Monday, August 31, 2009

Some Practical and Ambitious Ideas for REAL Healthcare Reform

Lost in all the misleading statements or outright lies about the costs of healthcare reform coming from democrats, or the fear-mongering tactics of republicans, is a recognition of the reality that “YES our healthcare system needs to be reformed and YES there are some practical, non-partisan ways that we can seriously reform the system without* creating the dreaded “public option”.

The Practical:

Some popular non-partisan ideas I’ve heard tossed around include the right to pool insurance risk across state lines, and opening up private insurance markets allowing consumers greater choice in who their service provider will be. A practical idea Obama has endorsed is instituting an electronic billing and prescription system. A more populist idea is eliminating the prohibition of coverage denials based on pre-existing conditions- but this could be paid for by savings realized from passing some minor (or major) tort reform. All of these ideas are pragmatic and relatively non-partisan ways to realize some serious cost savings whether taken as a whole or instituted incrementally.

The Ambitious:

My own original, and admittedly very ambitious idea, is that significant savings can be realized by making some key changes to the U.S. intellectual property regime (USPTO) and the Food & Drug Administration (FDA) approval process for pharmaceuticals and medical devices.

Working together, the USPTO, the FDA, and the pharmaceutical / med device industries can take a number of steps in their mutual interests that will lower the cost of healthcare for everyone.

Approximately 20% of healthcare cots in the U.S. are linked to prescription medication**. Pharmaceutical and medical device companies spend billions of dollars to approve a single drug or device, and for all we hear about multi-billion dollar blockbusters, most drugs never even make it to market. At present, U.S. law grants new drug / device inventors a 20-year “monopoly” on the manufacture of new drugs. This system ensures that pharmaceutical companies will continue to invest the billions of dollars it costs to develop a new drug, because they know that they will be able to reap ample rewards over an extended period of time if they are successful. While this system works, there is plenty of room for improvement.

First, the USPTO should move to decrease the patent life on new, innovative pharmaceuticals and devices from 20 to 18 years. Concurrently, the federal government should expand the size of the currently under-funded and under-staffed USPTO to ensure that patents for new drugs / devices are processed within a matter of weeks (rather than many months or even years), while also taking steps to further streamline the patent application process. In this way, inventors, and companies would be swapping some extended patent life for a faster and cheaper patent process, cutting through delays and red-tape at the USPTO.

Second, and most importantly, the FDA should also be expanded so that New Drug Applications (NDA’s) can be processed in months, rather than years. Red-tape should be removed from the approval process wherever possible and the costs and numbers of clinical trials demanded before approval should be decreased substantially.

By decreasing the time and costs associated with the patent and drug approval processes, the pharmaceutical and device industries would more than make up for their sacrifice of 2 years of patent life with faster and higher upfront earnings, Considering the “time-value” of money and that $1 today is worth more than $1 next year, these companies might be convinced to support such reform. Most importantly, the U.S. consumer, along with both public and private insurance payers would all benefit in that generic, and thus cheaper, versions of prescription drugs will be available 2 years faster than they are at present, saving EVERYONE money. The savings these reforms would generate would more than off-set the nominal costs of expanding the sizes of the FDA and USPTO, especially when compared with the costs associated with any “public option” currently under discussion.

*(it is my hope that even the most die-hard supporter of universal healthcare would at the very least substitute the above underlined “without” with “before”)
**The Economist (a couple of weeks ago!)

8.31.09

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