It just costs too much

Stuart Altman and I were invited to share the podium as lunchtime speakers today at the New England-Israel Business Council's 2010 Life Sciences Summit. The Summit is designed to foster relationships between the life science industry, research, healthcare and the investment community in New England and their counterparts in Israel.

We had not really coordinated our talks beforehand, but we ended up with similar themes. Stuart starting out by reminiscing about one of his first jobs, when he was warned that if the then-current 7.5% of GDP represented by health care spending increased to 8.0%, a disaster would be befall the country. Of course, it is now over 17%. He explored the trends that have led to this and suggested that the higher prices of US medical services accounts for a significant portion of this result.

He concluded by advocating for a change in the current fee-for-service pricing regime and for implementation of the Accountable Care Organizations envisioned in the recently passed US health care bill. Turning then to specific concerns of the audience, Stuart suggested that there will be pressure to limit the use of drugs that are not cost-effective and that the pharma and device industry will be incented to produce products that enhance quality and improve efficiency.

My talk centered on topics familiar to readers here. I touched on the marketing-driven success of certain products whose clinical efficacy has yet to be found superior, and yet whose costs inflate the overall health care budget. I challenged those firms in the audience to focus on innovation that has the potential to reduce the cost of health care delivery.