WHY CANCER CARE COSTS SO MUCH?

They ask, sometime in pure ignorance and oft times with incredulity, “why is cancer care so expensive?”

The rabbit hole is deep and dark, but if you shine the light, you can see the trail of the smoking caterpillar. 

Some try to create cost algorithm based on survival benefit of a drug on cancer care, others are trying to legislate lower costs, while still others reach out for subsidies from the eternal fountain of taxpayer wealth. Life in these United States is indeed interesting.

While searching for a gradient to seek the fissures of thought, let me break it down by category:

Drug development: The claim is that bringing a new drug to market is valued at $2.6 Billion (of which $1.2 Billion are time costs). ① 

Incurred in this cost is the old premise that of the 5000 drugs tested only one enters the market, showing benefit in the petri dish, mouse model and then through human Phase I and II trials leading to FDA approval. That $1.4 billion in actual expense is amortized over the next 7 years of patent protection with a certain Return on Investment or ROI for the risk undertaken by the company. There are quite a few “wrong-headed methodologies” in use there. ② However not all costs are related to drug development, some are purely annual price increases to keep up with the earnings per share (EPS).

Insurers: The Cost to insurers is defrayed easily by the price of the premiums. In essence for all the talk of “Risk Mitigation” from the insurers, there is little risk involved, except the agency risk of losing a bonus for the managers should the benchmark of the stock price not reach the intended target. Overall unless you happen to take some real wild risks like AIG with Credit Default Swaps and the like, your chance as an insurer of an extremal event is nigh impossible. ③ Meanwhile as the money trail indicates that the Insurers paid $102 million to lobby the congress to tweak the Obamacare and in return the Health Care Index has risen by 305% over the past three years! Stupendous Returns eh?

Supply and Demand: If a drug is developed for a condition that afflicts only a few souls, it is given an orphan drug status. The price of the drug development will always be high to amortize the drug development costs. But a drug for an affliction of the masses should not be that expensive. The case in point is a company named Dendreon and their drug product Provenge used for Prostate Cancer. The Provenge cost was $93,000 per treatment and enhanced survival by only 4 months led to the eventual decline in the fortunes of that company into a bankruptcy. ④ 

The fault line in this exceedingly pure appearing surface had been discovered. But there were two important lessons from that case; one, the concept of using immunity against malignancies and two, careful how you price the product with limited benefit. Careful of the faint light that beckons, like a mirage, and then dies. 

Oncologists in delivery of care: Much is made of the physician who uses the expensive medicine for his or her own benefit. Fortunately except in a select few unfortunate cases, the majority of the physicians use cancer drugs based on the data they have for the fullest benefit to their patients. This might appear a heresy to the journalists since it does not follow their narrative, but based on talking with my colleagues, the foregoing is a fact. The problem in most cases is the transparency of the drug cost itself. We as oncologists offer treatment on the basis of the best benefit against the malignancy and not necessarily based on cost to benefit ratio. We are after all doctors and not businessmen or women. Our purpose is to heal. And therein is the crux of the matter. Big Pharma and Biotech companies know our ethos and price their products according to their cost plus ROIs. Unfortunately more often than not the “studies” being quoted are based on a low “n” and tortured statistics based on assumptions that carry their argument. The studies are touted as the next best thing since sliced bread! ⑤. The fault may not fall too far from the physicians either at times when more expensive drugs are used where cheaper ones would suffice. The human dignity is best served through truth.

Mini-incrementalism:  There are very few large leaps in oncology patient care, more of the medical literature litters the landscape with mini-incrementalism in benefits through the tortured use of Progression Free Survival or PFS. Unfortunately half of those studies cannot be verified or validated. The purpose in some cases is a continuous source of incremental revenue. This is by far the most destructive force in medicine today. Read here on...PFS

800lb Gorilla: The Insurer-Lobbyist-Expert-Middling-Manager remains the big culprit. Realizing that from 1970 to 2009 physician population increased minimally  less than 5% in spite of the total population of the United States that grew to 320 million, the administrators however grew by over 3000% according to the Bureau of Labor Statistics (BLS).

To apply the Supply – Demand metrics to the oncology dilemma is akin to creating a skin in the game for the two main entities concerned; the patient and the physician. If the patient cannot afford the medication then the volume will dry up and the cost of the product will of necessity go down as long as the intermediaries are not in the process of processing these payments and extracting their bounty. Already China rejected the patent for Solvadi ($84,000 drug against Hepatitis C) India and France successfully negotiated the cost at 70% less. But in truth if one looks at the cost of the Hepatitis C infection, its complications and overall health costs of are for the illness, the cost of Solvadi is actually a fraction of that expense ⑥. Using mandated price controls however is a top-down measure that governments and policy makers use in an attempt to control price and show how they are working for the public benefit. Alas price controls never achieve their objective of cost reduction but in effect becomes the force du jour for control of care and higher prices.

We have come a long way baby! True. But where we are going is not that long. At this rate it will be a long hard winter soon and the chilling frost will last a very long time. 

References:

① http://www.nytimes.com/2014/11/19/upshot/calculating-the-real-costs-of-developing-a-new-drug.html?_r=0&abt=0002&abg=1

② http://www.citizen.org/publications/publicationredirect.cfm?ID=7065

③ http://www.businessinsider.com/michael-lewis-on-aigs-stupid-stupid-cds-business-2009-7

④ http://dealbook.nytimes.com/2014/11/10/dendreon-maker-of-prostate-cancer-drug-provenge-files-for-bankruptcy/

⑤ http://www.forbes.com/sites/matthewherper/2014/10/05/60-minutes-just-attacked-high-drug-prices-heres-what-you-should-know/

⑥ http://blogs.wsj.com/pharmalot/2014/09/15/gilead-deal-to-sell-sovaldi-in-poor-countries-meets-criticism/

INCENTIVES

What drives you is the same as what motivates you? Provocative, yes, but that statement needs an answer in your own silence.

We have long been stretched across the mountainous range of incentives; the higher the peak the better the result is the dogma. But is that true?

Behavior Theorists will say yes. They as you know have confused the issues of Mice and Men. Pavlov’s old ghost that rewarded with a snack from the correctly recognized trap door vs an electric shock from the wrong one in mice works to do more harm than good in the short and the long run both in mice and men. Mice are synaptically hard-wired to reach a certain destination to receive a reward in forms of food and little else. In men watching the mice, it accentuates their resolve of incentives to potentially enhance productivity.

Incentives are both Intrinsic and Extrinsic. The former have a moral compass attached to them and the latter are more coercive in nature. Or let us just say the difference is between, “what I want to do, vs. what you want me to do.” The misguided mind wishes to enforce the extrinsic incentives to modulate the intrinsic ones and that, time, data and reason suggest is impossible – Edwin Locke (Ref # 1)

The misguided view of such thought is obvious. Pavlov’s conditioning is based on avoidance as much as it is in survival. The human kind mistakes that as increase in productivity causal through rewards. Our weaknesses are revealed under the uncompromising high altitude truths and there we find; rewards that feed desires quickly cause the hunger of understanding to flame out faster and with that exploration and innovation.

What good do incentives do then? Here are a few answers you will hear from the managers who have grown up with the “If this then that” concept of the American way of life.

1.       1. Productivity goes up! Does it? The answer in the short term is it does but then as more productivity is needed to keep the incentive, the quality goes south. The initial incentive creates a temporary phenomenon which fades quickly forcing the manager to go back for more and more of the manna. The classic fallacy that follows is; the initial hypothesis is correct and therefore more incentivizing is needed. The spiraling structure rides the next turn of the screw. Ultimately the train of thought has to reach a destination and it does when the cost per widget equals the profit from that widget and demand equals supply. To the manager who benefits from incentive programs because of his own bonus tied to it, it is always a “self-fulfilling prophecy,” when things go bad from good and he chimes his new incentive program as the panacea for success.

2.     2.   It motivates the producer. Does it? Temporarily, but it also creates a window of discontent from the others in the field who are without the incentives and feel inferior or “left out.” This particular cycle ends viciously in employee rivalry and competing for the finite pool of incentives thus leading to short cuts and loss of real productivity in the intermediate and long term. It is demoralizing to the ones who do not receive the incentives to continue with their daily workload with the same enthusiasm.

3.      3.  It benefits the manager. Yes that it does!

Mimi and Eunice

What bad do incentives do? Plenty!

1.       1. Incentives do not lead to an enduring commitment to any action or any program. Rewards have a similar effect on the human behavior as punishment and both in the end from the individual’s perspective feel like manipulation.

2.       2. Individual gain becomes the name of the game. Call it the Agency problem where the incentivized motivated manager cares only for the short term solution for a long term issue. Example a CEO/CFO who for the sake of a large bonus has to show a rising Stock Price to gain the appropriate stock shares as bonus reward for his actions. His actions might consist of reducing the labor force to reduce expense and thus increase the net income during a decrease in revenue, or he might consider increasing the debt (to offset income tax) and use the debt to buy-back the shares to enhance share value or he might sell a long term promising project for a short term windfall to shore up the assets and the share value through buy-back or report financial problems within the company in arcane hidden parts of the financial reports as “Special Purpose Entities” used by Arthur Anderson, the auditing firm in the classic case of Enron, where realized losses were hidden.

3.     3.   Incentives destroy exploration of causality in dwindling productivity and try to fix it with rewards.

4.      4.  Incentives are thieves of individual intrinsic motivation and desire.

5.      5.  Extrinsic Incentives reduce innovation. (Ref #s 2-5)

Nowhere is there a better example of such promotion of behavioral reward followed by punitive action more visible than in the field of medicine.  The CMS Authority has burdened the physicians with miniscule rewards and heavy penalties to attempt to change physician behavior. The long held Damocles Sword over the physicians called the SGR (Sustainable Growth Rate) formula to pay physicians that kept hinting at a 21% cut in reimbursements was repealed and instead a worse APM (Alternate Payment Model) was adopted that gives the CMS sweeping powers for draconian reduction in payments to physician from the 7 cents per dollar paid to them of the total healthcare costs. The 7 cents are under the most glaring of scrutiny than any in any kind of vocation. Meanwhile the healthcare managers with 5-6 times the average salary of physician, continue to reap the rewards from the Agency Problem by creating surreptitious models that point fingers of blame at the physicians for the escalating healthcare costs. Another example, for instance in this game of sham is the 0.5% reward for following a directive (“Meaningful Use” of EMRs) otherwise a 2% penalty. Likewise promoting ACOs to cut costs through “Less is More” policy saved the CMS over $400 million and rewarded the ACOs with less than 1/10^th in return. As the “Pioneer ACO” program fall out shows several of the ACOs disbanded due to belief that such dire cost cutting was leading to poor patient practices and hurting their chances of surviving financially in providing care to their communities.

More recently however the Insuring forces are incentivizing the use of poorly designed pseudo-scientific data to enforce limited screening of diseases like cancer.

Punitive actions are like their twin sister  incentives, neither present a long term viable behavioral modification. They actually lead to demoralization, as Robert W. Baird and Co., Inc., wrote in the 1985 book, Intrinsic Motivation and Self-Determination in Human Behavior, “the research has consistently shown that any contingent payment system tends to undermine intrinsic motivation.” The basic effect is the same for a variety of rewards and tasks, although extrinsic motivators are particularly destructive when tied to interesting or complicated tasks.” Incentives like punitive actions perversely affect human behavior; opportunity for exploration, improvement of self, advancing of one’s self image, achieving personal goals and renders obsolete intrinsic motivation."

The last question that remains is, “Do incentives  motivate passion?”

The answer is NOT, as Jonathan Friedman of University of Toronto stated simply, “If they have to bribe me to do it, it must be something I wouldn’t want to do.” So it comes to this final conclusion should anyone care to listen: You cannot force passion into a mind that is closed to it, with rewards! Incentives squelch innovation and real growth.

REFERENCES:

1.         “Financial Incentives” G. Douglas Jenkins, Jr. in Generalizing from Laboratory to Field          Settings, edited by Edwin A. Locke (Lexington, MA: Lexington Books, 1986.

2.        “Intrinsic and Extrinsic Motivational Orientations: Reward-Induced Changes in Preference for Complexity” Thane S. Pittman, Jolee Emery, and Ann K. Boggiano (Journal of Personality and Social Psychology March 1982).

3.       “Enemies of Exploration: Self-Initiated Versus Other-Initiated Learning,” John Condry (Journal of Personality and Social Psychology July 1977).

4.       “Toward a Theory of Task Motivation and Incentives” Edwin A. Locke (Organizational Behavior and Human Performance Volume 3, 1968).

5.       Intrinsic Motivation and Self-Determination in Human Behavior, Edward L. Deci and Richard M. Ryan (New York: Plenum Press, 1985).

INTUITION

Funny thing about asking someone, “What is Intuition?” And you will get different answers. Some will say it is your inner conscience, others will say it is your ability to quickly differentiate while others will opine that it is mindless instantaneous reaction. Of all the answers the last one is intriguing. And it is pretty close to the official definition: “the ability to understand something immediately, without the need for conscious reasoning,” (from the Latin word "Intuir" or knowledge from within) don’t you think?

We function through the day as radiant blossoms or wilted lilies. The modus inspired by what elevates our spirits or weighs down our minds. It might be looking forward to a quiet evening listening to music, thinking about a solution to a pet project or starting a paper due in the math class the next day, a business plan for a customer, or dictating a consultation that involves a large dose of research.  In the more delightful measures of expectations, we dive head long with the Rosseauvian delight. All in! Here the corridors appear as large expectant runways at International Airports and navigating is applied with ease. In the latter each corridor is filled with constrictions to passage and the whole task is laborious and trying. Our ability to circumnavigate the complex jungle of our existence is enhanced through intuition. Intuition protects us, saves us from disasters and lacking it with equal measure can feed us into the lion’s den.

After conducting a “Human Factor and Decision Making” seminar at the FAA Seminar, I was asked to fly with a pilot for a flight review. He was good. All the steep turns, the slow flight, detecting impending stalls and recovery from actual stalls was done with proficiency and thoroughness. He after all had several thousand hours under his belt. Equally his gaze was never fixated. His eyes glanced at all the gauges under the glow and flicker of each instrument. Monitoring the airspeed, the attitude indicator, the Vertical Speed Indicator, the turn coordinator, the wind direction, the aircraft crab angle, the pitch and yaw in the turn, the fuel consumption, the ground-speed, the trim, the radio communication with Air Traffic Control, while my was gaze was outside the windshield to look for other aircraft and he all the while communicating with me about his intentions of what he was doing. All these actions were being performed effortlessly and with a certain command on the phraseology of the spoken sentence and the articulation of the intended thought. This was multitasking at its best. Or was it?

This was the Jeffersonian hand at play; a thoughtful, implicit consent to be governed by the explicit rules of the game. Experiential references carried the day. If you prefer we could term that as “muscle memory.” How do we build that muscle memory? The answer is obvious by practicing the required subset of practical knowledge. One cannot learn this straight from the book. Knowing that reducing power causes changes in the aircraft attitude is one relegated to experience as the acceleration decreases and the plan lurches forward nose down to regain that speed and without a pilot’s input it would reach the speed that would increase the lift and by virtue of aerodynamic laws it would try to climb again and create an unbalanced pitch motion. It goes back to the old mantra of Lift to weight and thrust to drag ratio. So unless you have felt the forces at play while flying the aircraft, you could hold yourself as an aviator in front of a landlubber class of hundreds and fool them, by regurgitating “bookish words.” Sitting in the pilot’s seat for a minute and experiencing the sensations is worth more than the countless hours of learning by rote.

Let us get back to my proficiency seeking pilot in the left seat for the moment. We had accomplished a lot in the almost four hours of flight. No there were no moments of fright in this flight. Everything was a seamless act of coordination and evaluation. This guy was good. We were flying over a beautiful countryside over Tennessee, with fields of green and red rose bushes visible too as cows snacked on grass and empty roads on a workday flew by below, all visible from the side window of my right seat.

We were at 3000 feet and about 10 miles from the nearest airport. I decided to test his one main skill.

I killed the engine!

He looked at me dumbfounded.

I asked, “What is the first thing you are going to do?”

“I will push the mixture, prop and throttle to the max!” he responded.

“Try again!”

“I will check the magnetos!”

“Try again!”

“I will change the fuel tanks and turn on the fuel boost pump!” he said in a husky voice, his face taking on an amber shade of yellow. The push and pull of remote thought and recent encounter danced in a fugue dreamscape; diving in madly then holding back to review, as all the memorization poured out in a linear splash.

“Nope!”

“I will change the Transponder to squawk 7700!”

“Nope!”

“I will call ATC and declare an Emergency!” His face was now the color of fusion between red and purple.

“Nope!”

Meanwhile the aircraft is flying at 165knots and we had lost 500 feet during this discussion. Now the cows seemed concerned too, their mouths frozen in mid mastication. The tiny windmill below shook to the sudden gusty breeze from the west. The moment lingered.

“Well then I give up.” He said as his face slumped. He had abrogated his responsibility in flying the aircraft. “Oh, I would pull out my Pilot Operating Handbook! Is that what you are looking for?”

“Glide Speed.”  I said quietly.

“Pitch to Glide Speed!” I said with a little emphasis. “That should be your first reaction…always. Transferring speed energy into altitude gives you more distance to find a suitable site to land. It also adds to your time to find the potential cause of the engine failure and find a safe landing zone and it diminishes your descent rate flying at L/D max (or maximum lift with the weakest of drag).”

“What do we do now?” he asked

“Land the plane!”

“You mean anywhere?”

“Anywhere, safe!” I answered.

His instincts took over as he gained some altitude, transitioning to glide speed and making all the arrangements to land. He looked at an open pasture and set himself up to land on the green grassy field to his left.

Once he had committed and the safe landing was assured I  restarted the engine at around 700 feet and off we went headed back for the airport, which was now only 4 miles away. In a debriefing later, he acknowledged that had he resorted to glide speed immediately that we would have easily made it to the airport given the winds at 3000 feet.

You cannot learn that kind of knowledge from reading books. If ever he was faced with such a dilemma, he will know what to do without hesitation. Now this will be in his repertoire to execute effortlessly as a routine. After the red blush on his face had waned a bit, he came over during dinner the next night and thanked me for the lesson. “I will never forget that.” he said. The Angel of Reason had visited him overnight. 

That in itself was the best reward!

A Short Psychology of Intuition:
From William James' two mode Intuitions of "Effortless and Fast or Rational and Analytical to Kahneman's Type and Type II modes of intuition, both embody the visceral mid-brain response and the contemplated neo-cortical revisions. The Type I is ingrained from age-old hunter gatherer fear and flight function to escape beasts and monsters and the Type II is learnt. As Massimo Pigliucci stated in his book Answers for Aristotle,"Moreover, intuitions get better with practice — especially with a lot of practice — because at bottom intuition is about the brain’s ability to pick up on certain recurring patterns; the more we are exposed to a particular domain of activity the more familiar we become with the relevant patterns (medical charts, positions of chess pieces), and the more and faster our brains generate heuristic solutions to the problem we happen to be facing within that domain." Meanwhile causal links that determine our intuition is illustrated by this statement from Kahneman, "You have to think of [your associative memory] as a huge repository of ideas, linked to each other in many ways, including causal links and other links, and activation spreading from ideas to other ideas until a small subset of that enormous network is illuminated, and the subset is what’s happening in the mind at the moment. You’re not conscious of it, you’re conscious of very little of it."  Thus it is all about the coherence of the causal links that are arrived at in the form of intuition. Perceived causality and the reaction to it, after all are the underpinnings of all rational reasoned thoughts. Inadvertently however, there are moments where the fly in the ointment is perceived and the flaw of jumping to conclusions comes into play and overconfidence is the outcome. This overconfidence stems from the coherence of disjointed beliefs and thus can create a major error. The human mind has the capacity and capability to fool itself with wonderful stories built upon a foundation of little or no evidence. Unfortunately, when executing such ill-begotten plans the person subjectively has the same sense of accomplishment as another who has done his or her due diligence. So at times raw intuition is a man with a Janus face holding a double-edged sword!

Intuition is borne of experience. No amount of cognitive rationalizing and reasoning in moments of distress can bring about the right outcome except a brush with that one dose of raw experience. Speaking of comparing medicine and piloting, as most experts tend to do, this is the only intersect between the two; learning from raw experience!