Market Failure and Medications: The Consequences of Healthcare Economics

I have a friend who happens to be an economist.  He's a really (really) smart guy and I value his views on everything from parenting to high finance.  So when he struck up a conversation about a recent blog post of mine that covered the intersection of drug prices and basic economic principles, I was all ears.  

"You haven't identified the market failure," he said.  

I was caught a little off guard.  I needed a moment to recall the specific definition of "market failure." It's not what most people think.  If the average person hears the term "market failure," they're likely to believe the S&P 500 dropped precipitously that day.  But when an economist uses the term, he means that the supply and demand dynamics of any given market have failed to reach a market clearing price.  The market could be for guns, butter, iPhones, or medications.  Doesn't matter. Buyers are unwilling to buy, sellers are unwilling to sell.  The market isn't working.  It has failed to produce transactions of any kind.     

My friend's point was that the market for naloxone was still functioning.  Buyers were complaining vociferously (in the press, to Congress, to manufacturers, etc.) but naloxone was still being bought and sold.  Howls of protest are one thing, he was saying, but the market still looks like it's working - albeit at a significantly higher market clearing price than a few years ago.  

From a purely economic perspective, he's exactly right.  But this isn't "pure" economics.  This is healthcare economics.  And the difference isn't that we in healthcare don't get it, it's that we have to get it sooner... because the stakes are much higher.  

In my original blog post, I told the story of my son Will and his experience with the supply and demand of chocolate.  I pointed out some of the differences between his experience selling Hershey bars to 1st graders and the pharmaceutical companies raising prices of medications like naloxone.  But there's one difference I did not identify in that original post and it's critical to understanding the current public discourse around naloxone and EpiPens and other medications whose price has risen substantially as of late.  

If Will's market for chocolate fails, then kids neither buy nor sell chocolate.

If the market for EpiPens fails, a kid dies.  

Overly dramatic?  Not in the least.  If access to potentially live saving medications is inhibited by market failure, then preventable death is not only a possible consequence, it's a probable one.  Those of us who work in this space have to anticipate market failures and prevent them from happening. We cannot sit back and wait for the market to fail and then act to correct it.    

Economics is different in healthcare for lots of reasons (government participation in price setting, employer-based health coverage, third party payers, just to name a few), but ultimately, what makes the domain of healthcare economics so unique is that it carries life and death consequences at every turn.  What's past is prologue... and we have to get it right.    

Michael 

On Twitter @PRIUM1

Standing Orders: Are You Prepared?

The Missouri PDMP watch goes on... I think CNN should have a clock for it.  Instead of counting down to an event, the clock would continually count up, marking the years, months, days, hours, and minutes since Missouri became the only state without a law creating a Prescription Drug Monitoring Database.  For the record, the District of Columbia enacted its own PDMP legislation on Saturday, February 22, 2014.  So by my count, the clock would read: 2 years, 6 months, 7 days, 10 hours, 59 minutes, 32 seconds... 

But the state did make some progress recently.  Missouri HB 1568 creates a "standing order" for naloxone.  There's a legitimate debate regarding standing orders for naloxone, but regardless of where you stand in that debate, there's little doubt we're going to see more and more of these across the country.  So let's establish some definitions and pose some interesting questions for the payer community.

First, looking up "standing order" in an average dictionary isn't terribly useful.  We're looking for a clinically oriented definition and I found the best one at medical-dictionary.com:

"a written document containing rules, policies, procedures, regulations, and orders for the conduct of patient care in various stipulated clinical situations. The standing orders are usually formulated collectively by the professional members of a department in a hospital or other health care facility. Standing orders usually name the condition and prescribe the action to be taken in caring for the patient, including the dosage and route of administration for a drug or the schedule for the administration of a therapeutic procedure. Standing orders are commonly used in intensive care units, coronary care units, and emergency departments."

Translation: Pre-approved treatments that can be dispensed and administered by non-physicians because a doctor said it was ok ahead of time.

The language in Missouri is indicative of what we're likely to see elsewhere: "Notwithstanding any other law or regulation to the contrary, any licensed pharmacist in Missouri may sell and dispense an opioid antagonist under physician protocol" and "Notwithstanding any other law or regulation to the contrary, it shall be permissible for any person to possess an opioid antagonist."  Additonally, the bill also contains language that relinquishes pharmacists from any liability associated with dispensing naloxone as well as protection of individuals who administer naloxone.  This is an important component of any legislation in this area.

Translation: Want naloxone?  Show up at a pharmacy in Missouri with some money and you can have some.  No questions asked.  And no one is going to get arrested or sued for dispensing or administering the drug.  

But this begs several important questions for the work comp payer community.

First: How much is naloxone going to cost?  Are we talking generic syringes?  Or EVZIO auto-injector pens?  This "standing order" in Missouri spells out the ingredient a patient can obtain, but not any preferred form of administration.  Notably, the cost of this stuff is skyrocketing.

Second: Who is going to pay for this, ultimately?  If an injured worker pays for EVZIO pens out of pocket via a standing order, will he submit for reimbursement to the employer/carrier?  How will this be handled?

Third: Will we submit this to utilization review?  Are the guidelines sufficiently thorough to cover this type of scenario?  (I can answer that one, actually: no, they're not).  So where does that leave us? Do we really want to deny payment and then have the unthinkable happen?  Imagine the headlines. "Work Comp Screws Up Again: Injured Worker Dies of Overdose After Employer Denies Payment for Life Saving Antidote."

No one wants that.  But we also want to ensure we're addressing the underlying issue.  Why do we have injured workers on sufficiently high doses of opioid medications that the patient (or, likely, a loved one) feels the need to take advantage of a "standing order" and obtain naloxone from the local pharmacy?

Which brings us to a fourth question: Does the employer have an obligation (ethically, not necessarily legally) to inform the prescribing physician that the injured worker has obtained naloxone via a standing order?  "Hey doc, just thought you'd be interested to know... Injured Worker Joe?  Yeah, his wife just picked up a pack of two EVZIO pens at Walgreens.  We're going to reimburse them the $800, but thought you might interested in your patient's perception of overdose risk."  That's a pickle: the reality is that the adjuster may be the only one that knows about both the opioid scripts and the naloxone secured via a standing order.

Unintended consequences abound.

Michael
Follow me on Twitter @PRIUM1

So Why is Naloxone Getting So Expensive?

Last week, I posted a piece on the public health debate around naloxone.  Since then, I've received a stream of new and interesting data to share.  

First, a report showing that naloxone scripts led to fewer ED visits... of the 2,000 patients in this study focused in safety-net clinics around San Francisco, those receiving naloxone along with long-term opioid prescriptions had 47% fewer visits to the emergency department.  That appears to be compelling evidence to suggest co-prescribing naloxone makes sense (though the focus on the safety net clinic population begs the question of how translatable the conclusions might be to other populations).

We also saw the release of a white paper from Fair Health that suggests diagnosis of opioid dependence is skyrocketing.  Fair Health is a non-profit organization dedicated to transparency in health care costs.  They analyzed their database of 20 billion privately insured healthcare claims and found a 3,203% rise in opioid dependence diagnosis between 2007 and 2014.  So maybe we need to focus more on the underlying issue of opioid dependence after all?   

Third, the price of naloxone is rising... this excellent an in-depth piece from Business Insider details the controversy surrounding the price increases.  Out there in social media land, I've seen several comments regarding the price increase that indicate a basic understanding of microeconomics, but that lack the depth necessary to understand what's happening here.  "Demand has gone up," read many of these comments, "so price goes up, right?"

Not necessarily.  A personal story to illustrate the point:     

Some of you have heard me tell one of my favorite “Will stories".  Will is my 10 year old and the kid is a natural entrepreneur.  Back when he was in 1st grade, his school had an activity called Economics Day.  Each of the six 1st grade classrooms in Will's school had to make a simple product and then sell it to their peers in an open “marketplace” (which, in this case, was a series of tables in the school gym).  One class made puppets out of brown paper bags.  Another class made pet rocks.  One class did the classic lemonade stand.  Will’s class made “S’more packs” (two graham crackers, a marshmallow, and a small Hershey’s chocolate bar all in a small plastic sandwich bag).  Each kid had earned “money” to spend through good behavior and acts of service to others over the course of the semester. 

All the first graders gathered in the gym and awaited the signal from one of the teachers.  When she blew her whistle, nearly all of the children would begin freely “shopping” the various tables of merchandise around the gym.  Only a small group of students from each class would remain at their respective “cash registers” to do the actual selling.  William volunteered for this duty first.  While everyone else shopped, Will would be in charge of selling his class’s S'more Packets.  I stood behind him and made sure order was maintained.  Easy duty… or so I thought.

The whistle blows.  Nearly every kid in the gym makes a run for Will’s table.  There’s chocolate there, right?  The kids who don’t run for the chocolate instead go for the lemonade.  The Pet Rock and hand puppet kids are immediately bored.

Suddenly, Will finds himself in the middle of an old fashioned Wall Street trading pit.   He’s surrounded by kids, each holding out $5 of play money and shouting for chocolate.  Initially, Will is collecting money and handing out ‘Smore Packets just as he’s supposed to do. He’s happy his class’s product is popular and he’s clearly grateful for the business.  But as the crowd thickens and the kids grow louder, I begin to notice what Alan Greenspan once called “irrational exuberance.”  The kids are frantic.  Markets are psychological and this one is getting crazy.  Kids are elbowing for position.  They’re screaming Will’s name in an attempt to get his head to swivel in their direction, potentially increasing the probability they’ll be the next to walk away with chocolate.  He’s getting bumped, jostled, and hit.  I’m getting worried about him and I wonder if he’s going to lose it under the pressure.  Should I step in?  Be an adult?  Organize this chaos?  It’s getting out of control…

And at that moment, Will did something both courageous and, to him, completely logical.  Without permission from his teacher, without encouragement from me, without any warning at all…

He raised the price.

“These aren’t $5 anymore,” he yelled over the din, “they’re $10!”  Only a few kids drop out of the crowd.  The rest simply reach into their pockets and pull another $5 of play money out to add to the $5 they’ve already been waving in Will’s face.  He sells a few packets at $10 and realizes he can go higher.  “Now they’re $15!” he yells.  I glance over at his teacher, Ms. Foster, who takes one step toward Will.  I can see she’s a little unsure of what to make of this scene and I have a moment of panic that she’s going to shut down the most perfect example of an efficient market I’ve seen in my life.  Then she pauses, steps back, looks at me, and smiles.  Thank goodness, I think, she gets what’s happening.  This is Economics Day… and these kids are learning economics!

Little did anyone know that the laws of supply and demand would be as intuitive to Will as eating, sleeping, and breathing are to you and me.

By the time I turn my attention back to Will, he’s at $30 and the flow of ‘Smore Packets into the greedy hands of first graders is starting to ebb.  He senses he’s neared the market price, the equilibrium between supply and demand.  This is what economists call it, economists who have studied this phenomenon and only this phenomenon, for longer than Will’s been alive.  To Will, though, there are no fancy terms or theories.  There’s just a point, he says later, that “felt right.”

So how do pharma companies justify jacking up the price of naloxone?  It’s just supply and demand, right?  What’s the big deal? 

Here’s the key difference: Will had a finite supply of chocolate.  Once it was gone, it was gone.  When supply is fixed and demand rises, price increases.  But that’s not true of naloxone.  This stuff is easy to make and has been around for 40 years.  When demand rises (and it certainly has), supply should increase commensurately and price should remain relatively stable over the long term.  That’s how economics works.  Anticipating objections from the "econ major" crowd who will argue we're experiencing a "shift in the demand curve" for naloxone (which is different than a simple increase in demand), I would argue that a commensurate shift in the supply curve is not only possible, but easily achievable given the nature of the underlying molecule.  

"We're not talking about a limited commodity. Naloxone is a medicine that is almost as cheap as sterile sodium chloride — salt water," said Dan Bigg, the executive director of the Chicago Recovery Alliance.

Unless you’re a pharma company.  Then you get to smile and smile... and be a villain.  You get to exploit the average American's lack of understanding of microeconomic theory and suggest that a rise in demand logically leads to an increase in price. 

Supply and demand, right?   

Michael
On Twitter @PRIUM1

Nuance is Necessary in the Naloxone Debate

American Medical Association white paper headline: "Help save lives: Increase access to naloxone"
New York Times headline: "Naloxone Saves Lives, but Is No Cure in Heroin Epidemic"

These headlines aren't inconsistent, but they do hint at the evolving national dialogue around naloxone.  I would say there's a debate brewing around the appropriateness of naloxone access, but the truth is that the debate isn't new - it's been going on for decades.  What makes it feel new to many of us is that the prescription drug and heroin epidemic is pushing our medical and public health professionals to more aggressively pursue any and all possible solutions at our disposal. And with every solution comes a critique.

Let's start with a few basic facts:

• Naloxone was approved by the FDA in 1971.  
• Naloxone is an opioid antagonist, which means (in layman's terms) that the drug kicks opioids off of the receptors in the brain and replaces them, eliminating the "high" and reviving the patient (and also sending them into immediate withdrawal).
• Naloxone works quickly (approximately 2-3 minutes) and its effects last between 30 and 90 minutes depending on the type of opioid that was used; sometimes, more than one administration of naloxone is necessary to reverse an overdose.  
• There is virtually zero potential for abuse of naloxone and virtually zero effect on an individual given naloxone who is not experiencing an overdose.  
• Naloxone comes in various forms: generic via syringe, branded injector pens (EVZIO), nasal spray (Narcan or naloxone w/ atomizer).

Now to the debate, literally an existential one at that (you might say naloxone is the "to be or not to be" drug... that is the question...)   

There are many (Centers for Disease Control, American Medical Association, Substance Abuse and Mental Health Services Administration, American Society of Addiction Medicine) who support widespread access to naloxone.  According to the CDC (and quoted in the AMA's white paper), from 1996 to 2014, the lives of more than 26,000 people were saved by naloxone.    

There are others who express concern that widespread access to naloxone will give addicts a safety net, encouraging risky behavior.  Governor Paul LePage (R) of Maine, never shy and certainly never concerned about causing offense, summed up the argument this way (in light of his veto of naloxone-related legislation): "Naloxone doesn't truly save lives; it merely extends them until the next overdose.  Creating a situation where an addict has a heroin needle in one hand and a shot of naloxone in the other produces a sense of normalcy and security around heroin use that serves only to perpetuate the cycle of addiction."  

As so often occurs in complicated policy debates, blanket assumptions and blunt statements lead to poor dialogue and lack of action.  So let's explore the nuance by segmenting the population of potential naloxone beneficiaries.  Note that this isn't the only way to segment the population nor is it the most detailed, but it's better than lumping everyone together.

1. First responders: Here, there is little debate.  First responders should be equipped with naloxone. They have a professional duty to save lives and naloxone will help them do that.  They are trained medical professionals and to withhold a vital life-saving antidote in the midst of a prescription drug and heroin epidemic is blatantly irresponsible.  

2. Drug abusers: Whether its prescription drugs or heroin, this is obviously a group at high risk for overdose. What Gov. LePage is missing in his inelegant portrait quoted above is that the person who overdoses will not be the one who administers the naloxone (having naloxone "in the other [hand]" doesn't do one any good if one is unconscious).  He also misses the reality that naloxone administration leads to immediate withdrawal - rather than experiencing "normalcy and security," the addict, while thankfully alive instead of dead, is thrust directly into hell on Earth.  

This segment of the patient population actually highlights two axes along which the debate takes place:  First, should drug abusers have access to naloxone at all?  Second, should we enable non-medically trained people (possibly fellow addicts) to administer the drug? If you believe in LePage's premise, that naloxone "merely extends [lives] until the next overdose," well, then... you are a cold and callous person who doesn't believe in the basic human aspiration toward redemption and recovery.  Might it be a long and hard road?  Yes.  Might there be relapses and multiple overdoses requiring naloxone?  Yes.  If it was your loved suffering from the addiction, would you want to give them every possible chance at recovery?  Yes.  As to whether non-medically trained people should be able to administer it... if I can give my kid an EpiPen injection when he gets stung by a bee, then I can administer naloxone.  No medical degree necessary.  

Thank goodness the Maine Legislature had the good sense to override LePage's veto, allowing Maine to count itself among the 34 states with a standing order for naloxone.   

3. Legitimate prescription drug users: This group is tricky.  These patients are under the care of a doctor, receiving legal prescriptions for opioids, and securing those medications at a pharmacy. I note there could be overlap between this group the group 2 (drug abusers), but this group has the benefit of a doctor overseeing their prescription regimen. The CDC and AMA guidance on naloxone prescribing among primary care doctors is fairly consistent.  A co-prescription for naloxone should be considered if the patient has a history of overdose, a concomitant script for a benzodiazepine, a history of substance use disorder, a mental health condition, or a medical condition that might make the patient susceptible to respiratory distress.  

But wait. Aren't these all the same factors that should cause the doctor to reevaluate the appropriateness of prescribing opioids at all?  Should a doctor manage the risk of overdose by prescribing an overdose antidote?  Or should the doctor be more diligent in exploring non-opioid alternatives first?  

This isn't just theory.  We're seeing it in PRIUM cases.  It's expensive, the cost is rising, and the benefit is unclear.  Surely, there are circumstances in which naloxone will be appropriate for co-prescribing (perhaps immediately post-injury or post-surgery when opioids are indicated for acute pain and the patient has a history of overdose, for example).  But the practice of co-prescribing naloxone for chronic pain patients is troubling.  

When it comes to high dose opioid therapy for chronic pain, we need to demand more from prescribing doctors than a "just in case" antidote.  Chronic pain care requires rigorous exploration of alternatives, difficult conversations with patients, careful management of medications, and a commitment to patient safety.  

Michael 

On Twitter @PRIUM1 

Naloxone, Fences, and Ambulances

[The following is a guest post from PRIUM's General Counsel, Ben Roberts]

Every day we are hearing more news and reporting on the “anti-overdose” drug Naloxone. Just looking at my Google feed this morning I see articles from Maine, West Virginia, Pennsylvania, and Virginia discussing legislation and it widespread use.

Last year, New Jersey passed the Overdose Prevention Act which permits broader access to naloxone and provided criminal and civil protections for those who administer it.

The Governor of West Virginia is about to sign SB 335  which allows medical responders and law enforcement to carry naloxone as well as allows physicians to prescribe the drug to those at risk of an overdoes as wells as their family and friends.

Many more state have passed and proposed similar legislation.

I think that these efforts should be applauded.  Given the state of the prescription drug epidemic, overdose prevention is something that should be on every legislative agenda this year.  But when I see these reactive approaches to public health issues I can’t help but be reminded of a poem from my childhood. 

In Joseph Malines “The Fence or the Ambulance” a great debate arises in a community about their own “public health” issue:

Twas a dangerous cliff, as they freely confessed

though to walk near its crest was so pleasant

But over its terrible edge there had slipped a duke and many a peasant

So the people said something would have to be done

But their projects did not at all tally

Some said, "Put a fence around the edge of the cliff"

Some, "An ambulance down in the valley.”

The poem continues with the community making the choice of the ambulance over the fence.

'For the cliff is all right if you are careful,' they said,

"And if folks even slip or are dropping

it isn't the slipping that hurts them so much

as the shock down below when they're stopping."

…

Then an old man remarked: "It's a marvel to me

that people give far more attention

to repairing results than to stopping the cause

when they'd much better aim at prevention

…

if the cliff we will fence, we might also dispense

with the ambulance down in the valley.

Overdose prevention, like abuse deterrent formulations of opioids is a positive step, but legislators need to be focusing on proactive steps to help avoid this problem and stem this epidemic.

Ben Roberts

Ben is PRIUM's General Counsel.  You can follow him on Twitter @WC_Compliance

As always, you can follow PRIUM @PRIUM1