Unbiased Analysis of Today's Healthcare Issues

Thursday Links

Written By: Jason Shafrin - Mar• 06•14

CoR #203 is Up

Written By: Jason Shafrin - Mar• 05•14

Bob Wilson presents a truly remarkable edition of the Cavalcade of Risk at WorkersCompensation.com.

Too much competition?

Written By: Jason Shafrin - Mar• 05•14

Rarely due consumers think that too much competition is a problem.  According to the Centers for Medicare and Medicaid Services (CMS), however, this is a major issue for consumers when they choose Part D prescription drug health plans.  Avalere reports that:

Proposed revisions to the meaningful differences policy will restrict the market’s top sponsors from offering more than two plan options in a given Part D region, leading to significant consolidation in CY 2016 among the top sponsors. Additionally, the proposed rule will limit the ability of several sponsors to offer low-cost enhanced PDPs that attract cost-conscious enrollees.

In essence, these plans would be limited to one basic and one enhanced plan per region.  Why would CMS limit choice?  One reason is that they worry about risk segmentation. The sickest patients may choose plans with lower cost sharing but higher premiums, which could create an adverse selection death spiral.  To date, however, this has not been a large issue for Medicare and it is unclear what the true benefit would be.  Reducing cognitive strain on consumers may also be a laudable goal since choosing Part D plans is often difficult for the elderly (and non-elderly).  Reducing choice may be an optimal partial equilibrium strategy, it is certainly not a good general equilibrium strategy as it may reduce entry into the market and drive up costs.

Quotation of the Day: Pricing of Biosimilars

Written By: Jason Shafrin - Mar• 04•14

Bilsimilars are biologic medical products whose active drug substance is made by a living organism or derived from a living organism by means of recombinant DNA or controlled gene expression methods. Biologic drugs can be patented, but once the patents expire, biosimilars can enter the market.

Are biosimilars> priced similarly to generics? According to Ana Nicholls, healthcare analyst at The Economist Intelligence Unit, the answer is no:

“Given the lower levels of competition in the biosimilars market, the copies tend to be priced at just 20-30% below the original drugs, compared with around 90% below for traditional generics.”

Increasing Generalizability of RCTs

Written By: Jason Shafrin - Mar• 02•14

Is your randomized controlled trial (RCT) generalizable to the general population?  This question is known as external validity and is a major issue for a number of treatments.  Sometimes, a treatment is very effective in an RCT, but less so in the real world.

One reason why this may be the case is that the sites selected for the RCT may not be representative of the general population who use the treatment.  To address this issue, a paper by Gheorghe et al. (2014) proposes using a generalizability index (GIx) to measure whether the sites selected for an RCT are representative of the general population.  Below I describe how to estimate the GIx.

GIx calculation

  1. Identify site-specific variables that could influence cost effectiveness estimator. Some variables which may cause differences in site-specific clinical efficiency include the site’s capacity, clinical expertise, patient case-mix and specialization.   For instance, there are likely differences in cost-effectiveness based on whether an RCT is implemented in a teaching or non-teaching hospital.
  2. Generate jurisdiction-wide estimates of these variables.  For all sites where the treatment could be implemented, measure the average values of the relevant variables form Step 1.
  3. Summarize the “typical” value for the population of interest.  This could be the mean, median or other statistic representing the typical patient in the general population.
  4. Rank sites in the study by each variable.   The rank will be based on the deviation from the “typical value”
  5. Calculate and rank the (weighted) sum of ranks for each site across the included dimensions.  The authors describe this calculation in more detail: “The centre-level GIx will be given by the rank of its (weighted) sum of dimension ranks. Lower values of the GIx will correspond to the more ‘typical’ centres, whose characteristics are close to the typical values in the population of centres. Higher values of the GIx will correspond to centres that are more extreme in one or more dimensions. Weighting the variables may be desirable to incorporate evidence or belief about the relative influence of the included variables on cost-effectiveness estimates, such as from the variance – covariance matrix of a regression on the incremental net benefit.”

The GIx can serve two purposes.  First, it can identify sites that are most likely to be representative of the general population. To identify these sites, one could simply choose centers with low GIx scores.  Second, one could select sites from all quintiles of the GIx distribution in the case where site heterogeneity creates non-linear effects on cost-effectiveness.


GIx helps to address the issue of the generalizability of site selection but one should not that it does not solve all problems of external validity.  For instance, the RCT itself may not reflect real-world treatment.  For instance, physician visits may be more frequent during and RCT than would occur in the real world.  Additionally, medications are often given to patients for free.  Thus, adherence rates in RCTs are much higher than those in real-world studies.  Nevertheless, GIx is a useful tool to address some part of the external validity problem.

Friday Links

Written By: Jason Shafrin - Feb• 28•14

HWR: In like a lion edition

Written By: Jason Shafrin - Feb• 27•14

The latest edition of the HWR is up at David Harlow’s HealthBlawg.  Check it out.

Use of Medicaid in old age

Written By: Jason Shafrin - Feb• 25•14

Many health care wonks know that Medicaid covers long-term care for poor elderly individuals.  However, the impact of Medicaid among the elderly may be underappreciated.  As a paper by Di Nardi, French and Jones, finds:

Among respondents in the lowest quintile of lifetime income, nearly seventy percent are receiving Medicaid at age 74.

Medicaid use isn’t just people who were poor for most of their lives.

In the two highest quintiles, eligibility at age 74 is negligible, but grows to twenty percent by age 96…although the lifetime discounted presented value of Medicaid payments does decrease with permanent income, even higher income people can receive sizeable Medicaid payments, as they tend to live longer and face higher medical needs in old age.

Why is Medicaid so popular with even the elderly rich? Mostly because long-term care is expensive and Medicaid provides insulation against rising costs. According to the authors model:

In the top income quintile, out-of-pocket spending rises rapidly from around $4,000 per year at age 74 to $20,000 at age 100; for the lower two income quintiles, out-of-pocket spending remains below $2,000 per year as an individual ages.


Free Heroin?

Written By: Jason Shafrin - Feb• 24•14

Giving away heroin may sound like a good plan for a start-up drug dealer.; get new customers hooked and them make money off their addiction.  Drug dealers aren’t the only ones considering giving heroin away for free; so are some European governments.

The Economist reports:

Over the past two decades many have come to favour tackling heroin abuse through “harm reduction” policies, rather than tougher policing. Many governments have decriminalised personal use and provided free therapy programmes, using drugs such as methadone and buprenorphine that block heroin’s high. Two other proven ways to reduce harm, however, are more politically controversial: setting up safe sites where users can inject while monitored by health-care staff, and—for registered addicts who cannot or will not comply with treatment regimes—providing heroin itself free.

Switzerland and the Netherlands pioneered “Heroin Assisted Treatment” (HAT) approach and Britain, Canada, Germany and Spain have run trials of HAT.

Is this a good policy? This basically depends on two factors. The first factor is whether giving away heroin for free improves health and/or reduces costs among the current addicts. Giving away heroin can reduce heroin-related crime and also reduce medical cost from HIV infections through unclean needles. If these gains outweigh the gains, then the program could potentially be worthwhile.

A second factor to consider is how giving away heroin for free affects the likelihood non-addicts become addicts. Giving away heroin for free reduces the price of heroin and makes a heroin habit less costly. Further, it could de-stigmatize the use of heroin and increase the likelihood individuals sample the drug. Thus, giving away heroin for free could increase the number of addicts and actually be detrimental to society.

Although I doubt this policy will come to the U.S. the near future, recent developments–including the decriminalization of marijuana by Colorado and the death of Philip Seymour Hoffman–could shift the balance of public opinion.

Friday Links

Written By: Jason Shafrin - Feb• 21•14