Relevant and even prescient commentary on news, politics and the economy.

Covering the Sahara Desert with Solar Panels to Fight Climate Disaster?

Juan Cole at Informed Comment has a post up by Will de Freitas Should we cover the Sahara Desert with Solar Panels to Fight Climate Disaster?

A map of North Africa is shown, with a surprisingly small box somewhere in Libya or Algeria shaded in. An area of the Sahara this size, the caption will say, could power the entire world through solar energy.

Over the years various different schemes have been proposed for making this idea a reality. Though a company called Desertec caused a splash with some bold ideas a decade ago, it collapsed in 2014 and none of the other proposals to export serious amounts of electricity from the Sahara to Europe and beyond are anywhere close to being realized.

An engineer at Nottingham Trent University has researched various options for Saharan solar, Amin Al-Habaibeh and discusses the sheer size of the Sahara desert and amount of sunshine it receives:

– It’s larger than Brazil, and slightly smaller than the US.

– If every ray of sunshine hitting s the Sahara was converted into energy, the desert would produce enough electricity over any given period to power Europe 7,000 times over.

So even a small chunk of the desert could indeed power much of the world, in theory. But how would this be achieved?

According to Amin Al-Habaibeh, there are two main technologies which can be applied to this project and each has their pros and cons:

– Concentrated solar power using lenses or mirrors to focus the sun’s energy in one spot, which becomes incredibly hot. This heat then generates electricity through a steam turbine.

– A tower in the middle of the mirror or lens is the “receiver” which then feeds heat to a generator.

– Some systems store the heat in the form of molten salt. This means they can release energy overnight, when the sun isn’t shining, providing a 24 hour per day supply of electricity.

– Concentrated solar power is very efficient in hot, dry environments, but the steam generators use large amounts of water.

– There are also the regular photovoltaic solar panels which are much more flexible and easier to set up, but less efficient in the very hottest weather.

Amin Al-Habaibeh: “Just a small portion of the Sahara could produce as much energy as the entire continent of Africa does at present. As solar technology improves, things will only get cheaper and more efficient. The Sahara may be inhospitable for most plants and animals, but it could bring sustainable energy to life across North Africa – and beyond.”

The issue may be in how to transmit the energy to other areas? Is it still transmission via immense cables?

The longer we delay, wait, deny, and ignore the issues we produced for climate; the more drastic the action to be taken. There is more to the discussion on producing power from the sun in the desert and worth exploring. In Juan Cole’s post: Should we cover the Sahara Desert with Solar Panels to Fight Climate Disaster? there are other sites identified in which to do similar installations.

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Interesting Healthcare Outcomes . . .

Opioid Overdose Now Provides 1 in 6 Donor Hearts,” Ashley Lyles, MedPage Today

Overdose-death donors have accounted for a rapidly growing proportion of cardiac allografts, with a 14-fold increase from about 1% in 2000 to now 16.9%, “consistent with the rising opioid epidemic,” reported Nader Moazami, MD, of New York University Langone Health in New York City, and colleagues in The Annals of Thoracic Surgery. Earlier findings:

A total of 1,710 of 15,904 (10.8%) cardiac transplantations were from ODDs, approximately a 10-fold increase from 2000 (1.2%). ODDs were more frequently older than 40 years of age (87.2% vs 70.1%; p < 0.001), had higher rates of substance abuse, were more likely hepatitis C positive (1.3% vs 0.2%; p < 0.001), and less frequently required inotropic support at the time of procurement (38.4% vs 44.8%; p < 0.001). Overall survival was not different between the groups (p = 0.066). Discarded ODD allografts were more likely to be hepatitis C positive (30.8% vs 5.3%; p < 0.001) and to be identified as conveying increased risk by the Public Health Services (63.3% vs 13.2%; p < 0.001), but they were less likely to be discarded because of a diseased organ state (28.2% vs 36.1%; p < 0.001).

In many states, overdose-death donors comprised greater than 25% of cardiac allograft donors in 2018, with a high of 50% in Delaware.

While there have been concerns regarding allograft function and infectious risk, the researchers noted overall survival was the same between recipients of overdose-death and non-overdose-death donor organs (P= 0.066).

The discard analysis of donors who had at least one organ transplanted but not the cardiac allograft showed overdose-death donor hearts (7.4% of all discards) were: less likely to be discarded due to being in a diseased organ condition than those donors who died of other causes (28.2% vs 36.1%; P less 0.001), more likely deemed higher risk by Public Health Services (63.3% vs 13.2%; P less 0.001), and more likely to be hepatitis C positive (30.8% vs 5.3%; P less 0.001).

Even with the hazards of using a heart from an opioid abuse donor, survival outcomes of recipients of hearts that come from donors that have died from opioid overdose are equivalent to ones that we have traditionally been using, and because of this we believe that there are more donors out there that can be utilized.

STIs: ‘Hidden, Silent, Dangerous’ Global Epidemic, Molly Walker, MedPage Today

World Health Organization (WHO): “no substantial decline in global STI prevalence since 2012”

An approximate one in 25 people worldwide had at least one curable, sexually transmitted nonviral infection in 2016.

The incidence of gonorrhea, chlamydia, trichomoniasis and syphilis amounts to about one million new infections each day, and more than 376 million new cases annually. Additionally as Melanie Taylor MD and medical epidemiologist at the WHO Department of Reproductive Health and Research (and colleagues noted), “there has been no substantial decline in the number of new infections since the data was last updated in 2012.”

Also of the WHO Department of Reproductive Health and Research Teodora Wi MD; “We cannot sweep [sexually transmitted infections] under the carpet and pretend they don’t exist while we continue to stigmatize people living with STIs, neglect their care. and fail in prevention.”

STIs are a “hidden, silent, dangerous” epidemic, and are still “persistent” globally, despite an increase in education about the dangers of sexually transmitted infections. Dr. Taylor added that it’s not just stigma and shame that keep people from treatment — many patients do not realize they are infected.

In my first week of 4, the Grey’s Anatomy bunch swarmed my half of a hospital room and gayly announced, you do not have HIV, Hepatitis C, or any STD/STIs. Puzzled look on my face, “when am I getting out of here?”

Dropped From Health Insurance Without Warning: Was It Legal? , Julie Appleby, KHN

Those who qualify for a subsidy due to income being less than 400% of the federal poverty level (roughly $50,000 for an individual) have a 90-day grace period to make payment after missing a payment. The law requires insurers to notify those policyholders they have fallen behind and face cancellation. If a payment is made in full before the end of the 90-day grace period, they are reinstated. If not they are canceled and medical costs incurred in the second and third months of the grace period fall on the consumer.

This policy keeps federal subsidy dollars flowing to insurers during the grace period, even if a consumer has a financial wobble.

It’s different for people who are a part of the ACA; but, their income is above 400% and do not qualify for a subsidy. They are subject to state laws and they can be dropped much more abruptly. Most states have a 30 day Grace Period for payment; however, Prior Notification law differs state to state.

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May jobs report: this is the kind of report you see at negative inflection points

May jobs report: this is the kind of report you see at negative inflection points

HEADLINES:

  • +75,000 jobs added
  • U3 unemployment rate unchanged at 3.6%
  • U6 underemployment rate declined -0.2% from 7.3% to 7.1% (new expansion low)

Leading employment indicators of a slowdown or recession

 

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed m/m, but several are now sending significant negative signals.

  • the average manufacturing workweek declined -0.1 from 40.7 hours to 40.6 hours. This is one of the 10 components of the LEI. It is down -0.7 hours from its peak during this expansion. This has now crossed the threshold to being consistent with an oncoming recession.
  • Manufacturing jobs rose by 3,000. YoY manufacturing is up 184,000, a big deceleration from last summer’s pace.
  • construction jobs rose by 4,000. YoY construction jobs are up 215,000, also a deceleration from last summer. Residential construction jobs, which are even more leading, fell by -100, the second monthly decline in a row, a signal that the housing slowdown from last year has finally bled through into jobs.
  • temporary jobs rose by 5100, but April was revised down by about 4500. YoY these are up +44,000.
  • the number of people unemployed for 5 weeks or less rose by 243,000 from 1,904,000 to 2,147,000. The post-recession low was last month.

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

 

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“While Considering Medicare For All: Policies For Making Health Care In The United States Better”

Robert Kocher and Donald M. BerwickWhile Considering Medicare For All: Policies For Making Health Care In The United States Better,” Health Affairs

Dr. Donald Berwick is the former Director of Medicare and Medicaid who talked about waste in Medicare and Doctors knowing such waste exists.

“It is unlikely that the United States will move quickly to a full publicly financed health insurance when Congress next considers health policy after the 2020 presidential election. Despite its theoretical advantages, passage of Medicare for All would require a massive political battle to make feasible the shift from private to public funding, to develop enough public trust to expand an entitlement program for all Americans, and to mitigate the disruption for many of substituting public insurance for familiar, existing health insurance policies. The transition will take time.”

Improving Affordability

Donald Berwick’s direction on Medicare was this: While US health care can and should be made more affordable by attacking waste, innovating in delivery system design, and improving productivity, these mechanisms are unlikely to achieve affordability quickly. He comes back with other comments which can be quicker in implementing.

• Lower the cost of health insurance for more Americans: Two types of financial assistance were implemented in the form of premium and cost-sharing subsidies. Sliding-scale premium subsidies reduced the monthly cost of insurance substantially when they phase in for people with incomes at 133 percent of the federal poverty level up till 300% FPL and phased out at 400 percent of poverty. 400% of income was $100,400 for a family of four in 2019. With an average silver-level insurance plan, the costs for healthcare insurance were $15,855 or 16 percent of income. It is recommended, no American should spend more than 10 percent of income on insurance premiums.

Cost-sharing subsidies were available to those with incomes up to 250% of poverty, average deductibles have risen to $3,000, and total out-of-pocket costs are capped at $7,900. The deductibles and out-of-pockets was done so as to give patients some skin-in-the-game and not abuse insurance. “Skin-in-the-game,” are regressive actions which disproportionately penalize people with chronic diseases. The authors recommend eliminating all cost sharing for people with incomes below 250% of poverty. For people with incomes from 251 percent to 1,000% of poverty, the authors suggest a sliding-scale of subsidies similar to the current program. Instead of annual appropriations, we would make these subsidies mandatory expenditures to replace annual appropriations and prevent an Executive Branch from using the funding of these benefits as a political weapon.

• Reduce insurance premium growth rates by limiting hospital prices. As I wrote in Again, Healthcare Cost Drivers Pharma, Doctors, and Hospitals, the biggest driver of healthcare cost is simply “pricing” increases reflected in hospitals and pharmaceuticals. These increases are reflected in insurance premiums. As the authors also point out, the biggest driver of premium increases has been in hospital price increases which have risen 42% between 2007 to 2014 and far greater than physician prices.

The ACO strategy has allowed hospitals to exploit the market through consolidation thereby eliminating competition to raise prices and enabling the employment of specialist doctors, making them “must haves” in insurance networks. As planned, the consolidation should have generated administrative cost synergy and quality benefits instead of enabling healthcare to consolidate and control prices. The authors believe no hospital should be able to charge prices that equal more than Medicare prices plus 20 percent, which is far less than many charge today (plus 89% on average) also far, far less than the 200 to 240% for hospitals in Michigan for catastrophic automobile accidents recently signed into law. The authors claim the plus 20% is enough revenue to offset Medicaid underpayments and provide incentive to be more productive. Indexing hospital prices to the Consumer Price Index rather than medical inflation, hospitals are not perversely rewarded for lower levels of productivity improvement than the rest of the economy. It is recommended, hospitals with greater than 40% market share in a given area would be required to contract with all health plans so that they cannot limit choice and competition.

• Make medications more affordable. As I noted in “ Again, Healthcare Cost Drivers Pharma, Doctors, and Hospitals,” from 1996 to 2013 in one JAMA study, healthcare costs increased by ~$1 trillion of which 50% was due solely to pricing increases. The big issue is the change in pricing for in and out patient hospital stays/care and pharmaceuticals. Hospital/clinic consolidations leads to the former even though insurance has been fighting for a reduction in stays. Pharmaceutical has instituted new pricing strategies which we have all read about in the news. Old drugs such as Humalog, Vimovo, and the infamous EpiPens as well as others are now vastly more expensive. This study points to pricing for pharma and service as one of the issues.

The authors recommend; a ban on rebates to all insurance markets and not just Medicare; reducing the period of market exclusivity for biologic drugs from 13 years to 7 years to enable generic competition sooner since biologic drugs are the most expensive drugs accounting for 70 percent of spending growth from 2010 to 2015; and adopting the Trump administration’s proposed international market basket pricing approach to set the upper limit for drug prices.

Improving Access

Improve the risk pool of people buying coverage and make Medicaid more universal.

• Create larger, lower-cost, healthier risk pools to reduce premiums. Reimpose the Individual Mandate to create larger, lower-cost, and healthier risk pools thereby reducing premiums. Since subsidies would be more generous, the penalty for not buying insurance would be larger. Short-term three-year plans would be eliminated. Reinstate the coverage of essential health benefits in all plans.

• Expand the use of reinsurance. Reinsurance lowers premiums by reimbursing plans for medical expenses for the most expensive patients These expenses do not have to be offset by premium increases from healthier patients.

• Improve Medicaid access. Medicaid provides comprehensive insurance for 74 million Americans and in some states, coverage is dropping as a result of work requirements besides other barriers to enrollment and reenrollment. The authors would eliminate Medicaid cost sharing as even small amounts of cost sharing can reduce the use of necessary services and increase wait times for enrolling in Medicaid coverage after losing commercial insurance. We would encourage the 14 states that have not expanded Medicaid to accept federal funds to expand their programs and urge the administration to accept waivers from these states, with the exception of work requirements, cost sharing, or other policies that undercut the core mission of Medicaid.

Improve Health Care Quality

The provisions in the ACA were designed to switch “volume” (fee for service) to “value” (getting paid for better outcomes). Accountable care organizations and bundled payments were two such innovations put in place to do such. They appear to have had mild and directionally desirable impact on both quality and cost. There is still more to learn.

The Institute of Medicine has categorized six defects in the quality of care resulting in excess cost. Problems in patient safety, unscientific variations in care leading to ineffective treatment, lack of patient-focus, unwarranted delays due to poor system designs, excessive prices due to lack of transparency and open competition, and fraud all of which lead to wasted resource, bad patient outcomes, and decreased value. The switch from volume to value will alleviate these defects.

The authors endorse the creations of the Center for Medicare and Medicaid Innovation to sponsor tests of new payment models and delivery system designs such as home and community-based alternatives to hospitalization, telemedicine, and the integration of behavioral health into the care mainstream. Renewed efforts to improve patient safety through innovations in training, equipment, and job roles.

Stakeholders have become enthusiastic in spending health care dollars to mitigate the power of “social determinants of health” such as housing, food availability, exercise patterns, precursors of substance abuse, early childhood trauma, and more. The authors strongly favor action and funding in that direction.

Other Issues

• Reform medical malpractice policy. Eliminate the excuse medical malpractice necessitates wasteful extra tests and treatments encouraging doctors to adopt risk-based payment models and more parsimonious approaches to care. I do have a problem with this as many states have put in place limits to malpractice. The authors have suggested a safe-harbor when doctors adhere to clinical guidelines and evidence-based care. Is malpractice a big issue? Public Citizen’s “ The Medical Malpractice Scapegoat;” details the data from 2015, (most recent full year for available data) the medical malpractice payments on behalf of doctors amounted to about 0.2 percent of costs for hospital and physician services and about 0.1 percent of all healthcare costs. The number of payments on behalf of doctors in 2015 was the lowest on record and is lower than what it was during Clinton or Bush.

• Protect Americans from surprise bills. The authors would require all doctors who provide care at in-network hospitals or outpatient facilities to bill patients at average in-network prices.

The authors believe this portfolio represents a set of policies that could be supported at least somewhat on a bipartisan basis and believe are likely to be effective and in the short term more politically viable than Medicare for All.

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Michigan, Do Not Be Fooled – You Just Lost More Than You Got in Return

No Fault Auto Insurance

On May 30th, the Democratic Governor of Michigan Gretchen Whitmer, signed what was called a bipartisan effort by the Republican controlled legislature and a few of the Democratic members to solve the problems of expensive automotive insurance in Michigan. Due to redlining, other nefarious schemes, and a lack of transparency to how fees were calculated, No Fault Insurance in Detroit was substantially higher than in other areas. It is true the state’s no fault insurance has been a cost burden on many people; but, every attempt made to understand the whys of the costs were stopped by Republicans. The lack of transparency in how the fees for the Personal Injury Protection portion of No Fault insurance were calculated, how fees to doctors and hospitals are set, and how much is in the PIP fund resulted in a constant battle.

With the revision, Republicans have left Michigan constituents with an over priced commercial healthcare insurance plan which does not mirror the care provided by No Fault’s Personal Injury Plan (PIP). Republicans have promised there will be a decrease in premiums. Yes, there probably will be such but it will not be equivalent to want has been lost in benefits and the payout may be reduced by increases in other areas.

Over the last couple of weeks Republican Senate Leader Mike Shirkey and the Republican House Leader Lee Chatfield have led the Republican controlled Senate and House along with a few Dems to pass a bill gutting the present No Fault Insurance in Michigan and stranding constituents. The new bill relies on Commercial Healthcare, Medicare, and Medicaid plans to replace life time Personal Injury Protection and guts the protections of No Fault. It does lessen the cost of Automobile Insurance but it also calls out for a 200 to 240% payment to hospitals and clinics for care. The CBO already studied Commercial Healthcare Insurance cost as compared to Medicare and found Commercial Healthcare pays 89% more than Medicare. The Republicans new plan is a large giveaway to the Healthcare Industry.

This is an abbreviated article of what was written by RN Julia Pulver of Medium Magazine who took the time to review the recent legislation passed by the Michigan Legislature before Memorial Day. RN Julia Pulver is a certified nurse case manager who worked in the field of catastrophic injury for 5 years.

In a planned nontransparent manner reminiscent of what the lame duck legislature did before the reins of the Governorship were handed over to Governor Whitmer, the Republican majority-controlled legislature passed legislation pre-Memorial day, sent it off to Governor Whitmer and asked her to sign it. This to similar to an attempt by a lame duck legislature when the governorship was changing hands earlier this year. No one has had time to review the bill and its potential issues. The Republicans are hoping Whitmer would just sign it, she did, and having felt boxed into a no-win situation.

Such a ploy by Republicans was to also avoid feedback and prevent input from those who already use this valuable portion of No-Fault Insurance covering the results of serious automotive injury. It is being done in such a manner to prevent experts such as RN Julia Pulver from having any input. It is being rushed off to Governor Whitmer’s desk to be signed (and I would urge Governor Whitmer to veto it) before Michigan constituents are aware of what they will lose.

Under the guise of equating Healthcare Insurance Medical benefits to No Fault Personal Injury Protection benefits, the Republican led bipartisan effort are applauding their efforts to take away protections resulting from automotive accidents. Furthermore (redundant alert here), there is no comparison between commercial Healthcare Insurance Medical Benefits and Personal Injury Protection Benefits as the former is only a part of the later.

Also keep in mind, the legislation will allow for medical payments 2 to 2.4 times of what Medicare allows for the same treatment. A Congressional Budget Office analysis had determined the average payout by commercial healthcare insurance is 89% higher than what Medicare pays out. This legislation allows more than twice such at 200 and 240% resulting in a big giveaway to Michigan hospitals, clinics, and doctors.

As researched by RN Julia Pulver, the following is what Michigan constituents will lose now that Governor Whitmer has signed this legislation:

• Coverage for wage loss for three years following an accident, usually 80% of your base wages, paid in real time, while you’re out of work.

• Coverage of guardianship costs for people with brain injuries.

• It pays for a home health aide who can help you with your activities in your own home.

• It pays for replacement services to offset the cost of household needs ( mow your lawn, etc.).

• It pays for modifications to your home and car if you are wheel chair bound or unable to use stairs.

• It pays for an occupational therapist to come to your home, assess what modifications need to be made, and determine the number of care giver hours you require to ensure you are safe in your home and everyone’s care needs are appropriate.

• It pays for an independent nurse case manager to be your patient advocate.

• It pays for long term rehab and community-based care allowing disabled patients to achieve and maintain as much mobility and independence as possible.

• It pays for intensive therapies for children to help physically recover and maintain their cognitive and physical abilities into adulthood.

• It pays for therapists to help injured people re-learn their jobs or find new jobs or skills to continue and lead meaningful lives following injuries.

• It provides transportation for those who can’t drive following an accident, get to their appointments, pick up prescriptions, and stay on track with their recovery. This keeps them out of the ER saving money in the end.

I would also urge you to read RN Julia Pulver’s more detailed article which can be found at the “Medium” to better understand the result of this legislation.

Do Not Be Fooled- You Just Lost More Than You Got.” RN Julia Pulver BSN, CCM; Medium, May 28, 2019

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SOCIAL SECURITY, a little bad news (sorta) and a little good news (sorta)

by Dale Coberly

The bad news is that we have slipped past the day when we could have saved Social Security from ever reporting “short term actuarial insolvency” by raising the payroll tax one tenth of one percent per year (about a dollar per week). This is only sorta bad because it doesn’t really matter . . . sorta. Social Security can still pay ALL promised benefits forever . . . by raising the payroll tax one tenth of one percent per year.

The reason it is sorta bad is that the people who hate Social Security will react to a Trustees Report of “short term actuarial insolvency” as if the world was going to come to a violent end tomorrow and they would lose all their money. “We told you so!” would be their last words. Well, not their last words, unfortunately. They would keep saying it at least every year if not every day, loudly, in the halls of Congress and on a TV station near you. Even the serious and responsible ones.

That’s because at one tenth of one percent per year short term insolvency never goes away; it just gets put back a year every year. Actually, the one tenth percent per year would catch up and “short term insolvency” would go away. But not before the Congress did something stupid and “fixed” Social Security by privatizing it, or by turning it into welfare as we knew it . . . depending on which party gets the votes first.

But the good news is that “short term insolvency” could be made to go away by raising the payroll tax one-and-a-half tenths of one percent per year starting next year. This would be a dollar and a half per week. But the “per year” is misleading. The tax would only need to be raised about every other year for a few years and at increasing intervals after that. This would average less than one tenth of one percent per year until the tax increase stabilizes at a little less than two percent above the current 6.2%

There are many other ways to accomplish essentially the same thing. But this is probably the simplest. It is also the fairest because it spreads the cost more or less evenly over the people who will get the increased benefits from their longer life expectancy. It also avoids creating a large Trust Fund which gives the bad guys so many opportunities for mischief (mostly crying “Social Security is Broke! Flat Bust!”) whenever the Trustees Report says “the Trust Fund may run out of money in seventy-five years or so unless we raise the tax a tenth of a percent or so . . . when wages will be twice as high as they are now.”

Please note, the percent tax goes up, but due to the magic of mathematics and a rising standard of living, you will have more money (real dollars) in your pocket after paying the tax than you have today. AND you will get the “tax” back with interest when you need it most. Without a “means test.”

If we don’t get around to raising the tax one and a half tenths of one percent starting next year (2020), we would still be able to avoid further projections of “short term insolvency” by raising the tax two tenths of a percent by 2021. Again this would be only for a few years, then the tax increases could fall back to one tenth of one percent per year, OR we could continue with the two tenths every other year or so for a few years, and then at decreasing intervals for a few more years until the total tax increase reaches the magic two full percent above what it is today. That would be a sustainable level for as the eye can see into the infinite horizon.

But the really bad news is that you won’t do anything to make Congress understand this, and probably sooner than later they will “fix” Social Security in a way that destroys its value as retirement insurance for workers. REAL insurance. Backed by the full faith and credit of the United States of America, which used to mean something.

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“Can You Patent the Sun?”

I have access to too many articles on a daily basis to the point of where I can not read them all much less write on each topic. This particular one emanates from SWI or Swiss Info High Pharma Margins Squeeze Health Systems by Jessica Davis Plüss. The topic? Cancer drug pricing is rising rapidly and margins are exceeding 80% of price according to Swiss Public Television known as RTS. I find it interesting the Swiss are discussing what to do with cancer drug companies, the pricing of the drugs, and still maintain a good relationship. This is also relevant to non-cancer related drugs.

As you must know by now, healthcare pricing is controlled in Europe. Pricing and costs are more of a complaint in the US and still not an actionable item where Congress takes notice and “actually does something.” Some examples include cancer drugs such as Rituxan, etc. and far more common drugs such as Humalog, Vimovo, and the more familiar one in EpiPens (epinephrine autoinjector).

What About costs?

EpiPen is a good example of out-of-control pricing. In 2007 Mylan acquired the EpiPen brand from Pfizer; however, Mylan did not acquire the Pfizer subsidiary which manufactures EpiPen. CEO Heather Bresch reported to a congressional committee Mylan pays $69 per two-pack to the Pfizer subsidiary Meridian Medical Technologies. The price of a two-pack of EpiPens is ~10 times its cost.

To calculate the costs of manufacturing a product, one does not need to be an engineer or a PhD. Knowledge of the overhead, process, materials, and labor allows an astute and experienced layman to calculate the cost. Even so in 2016, a Silicon Valley engineering consultancy did perform an analysis of an EpiPen components and estimated the manufacturing and packaging costs at about $10 for a two-pack.

Whether the cost is $10 for a two pack or $34.50 for one EpiPen as Mylan claims, the costs do not vindicate wholesale price increases going from $100 in 2009, to $265 in 2013, to $461 in 2015, and finally $609 in 2016. With insurance some still have a sizeable co-pay. The list price at a CVS pharmacy is $733 for a two-pack. In some cases, a manufacturer will issue a coupon to a buyer which can be used at the pharmacy and shuffles the costs to the insure company leaving the user with a smaller co-pay. In the end, someone is still paying an out-of-control price.

The costs reflected in the attached chart come from Heather Bresch’s testimony to Congress. $334 of the $608 is paid out to pharmacy benefit managers (third-party administrator of prescription-drug programs for end payers, such as private insurers, and Medicare Part D plans), insurance companies, wholesalers, and pharmacy retailers leaving Mylan with $274 after rebates and fees. Deduct the cost of $69 of a two-pack paid to Meridian, and supposedly Mylan is left with $205 for each two-unit injector. After the company deducts expenses for research and development, sales and marketing, regulatory compliance, distribution and various access programs, profit drops to $100 per two-pack. As stated Mylan proposed cost structure is being challenged when compared to the expected costs of manufacture. WSJ claimed Mylan improperly assigned a tax to the expected profit which decreased Mylan’s profit by $66.

“Can You Patent the Sun?”

Times have changed since Jonas Salk and Albert Sabin developed their polio vaccines and purposely did not patent them. As reported by a Forbes analysis, by not patenting their vaccines each inventor/researcher lost out on profits in the $billions.

Jonas Salk had a simple answer when asked why he did not patent his vaccine; “Can you patent the sun?” Salk was not called the “Father of Biophilosophy” without reason . . . a philosophy taking in epistemological, metaphysical, and ethical issues in the biological and biomedical sciences.

Before he died, Salk was attempting to create an AIDS vaccine which he would not have patented either. Times have changed since the Polio vaccine.

As one commenter said, Salk could have patented his discovery; but his research was federally funded and all of his profits would have gone to the Federal Government. Research as tied to business interests has gone in a different direction from where Jonas Salk began as the law has changed. In place of social responsibility, a profit motive has taken hold.

Value Analysis

Novartis CEO Vas Narasimhan: “Cell and gene therapies are bringing about a new era of cancer medicines going beyond ‘just improving lives and are saving them.'” continuing; The new therapies are challenging the traditional model for paying for medical treatment and the industry is divided on this approach. Pricing for these one-time usage therapies are to be based on four key measures of value – the improvements they offer to patients both clinically and in terms of their quality of life, and the resulting benefits to the health-care system and society. As pointed out in the Swiss Info article, based on value to the patient, pharmaceutical companies believe they are justified in getting back $14.50 for every dollar invested in bring a new drug to market.

Pharmaceutical companies have noted four industry determinants (page viii-ix) of setting pricing as detailed in WHO’s “Pricing of cancer medicines and its impacts to the setting of medicine prices” technical report.

(1) Costs of R&D; Prices must account for the R&D costs of the approved medicine and the expenditures from investigating drug candidates for which marketing approvals did not occur, failed attempts, and the cost of capital.

(2) Costs of production and expenditures relating to product commercialization; Costs of production are operating expenses related to commercialization support, regulatory compliance, manufacturing, distribution, marketing and sales, and general administration. The marginal costs of production refer to the added costs of producing an additional unit of product.

(3) Value of medicine to patients, health care system and society; Besides setting prices according to the value of medicines, pharmaceutical companies often place more emphasis on setting prices according to income expectations or they attempt to reach their profit goals by setting prices as high as the market will bear.

(4) Sufficient financial returns to incentivize future R&D programs. The industry justifies prices of medicine by stating the return on investment needs to be sufficient to incentivize the discovery of future medicines and notes 20% of its revenues were re-invested into R&D.

A little bit of a discussion. Point 1 is stating the industry must account for failures, as well as the successes, and changes to the initial product. Point 2 is a capacity remark to which I would say if properly planned the capacity would already be there and the increase in one additional unit is minimal. No one plans to 100% of capacity. Point 3 assesses the value of human life by assigning a price to it with regard to the medicine or “what would you pay for a drink of water in the desert when there is none available for hundreds of miles.” Point 4 is new research and states we need to be able to have revenue to invest in it after expenses. I would question how much is actually needed.

And the other 80% which is now attributed to profit margin?

Typically Pharma has defended new product pricing with a justification of large investments in research and development and numerous clinical trials which can be successful or failures. Indeed CEO Vas Narasimhan pretty much says the same in bringing a product to market and also calls on additional criteria as justification for the increased pricing.

As linked to by Swiss Info, the World Health Organization (WHO) in reviewing the high prices for cancer drugs found the pricing strategy resulted in margins multiple times higher than just the R&D costs and even so when Distribution and Manufacturing costs were included in the analysis. For example, a vial of the breast cancer drug Herceptin costs approximately CHF50 to produce. In 2018 a vial was sold for CHF2,095 in Switzerland or 42 times its manufacturing cost. According to the WHO report ; for every dollar invested in cancer research, pharmaceutical companies earned on average $14.50 (CHF 14.50) in revenue.

The calculations of the cost data (chart) for two specific cancer drugs showed the final pricing for the two top treatments bear little relationship to R&D and/or Manufacturing costs. Swiss TV station’s (RTS) exposé revealed the pricing for two of Roche’s top cancer treatments are far more than just a recovery of R&D, distribution, and manufacturing costs. Herceptin costs are approximately CHF50 ($50) to manufacture and sold for CHF2,095 in Switzerland in 2018 which is 42 times the manufacturing cost. In terms of cost recovery, Herceptin has earned Roche CHF82.8 billion (85% profit margin) over 20 years or more than enough to recoup an investment and provide for R&D. A study of Novartis’s Glivec by the University of Liverpool revealed similar margin excess.

Roche media relations team member Ulrike Engels in defending the pricing strategy suggested the RTS calculations based on just Cost plus Margin data shows a fundamental misunderstanding of how prices are determined. Similar to what was stated by Novartis CEO Vas Narasimhan, Roche/Engels pricing of certain drugs which are life saving are based on the benefits or improvements in the treatment of patients both clinically and in their quality of life afterwards and the resulting benefits to the health-care system and society. It is not just a cost to bring a product to market plus a respectable margin. Neither is it a realization by Roche of having recovered investment costs and gained sufficient funds for R&D, the Failures, the Trials, and the Capitalization, it can relax its pricing.

Older Drugs

Pharma companies are also using the “value-based” analysis to determine pricing for old drugs even without improvement. This is precisely what HHS Alex Azar did at Eli Lilly with Humalog a decades old drug used to treat diabetes. The six million diabetic Americans watched as insulin (Humalog) prices tripled under Azar’s watch at Eli Lilly from 2007 to 2017. During his tenure as president and vice president, Eli Lilly raised the price of Humalog by 345% from $2,657.88 per year to $9,172.80 per year. The resulting pricing shock forced some patients to attempt rationing their taking of the product which in some cases caused death.

According to a JAMA study in 2017, the rising cost of healthcare and “after accounting for inflation, healthcare expenditures increased $933.5 billion from 1996 to 2013.” 50% of the increase in healthcare costs during that period was simply due to higher prices. Be that as it may, different chronic diseases have different patterns of price increases. The biggest increase was seen in diabetes care and driven largely by the rising costs of pharmaceuticals. During that period of time, Diabetes care increased $66 billion in cost of which an approximate two thirds of it being solely due to the increased cost of the pharmaceuticals used in treatment.

To be redundant, value based analysis methodology considers the extra years of life gained, the quality of life during the time period lived, and the healthcare savings gained (an overall cost reduction in treatment), in addition to other benefits, to determine the value of the drug to a person and society in which to set a price. This is the argument being made. Roche’s Herceptin targets HER2-positive breast cancer, an aggressive cancer which occurs in younger women, and claims the benefits of treatment being particularly high thereby deserving of a higher price.

Novartis applied the same “value-based” analysis to justify pricing for Kymriah used to treat unresponsive b-cell acute lymphoblastic leukemia when there are no other options for them or their families. It is a one-time treatment with follow-up treatments far less frequent than traditional therapies.

The Institute for Clinical Economic Review — an independent expert body assessing cost effectiveness of medical treatments — assigned a cost effectiveness value of up to $1,688,000 for Kymriah for its use in children. The value this treatment offers considered the four key measures to set the Kymriah list price for pediatric use at $475,000, which is well below the cost effectiveness value set by ICER, and $373,000 for rapidly progressing adult cancers.

Social Responsibility Over Profits

The questions can be asked of whether it is morally responsible or acceptable for a company to set the valuation/pricing of a product used to save a life at a level tens of times higher than actual cost to bring it to market? Is it also morally responsible or acceptable to increase an older product’s pricing when the costs have been recovered many times over? Yet, this is what the corporate expectation is for cancer drugs with its pricing and also for older drugs such as Humalog, Vimovo, and EpiPen applications based upon a value analysis to patients.

Run75441 (Bill H)

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Morehouse Keynote Speaker To Graduates, I am Paying Off Your Student Loan Debt

Morehouse College seniors got a surprise Sunday, Billionaire investor Robert F. Smith announced during his commencement speech he would pay off the student-loan debt for the historically black college’s graduating class. Morehouse President David A. Thomas; “The total amount of student loan debt from the 396 students adds up to about $40 million. He called Smith’s gesture “a liberation gift.”

Smith: “‘When you have to service debt, the choices about what you can go do in the world are constrained,’ (Smith’s gift) gives them the liberty to follow their dreams, their passions.”

It would be an interesting to track these students and compare the results to others who are burdened with student loan debt.

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US Library of Congress selects Angry Bear to archive

Dan here…the United States Library of Congress will be archiving and collecting material from Angry Bear. The overall digital archiving project began in ernest since 2013.   Abbie Grotke,  Lead Librarian Web Archiving Team, affirmed the process.  Below are excerpts from the letter of request and the Library website.

 

The United States Library of Congress has selected your website for inclusion in the historic collection of Internet materials related to the Economics Blogs Web Archive. We consider your website to be an important part of this collection and the historical record.

The Library of Congress preserves important cultural artifacts and provides enduring access to them. The Library’s traditional functions, acquiring, cataloging, preserving and serving collection materials of historical importance to foster education and scholarship, extend to digital materials, including websites. Our web archives are important because they contribute to the historical record, capturing information that could otherwise be lost. With the growing role of the web as an influential medium, records of historic events could be considered incomplete without materials that were “born digital” and never printed on paper.

The following URL has been selected for archiving:

https://angrybearblog.com/

(Dan here…from the FAQ section)

Why was my web site selected?

The Library maintains a collections policy statement and other internal documents to guide the selection of electronic resources, including web sites. Web sites are selected for archiving by Library Recommending Officers. Sites in the web archive are generally representative samples of web content that document an event or cover a particular theme or subject area for our thematic and event collections.

How often and for how long will you collect my site?

The Library archives sites at various frequencies and for various time periods based on the type of site and the collection it was selected for. Typically the Library crawls web sites once a week, once a month, or quarterly, depending on how frequently the content changes. Some sites are crawled less frequently—just once or twice a year. In some instances, the Library uses RSS feeds to identify rapidly changing content and to crawl multiple times per day.

The Library may crawl your site for a specific period of time or on an ongoing basis. This varies depending on the scope of a particular project. Some archiving activities are related to a time-sensitive event, such as before and immediately after a national election. Other collections we are developing may be ongoing with no specified end date, in order to capture changes in web sites over a longer period of time.

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Larry Kotlikoff’s Social Security editorial in “The Hill”

by Dale Coberly

KOTLICOFF ON THE HILL

with Social Security

 

Larry Kotlikoff wrote an editorial that appeared May 14 in “The Hill:”  https://thehill.com/opinion/finance/443465-social-security-just-ran-a-9-trillion-deficit-and-nobody-noticed

He cried, “Wolf! Wolf! Social Security ran a 9 Trillion Dollar Deficit last year and nobody noticed!”

He went on to explain this was the increase in the “infinite horizon Present Value of the Unfunded Deficit” from 2017 to 2018.

He neglected to explain that the infinite horizon Present Value of the Taxable Payroll is over ONE THOUSAND TRILLION Dollars. Or that the 9 trillion dollars did not come from Social Security spending any more money, or old people getting more benefits, or taxpayers running out of money. It came from revising the Discount Rate from 2.7% to 2.5%.

The discount rate is a kind of imaginary number at the heart of Present Value calculations. It is a guess about the real interest rate you might have to pay or might expect to get on or from an investment. Change the guess and you change the PV calculated. The PV is a useful concept if you know what you are doing. And insane if you don’t.

A more useful number for evaluating the ACTUARIAL deficit (NOT a debt) in Social Security finances is the percent difference between expected expenses and expected income. That turns out to be about 4%. This deficit starts in about 2030 and remains the same essentially forever. That means an increase in the FICA so-called “payroll tax” (it’s really a savings and insurance plan: you get your money back with interest, more if your luck is bad)… an increase of about 4% starting in about 2030 or so will pay all future needed  benefits essentially forever.
Kotlikoff even says as much, though in a way that neither you nor he noticed.

This is the amount of money you (we) will have to pay whether we have SS or not. It is the amount that will be needed to keep old people from living (dying) in the streets and eating out of garbage cans (this means YOU when you can no longer work). This can come from personal savings, redirecting investment profits, real government taxes (that you don’t get back), or living with your son-in-law. What Social Security does is let you pay for it yourself while you are still working. Protects your money from inflation. Pays interest that keeps up with the standard of living, and insures you against the accidents that all cash is heir to.

And since the worker only sees half of the FICA, he won’t feel the extra 2% deducted from his paycheck… especially as his paycheck will be more than 20% bigger. Moreover, since there is still time to raise the “tax” gradually about one tenth of one percent per year (or less, because as you raise the tax the “deficit” recedes into the future), no sane person will even notice it. One tenth of one percent of a 50k per year salary is one dollar per week.

Kotlikoff offers his own plan: force you to pay 10% of your income to a mutual fund. Then force you to pay real taxes to make up for the difference between what the mutual fund pays you and what you paid in (that’s 0% interest), with no guarantees if you lose your job, become disabled, or die with dependents.

You can find all of this out for yourself by actually reading the Trustees Report, page 200, (NOT the summary) and “doing the math” as opposed to just prating “it’s the math” like the reporters and commentators who have NEVER done the math, or understood it. OR you can run around screaming we are all going to die, and cutting off your own head because Larry Kotlikoff has bad dreams, for which he gets paid.

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