By Don McCanne, M.D.

Quote of the Day will take a brief interlude. We are refining our approach to communicating information to educate and advocate for single payer and health care justice for all.

See you soon.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Over 30 years, dramatic consolidation has meant higher prices, fewer treatment options and less incentive to innovate

By Robin Feldman
The Washington Post, April 6, 2021

In the past few decades, three waves of mergers have substantially increased concentration in the pharmaceutical industry.

All told, between 1995 and 2015, the 60 leading pharmaceutical companies merged to only 10.

As a result, now only a handful of manufacturers are responsible for sourcing the vast majority of prescription drugs: Just four companies, for example, produced more than 50 percent of all generic drugs in 2017.

Drug companies were drawn to merging because of the lure of increased market power, improved synergies, larger economies of scale and more diverse product portfolios.

In the period following merger waves one and two, the industry generated fewer new molecular entities each year compared to pre-merger levels. Merged drug companies also spent proportionally less on research than their non-merged competitors.

Consolidation also enabled drugmakers to directly quell competition through what were known as “killer acquisitions,” in which they acquired innovative peers solely to stop potential competition.

In short, consumers were the losers from the two waves of drug company mergers. They confronted higher prices and fewer choices — and saw companies exploring fewer paths that might produce breakthroughs. To make matters worse, around 2010, another wave of mergers began.

As with the earlier waves, giant drug companies have merged. But in a new twist, in recent years, most consolidation has featured bigger players acquiring smaller start-ups. The difference reflects a dramatic shift in the structure of the pharmaceutical industry. Faced with stagnating research productivity, large drugmakers now rely on outsourcing their new drug research to start-ups and other small pharmaceutical firms.

Increasingly, these smaller players specialize in high-risk research and early drug development, with larger firms then gobbling them up and navigating the FDA’s regulatory process. For example, 63 percent of all new molecular entities in 2018 came from smaller biopharma firms, compared with just 31 percent in 2009.

The end result of now three waves of pharmaceutical consolidation is decreased or diverted new drug innovation, fewer treatment options and higher prices. Consumers have lost as firms fuse together to bolster the bottom line.

Robin Feldman is director of the UC Hastings Center for Innovation.

https://www.washingtonpost.com…

---

Comment:

By Don McCanne, M.D.

Yesterday we discussed consolidation of UnitedHealth/Optum and how it has become a mega-corporation of the medical-industrial complex. Today’s selection discusses consolidation within the pharmaceutical industry. The article describes how we can expect decreased or diverted drug innovation, fewer treatment options, and above all, higher prices. Works for the industry, but not so well for the people.

We’re just trying to introduce single payer Medicare for All. How much impact can that have on these mega-corporations? Where is our government in all of this? Aren’t they supposed to protect us? Maybe we’re aiming too low by advocating for a social insurance program. Maybe we should be taking over the industry so that we can gear it up to better serve us, the people. International comparisons do rate national health services very high in performance. Maybe if we talk about it a little more we can convince them that Medicare for All is a compromise that they can live with. We think we can too.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

The merger between a subsidiary of UnitedHealth and Change Healthcare would create a vertically integrated, all-seeing giant.

By Krista Brown, Olivia Webb
The American Prospect, April 5, 2021

It’s not often that the American Hospital Association — known for fun lobbying tricks like hiring consultants to create studies showing the benefits of hospital mergers — directly goes after another consolidation in the industry.

But when the AHA caught wind of UnitedHealth Group subsidiary Optum’s plans, announced in January 2021, to acquire data analytics firm Change Healthcare, they offered up some fiery language in a letter to the Justice Department. “The acquisition… will concentrate an immense volume of competitively sensitive data in the hands of the most powerful health insurance company in the United States, with substantial clinical provider and health insurance assets, and ultimately removes a neutral intermediary.”

If permitted to go through, Optum’s acquisition of Change would fundamentally alter both the health data landscape and the balance of power in American health care. UnitedHealth, the largest health care corporation in the U.S., would have access to all of its competitors’ business secrets. It would be able to self-preference its own doctors. It would be able to discriminate, racially and geographically, against different groups seeking insurance. None of this will improve public health; all of it will improve the profits of Optum and its corporate parent.

UnitedHealth is the largest health care entity in the U.S., using several metrics. United Healthcare (the insurance arm) is the largest health insurer in the United States, with over 70 million members, 6,500 hospitals, and 1.4 million physicians and other providers. Optum, a separate subsidiary, provides data analytics and infrastructure, a pharmacy benefit manager called OptumRx, a bank providing patient loans called Optum Bank, and more. Through Optum, UnitedHealth also controls more than 50,000 affiliated physicians, the largest collection of physicians in the country.

Acquisitions of entities as varied as DaVita’s dialysis physicians, MedExpress urgent care, and Advisory Board Company’s consultants have already changed the health care landscape. As Optum gobbles up competitors, customers, and suppliers, it has turned into UnitedHealth’s cash cow, bringing in more than 50 percent of the entity’s annual revenue.

On a recent podcast, Chas Roades and Dr. Lisa Bielamowicz of Gist Healthcare described Optum in a way that sounds eerily similar to a single-payer health care system. “If you think about what Optum is assembling, they are pulling together now the nation’s largest employers of docs, owners of one of the country’s largest ambulatory surgery center chains, the nation’s largest operator of urgent care clinics,” said Bielamowicz. With 98 million customers in 2020, OptumHealth, just one branch of Optum’s services, had eyes on roughly 30 percent of the U.S. population.

Change Healthcare has access to all of the data that flows between physicians and insurers and between pharmacies and insurers—both of which give insurers leverage when negotiating contracts. Insurers often send additional suggestions to Change as well; essentially their commercial secrets on how the insurer is uniquely saving money. Acquiring Change could allow Optum to see all of this.

If the acquisition proceeds and Change is owned by UnitedHealth, the largest health care corporation in the U.S. will own the ability to peek into the book of business for every insurer in the country.

The most obvious potential outcome of the merger is that the flow of data will allow Optum/UnitedHealth to preference their own entities and physicians above others. This means that doctors (and someday, perhaps, hospitals) owned by the corporation will get better rates, funded by increased premiums on patients. Optum drugs might seem cheaper, Optum care better covered. Meanwhile, health care costs will continue to rise as UnitedHealth fuels executive salaries and stock buybacks.

Optum’s acquisition of Change heralds the end of that status quo and the emergence of a new “Big Tech” of health care. With the Change data, Optum/UnitedHealth will own the data, providers, and the network through which people receive care.

There are signs that the DOJ knows that to approve this acquisition is to approve a new era of vertical integration. In a document filed on March 24, Change informed the SEC that the DOJ had requested more information and extended its initial 30-day review period. But the stakes are high. If the acquisition is approved, we face a future in which UnitedHealth/Optum is undoubtedly “the thing that ate American health care.”

https://prospect.org…

---

Comment:

By Don McCanne, M.D.

UnitedHealth/Optum is BIG – the largest health care entity in the U.S. – representing that medical-industrial complex that Arnold Relman warned us about so many years ago. Well, it’s here. And it is structured to make money – a lot of it – and patients just happen to be an essential element in their equation, but patient care is an expense. So much of what they do is to create administrative functions that are designed to reduce spending on patients, and, further, to increase revenues by selling those administrative services. By gaining control of much of the industry – hospitals, doctors, pharmacies, insurance functions – they are in a position to dictate the business terms for health care.

So what will happen should we ever be able to enact and implement a single payer Medicare for All program? The model calls for negotiating rates with physicians, global budgets for hospitals and bulk purchasing of pharmaceuticals. How do you do that with a mega-corporation like UnitedHealth/Optum? Do you really think that they will accept government negotiations for payment rates for health care entities such as doctors, hospitals and pharmacies while not being paid for their large infrastructure that has been designed to increase revenues? Change Healthcare is a data analytics firm that is used to leverage higher revenues (profits, executive salaries, stock dividends and buybacks); it is not for the purpose of providing quality and value in patient care. Again, the entire corporation is structured to make money with patient services being a necessary expense that is to be minimized as much as possible.

Will Medicare for All legislation be written in a way that we can remove passive corporate investors and excess executive salaries from the equation, thus essentially destroying the for-profit corporate structure? Would our conservative courts even uphold such limitations?

Health care should be guided by a patient service ethic rather than a business ethic. Can we rein in the medical-industrial complex, or is it too late? The transition to Medicare for all will certainly cross paths with this corporate monster, and something will have to give.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Ge Bai, Hossein Zare, Matthew D. Eisenberg, Daniel Polsky, and Gerard F. Anderson
Health Affairs, April 2021

Abstract

The different tax treatment of government, nonprofit, and for-profit hospitals implies different charity care obligations, with the greatest obligation for government hospitals and the least for for-profit hospitals. Prior research has not examined charity care provision among all three ownership types at the national level. Using 2018 Medicare Hospital Cost Reports, we compared charity care provision across 1,024 government, 2,709 nonprofit, and 930 for-profit hospitals. In aggregate, nonprofit hospitals spent $2.3 of every $100 in total expenses incurred on charity care, which was less than government ($4.1) or for-profit ($3.8) hospitals. No hospital ownership type outperformed the other two types with respect to charity care provision in a majority of hospital service areas containing all three types. Using different kinds of analyses, we also found wide variation in charity care provision within ownership types and a lack of a consistent pattern across ownership types. These results suggest that many government and nonprofit hospitals’ charity care provision was not aligned with their charity care obligations arising from their favorable tax treatment. Policy makers may consider initiatives to enhance hospitals’ charity care provision, particularly hospitals with government and nonprofit ownership.

https://www.healthaffairs.org…

---

Comment:

By Don McCanne, M.D.

There has long been a concern that nonprofit hospitals fail to provide charity care commensurate with the tax advantages afforded by the government. This study indicates that nonprofit hospitals provide even less charity care than for-profit hospitals (although others have questioned whether for-profit hospitals take liberties in adjusting off bad debt or contractual reductions in charges labeled as charity care).

Although under a single payer Medicare for All system issues would remain regarding the relative status of government, nonprofit, and for-profit hospitals, nevertheless a well designed single payer system should obviate the need for charity care since the system should be truly universal, comprehensive, and equitable.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About 1 in 5 American adults reported donating to a crowdfunding campaign to help raise money for a medical bill or treatment over the last year.

NORC at the University of Chicago, April 1, 2021

Eighteen percent of adults in America report having donated to a crowdfunding campaign to pay for medical bills or treatment at some point over the last year. This figure has held steady from surveys over the past year despite the increase in financial hardship, including record levels of unemployment due to the ongoing pandemic. The data come from the latest NORC Spotlight on Health survey powered by AmeriSpeak®.

Nearly 40 percent of Americans who donated to crowdfunding campaigns were from households with incomes of less than $60,000 per year. In 2019, the median household income in the United States was $68,703. Of the Americans who made a donation to a campaign, 36 percent were not working (unemployed or retired) and 6 percent did not have health insurance themselves at the time of the survey.

Crowdfunding is the process by which individuals raise funds from a large number of people through websites such as GoFundMe. The new survey found the numbers of Americans starting such campaigns holding steady relative to 2020. An estimated 6 million Americans started a campaign for themselves or someone in their household, and nearly 9 million Americans started a campaign for someone else. In addition, approximately 16 million Americans made donations to help strangers, a similar number to previous surveys.

Forty-five million Americans reported an estimated 61 million individual donations to campaigns for different diseases and conditions. Twenty-eight percent of Americans who made contributions to crowdfunding campaigns reported having donated to more than one campaign for different diseases or conditions. These new data indicate that, of the 61 million donations to medical campaigns, over half were related either to campaigns for cancer (17 million) or campaigns for accidental injuries (16 million). Other popular donation categories included heart disease (9 million) and mental illness (5 million). There were also an estimated 2 million donations specifically for COVID-19.

“Even as many Americans have struggled over the past year with unemployment and a lack of affordable health insurance, individuals are still donating to crowdfunding sites to help others pay for their medical bills and treatments,” said Mollie Hertel, AM, MPP, senior research scientist at NORC.

“People reported that the vast majority of donations were going to campaigns raising money for cancer treatments and accidental injuries. This information highlights again where gaps in insurance coverage—such as high out-of-pocket costs—may exist and the challenges that Americans with serious illnesses continue to face,” added Susan Cahn, DrPH, also a senior research scientist at NORC and co-author of the study.

Nearly 60 percent of adults in America believe that the government should bear a great deal or a lot of responsibility for providing health care to people who need free or lower-cost medical care. Forty-four percent of Americans think hospitals and clinics bear a great deal or a lot of responsibility when care is unaffordable and 35 percent believe doctors should bear this level of responsibility.

https://www.norc.org…

NORC AmeriSpeak Omnibus Survey:
https://www.norc.org…

---

Comment:

By Don McCanne, M.D.

Imagine. Forty-five million Americans felt compelled to make charitable cash donations to individuals with ongoing medical needs. What does that say about our health care financing system in America? Well, there are a few important conclusions we can draw from this survey.

• Medical debt is common and severe enough to cause people to initiate charitable campaigns to help pay the bills.
• People do not have enough faith in our current health care financing system to believe that it is adequate to cover medical expenses for many individuals with large medical bills (cancer, major accidents, etc.).
• Ninety-one percent of individuals surveyed were currently insured which tends to indicate a lack of faith in the adequacy of our fragmented, public and private insurance-based system of health care financing. People realize that it is not working well.
• The majority of adults in America believe that “the government should bear a great deal or a lot of responsibility for providing health care to people who need free or lower-cost medical care.”

The perception of excess medical debt has become quite prevalent, yet as a source of financing health care, crowdfunding hardly makes a dent in our national health expenditures. How can we delay any further the enactment and implementation of single payer improved Medicare for All? President Biden, this question is especially directed at you. Your temporary program to donate our tax funds to private insurance companies to cover high deductibles and other cost sharing takes care of the private insurers and their investors but leaves us taxpayers footing the bill.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.