Posted by: Audrey Erbes | May 18, 2014

Possibility of Improved Patient Outcomes in Market System? Plus Events & Jobs

I’ve been thinking about the difficulty of focus on patient outcomes in the U.S. healthcare marketplace due to predominance of for profit and ROI driven providers. I joined the pharmaceutical industry in the 1970s because I believed industry and the private practice physicians who were predominant in providing care then were all interested in providing new, improved treatments and improving health care for our citizens. I knew that companies had to make profits to pay for their research and development costs but never have understood why salaried doctors working for managed care corporations are thought to provide better care than private practice doctors or salaried government funded staff. To me we added a new layer of bureaucracy that added additional costs but also added need to provide stock market value profits for shareholders in addition to payments for medical staff. Their focus on profits always worried me and seemed in conflict with a focus on delivering the best medical outcomes for all patients.

In my exposure to healthcare delivery worldwide, I learned that this basic ethic of improving the healthcare of all citizens was not universally accepted by industry and providers globally. Cheating on clinical trials, denying health care to large segments of the population due to cultural bias and politicians twisting the rules of reimbursement to maintain the same false share of medical costs for drugs even if their lowered and offset previous government expenditures for hospitalization and morbidity. The math was never accurately done to show how usage of new improved drugs lowered health care costs overall because of resulting reductions elsewhere in the system. There developed a strait jacket for the outlays for drugs being restricted to an historic lower share of costs prior to discovery of improved pharmaceuticals.

The recent revelation that there are doctors who make an exorbitant amount of extra money selling drugs to their patients, because the Medicare rules of payment for delivery of drugs in physician’s offices permits this, showed additional income that was far more than I expected. The fact that ophthalmologists are some of the top earning physicians today due to their profits from administering drugs directly into the eye for macular degeneration surprised me as well. I expected they could be making a $100,000 but not millions a year.

Now I learned from this week’s BioCentury that hospitals are selling 340B drugs, bought at discount and intended for poor patients, to inappropriate patients in order make profits by selling the drugs at market prices to insurance-supported patients. Manufacturers provide 340b drugs at a substantial discount to provide less expensive pharmaceutical care for the poorest patients in our country. This policy was established in 1992 to help hospitals support care of their Medicaid patients through lower priced drugs.

Originally, doctors provided free samples to the indigent in addition to the intended patients for a trial of a drug prior to purchasing a prescription. That practice was overlooked because manufacturers supported finding way to help the poor access good medicine. The 340 B program was supposed to help hospitals achieve this end but now even after appearance of Part D and ObamaCare, the demand for these discounted drugs has increased markedly. It appears the increased demand make be to provide a new profit center for hospitals. In defense of the hospitals, they claim they use the profits to recover losses for other services for nonpaying patients, such as, burn centers.

I believe the root cause of the often dishonest gaming of the system in the U.S. is the fact that profit making in a “market business system” has become stronger objective than quality patient outcomes for all. When lobbyists and politicians support policies that discourage pursuit of quality care for all in order to enrich stockholders and upper management’s salaries and bonuses, I take more seriously a movement to a modified a single payer system as delivered in Scandinavia and selected EU countries. The more favorable mortality and morbidity statistics in these countries reinforce that their systems are more successful at delivering on patient outcomes and superior in delivering quality care for all their citizens.

I don’t support pure single payer systems that cut costs so drastically that there is excessive waiting for care or lack of it delivered. It is suggested by some analysts that the VA medical system’s shocking failures in the recent news is based on underfunding and similar to poorly operating single payer systems in this regard.

I find it hard to follow the logic of those who claim they don’t want the government to be involved in healthcare for ideological reasons because the supposed private sector doctors will provide better care than government salaried doctors. I think they are lacking knowledge that private practice doctors who practiced as individuals or in groups and used to be the overwhelming majority of providers in the past have disappeared. Now for- profit managed care companies provide the overwhelming number of physicians, with exception of a few providers, and those physicians are salaried.

I don’t pretend to have an answer to turn around our broken health care delivery system based on market and business principles but believe more transparency and focus on improved health care outcomes for all will be a positive step forward. I believe that the Affordable Care Act though imperfect is a step toward a more ethical system than that based on ROI calculations.

This Week’s Upcoming Life Science Events in the Bay Area

  • BioCentury This Week, See new program Webcast Starting Sunday, May 18, 2014,, Available anytime starting at 9:00 a.m. EDT; Topic: “Telehealth: The Future of Medicine;” Speakers: Former Sen. Tom Daschle, senior policy advisor at law firm DLA Piper; Dr. Ray Dorsey, professor of neurology and co-director of the Center For Human Experimental Therapeutics at the University of Rochester Medical Center and John Jesser, VP and general manager of LiveHealth Online at WellPoint
  • Bio2Device Group, Tuesday Morning, May 20, 2014; Topic: “Creating a Winning Life Science Product Marketing Plan;” Speaker: Audrey S. Erbes, Ph.D., Principal, Erbes & Associates, Blogger at
  •, Tuesday Morning, May 20, 2014; Topic: “Free webinar–Startup Growth Series: Corporate Lawyers- When, Why, & How Much?” Speaker: Evan Pickering, Seed Mackall LLP
  • Janssen, Tuesday Mid-Day, May 20, 2014; Topic: “From the Trenches: Are you Ready to IPO?”Speakers: Carin Canale-Theakston | President and Founder, Canale Communications Inc. ; Bryan Giraudo | Managing Director, Leerink; John Orwin | President and Chief Executive Officer, Relypsa Inc.
  • HBA, Thursday Evening, May 22, 2014;” Topic: “Competency-Based Interviewing”
  • CABS, Friday Afternoon, May 23, 2014; Event: “CABS Science and Technology Workshop – Large Molecule Drug Discovery and Development Series – Biologics CMC Development and Regulatory Considerations;” Speakers and topics: Esohe Idusogie, Senior Director, Analytical and Process Development, OncoMed Pharmaceuticals; Talk title: The path to IND: product characterization, stability and challenges along the way; Krishna Allamneni, Director, Preclinical Development at NGM Biopharmaceuticalsm Talk title: TBD (she will focus on Toxicology issues related to CMC development); Vinaya Kapoor, Director, Global Regulatory Affairs CMC, Johnson & Johnson, Talk title: Biologics CMC Development: Regulatory Considerations and Global Perspectives

Life Science Business Development Course: An Intensive Course June 19-20

This course which focuses on dealmaking, collaboration and alliances includes two days of intensive classes and then two months of project time with help of resources and access to BioCentury and Thomson Reuters Recap deal databases. See details at Registration is now open.

Find all the details for this coming week’s upcoming events plus those through June 2014 in Audrey’s Picks. You can download the pdf of Audreys Picks, May 18, 2014 and Jobs That Crossed My DeskThrough May 18 2014 by right clicking on the highlighted titles.

You can always find my weekly blog and listings at and view my website at







  1. While the results of for-profit health care are enormously discouraging and egregious, they are hardly surprising. Appreciate your documenting some of the excess and outrage. Lawyers are another big part of this mess. Not only raising cost of practice enormously (malpractice insurance) but also cutting patient-doctor communication. Ever try telling a Doctor that something could be improved? In general, forget it, they are coached not to listen for fear that admitting something wasn’t done well could lead to a law suit. So that’s another reason that health care costs in the US are so high, while quality of care lags.

    • Thank you for your thoughtful comments, Ron.

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