The Institute of Medicine has released a report putting the cost of unnecessary medical care at $750 billion a year and counting. What does it mean for pharmas? Depends on how you read it.
The IOM determined that three quarters of a trillion dollars (yes, that’s trillion, with a ‘t’) in health spending was wasted in 2009 – around 30% of all US healthcare spending – due to unnecessary services rendered, excessive administrative costs, fraud and other causes. Unnecessary services accounts for the largest chunk of that number, at around $210 billion, followed by “excess administrative costs,” at $190 billion, and then “inefficiently delivered care,” including mistakes and the unnecessary use of pricey providers, at $130 billion. “Prices that are too high,” defined as “services and products beyond competitive benchmarks,” costs $105 billion, while fraud runs $75 billion and “Missed prevention opportunities” $55 million.
Expressed through a different, and starker, metric, IOM noted estimates that around 75,000 deaths might have been averted in 2005 had all states delivered care as well as the best-performing ones.
While the report, “Best Care at Lower Cost: The Path to Continuously Learning Health Care in America,” doesn’t have much to say about costs associated with drugs and biologics, specifically, it could provide fodder for advocates of European-style cost curbing for federal programs, but it also adds urgency to the movement towards personalized medicine.
“The slippery slope to comparative effectiveness is there,” says Peter Pitts of the Center for Medicine in the Public Interest. He worries that a price control scheme like the UK’s NICE could be implemented in the name of efficiency, but also sees the report’s findings dovetailing nicely with the drug industry’s move towards more narrowly targeted drugs, biologics and diagnostics.
“If the idea is to get the right treatment to the right patient at the right dose as early in the cycle as possible, even if that sometimes means a more expensive drug rather than a generic, that’s going to save money over the “fail your way to success” route [of cycling through multiple treatments until one works],” said Pitts.
The IOM sees several big factors impeding efficiency in US care delivery – chief among them, the lack of price transparency and collaboration between across providers, institutions and other players. And then there’s the sheer complexity of modern healthcare, made all the more daunting by Big Data and the rapidly multiplying number of available therapies and procedures.
“The US healthcare system is characterized by more to do, more to know and more to manage than at any time in history,” says the report.
As medical technology has progressed, the volume of information available to practitioners has multiplied exponentially. The number of journals and other research publications has more than tripled over the past four decades, from 200,000 in 1970 to 750,000 in 2010, the report notes.
The IOM is an influential body of the National Academy of Sciences whose pronouncements can have far-reaching effects on regulators and policymakers. In recent years, the group has taken on thorny topics like consumer advertising of prescription drugs, CME and industry influence on the practice of medicine.
