Xpectives News


DTC in Perspective: The Obamacare Reform Puzzle and DTC

June 30, 2017 by Bob Ehrlich0

First, I am now back writing my weekly column after taking a couple of months off to recharge my batteries. Happy to be back giving my thoughts on issues affecting our DTC community. As I was watching CNN discuss healthcare reform yesterday I was surprised to hear host Chris Cuomo say drug prices were the main driver of rising insurance costs. He said this to Senator Dick Durban a democrat from Illinois. Durbin promptly said DTC is a big culprit in rising drug bills.

Ok, Chris and Dick. You are both wrong. The drug bill in America is a relatively minor cost at 10% of total health care expenditures. DTC spending is about 1% of total drug sales, hardly a driver of rising costs. While some high profile drugs are very expensive for cancer and hepatitis C, most branded drugs are not. The facts say Americans spend about $1100 annually versus $770 in Canada and $740 in Germany. (OECD study 2014) That difference is significant but not the driver of out of control health insurance premiums and deductibles.

Bob Ehrlich
“Reducing information flow…is not the answer to lowering health care costs.”
-Bob Ehrlich

The bottom line problem in America is we have an incentive for all providers to do services to get paid. We reward treatment not prevention. Doctors and hospitals get paid for procedures not watchful waiting or advice on prevention. Defensive medicine encourages added tests to protect from lawsuits. The latest technology we all love is expensive to install and providers recover their costs by high utilization. Americans want fast answers to their health issues and providers are more than willing to accommodate us with MRI’s and diagnostic procedures.

Drug companies are under attack and the lack of facts used by reporters like Cuomo are troubling. Durbin has no basis for saying DTC is a major problem driving up prices. His actual basis is his own distorted view that if patients ask their doctor for an advertised drug, then that must be for a drug not really needed. While DTC advertising is designed to encourage patient initiated discussion it is the doctor who decides whether it is needed. Drug companies have a chance to make their case to the consumer and doctor through DTC, detailing and medical advertising. Reducing information flow as Durbin seems to want is not the answer to lowering health costs.

The better solution to health care cost control is to incentivize consumers to shop around. We can do this by total price transparency from providers and by consumers having some skin in the game with their deductibles and copays. Hospitals and doctors want their fees to be opaque to patients. As long as someone else pays our bills most consumers do not ask or care. As we all face higher deductibles we are starting to care more what we are being charged.

Obamacare has caused significant increases in premiums, deductibles and copays. If we are to continue it, then we either can care more as consumers about prices we pay or ask the government to subsidize insurance companies to keep those premiums, deductibles and copays under control. I would recommend the former. If we give consumers the knowledge and incentive to negotiate with providers for lower prices, it will happen. There are many ways to provide consumers with price and quality information on providers. We have health technology companies who have that information and are happy to provide it. If we just ask government to continue to pay insurance companies to subsidize high provider costs we continue the fee for service model.

What unfortunately is happening is each side of the political aisle has reduced the discussion to simplistic slogans. We need moderates on both sides to create a coalition to solve the problem not to say ridiculous things like millions will die if we change Obamacare or Americans must be free of government mandates. Maybe I ask too much that reasonable people emerge to create a more workable health care system. I can still dream that the warring parties will actually think more about solving problems for America than destroying the opposition.

Bob Ehrlich


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