Health Business Blog

Venture capital investment in New England dropped 45 percent in the most recent quarter, largely due to fewer deals in biotechnology and medical devices. The national trend is down, too, though not as much, according to a new report from the National Venture Capital Association and PricewaterhouseCoopers.

It’s definitely a challenge for the Boston area, where biotech startups in particular have been a good source of new, high-skill jobs and the infrastructure spending that accompanies business formation and growth. Quarterly figures bounce around, and the overall year still looks ok. But the trend is clearly something to worry about here.

The long-term (15-100 year) potential of life sciences is amazing, and I do expect investment to increase dramatically over the course of the next few decades. Still, the near term picture is not so pretty. Commentators are quick to blame difficulties with the FDA and the choppy IPO market for the slowdown in investing. There’s some truth underlying their whining about FDA on the medical device side, but in general the explanations are too simplistic and off base.

Investing in biotechnology drugs has always been a big gamble, and it’s unclear to me whether there’s ever been a great return on investment argument for early stage investors, considering the time, cost and risk of development. The additional problem now is that it’s unlikely that society will be prepared to pay rich rewards for those few products that do make it to market. A lot of biotech drugs are priced at tens to hundreds of thousands of dollars annually per patient. That worked ok when drugs like Cerezyme were introduced with breathtaking pricing. Insurance companies actually liked to point to the high reimbursement for those products as proof of their compassion. The unit costs were high but the number of patients was very low.

Life’s different today now that everyone’s latched onto the idea of pricey cancer treatments. As a society we haven’t yet faced up to the fact that we can’t afford to pay so much, especially for products that have only modest benefits on average. However, investors have already concluded that by the time newly funded drugs make it to market that day or reckoning will have arrived. And I agree with their conclusions.

VC-funded drug and device companies have generally contributed to the growth of medical costs by introducing expensive substitutes for existing treatments or layering additional therapies on top of existing approaches. That game is ending, but luckily a new one is beginning. For the next 10 to 20 years the name of the game is constraining the growth of health care costs while increasing quality and improving the patient experience. There is a (small) role for drugs and devices, but much larger opportunities in health care service innovation and health information technology. Some of these emerging opportunities are appropriate for venture funding, but others don’t require much capital or lack the potential for venture-style returns.

Some specific growth areas include:

• Clinical decision support for clinicians and patients
• Navigation tools for patients and providers that take into account clinical and financial choices
• Remote patient monitoring
• Provider/patient/plan communications
• eLearning to replace traditional continuing medical education approaches
• Consumer oriented tools to enhance the patient experience in the outpatient and inpatient settings
• Tools to speed and reduce the cost of clinical development of pharmaceuticals and devices

There is a mobile overlay to all of these points.

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One of the striking things about people who live to very old ages is how spry and healthy many are until close to the end. There are exceptions of course, but in general the very old are a hopeful beacon for those who are younger. So I was happy to see a Wall Street Journal article (Living Lab Sets Up at a Seniors Residence), which profiles efforts by the Mayo Clinic to apply research on healthier aging to an old-age residence next door. The article introduced me to the term “health span,” defined as “the number of years living on one’s own and free of major disease.” That’s a great objective that conforms to how almost everyone wants to age.

Researchers –and presumably their subjects, too– are looking for ways to extend the health span and bring it as close to the lifespan as possible. Techniques include medication adherence apps, vital sign monitoring systems, and seeking medications to improve muscle function. The article doesn’t discuss non-medical interventions, but there is a photo of residents lifting weights so presumably that’s an important part of the approach. I sure hope so.

“If you can attack the intersection between aging and chronic disease, you could really improve the health and independence of older people,” says Dr. [James] Kirkland, [head of Mayo's Center on Aging].

“This could substantially decrease health costs, especially if we are able to extend health span and shorten the period of disability at the end of the life span,” he adds.

I hope it works out.

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Physicians Interactive Holdings and the Robert F. Kennedy Center for Justice and Human Rights have launched Health eVillages, a consortium that has so far brought mobile medical tools to Kenya, Uganda, Haiti, and the US Gulf Coast. In this podcast interview, Health eVillages co-founder Donato Tramuto discusses the inspiration for the initiative and describes how the partners are working together to turn their vision into a reality.

Tramuto is also founding partner, CEO and vice chairman of Physicians Interactive.

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David Williams interviews Health eVillages co-founder Donato Tramuto [ 13:59 ] Play Now | Play in Popup | Download

Now that Herman Cain sits atop at least some GOP presidential polls, I decided to have a quick peek to see what he has to say about health care and how it fits into his catchy sounding 9-9-9 plan. I may well be missing something but at first glance I don’t see how his policies mesh.

Cain has some sharp words for President Obama and the “liberals in Congress” who have introduced what he calls health “deform.” He says:

Let’s level the playing field under the current tax code and allow the deductibility of health insurance premiums regardless of whether they are purchased by the employer or the employee.

But the 9-9-9 plan calls for a flat tax of 9% on businesses and individuals, plus a 9% national sales tax. For individuals, the plan is based on:

• Gross income less charitable deductions.
• Empowerment Zones will offer additional deductions for those living and/or working in the zone.

Unless health insurance premiums are classified as charitable deductions, I don’t see how Cain’s plan would allow them to be deducted. Also, the cost of health insurance for a family is about $15,000 on average, which is a lot more than 9 percent of median household income of about $50,000. If insurance is fully deductible that will wipe out the tax for many.

Maybe Cain is suggesting allowing deductibility of health insurance as an interim step until 9-9-9 is in place. But since he proposes that the Super Committee –which is meeting now– push for 9-9-9, I don’t think that’s likely.

Meanwhile Huffington Post speculates that 9-9-9 came from SimCity. I have a hard time taking this guy seriously.

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Social Security recipients are likely to get a cost of living allowance (COLA) adjustment next year, based on an increase in the Consumer Price Index. Yet most senior citizens will see part of that increase eaten up by a rise in the Medicare Part B premium, which covers doctor visits and outpatient services and is usually deducted from Social Security payments. Part B premiums are driven by the cost of Medicare, which has been going up faster than inflation. The impact differs for different people, and some won’t feel any effect, but many beneficiaries will see their Social Security increase cut to 2 or 2.5 percent instead of 3.5 percent.

I wish the impact were more substantial and more transparent. In fact, the best would be for seniors to get a letter explaining that they would have seen an increase of 3.5 percent but instead will get zero, thanks to rising health care costs. That would mirror what’s happening in the private sector, where increases in the cost of employer sponsored health care have largely offset wage growth. Come to think of it, maybe employers should also make this phenomenon explicit by showing employees a hypothetical wage increase and illustrating how the raise is being withheld to pay the rising health insurance bill.

This plan would make it a lot clearer how failure to act on health care cost control is taking money out of people’s pockets.

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Health Affairs Blog hosts the latest edition of the Health Wonk Review. No theme this time, just pure, gooey wonkery.

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I’ll concede right upfront that I’m one of those Massachusetts liberals certain Republicans love to rail against. Ivy league educated (at least for trade school), in favor of progressive taxation and a role for government in the economy. I support my Congressman, Barney Frank. So I’m certainly in no position to suggest to Republicans how they run their primary campaign. Still, with the country in crisis and such fundamental, consequential issues at stake in the 2012 election I would really like to see a serious debate on health care and other issues, and especially the emergence of a general election candidate I could consider supporting.

So far, the Republican frontrunners have not engaged in a credible debate about health care. Rick Perry, Herman Cain and Michele Bachmann have nothing to say on the topic of any consequence. Trying to pin Romney down as the father of ObamaCare doesn’t really count as a bold policy. To Romney’s credit, he defended the Massachusetts reforms last night and pointed out there’s a million uninsured kids in Texas and very few in Massachusetts.

Those further back in the pack, namely Ron Paul, Newt Gingrich and Jon Huntsman are more substantive from what I can tell. Paul is a doctor and a principled guy, but his health care positions are mainly the usual Republican ideological pap. Gingrich is a thinker –and though he’ll self-destruct every chance he gets– he certainly has a lot to talk about on health care. But most of all I’d like to hear some substance from Huntsman, who has gone well beyond the others in contrasting his health reforms as Governor of Utah with those of Mitt Romney in Massachusetts.

Given a chance, reasonable, thoughtful votes may well come to the conclusion that Massachusetts’ plan was right for it, while Utah’s approach fit better with that state’s needs, but that neither flavor is exactly right for the country as a whole. In fact, federal reform is a lot harder to do. I’d love to see Huntsman, Romney and Gingrich go at it.

I know it’s wishful thinking to expect a primary campaign to be so substantive, but I can dream if I want.

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Healthcare Economist hosts the latest issue of Grand Rounds. It’s the Wisconsin Sports edition, and why not?

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Much has and will be written on the new US Preventive Services Task Force (USPTF) recommendations against routine use of the prostate specific antigen (PSA) blood test in healthy men .

I’m not a doctor or scientist and have not had the PSA test or a subsequent biopsy myself, but I am a close observer of the health care system. Two key takeaways for me are:

• The USPTF should have issued the PSA guidelines before it issued the screening mammography guidelines
• A substantial, positive effect of the new guidelines will be to empower patients and families to take a more active role in their care, which will counterbalance some of the bias toward unnecessary treatment that currently characterizes the system

Let me explain:

It appears the USPTF put off the PSA decision after the firestorm of criticism ignited by its 2009 recommendation to reduce the use of screening mammography on younger women. In my estimation the leading reason for all the fuss two years ago was that while it was easy to identify people whose lives may have been saved by screening mammography, it was harder –though far from impossible—to identify people who’d been harmed. In addition, a whole movement had been built through the joint efforts of patient activists and commercial interests, with increases in screening mammography rates held up as an explicit goal. And finally, the issue of breast cancer is inextricably connected with the empowerment of women and access to the health care system.

PSA screening is different. No one thinks PSA is a great test: the high rates of false positives and false negatives are widely acknowledged. Watchful waiting is an accepted practice. Many patients understand that treatment involves serious tradeoffs, especially the strong possibility of incontinence and impotence. People are learning that biopsies have their own challenges, such as the possibility of blood in the semen for weeks afterwards. Many people who get prostate cancer die of something else.  Finally access to PSA testing is not connected with any male empowerment movement that I’m aware of.

If the Task Force had issued the PSA recommendation first it would have given people an opportunity to discuss and debate some of the central issues and nuances of screening without so many of the distractions. Maybe that would have cleared the way for a more thoughtful discourse on screening mammography.

I thought the New York Times did a great job of laying out the range of reactions in its letters section today:

• An academic oncologist points out that the PSA blood test doesn’t cause impotence or incontinence and that 30,000 men die of prostate cancer in the US annually. His solution: use the test, but carefully, and have doctor and patient work together to decide course of action. I agree.
• The wife of a man treated for prostate cancer points out the “terrible toll” of treatments and says the only benefit is to the medical/industrial complex. I generally agree, but she goes too far in ascribing PSA testing solely to financial interests.
• An academic urologist argues its irresponsible to reject PSA based on 10 year follow-up data, when 20 years is more appropriate. He may have a point, but he neglects any mention of the harm of false positives.
• A man who had a positive biopsy after his PSA spiked underwent radiation treatment and recovered with minimal side effects. He’s outraged by the recommendation to stop PSA. Hard to argue, and he should count himself among the lucky.
• A urologist suggests “rationing” (his words) by banning Medicare from paying for screening of men over 75 or 80 when it pretty clearly does more harm than good. His letter is perhaps the best, and he is the only one of the writers who steps outside his own self-interest to make a broader point.

As people read this range of strongly held, but complementary views I feel confident many will be in a better position to make informed decisions in their particular situations.

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The Health Business Blog is taking the day off.

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