are being rationalised, converted into trauma centres, and patients transferred to superior treatment facilities when a particular hospital cannot cope. Patients and ambulances are apparently queuing outside the A&Es. There could be a case to be made for private urgi-care centres (18 hours a day, out-patients only), but the private sector would need to made a strategic decision that they wanted to elevate their service mix above elective, private insured care. Until they do something to fix that fault line, they’ll likely be continuing target.
  4. As for the money, in the total scheme of things, private contracting is still less than 10% of total expenditure on the NHS. The article typically falls into the trap of making numbers look big, when as a proportion they are quite small.
  5. NHS managerial expertise is generally what is used to run private hospitals. Many former NHS managers work in hospital contract management, where a hospital is run by a management team on contract.
  6. Circle had trouble not because the Hinchingbrooke is particularly challenging but because the managerial and financial environment was unsustainable partly because of underfunding of the contract by the NHS among other reasons.
  7. It is worth keeping in mind that while the US is seen as a bastion of private healthcare, the majority of providers are not-for-profits (including the hospitals associated with universities where the care is of world class excellence) and that the US care system is over 50% funded from the public purse. Private care providers exist globally and we might usefully look to countries in Asia, such as South Korea, to see what at future healthcare system might look like. Think Samsung.

What Cognology would say:

The government does not consider healthcare as a whole system but fragments regulation by ownership type; this is the root cause rather than something intrinsically problematic with private care, especially given the substantial evidence of problems with NHS care. This means they have failed to create a single regulatory environment to cover both public and private providers which would benefit all citizens in the country regardless of their personal choices. Taking this one step further, embedding intelligence in organisations, hive mind type logic which drives complex adaptive systems, would alter the objectives of regulators and embolden the component parts toward greater autonomy.

 

 

UK and the EU: Brexit as failed ideology

Dr Tim Oliver posted on the LSE Blog a thoughtful item on the various ways to understand the negotiation structure of Brexit [link to item]

He puts forward four key ones, and what I want to do is briefly comment on each.

Neoclassical Realism: This is about power relationships. The UK’s position within the EU has been weaked  as a naysayer of much of the European agenda. Externally, it is a full member of the UN security council and a member of NATO but both of these are immaterial to the Brexit outcome. As a card to play, they carry very little weight in negotiations as for the UK to abrogate its security responsibilities or use them as a bargain chip would actually signal weakness. In response, NATO would see the UK as an unreliable partner who would trade collective security for self-interest. As a global power in its own right, I suspect the evolution will be continuing geopolitical decline and loss of global influence. While we may see new alliances, for a realist, the international anarchy of inter-state relationships will become a factor in dealing with the EU and the UK will be the weaker for opting out of power relationships, for a delusional view of national power.

Constructivism: This is about norms and rules. The Brexit leave logic is that the UK can forge new relationships more productively outside the EU than within. Trade is a proxy for the power of nations to abide by norms or construct rules. As a nation among many, trade migrates to the larger blocs and the single actors take what they can get. The UK will become a rule-taker outside the EU. The test will be the deal with the EU. If the UK can’t agree a good deal with the EU, that would signal the UK can’t be negotiated with unless they get their way. This is of course silly logic at one level since the UK is leaving a trading bloc where it was a rule maker. Only fools and deluded politicians believe rule taking is preferable.

Bureaucratic politics: This is about the behaviours of bureaucratic systems. The UK has viewed the Brussels bureaucracy in some respects as a distraction from domestic affairs. The EU relationship was managed through the “Foreign and Commonwealth Office”, a strong clue on how the EU was viewed (viz. foreign). In terms of civil servants building careers, postings in Brussels were not seen as career enhancing (unlike working for the Home Office for instance); this led to very good individuals pursing careers at the Commission to the detriment of their domestic career progression. Indeed, expertise in European matters was frequently dismissed. This sorry state of affairs of course played out through the removal or departure of key individuals with expertise in European affairs. That they might have gone ‘native’ is a concern all governments have and is one reason diplomats are routinely rotated. But the EU requires deep expertise both because it is a unique body of law but also because the UK was a key actor in that system. I suspect that the current negotiations are being handled badly partly because the UK team lacks the ‘native’ understanding; this may explain why the government is afraid of civil servants with strong EU views; like Orwell’s 1984, this doesn’t fit with the mind set in government. The consequence is more about failure for the UK from incompetence than from bad bargaining.

Cognitivism: This is about ideas and mindsets. The UK has seen the EU as simply a trade arrangement, consistent with years of free trading. The EU sees itself as an idea, in the same was the US sees itself as an ideology. There is nothing wrong with that. The weakness is the UK sees itself defined through trade and not as a national idea called the UK; indeed it not sufficient to argue the UK’s ideology rests on notions of sovereignty and taking back control as this flies in the face of the fact that all nations are constrained by treaties of one sort or another should they choose — what Brexit does signal is the UK can abrogate a treaty obligation and may be prima facie unreliable. The Brexit debate has shown how poorly prepared the UK politicians on the government side are, and who actively avoid discussing the social dimension of the EU — indeed look very uncomfortable discussion the rights of 3 million EU citizens within the UK. Social Europe is made up of academic networks amongst research institutions, or families brought together across borders, of young people experiencing another culture through Erasmus exchanges, even of duty free wine and beer, freedom to travel, enjoying the security the European Health Insurance Card brings and so on. As an ideology, the UK dismisses this as a ‘project’ and emphasises that all things about money matter more than people. Barnier and colleagues emphasise the primacy of people. This is consistent with the ideological basis for the EU’s bargaining position. The result is incomprehension by the UK of the EU position, while the EU knows the UK position well as it has played out over 40 years of opposition to social Europe.

From a decision making perspective, I concur with Oliver that each in some way is being played out. The salience of the various issues is rising for those who voted in the referendum and showing the problems that were indeed well-known beforehand, by experts of course. But rising public salience will constrain politicians’ actions as technical issues evolve into political ones. For instance, cross-border access to healthcare (1708/71) is full of technical details, but the public salience will be loss of healthcare when they travel. The departure of EMA from the UK looks like a technical issue of moving offices, but its salience lies in drug companies deprioritising the country for launching new medicines, with possible diminution of research infrastructure. Inside each technical issue that can be hammered out by civil servants, lurks a political issue that can only be resolved through public discussion.

What Cognology would say.

Intelligent application of game theory in complex areas such as Brexit would have revealed that perhaps there are/were more options than assumed. The driving anti-intellectual logic of “red lines”, which signalled boundaries within negotiation, is always a bad thing. In the case of Brexit, it probably guarantees a bad outcome at least for the UK. I think smarter negotiating would have done a better job early on modelling or gaming the likely scenarios. What we are left with is political egos, hardly something noted for intelligence.

Intelligent medicines optimisation

A central feature of any high performing healthcare system or organisation includes best practice in medicines use and management. As all aspects of healthcare are under varying degrees of financial stress these days, cost controls and appropriate use of medicines must support the highest standards of clinical practice and safe patient care.

Medicines optimisation is one strategy as the use of medicines influences the quality of healthcare across the whole patient treatment pathway.

Failure to optimise the use of medicines across this pathway may arise from:

  • misuse of medicines (failure to prescribe when appropriate, prescribing when not appropriate, prescribing the wrong medicine, failure to reconcile medicines use across clinical hand-offs;
  • “clinical inertia” and failure to manage patients to goal (e.g. management of diabetes, and hypertension post aMI) [O’Connor PJ, SperlHillen JM, Johnson PE, Rush WA, Blitz WAR, Clinical inertia and outpatient medical errors, in Henriksen K, Battles JB, Marks ES et al, editors, Advances in Patient Safety: From Research to Implementation Vol 2: Concepts and Methodology), Agency for Healthcare Research and Quality, 2005];
  • failure to use or follow best-practice and rational prescribing guidance;
  • lack of synchronisation between the use of medicines (demand) and procurement (supply), with an impact on inventory management and
  • loss of cost control of the medicines budget.

The essential challenge is ensuring that the healthcare system and its constituent parts are fit for purpose to address and avoid these failures or at least minimise their negative impact.

Medicines costs are the fastest growing area of expenditure and comprise a major constituent of patient treatment and recovery.

The cost of drug mortality was described in 1995 [Johnson JA, Bootman JL. Drug-related morbidity and mortality; a cost of illness model. Arch Int Med. 1995;155:1949/56] showing the cost of drug mortality and morbidity in the USA and costed the impact at $76.6 billion per year (greater than the cost of diabetes).

The study was repeated five years later [Ernst FR, Grizzle A, Drug-related morbidity and mortality: updating the cost of illness model, J Am Pharm Assoc. 2001;41(2)] and the costs had doubled.

Evidence from a variety of jurisdictions suggests that drugs within the total cost of illness can be substantial, for instance:

  • Atrial fibrillation: drugs accounted for 20% of expenditure [Wolowacz SE, Samuel M, Brennan VK, Jasso-Mosqueda J-G, Van Gelder IC, The cost of illness of atrial fibrillation: a systematic review of the recent literature, EP Eurospace (2011)13 (10):1375-1385]
  • Pulmonary arterial hypertension: drugs accounted for 15% in a US study [Kirson NY, et al, Pulmonary arterial hypertension (PAH): direct costs of illness in the US privately insured population, Chest, 2010; 138.]

Upward pressure on the medicines budget include:

  • medicines with new indications (be careful, some of this is an artefact of drug regulation gamed by manufacturers)
  • changes in clinical practice which has an uplift effect on medicines use (especially if guidelines are poorly designed)
  • increasing the number of prescribers (keep in mind that prescribers are cost-drivers)
  • medicines for previously untreated conditions (this trades-off with reduced costs in misdiagnosis, mis-/delayed treatment)
  • therapeutic improvements over existing medicines, and
  • price increases (think of monopoly generic manufacturers, for instance).

Downward pressures include:

  • effective procurement methods (e.g. avoid giving winners of tenders ‘the whole market’ and ensure that rules enable generic competition)
  • use of drug and therapeutic committees and drug review processes (it is all about knowing where the money goes for improving value)
  • use of prescribing and substitution guidelines e.g. generic substitution (oh yes, enforcing it, too; it also helps to ensure OTC medicines are not reimbursed by insurance as this adds to competitive pricing pressure and improves patient choices)
  • positive and negative hospital formularies (yes, hard choices)
  • pro-active clinical pharmacy services engaged in both business and professional domains, (this means ensuring the expertise of pharmacists are central to decision-making) and
  • reduction of waste (you don’t want to know how much drug waste there is but estimates are up to 30% of expenditure is waste).

Additional sources of pressure in either direction come from:

  • population case-mix (that means paying attention of the health of the nation)
  • changing prevalence and incidence over time (also paying attention to the determinants of ill-health, particularly avoidable causes and effects by age cohorts)
  • performance and efficiency of clinical workflow across the patient pathway (this is where money gets wasted at light speed and where it can also be saved; clinicians are in control of workflow so engaging them in areas where they can make a difference matters a lot)
  • medicines payment and reimbursement practices including patient co-payments where they exist and the structure of hospital budgets or financing, (do we want to discuss the unintended and perverse consequences of the payment system?) and
  • healthcare system regulations (yes, where many problems are caused in the first place).

What Cognology says.

Many of the drivers of problems can be addressed through a combination of professional staff development, better use of information, particularly within decision-support systems to support guidelines and prescribing compliance, and organisational interventions.

 

Smart anti-counterfeiting: it is all in the system’s design

How can I be sure the medicine I take is genuine?

Counterfeit medicines are a global problem, with trade in the billions of dollars. The World Health Organization estimates 8-10% of all drugs supplied globally are counterfeit.
Counterfeits are a clear and present danger to human health. No country is immune from the risk. Fake medicines are hazardous, with documented toxicity, instability and ineffectiveness but few people are experts in pill authentication (even pharmacists get fooled). Counterfeit drugs are easier to make and fake than money. But there is little patients can do but rely on assurances by others that drugs are genuine. That may not be good enough.

The health and medicines regulators had for years believed there wasn’t a problem because there are few cases from their perspective. But today we know better and there have been efforts to address regulatory denial.

Counterfeit medicines are infiltrated into the supply and distribution of legitimate medicines by rogue, criminal organizations and individuals, who specifically target the weaknesses in supply chains, as well as human weakness (bribes and kickbacks) and gaps in healthcare payment systems.

Counterfeiting had originally been viewed as a patent issue legal advisors took a purely legalistic interpretation. It was not until the problem of counterfeiting was presented as a risk to human health and people’s lives that the dead end logic of patent protection was dropped. But why did the lawyers fail understand the context in which the problem existed? New legislation is always being introduced, such as the EU’s Falsified Medicines Directive, but the criminals will find a way to game this, even though this directive was apparently ‘gamed’ by developers using the French problem with the drug Mediator. However, gaming policy for developmental purposes also needs people to think like a criminal.

Once a medicine has been factory sealed by the pharmaceutical manufacturer, there is no assurance that it will reach the patient unopened; a pharmacist and doctor can open it, and packages that cross borders are opened for repackaging and labelling. Indeed, there are companies with the licensed authority to repackage factory-sealed medicines with new labels in new languages. Unscrupulous distributors can conceal the illegal substitution of counterfeits within these apparently highly regulated systems. Many countries are net importers of medicines as they lack sufficient domestic manufacturing capacity or the medicine is complex and is manufactured in only a few places. This makes these countries vulnerable to supply chain interference.
While international trade in medicines trade has often focused on internet pharmacies, the real problem is that the online mail-order environment is a counterfeit drug delivery system into every home on the planet.

Healthcare systems themselves must address perverse incentives that drive criminal behaviour; keep in mind that criminals exploit weaknesses in supply chains, laws and regulations, and respond to unmet demand for a product (from toasters to cars, there are illegal markets everywhere and not just for drugs) resting on common incentives. A major driver for criminals is the existence of cash markets for their products (they tend not to take cheques), and one of the largest cash markets is people without adequate health insurance cover and reimbursement systems that do not cover the full cost of medicines, or fail to insulate patients from high drug costs. In addition, as information on medicines can now be widely salient through internet social media, a country failing to license a medicine that some people would value opens a door to counterfeiters to exploit a patient demand for that medicine.

What Cognology says.

Catching crooks with counterfeit drugs is also a problem of finding them. Using advanced intelligent technologies (cognologies as in the name of this blog) means that surveillance can be smarter and less distracted by false signals.

Smarter and more Intelligent Healthcare in 2035

The King’s Fund, a UK health charity ran a scenario essay writing competition, and here is the link and of course congratulations to the winner: (winner, runner up and other scenarios, but not mine).

My scenario builds on the notion of service unbundling and draws on strong and weak signals of changes likely to impact health and social care perhaps to about 2035. The scenario is written as a retrospective view from the year 2047. My objective was to avoid a doctrinaire scenario.

Unbundling 2035

Between 2016 and 2035, the way that people worked had substantially changed by widespread digitisation of information. Smart machines and robots had moved from doing physical work to being central to much cognitive work and which led to fundamental restructuring of the economy. By 2035, taxation was changing from taxing people to taxing the work done by devices, cognologies, and robots.

The fault lines between reality and expectations were starkly evident during the 2020s, as public investment in health and social care struggled to cope with the rapidly changing world. People were becoming accustomed to flexible access to personalised services that came to them and expected the same from care provision. Rising displeasure at service decline led to middle-class flight to alternatives with rising use of private medical insurance, progressively fracturing the social contract that legitimated publicly-funded care. Indeed, by 2028, 38% of the population used private care, with over 55% amongst Millennials.

Fearful health and social executives and worried Ministers of Health had reacted to these stresses by pulling the system even more tightly together, to protect jobs and avoid the failure of publicly-funded institutions.

This fed further public displeasure by the dominant middle-aged Millennials who challenged the traditional approaches to health and social care. In the United Kingdom, for instance, this unrest led to the 2028 Referendum on their tax-funded healthcare system, leading to the replacement of this system with social insurers and personal Social and Health Care Savings Accounts.

The process of changes in health and social care around the world has become known as Unbundling. This brief historical retrospective outlines three of the key components of that unbundling.

The 1st Unbundling: of knowledge and clinical work

Professional knowledge was affected by digital technologies which had unbundled knowledge from the expert. This changed how expert knowledge was organised, used and accessed; research institutions and knowledge-based organisations were the first to feel the changes, with librarians being one of the first professions to face obsolescence. Rising under-employment, particularly in traditional male-dominated occupations was still being absorbed by the economy.

Routine cognitive work and access to information and services was increasingly provided by cognologies (intelligent technologies) or personal agents as they were called. Widely used across society, they were embedded in clinical workflow from diagnosis to autonomous minimally invasive surgery. By this time, jobs with “assistant” in the title had generally disappeared from the care system, despite having been seen as an innovative response to workforce shortages through the late 20-teens. These jobs had turned out to be uninteresting, and being highly fragmented, required time-consuming supervision.

The benefits of precision medicine were substantial by this time, enabling earlier diagnosis and simpler and less invasive treatments. Theranostics, the merging of diagnosis and therapy, unbundled the linear care pathway and the associated clinical and support work. This also led to the unbundling of specialist clinical services, laboratory testing and imaging from monopoly supply by hospitals. Indeed, the last hospital was planned in 2025, but by the time it opened in 2033, was deemed obsolete.

The 2nd Unbundling: of financing and payment

The unbearable and unsustainable rise in health and social care costs necessitated better ways to align individual behaviours and preferences with long term health and well-being. Behavioural science had shown that people did not always act in their own best interests; this meant the care system needed people to have ‘skin in the game’, best done by monetising highly salient personal risks.

Existing social insurance systems which used co-payments were more progressive in this direction, while countries with tax-funded systems were forced to reassess the use of co-payments, and financial incentives. The Millennials, having replaced the baby-boomers as the primary demographic group, were prepared to trade-off equity for more direct access to care. It also became politically difficult to advance equity as a goal against the evidence of poorer health outcomes as comparisons with peer countries drove performance improvements.

The use of medical/social savings accounts was one way that gave individuals control of their own money and building on consumerist behaviour, this directly led to improved service quality and incentivised provider performance as they could no longer hide behind the protecting veil of public funding. The social insurers were able to leverage significant reforms through novel payment systems, and influence individual health behaviours through value-based (or evidence-based) insurance not possible under a taxation system.

The 3rd Unbundling: of organisations

With people used to having their preferences met through personalised arrangements, care was organised around flexible patterns of provision able to respond easily to new models of care. This replaced the “tightly coupled” organisational approach known in the early part of the 21st century as “integration”, which we know led to constrained patient pathways, and limited patient choices unable to evolve with social, clinical and technological changes.

The big-data tipping point is reckoned to have occurred around 2025. Because the various technologies and cognologies had become ambient in care environments they were invisible to patients, informal carers, and care professionals alike; this enabled the genesis of smaller and more diverse working environments.

By 2032, medical consultants were no-longer hospital-based, having become clinical care social organisations, with their cheaper, smaller, portable, networked and intelligent clinical resources. Other care professionals had followed suit. These clinical groupings accessed additional clinical expertise on as-needed basis (known as the “Hollywood” work model); this way of organising clinical expertise helped downsize and reshape the provision of care and met patient expectations for a plurality of care experiences.

It takes time to shift from the reliance on monopoly supply of care from hospitals in those countries that continued to pursue a state monopoly role in care provision. However, most repurposed themselves quite quickly as focused factories, while the more research-oriented specialised in accelerating the translation of research into daily use, helped along by the new research discovery tools and the deepening impact of systems biology which was making clinical trials obsolete.

What Cognology Says

This Unbundling arose as a product of the evolution of social attitudes, informed by the emerging technological possibilities of the day. The period from 2016 to 2025 was a critical time for all countries, exacerbated by shortages in the workforce coupled with economic difficulties and political instability.

Today, in 2047, we are well removed from those stresses that caused such great anxiety. We must marvel, though, at the courage of those who were prepared to build what today is a leaner, simpler and more plural system, removed from politicised finance and management decisions.

It is hard to imagine our familiar home-based theranostic pods emerging had this trajectory of events not happened. As our Gen-Zeds enter middle age, they will, in their turn, reshape today’s system.

Plus ça change, plus c’est la même chose.

27 December 2047

Note on the Scenario

This scenario is informed by strong and weak signals, including:

Ayers A, Miller K, Park J, Schwartz L, Antcliff R. The Hollywood model: leveraging the capabilities of freelance talent to advance innovation and reduce risk. Research-Technology Management. 2016 Sep 2;59(5):27–37.

Babraham Institute. The zero person biotech company. Drug Baron. http://drugbaron.com/the-zero-person-biotech-company/

Cook D, Thompson JE, Habermann EB, Visscher SL, Dearani JA, Roger VL, et al. From ‘Solution Shop’ Model to ‘Focused Factory’ in hospital surgery: increasing care value and predictability. Health Affairs. 2014 May 1;33(5):746–55.

Cullis P. The personalized medicine revolution: how diagnosing and treating disease are about to change forever. Greystone Books, 2015.

Does machine learning spell the end of the data scientist? Innovation Enterprise. https://channels.theinnovationenterprise.com/articles/does-machine-learning-spell-the-end-of-the-data-scientist

Eberstadt, N. Men without work. Templeton, 2016.

Europe’s robots to become ‘electronic persons’ under draft plan. Reuters. www.reuters.com/article/us-europe-robotics-lawmaking-idUSKCN0Z72AY

First 3D-printed drug just unveiled: welcome to the future of medicine. https://futurism.com/first-3d-printed-drug-just-unveiled-welcome-future-medicine/

Ford M. The rise of the robots: technology and the threat of mass unemployment. Basic Books, 2015.

Frey BC, Osborne MA. The future of employment: how susceptible are jobs to computerisation? Oxford Martin School, Oxford University, 2013.

Generation uphill. The Economist. www.economist.com/news/special-report/21688591-millennials-are-brainiest-best-educated-generation-ever-yet-their-elders-often [accessed December 2016]

Lakdawalla DN, Bhattacharya J, Goldman DP. Are the young becoming more disabled? Health Affairs, 23(1-2004):168-176.

Susskind R, Susskind D. The future of the professions: how technology will transform the work of human experts. Oxford UP, 2015.

Topol E. The creative destruction of medicine: how the digital revolution will create better health care. Basic Books, 2012.

With Samsung’s ‘Bio-Processor,’ wearable health tech is about to get weird. Motherboard. http://motherboard.vice.com/read/with-samsungs-bio-processor-wearable-health-tech-is-about-to-get-weird

Small might be smarter, think hive mind for innovation

Healthcare systems are often seen as requiring an economy of scale. This in part is a function of how prevalent diseases are, such that in some small countries they would have one case in 2 years, rather than one case per million of population. Healthcare technologies can be incredibly pricey; for instance, a proton therapy facility will run between €100 and €200 million to set up. Healthcare buildings and research infrastructure are expensive to build and run. Health professionals can be expensive to train and employ and are generally globally mobile.

Associated with investment in healthcare within the EU, we find that almost every region or member state has life sciences, in some form, in their top 5 or so areas of national priority. Life sciences is challenging and demanding, and requires high degrees of global visibility and connectivity to other researchers. Commercialisation of life sciences in Europe is not great; the EU’s research budget does not strictly speaking focus on research translation and there is precious little to help good ideas bridge the ‘valley of death’ where unfunded good ideas go to die. Financing for life sciences developments consume vast quantities of risk capital, some of which will be unlikely to return any value for a decade or more. The problem is not for the EU, but for the risk appetite in member states: it is difficult to raise more than €30 million or so in venture funding in Europe. The brooding presence of state interference in entrepreneurial start-ups can be discouraging. And with the UK leaving the EU, a liberal enterprising culture will be lost within the EU. Statist solutions in Europe tend to dominate.

Many EU countries try to avoid downside risks of failure by punishing it, rather than creating opportunities to learn. Countries that encourage risk taking, and make it easy to start and close down companies, with associated flexible labour practices, will outstrip protectionist fearful countries. Many countries protect jobs not workers, so actually create unemployment and discourage job creation. Life sciences is one such area that requires particular flexibility owing to the nature of the work.

Small countries are particularly interesting. In one of the EU’s small states, there has been active progress developing a bioscience research and commercialisation centre (partly funded by the EU, thanks for that). Higher education is active across life sciences, though the research is of middling status globally, but that is typical of most of Europe’s universities. The country has a well-developed and well-financed healthcare system, recognised as one of the best globally based on outcomes.

Building life science (or any research-based commercial capacity for that matter) means that setting priorities is more important the smaller you are, as you can’t do everything. That means grappling with disappointment as not everything can be done, and if trying to do everything, mediocrity abounds. It means, too, that infrastructure projects are precious, as they are enablers of future potential — the longer term vision must be sustainable, as getting it wrong can be expensive — research buildings don’t make very good hotels and what do you do with failing science parks like we see across Europe.

What Cognology says.

  • build on what you already are doing well as that is evidence you have the expertise, networks and working practices in place
  • keep in mind that life sciences is much, much more than drugs; progress may be quicker in other areas, such as informatics, telecommunications, bio-engineering, materials science, agricultural biotech, etc.
  • you can’t sensibly do life sciences with a weak university, so this entails difficult and hard rethinking of priorities and a sensible review of research productivity
  • you can’t sensibly do life sciences without a teaching hospital; the academic health science centres in the US account for over 80% of productive life sciences research, so the infrastructure should enable closer collaborations and alignment between university and hospital and industry; this may, by the way, raise real issues for government if the teaching hospital(s) is state run and therefore subject to bureaucratic overhang
  • you can’t sensibly do life sciences without understanding the logic of ‘bench to bedside’; productive work lies in translational research and solving clinical problems; this can challenge academics whose careers are rewarded from the production of papers and volume of research funding rather than solving problems; in life sciences, solving problems is paramount; understand what the Grand Challenges in life sciences are and see which one(s) you can focus on and ignore the rest
  • you’ll need to consider the economic developments that come with building a life sciences sector to energise high net worth individuals in the country to develop a risk appetite for national investments along with a cadre of managerial expertise to take start-ups forward; I’d discourage doing this through the public sector hiring as it disincentivises university graduates from pursuing entrepreneurial careers (there is good global evidence that this can be a problem, so don’t make that mistake); best role for government is ensuring a flexible corporate start-up environment, a non-punitive bankruptcy regime, sensible taxation of start-ups, and seed funding; it might also be a good idea to give away all that publicly owned intellectual property
  • finally, the good news is that size doesn’t matter for innovation; there is no correlation between the size of a country and the ability of the country to innovate; many very large countries have clumsy policies that disincentivise and frustrate; the EU is full of them and in the main, the governments have assumed the wrong type of highly interventionist policies rather than creating an enabling culture that does not punish failures and really does reward success.

Live short and don’t prosper: post-Brexit healthcare and life sciences

This is a summary of some emerging and salient issues related to the UK departure from the EU.

Workforce

It is estimated that the UK recruits 7000 nurses and 2000 doctors annually from the EU. The UK is currently unable to meet its workforce requirements for the NHS from its domestic higher education system. To do this it will need to create around 5 medical schools and a dozen nursing schools, not to mention the unmet needs for other health professionals such as pharmacists, physiotherapists, and so on.

The UK will be unable to widen recruitment from outside the EU without drawing people from countries which really need their own domestic supply; as well, non-EU migrants need to meet a points-based system, which also includes an income test, and many healthcare workers in nursing homes, for instance, earn less that this amount — EU recruits are exempt from this test.

The UK will likely need to repudiate the mutual recognition of qualifications if it also repudiates free movement of labour. Individuals acquiring new qualifications from the various Royal Colleges, for instance, will not be certain that those qualifications will be recognised should they return to the EU at some point.

Research

We’re hearing a lot about research as the UK is a major participant in EU research funding rounds. Academics in the UK will become third country researchers after Brexit and there is no guarantee that they will be able to lead major projects, but only be participants.  The loss annually is about one billion euros or so in R&D funding. While the UK is an attractive place to do research, the gradual erosion of this pre-eminent position is likely if UK researchers lead fewer major research programmes and the universities are unable to recruit from the EU — again, mutual recognition of qualifications may also be a consideration.

Drugs and Devices

The European Medicines Agency will need to relocate to within the EU. While this is perhaps 800-900 jobs at EMA, there is a large regulatory eco-system around EMA that will also need to move. Perhaps less noticed, though, is that the UK will need to duplicate EMA’s regulatory functions meaning that all pharma and device companies will need to file applications to the UK quite separately to the EU. Pharmacovigilance is one area that will need to be duplicated as EMA requires the competent authority to be inside the EU.

Drug and device prices themselves should rise as the UK exits the single market. That the UK is already a difficult market for market access, might lead to fewer drugs being launched in the UK.  While these factors are hard to quantify, but in the absence of alternatives, the NHS drug budget might go up by 10% (the tariff rate), while new products might be delayed; that they are launched in the EU would not provide market access to the UK under the free movement rules. The UK might become a low priority country for new products.

Patients

All these considerations will have an impact on patients who will lose access to portability of healthcare benefits provided by the EHIC (European Health Insurance Card) system. As well, the A1/S1 arrangements will disappear. This has some important implications for both the UK and EU states and their citizens.

France and Spain have a large number of Brits living there, while tourists travel all over. For instance, Malta receives about 1.5 million tourists a year, 500,000 of which are from the UK and access Malta’s healthcare system through the EHIC with the UK paying the bills to Malta. By losing the post-retirement S1 arrangements, individuals will need private health insurance, while tourists will need to buy medical travel insurance. Medical travel insurance is a very poor substitute for EHIC as it excludes pre-existing conditions and is not a substitute for statutory cover. Business travellers will also need to carry private travel insurance. [Note: see my FT comment describing this type of insurance as a money pump, following Tim Harford.]

EU citizens travelling to the UK will need to have travel insurance covering third countries or take out private insurance while in the UK. The UK’s private medical insurance industry offers very poor value products and importantly does not offer an equivalent substitute for NHS or social insurance cover, because of their failure to cover pre-existing conditions; with their additional limitations, access to care would be very difficult if individuals relied on a UK insurance product.

What Cognology says

No doubt as Brexit gets closer, the real risks will become salient and my guess is they’ll favour Remaining. The dumb money I suspect is on Leave, as meeting the needs of politicians still living in the past, and voters who wish they lived in the past or hope that Leave will make their lives better. I doubt the latter. All this could have been known from the very beginning without Brexit and people advised what the consequences will be before they voted. But then that would have been the smart thing to do.

 

Patience and the political process

While folks have been quick to jump on the results of the referendum as evidence of democracy at work, (and perhaps that is partly true), a few days later we see the consequences. Economic challenges anew, social discontent in the UK (racism and xenophobia legitimated by the exit vote) and political meltdown in the UK’s parliament.

I want to focus on process. The Commission president wants the article 50 triggered essentially now. Of course, Juncker’s call is just more evidence of his fundamental autocratic ways; he did say he dislikes referenda as do I, but I suspect for him it betrays a disregard for democratic process in favour of bureaucratic expediency. Tusk says that the UK is the one that must act and the rest of the EU must wait. This shows a much more nuanced understanding of democracy and is only right.

Until the UK signals otherwise, it is still a full member of the EU within the meaning of Article 1 of the Treaty on European Union. The UK’s Commissioner was hasty in his departure, and today’s display at the European Parliament unbecoming but feeds the egos of MEPs who tear down more often than they build up.

But process matters. The UK’s Parliament must receive formally the advice it sought from the referendum, which is non-binding. Few countries would dignify the results of a referendum of this magnitude with a simple majority, but require perhaps 75% with some turnout requirement (even compulsory voting for that matter). The UK prime minister is not the government; the UK Parliament is what is sovereign, so it must actually pass a bill in Parliament and that is what can only trigger Article 50 (it may help to read the Lisbon wording).

In the UK, no parliament can bind a successor parliament; therefore, a general election would in effect return a new parliament which can simply ignore the referendum results. Indeed, such a general election would likely be fought over the terms of departure and that isi probably the right thing to do. Converting the referendum votes into constituency votes would likely lead to a minority of MPs being elected that would have supported a Leave position anyway. Given the chaos we see coupled with voter regret, it is unlikely a Leave position would be politically successful.

Furthermore, Parliament must be satisfied that the referendum actually is the will of the people. Given what has been a shambolic campaign, we now see the Leave campaign rowing back from their pledges, while much of the evidence presented by the Remain campaign is coming true. In the end the result is suspect. Granted the vote revealed underlying divisions within UK society, but that is not what the referendum was asking. Parsing the vote in those terms is disingenuous.

It is clearly not in the EU’s interests to see the UK leave, despite what appears to be the fond wishes of some authoritarians in the Commission. Indeed, the leave vote may in fact trigger the sorts of EU reform that was not possible before; nothing like having the chickens come home to roost! It would be a tragedy for the EU to lose the UK just when it would be implementing reforms that would not just reassure the UK, but also deal with the more widespread Euroskepticism and nationalist threats to European unity itself. And of course, it would be a Pyrrhic victory for the UK.

The EU needs to help the UK government chart its way through the process, to understand the process that must be followed and not hasten the UK’s demise within the EU through impatience or intemperate comments. Restraint at the political level across the EU will do more to support the UK find its way out of this mess.

What Cognology says

The EU and UK need the outcome to be a win:win. A UK exit is not that. But perhaps being a loser is a type of winning for populists.