1
00:00:04,880 --> 00:00:08,280
Speaker 1: On this episode of news World. In the October thirty

2
00:00:08,320 --> 00:00:11,720
Speaker 1: first edition of The National Review, my guests wrote an

3
00:00:11,720 --> 00:00:15,360
Speaker 1: op ed entitled on Healthcare, the GOP needs a supply

4
00:00:15,480 --> 00:00:19,119
Speaker 1: side approach with better messengers and its peace caught the

5
00:00:19,120 --> 00:00:22,279
Speaker 1: attention of a member of our team, Joe Desanis, who

6
00:00:22,280 --> 00:00:25,360
Speaker 1: works with me on healthcare policy and reform. I've been

7
00:00:25,360 --> 00:00:27,720
Speaker 1: working on the issue of healthcare for more than thirty years,

8
00:00:28,040 --> 00:00:31,360
Speaker 1: and it's one of the most challenging public policy issues today,

9
00:00:31,640 --> 00:00:34,599
Speaker 1: and i wanted to talk about the inflation reduction impact

10
00:00:34,960 --> 00:00:38,440
Speaker 1: on medicare and drug development. So I'm really pleased to

11
00:00:38,479 --> 00:00:42,040
Speaker 1: welcome my guest, doctor Thomas Phillipson. He is the Daniel

12
00:00:42,080 --> 00:00:46,000
Speaker 1: Lovin Professor of Public Policy Studies Emeritus at the University

13
00:00:46,040 --> 00:00:49,839
Speaker 1: of Chicago the Harris School of Public Policy and directs

14
00:00:50,159 --> 00:00:55,400
Speaker 1: the Becker Friedman Institute's Program on Foundational Research and healthcare

15
00:00:55,480 --> 00:00:59,240
Speaker 1: Markets and Policies within the Health Economics Initiative. He has

16
00:00:59,240 --> 00:01:03,360
Speaker 1: served in several public sector positions, including as a member

17
00:01:03,360 --> 00:01:07,200
Speaker 1: of the President's Council of Economic Advisors from twenty seventeen

18
00:01:07,240 --> 00:01:11,120
Speaker 1: to twenty nineteen and as its chairman from twenty nineteen

19
00:01:11,480 --> 00:01:26,600
Speaker 1: twenty twenty Thomas, welcome and thank you for joining me

20
00:01:26,640 --> 00:01:29,360
Speaker 1: on news World. Thanks for having me. Let's start, if

21
00:01:29,400 --> 00:01:31,440
Speaker 1: we could, before we get into health policy, just with

22
00:01:31,520 --> 00:01:34,560
Speaker 1: your background, which is fascinating. You were born and raised

23
00:01:34,600 --> 00:01:38,000
Speaker 1: in Sweden and got your undergraduate degree in mathematics at

24
00:01:38,040 --> 00:01:41,360
Speaker 1: Upsala University. But then you came to the States and

25
00:01:41,440 --> 00:01:44,280
Speaker 1: got your m a. And PhD in economics from the

26
00:01:44,280 --> 00:01:46,840
Speaker 1: Warden School at the University of Pennsylvania. How big that

27
00:01:46,920 --> 00:01:51,520
Speaker 1: transition was it coming from Sweden to Pennsylvania. Well, it well,

28
00:01:51,640 --> 00:01:54,200
Speaker 1: certainly eye opening, and I always say, you know, you

29
00:01:54,400 --> 00:01:57,240
Speaker 1: learn more about your own country when you leave it

30
00:01:57,440 --> 00:01:59,880
Speaker 1: than when you're staying in it. Of course, you saw

31
00:02:00,040 --> 00:02:03,640
Speaker 1: a contrast which was quite remarkable at the time. And

32
00:02:03,720 --> 00:02:07,680
Speaker 1: I came in during a period when Reagan was president,

33
00:02:07,800 --> 00:02:11,040
Speaker 1: so you saw a lot of different approaches than I've

34
00:02:11,120 --> 00:02:14,600
Speaker 1: seen in Sweden. I was fairly new and being sort

35
00:02:14,639 --> 00:02:18,480
Speaker 1: of buried in mathematics textbooks as a youngster, I didn't

36
00:02:18,520 --> 00:02:20,840
Speaker 1: pay so much attention to politics. But then when I

37
00:02:20,880 --> 00:02:24,799
Speaker 1: started to study economics, my awareness kind of became more

38
00:02:25,320 --> 00:02:28,000
Speaker 1: solid of the differences. So, I mean, you've got an

39
00:02:28,000 --> 00:02:32,359
Speaker 1: interesting sort of back and forth between on the one

40
00:02:32,360 --> 00:02:36,480
Speaker 1: hand academic work and another actually being in government and

41
00:02:36,520 --> 00:02:40,120
Speaker 1: then also being active as advisor to politicians and being involved.

42
00:02:40,560 --> 00:02:43,400
Speaker 1: It's sort of like three different worlds that you blend together.

43
00:02:43,960 --> 00:02:46,200
Speaker 1: Do you learn things in one of them that you

44
00:02:46,240 --> 00:02:49,919
Speaker 1: then carry over to the other? Yeah. Absolutely. There's actually

45
00:02:49,960 --> 00:02:53,520
Speaker 1: a fourth pillar which is also very important as a

46
00:02:53,520 --> 00:02:57,000
Speaker 1: complimentary pillar. I co founded a company that grew quite

47
00:02:57,080 --> 00:03:00,720
Speaker 1: quickly and from twenty or five that we sold in fifteen,

48
00:03:01,600 --> 00:03:05,720
Speaker 1: and as an economist, running a company was invaluable in

49
00:03:05,800 --> 00:03:10,400
Speaker 1: terms of understanding sort of the policy impacts of some

50
00:03:10,520 --> 00:03:12,880
Speaker 1: of the stuff we were studying firsthand. As a small

51
00:03:12,919 --> 00:03:16,480
Speaker 1: business owner, there's somebody who's been in the marketplace as

52
00:03:16,480 --> 00:03:20,440
Speaker 1: well as studying the market Did you find yourself changing

53
00:03:20,520 --> 00:03:25,120
Speaker 1: your own views by the practical activity of trying to

54
00:03:25,160 --> 00:03:27,760
Speaker 1: make a profit and meet customers and do all the

55
00:03:27,840 --> 00:03:30,800
Speaker 1: things companies have to do. Yeah, exactly. So that was

56
00:03:30,840 --> 00:03:34,360
Speaker 1: the sort of the big not eye opener. But it's

57
00:03:34,480 --> 00:03:38,200
Speaker 1: different things when you experience things versus when you read them, right,

58
00:03:38,320 --> 00:03:41,520
Speaker 1: So I think there was a huge difference in reading

59
00:03:41,560 --> 00:03:45,440
Speaker 1: about what's the effect of deregulation, what's the effect of

60
00:03:45,560 --> 00:03:50,400
Speaker 1: lower coreporate taxes, etc. And actually experiencing it, So I

61
00:03:50,440 --> 00:03:54,480
Speaker 1: think that was by far the most important component in

62
00:03:54,800 --> 00:03:58,560
Speaker 1: making me a better economist, together with my training obviously,

63
00:03:58,640 --> 00:04:03,200
Speaker 1: but that combination I think made a huge difference in

64
00:04:03,320 --> 00:04:07,360
Speaker 1: how I viewed policy going forward. And how does that

65
00:04:07,480 --> 00:04:11,160
Speaker 1: experience of growing a company effect the way you think

66
00:04:11,200 --> 00:04:15,280
Speaker 1: about healthcare? I mean in terms of healthcare, was we

67
00:04:15,400 --> 00:04:19,520
Speaker 1: actually served a lot of fortune five hundred healthcare companies.

68
00:04:19,520 --> 00:04:22,040
Speaker 1: That was a business to business where we provided health

69
00:04:22,080 --> 00:04:28,440
Speaker 1: economic analysis for many companies, including payers, including public payers, governments,

70
00:04:29,279 --> 00:04:34,200
Speaker 1: biotech companies, pharma companies, and hospitals, etc. So you certainly

71
00:04:34,240 --> 00:04:39,000
Speaker 1: got an inside view of how the industry operated, and

72
00:04:39,040 --> 00:04:43,839
Speaker 1: that certainly influenced the research topics that you found of

73
00:04:43,960 --> 00:04:47,440
Speaker 1: interest in academia and certainly the policy stance you took

74
00:04:48,040 --> 00:04:52,159
Speaker 1: when I worked in government. Your article I thought made

75
00:04:52,400 --> 00:04:55,919
Speaker 1: really some very powerful points, And I want to start

76
00:04:56,000 --> 00:04:59,159
Speaker 1: with the point you make. The Democrats have a pretty

77
00:04:59,160 --> 00:05:03,120
Speaker 1: consistently have had for years a lead on the health issue,

78
00:05:03,560 --> 00:05:06,839
Speaker 1: and in October twenty two they had about a fifteen

79
00:05:06,920 --> 00:05:10,640
Speaker 1: percent lead over congressional Republicans over who do you trust

80
00:05:10,680 --> 00:05:14,440
Speaker 1: on healthcare? Why do you think Democrats have sustained that

81
00:05:14,600 --> 00:05:18,559
Speaker 1: consistent advantage, even though their solutions don't seem to work.

82
00:05:19,200 --> 00:05:24,320
Speaker 1: I think there's bipartisan support for that. When the poor

83
00:05:24,400 --> 00:05:26,560
Speaker 1: are in need and healthcare, we need to have a

84
00:05:26,640 --> 00:05:31,039
Speaker 1: safety net to take care of poor patience. I think

85
00:05:31,080 --> 00:05:33,960
Speaker 1: pretty much everyone agrees on that on both sides of

86
00:05:33,960 --> 00:05:37,800
Speaker 1: the aisle. The question is, then, why do we need

87
00:05:37,880 --> 00:05:42,520
Speaker 1: these universal programs such as Medicare, etc. And why do

88
00:05:42,600 --> 00:05:47,359
Speaker 1: we need so much government involvement in providing that help

89
00:05:47,400 --> 00:05:50,839
Speaker 1: to the poor. And that's where I think the missing

90
00:05:50,920 --> 00:05:54,640
Speaker 1: link is in convincing people that, you know, we think

91
00:05:54,680 --> 00:05:58,680
Speaker 1: competition and supply side expansions are great for most industries,

92
00:05:59,240 --> 00:06:03,080
Speaker 1: but for some reason, we think that in healthcare we're

93
00:06:03,120 --> 00:06:06,920
Speaker 1: going towards the European single payer gradually over time. If

94
00:06:06,960 --> 00:06:10,240
Speaker 1: you just look at the share of financing of healthcare,

95
00:06:10,240 --> 00:06:13,800
Speaker 1: it's gone up now to roughly fifty five closing on

96
00:06:14,000 --> 00:06:18,640
Speaker 1: sixty percent being publicly financed, and it's trending slowly every

97
00:06:18,720 --> 00:06:22,719
Speaker 1: year in the direction of But if you think of

98
00:06:22,760 --> 00:06:27,159
Speaker 1: a single payer, it's really a monopoly where you're forced

99
00:06:27,200 --> 00:06:30,559
Speaker 1: to pay the price for the monopoly services, which most

100
00:06:30,560 --> 00:06:34,240
Speaker 1: people in other industries would think to be absurd. But

101
00:06:34,400 --> 00:06:37,400
Speaker 1: for some reason when you force people to pay taxes

102
00:06:37,440 --> 00:06:42,960
Speaker 1: instead of having volunteer premiums to competing firms, having mandatory

103
00:06:43,040 --> 00:06:48,560
Speaker 1: taxes to monopoly government plan, people tend to think that's

104
00:06:48,600 --> 00:06:52,039
Speaker 1: a good idea for some reason, and that's where I

105
00:06:52,080 --> 00:06:55,440
Speaker 1: think the missing link is. I think Republicans are viewed

106
00:06:55,480 --> 00:06:59,640
Speaker 1: as not as compassionate because it gets confused that if

107
00:06:59,680 --> 00:07:03,839
Speaker 1: you are disagreeing with these public healthcare programs, you're disagreeing

108
00:07:03,839 --> 00:07:07,440
Speaker 1: with taking care of frail people. Which I don't think

109
00:07:07,560 --> 00:07:10,520
Speaker 1: is the disagreement, is the disagreement on how you do it.

110
00:07:10,840 --> 00:07:13,560
Speaker 1: I get the daily mail every day from London, and

111
00:07:14,080 --> 00:07:17,160
Speaker 1: the National Health Service, which has been I guess the

112
00:07:17,200 --> 00:07:21,920
Speaker 1: most widely recognized government monopoly health delivery system in the world,

113
00:07:22,600 --> 00:07:26,360
Speaker 1: is just disintegrating. I mean it's falling apart. People are dying.

114
00:07:26,800 --> 00:07:30,040
Speaker 1: The current Conservative government seems to have no answers. The

115
00:07:30,160 --> 00:07:33,040
Speaker 1: Labor Party is beginning to offer some timid answers, but

116
00:07:33,120 --> 00:07:36,400
Speaker 1: I would have thought that anybody who watched the decay

117
00:07:36,440 --> 00:07:39,600
Speaker 1: of the British National Health Service would think maybe that's

118
00:07:39,640 --> 00:07:42,480
Speaker 1: not a very good direction for us to go in. Well,

119
00:07:42,520 --> 00:07:45,680
Speaker 1: there's two things going on. One is public financing, which

120
00:07:45,680 --> 00:07:50,040
Speaker 1: should be separated from public production of healthcare. So in

121
00:07:50,080 --> 00:07:52,520
Speaker 1: the US they have both, right, they both have tax

122
00:07:52,680 --> 00:07:57,160
Speaker 1: finance care and the government is providing that care in

123
00:07:57,240 --> 00:08:00,280
Speaker 1: public hospitals, etc. Are paying the darkness in the hospital growth.

124
00:08:00,880 --> 00:08:04,360
Speaker 1: So it's a deterioration in the UK. Whenever you have

125
00:08:04,560 --> 00:08:06,880
Speaker 1: that and everything is free on the margin, you have

126
00:08:06,960 --> 00:08:09,600
Speaker 1: what an economists call excess demand. You have more buyers

127
00:08:09,640 --> 00:08:12,040
Speaker 1: than sellers when things are free on the margin. It's

128
00:08:12,080 --> 00:08:15,080
Speaker 1: not free because the taxes paid for it. But after

129
00:08:15,080 --> 00:08:18,880
Speaker 1: you're done paying taxes for it, you have quote unquote

130
00:08:18,920 --> 00:08:23,520
Speaker 1: free healthcare and a lot of more buyers are interested

131
00:08:23,520 --> 00:08:25,920
Speaker 1: in that than sellers are because the sellers get paid

132
00:08:25,920 --> 00:08:28,480
Speaker 1: by the government very poorly. So you have this enormous

133
00:08:28,680 --> 00:08:32,480
Speaker 1: queuing taking place, which is the waiting times. You can't

134
00:08:32,520 --> 00:08:36,080
Speaker 1: get elective surgery within six months sometimes in the UK,

135
00:08:37,160 --> 00:08:39,880
Speaker 1: and you have a deterioration of care because a lot

136
00:08:39,920 --> 00:08:43,480
Speaker 1: of good doctors figure out that they can earn more,

137
00:08:43,520 --> 00:08:47,560
Speaker 1: particularly in the US, for their skills than the government

138
00:08:47,679 --> 00:08:50,280
Speaker 1: is paying them in the UK. So I think, you know,

139
00:08:50,440 --> 00:08:56,120
Speaker 1: low supply excess demand because of the distorted pricing has

140
00:08:56,200 --> 00:08:59,599
Speaker 1: led to sort of a crisis currently, particularly with the

141
00:08:59,640 --> 00:09:02,160
Speaker 1: strike they're going through with the nurses, et cetera, and

142
00:09:02,160 --> 00:09:05,720
Speaker 1: the UK currently, if that's not the option for our future,

143
00:09:06,320 --> 00:09:09,440
Speaker 1: how would you expand on that idea and what would

144
00:09:09,440 --> 00:09:13,200
Speaker 1: a supply side healthcare approach look like. Well, it turns

145
00:09:13,240 --> 00:09:16,200
Speaker 1: out a lot of issues. We have very costly care

146
00:09:16,200 --> 00:09:18,640
Speaker 1: in the US. Some of it is because we have

147
00:09:18,760 --> 00:09:21,560
Speaker 1: higher quality, right So if, for example, look at we've

148
00:09:21,600 --> 00:09:23,640
Speaker 1: done a lot of that work. If you look at

149
00:09:23,679 --> 00:09:27,040
Speaker 1: a cancer diagnosis and pick a patient in a given

150
00:09:27,120 --> 00:09:30,880
Speaker 1: stage of a cancer, let's say breast cancer stage three,

151
00:09:31,400 --> 00:09:33,520
Speaker 1: they live a lot longer in the US than other

152
00:09:33,600 --> 00:09:37,080
Speaker 1: countries because we have higher quality care essentially, So some

153
00:09:37,160 --> 00:09:39,280
Speaker 1: of the higher prices we see in the US is

154
00:09:39,320 --> 00:09:42,640
Speaker 1: just higher quality. But some of it is also because

155
00:09:42,640 --> 00:09:45,880
Speaker 1: the government gets in the way of the supply side

156
00:09:45,880 --> 00:09:51,679
Speaker 1: by basically with well intended regulations and legislation, they're basically

157
00:09:51,800 --> 00:09:56,839
Speaker 1: blocking competitions. So my favorite example, if you look at

158
00:09:57,000 --> 00:10:03,000
Speaker 1: lasic eye surgery or cosmetics surgery, you have constantly declining

159
00:10:03,080 --> 00:10:06,719
Speaker 1: real prices over time because those are working. Those are

160
00:10:06,760 --> 00:10:12,000
Speaker 1: medical care markets working like a normal market essentially without insurance,

161
00:10:12,720 --> 00:10:15,720
Speaker 1: and you have competition, you have advertising, and you have

162
00:10:15,800 --> 00:10:20,000
Speaker 1: everything that a normal market have and you have declining

163
00:10:20,080 --> 00:10:24,400
Speaker 1: real prices quality just that real prices going down as

164
00:10:24,400 --> 00:10:27,439
Speaker 1: opposed to the rest of healthcare where it's going up.

165
00:10:28,000 --> 00:10:31,120
Speaker 1: So that's an example where the government is not standing

166
00:10:31,160 --> 00:10:33,960
Speaker 1: in the way of the supply in some sense. But

167
00:10:34,040 --> 00:10:38,240
Speaker 1: if you look at much of doctors and hospitals and drugs, etc.

168
00:10:39,320 --> 00:10:42,560
Speaker 1: The government many times restricts supply. And that's why I

169
00:10:42,559 --> 00:10:45,840
Speaker 1: mean by a supply side approach that we should focus

170
00:10:45,880 --> 00:10:49,760
Speaker 1: on how to expand supply. Why because that gets lower prices,

171
00:10:50,080 --> 00:10:53,439
Speaker 1: which we all want, and then by consequence, you get

172
00:10:53,880 --> 00:10:56,920
Speaker 1: higher access to a lot of people who can afford care.

173
00:10:57,720 --> 00:11:01,240
Speaker 1: For doctors, I give you an example. Doctors ten percent

174
00:11:01,600 --> 00:11:05,320
Speaker 1: of medical school applicants actually get in Imagine if we

175
00:11:05,400 --> 00:11:10,319
Speaker 1: increase that percentage and amy loosen up it's union essentially

176
00:11:11,120 --> 00:11:14,160
Speaker 1: how much more doctor competition you will get. So doctor

177
00:11:14,280 --> 00:11:17,920
Speaker 1: salaries are about twenty five percent of healthcare spending. Then

178
00:11:17,960 --> 00:11:20,480
Speaker 1: you go to hospitals, which is thirty five percent of

179
00:11:20,559 --> 00:11:24,760
Speaker 1: healthcare spending roughly, and we have loss certificate of need

180
00:11:24,840 --> 00:11:28,040
Speaker 1: laws where boards decide on the state level where the

181
00:11:28,080 --> 00:11:31,880
Speaker 1: hospitals can enter the market or not. That's a regulated

182
00:11:32,040 --> 00:11:35,400
Speaker 1: entry barrier. If you want and if you go to drugs,

183
00:11:35,440 --> 00:11:39,800
Speaker 1: we have a Medicare Part D program where doctor administrated drugs,

184
00:11:39,800 --> 00:11:43,720
Speaker 1: where doctors are essentially paid more than more expensive drugs

185
00:11:43,760 --> 00:11:47,440
Speaker 1: they use, so you have very poor price competition in

186
00:11:47,480 --> 00:11:50,480
Speaker 1: that market is essentially a market where the customers want

187
00:11:50,559 --> 00:11:55,480
Speaker 1: higher prices, and therefore you get this explosive price growth

188
00:11:55,960 --> 00:11:58,679
Speaker 1: in those types of drugs relative to other drugs. So

189
00:11:58,720 --> 00:12:02,320
Speaker 1: I think those are examples I think where the government

190
00:12:02,400 --> 00:12:06,959
Speaker 1: is standing in the way of adequate competition, which would

191
00:12:07,080 --> 00:12:11,000
Speaker 1: essentially expanse apply at lower prices and increase access. But

192
00:12:11,160 --> 00:12:14,440
Speaker 1: isn't it also true that the interest groups themselves stand

193
00:12:14,480 --> 00:12:17,439
Speaker 1: in the way. We got involved at one point looking

194
00:12:17,480 --> 00:12:21,920
Speaker 1: at a computerized analytics system that would allow you to

195
00:12:21,960 --> 00:12:25,320
Speaker 1: only go to the ophthalmologist to the optometrist every other year,

196
00:12:25,880 --> 00:12:28,320
Speaker 1: and then in the intervening year you could literally do

197
00:12:28,400 --> 00:12:33,160
Speaker 1: it by computer. And in almost every state, the lobbyist

198
00:12:33,280 --> 00:12:37,480
Speaker 1: for the optometrist and an ophthalmologists work to outlaw that procedure,

199
00:12:37,559 --> 00:12:40,720
Speaker 1: not because it was wrong, but because it reduced their income.

200
00:12:41,080 --> 00:12:44,320
Speaker 1: So isn't there a certain amount of guild behavior almost

201
00:12:44,360 --> 00:12:47,240
Speaker 1: in an atom Smith's sense, where the guilds try to

202
00:12:47,280 --> 00:12:50,880
Speaker 1: block competition or additional people make it hard to get

203
00:12:50,920 --> 00:12:53,959
Speaker 1: new doctors or new hospitals. Definitely. I mean, there's no

204
00:12:54,080 --> 00:13:00,240
Speaker 1: question that the suppliers many times captured the legislatures through

205
00:13:00,320 --> 00:13:04,600
Speaker 1: campaign finance and other means. But I'm talking about how

206
00:13:04,640 --> 00:13:07,120
Speaker 1: do you get rid of those supplies. I'm not a

207
00:13:07,120 --> 00:13:09,880
Speaker 1: political scientists. I'm not the best to analyze how do

208
00:13:09,960 --> 00:13:12,720
Speaker 1: we change our campaign finance laws to get rid of

209
00:13:13,480 --> 00:13:17,400
Speaker 1: interest group influence. I think certain amount of influenced by

210
00:13:17,440 --> 00:13:19,959
Speaker 1: interest groups is very healthy because they know more about

211
00:13:19,960 --> 00:13:23,959
Speaker 1: their industry, so that many crazy sort of attempts of

212
00:13:24,080 --> 00:13:28,719
Speaker 1: regulating industries gets fought off that way. On the other hand,

213
00:13:28,840 --> 00:13:34,480
Speaker 1: protective measures, collusive measures, etc. Are also in the interest

214
00:13:34,559 --> 00:13:38,080
Speaker 1: of these interest groups, and that's kind of the negative

215
00:13:38,120 --> 00:13:41,400
Speaker 1: side of having an industry which many times I think

216
00:13:41,400 --> 00:13:44,320
Speaker 1: it is very helpful and informing legislatives which are by

217
00:13:44,360 --> 00:13:48,880
Speaker 1: definition generalists and needs specialized knowledge. Where we need to

218
00:13:48,920 --> 00:13:53,760
Speaker 1: go is to a level of competition and a level

219
00:13:53,880 --> 00:13:58,080
Speaker 1: of fluidity, which is very threatening to a lot of

220
00:13:58,080 --> 00:14:01,560
Speaker 1: these bureaucracies. Many of the hospitals and many the insurance

221
00:14:01,559 --> 00:14:05,520
Speaker 1: companies are as bureaucratic as the government. It's true that

222
00:14:05,720 --> 00:14:08,960
Speaker 1: once you're an incumbent in an industry that's protected by

223
00:14:09,040 --> 00:14:12,440
Speaker 1: government barriers to competition, you wanted to keep the status quo,

224
00:14:12,600 --> 00:14:16,320
Speaker 1: that's for sure. So there's an interest in the industry

225
00:14:16,320 --> 00:14:20,600
Speaker 1: and keeping those government barriers up in some sense. I mean,

226
00:14:20,680 --> 00:14:24,360
Speaker 1: FDA is even like that, because you're keeping out some

227
00:14:24,440 --> 00:14:28,120
Speaker 1: competition by other things that would potentially sell. FDA has

228
00:14:28,160 --> 00:14:30,760
Speaker 1: a similar feature because once you get approved by FDA,

229
00:14:30,840 --> 00:14:33,720
Speaker 1: it's great news. It's very hard to get approved by FDA.

230
00:14:33,960 --> 00:14:37,880
Speaker 1: Takes ten years and ninety percent of failure. A we'll

231
00:14:37,880 --> 00:14:39,840
Speaker 1: talk a little bit about that in terms of the IRA,

232
00:14:40,000 --> 00:14:43,600
Speaker 1: the Implation Reduction Act. But it's also a very good

233
00:14:43,680 --> 00:14:49,960
Speaker 1: protector against competition because they're constantly telling competing alternatives that

234
00:14:50,000 --> 00:14:53,520
Speaker 1: they can't market their drugs. Essentially, a lot of agencies

235
00:14:53,560 --> 00:14:57,520
Speaker 1: have that feature that in the name of regulation or

236
00:14:57,560 --> 00:15:01,320
Speaker 1: regulating something that's good, in this case safety and efficacy

237
00:15:01,360 --> 00:15:05,000
Speaker 1: of drugs, they at the same time provide enormous entry

238
00:15:05,000 --> 00:15:26,000
Speaker 1: barrier into the industry. You know, you cite approvingly twenty

239
00:15:26,360 --> 00:15:29,680
Speaker 1: nineteen report from the Department of Health and Human Services,

240
00:15:29,720 --> 00:15:35,000
Speaker 1: which was called Reforming America's Healthcare System through choice and competition,

241
00:15:35,320 --> 00:15:38,760
Speaker 1: and they've really had a number of practical, common sense changes,

242
00:15:39,240 --> 00:15:42,239
Speaker 1: some of which will be fought bitterly by the current incumbents.

243
00:15:42,720 --> 00:15:45,480
Speaker 1: But it did strike me that there are people out

244
00:15:45,520 --> 00:15:47,720
Speaker 1: there who are being to understand what you're talking about

245
00:15:48,080 --> 00:15:50,440
Speaker 1: and who are trying to figure out, you know, what

246
00:15:50,560 --> 00:15:55,280
Speaker 1: would that more dynamic, more customer or patient oriented system

247
00:15:55,360 --> 00:15:58,120
Speaker 1: look like. Did you find that report in that sense helpful?

248
00:15:58,640 --> 00:16:01,080
Speaker 1: I found it help both because I partly wrote it,

249
00:16:01,280 --> 00:16:05,600
Speaker 1: so okay, well, I shouldn't say it. I see a

250
00:16:05,720 --> 00:16:08,680
Speaker 1: constant economic Advice that was heavily involved in that report,

251
00:16:08,800 --> 00:16:12,760
Speaker 1: as was the National Economic Council through Brian Blaze, and

252
00:16:12,800 --> 00:16:15,400
Speaker 1: mainly involved in that report. It was more of a

253
00:16:15,400 --> 00:16:18,680
Speaker 1: white House effort than it was a department agency effort,

254
00:16:18,800 --> 00:16:22,400
Speaker 1: I would say, especially given the focus on competition. So

255
00:16:22,440 --> 00:16:25,640
Speaker 1: I think that's a source for people who are listeners,

256
00:16:25,680 --> 00:16:28,240
Speaker 1: who are interested in this particular on the state level,

257
00:16:28,880 --> 00:16:30,800
Speaker 1: if they want to get ideas of what to do.

258
00:16:30,880 --> 00:16:33,640
Speaker 1: I'm currently pretty heavily involved with SCONCE and in working

259
00:16:33,640 --> 00:16:37,480
Speaker 1: with their initiatives. There other people listening. There's a list

260
00:16:37,520 --> 00:16:41,280
Speaker 1: of things we propose can be done there to basically

261
00:16:41,400 --> 00:16:45,880
Speaker 1: increase competition and choice in healthcare markets on their current

262
00:16:45,880 --> 00:16:51,680
Speaker 1: financing structure. You have a particular sense that the Inflation

263
00:16:51,760 --> 00:16:55,040
Speaker 1: Reduction Act was very destructive and set us on patterns

264
00:16:55,040 --> 00:16:58,040
Speaker 1: that could in the long run be very very damaging.

265
00:16:58,080 --> 00:17:01,400
Speaker 1: Can you comment on that. The prelude to this is

266
00:17:01,440 --> 00:17:05,600
Speaker 1: that economies have studied how important health is to overall

267
00:17:05,680 --> 00:17:08,960
Speaker 1: economic and wellbeing. We talk a lot about GDP growth, etc.

268
00:17:10,200 --> 00:17:12,960
Speaker 1: But if you look at the biggest change the last century,

269
00:17:13,040 --> 00:17:16,480
Speaker 1: what happened was, meaning nineteen hundred to two thousand, the

270
00:17:16,480 --> 00:17:19,879
Speaker 1: biggest change was that life almost doubled. In terms of

271
00:17:19,920 --> 00:17:25,000
Speaker 1: the most valuable change, we estimate how valuable is you know,

272
00:17:25,040 --> 00:17:28,639
Speaker 1: additional living that you know, any health related agency in

273
00:17:28,680 --> 00:17:32,520
Speaker 1: the government has numbers on how we typically value that

274
00:17:33,320 --> 00:17:37,720
Speaker 1: fdacms or what have you within an age. And if

275
00:17:37,720 --> 00:17:40,320
Speaker 1: you take those numbers and say how much how much

276
00:17:40,400 --> 00:17:44,639
Speaker 1: value have we gained from having better health or living

277
00:17:44,720 --> 00:17:48,800
Speaker 1: longer the last century, it's on part with overall economic

278
00:17:49,040 --> 00:17:54,119
Speaker 1: GDP growth. So think of GDP growth basically raising how

279
00:17:54,680 --> 00:17:58,600
Speaker 1: your well being in a given year, as opposed to longevity,

280
00:17:58,680 --> 00:18:01,280
Speaker 1: which means how many of those years you can enjoy

281
00:18:01,920 --> 00:18:07,600
Speaker 1: Essentially health, This is an extremely important component of overall wellbeing,

282
00:18:07,640 --> 00:18:11,960
Speaker 1: and most people realize that common sense discussions realize that

283
00:18:12,000 --> 00:18:13,560
Speaker 1: you know, if you don't have your health, you don't

284
00:18:13,600 --> 00:18:17,280
Speaker 1: have anything, etcetera. So in that regard, I think the

285
00:18:17,359 --> 00:18:20,960
Speaker 1: most important impact of the IRA the Inflation Reduction Act,

286
00:18:21,600 --> 00:18:26,640
Speaker 1: was not any kind of inflation or even climate impacts

287
00:18:26,680 --> 00:18:29,879
Speaker 1: that it has. Some people are skeptical about the climate impact,

288
00:18:29,960 --> 00:18:33,400
Speaker 1: but even if they had large climate impact, the biggest

289
00:18:33,440 --> 00:18:38,439
Speaker 1: impacts is the loss in longevity from clamping down on

290
00:18:38,640 --> 00:18:43,840
Speaker 1: medical innovation. And medical innovation many people think of as expensive,

291
00:18:43,920 --> 00:18:49,960
Speaker 1: but like any innovation, medical innovation reduces costs as opposed

292
00:18:50,000 --> 00:18:53,280
Speaker 1: to racism, and that sounds kind of counterintuitive when you

293
00:18:53,359 --> 00:18:56,399
Speaker 1: talk about healthcare, and the reason you should think about

294
00:18:56,400 --> 00:18:59,439
Speaker 1: it is that this essentially reduces the cost of a

295
00:18:59,560 --> 00:19:05,320
Speaker 1: better health as opposed to healthcare. So think about breast cancer,

296
00:19:05,600 --> 00:19:10,560
Speaker 1: HIV or similar diseases. Forty years ago, when you were

297
00:19:10,600 --> 00:19:13,959
Speaker 1: diagnosed with those diseases, you could not buy a longer

298
00:19:14,040 --> 00:19:17,320
Speaker 1: life anywhere on the planet. So basically a longer life

299
00:19:17,400 --> 00:19:22,840
Speaker 1: was prohibitly expensive to buy, but then medical innovation brought

300
00:19:22,880 --> 00:19:26,640
Speaker 1: that price down to patented levels, and then further on

301
00:19:26,680 --> 00:19:31,000
Speaker 1: too generic levels after that when patents run out, so

302
00:19:31,640 --> 00:19:35,560
Speaker 1: one should think of innovation that's basically being cost reducing

303
00:19:35,600 --> 00:19:39,159
Speaker 1: and the cost of better health is going down once

304
00:19:39,240 --> 00:19:42,359
Speaker 1: innovation comes in. And that's the important part about IRA.

305
00:19:42,560 --> 00:19:47,600
Speaker 1: I think that it's greatly damaging to medical innovation. One level.

306
00:19:47,680 --> 00:19:49,639
Speaker 1: Is hard to have people to focus on that because

307
00:19:50,280 --> 00:19:52,600
Speaker 1: you're asking them to pay in the present for a

308
00:19:52,600 --> 00:19:56,399
Speaker 1: potentially discounted future. Well, I mean, the HIV patient who's

309
00:19:56,440 --> 00:20:01,560
Speaker 1: diagnosed or the breast cancer patient who's diagnosed fully understand

310
00:20:01,600 --> 00:20:04,679
Speaker 1: that the current cost will pay off in terms of

311
00:20:04,680 --> 00:20:08,359
Speaker 1: longer living. But as a government, that's a little different

312
00:20:08,359 --> 00:20:10,560
Speaker 1: trade off. And I think on the patient level, I

313
00:20:10,560 --> 00:20:14,800
Speaker 1: think people are comfortable in healthcare investments in realizing that

314
00:20:14,840 --> 00:20:18,159
Speaker 1: it will be a future payoff in better health. I

315
00:20:18,160 --> 00:20:21,440
Speaker 1: think that's kind of comes naturally to people. You did

316
00:20:21,480 --> 00:20:24,680
Speaker 1: an issue brief about this called the impact of HR

317
00:20:24,760 --> 00:20:30,040
Speaker 1: five six Biopharmaceutical innovation and patient health. You really believe

318
00:20:30,720 --> 00:20:35,080
Speaker 1: that more people will die because we will have slowed

319
00:20:35,080 --> 00:20:37,680
Speaker 1: down the production of new drugs. There's sort of a

320
00:20:37,760 --> 00:20:42,200
Speaker 1: quantifiable expectation that's actually pretty staggering in terms of the

321
00:20:42,280 --> 00:20:44,960
Speaker 1: number of people who may die because of that walk

322
00:20:45,080 --> 00:20:47,680
Speaker 1: through with us. How you think like this, Yeah, So

323
00:20:47,760 --> 00:20:52,440
Speaker 1: we basically took CBO's revenue estimates. We wanted to contrast

324
00:20:52,440 --> 00:20:55,000
Speaker 1: it with CBO, which came out with a very small

325
00:20:55,040 --> 00:20:58,760
Speaker 1: effect which we thought initially didn't pass the smell test

326
00:20:58,840 --> 00:21:02,800
Speaker 1: in some sense, so to line up our analysis compared

327
00:21:02,880 --> 00:21:06,440
Speaker 1: to what CBO did. So if you take their revenue

328
00:21:06,520 --> 00:21:12,440
Speaker 1: losses from these price controls, essentially it's roughly a fifteen

329
00:21:12,480 --> 00:21:15,760
Speaker 1: percent reduction in revenue. And then you go to the

330
00:21:15,800 --> 00:21:18,920
Speaker 1: economic literature, there's a lot of papers on this how

331
00:21:19,000 --> 00:21:23,080
Speaker 1: much revenue losses translated into reduced investments in R and D.

332
00:21:23,480 --> 00:21:25,800
Speaker 1: If you go to any VC firm, or you go

333
00:21:25,880 --> 00:21:29,280
Speaker 1: to any private equity firm who fund medical R and

334
00:21:29,359 --> 00:21:34,560
Speaker 1: D essentially for drugs, they will presumably ask how profitable

335
00:21:34,680 --> 00:21:36,119
Speaker 1: is this going to be in the future, That is

336
00:21:36,119 --> 00:21:38,360
Speaker 1: to say, how big is the disease and how much

337
00:21:38,400 --> 00:21:40,520
Speaker 1: are you're going to charge for treatments and how much

338
00:21:40,560 --> 00:21:44,600
Speaker 1: insurance coverage the patients have, etc. To figure out if

339
00:21:44,600 --> 00:21:47,440
Speaker 1: they want to invest in it. So clearly R and

340
00:21:47,520 --> 00:21:51,280
Speaker 1: D is sensitive to future profitability. Even some lawmakers seems

341
00:21:51,320 --> 00:21:53,560
Speaker 1: to disagree with that. I think that's kind of being

342
00:21:54,000 --> 00:21:58,199
Speaker 1: divorced from reality. But regardless of their opinions, there's a

343
00:21:58,200 --> 00:22:01,639
Speaker 1: lot of economic evidence that they responsive. R and D

344
00:22:01,760 --> 00:22:04,560
Speaker 1: investments are very responsive the future revenues. So if you

345
00:22:04,600 --> 00:22:07,960
Speaker 1: take those estimates and then go back and say how

346
00:22:08,000 --> 00:22:12,159
Speaker 1: many more drugs get cut off because of this, you

347
00:22:12,240 --> 00:22:16,080
Speaker 1: get much larger magnitudes larger than CBO. And CBO said

348
00:22:16,119 --> 00:22:19,400
Speaker 1: that there would be less than ten drugs lost over

349
00:22:19,520 --> 00:22:23,000
Speaker 1: twenty years, which sounded very strange to us, and we

350
00:22:23,080 --> 00:22:25,399
Speaker 1: had to finding that at least one hundred and thirty

351
00:22:25,400 --> 00:22:29,240
Speaker 1: five would be lost given just the evidence base out

352
00:22:29,240 --> 00:22:31,720
Speaker 1: there or what we know about how much R and

353
00:22:31,760 --> 00:22:35,760
Speaker 1: D gets cut when revenues get cut. Now, what we

354
00:22:35,880 --> 00:22:39,159
Speaker 1: did after that, we went to earnings calls of publicly

355
00:22:39,160 --> 00:22:42,679
Speaker 1: traded companies, which if you rely on these calls you

356
00:22:42,680 --> 00:22:46,160
Speaker 1: can go to prison. So there's some discipline on what

357
00:22:46,240 --> 00:22:49,640
Speaker 1: the executives say about the company during these earnings calls.

358
00:22:50,280 --> 00:22:53,000
Speaker 1: And if you look just at the first four months

359
00:22:53,080 --> 00:22:57,760
Speaker 1: since the IRA passed, this reports to three to five

360
00:22:57,920 --> 00:23:03,159
Speaker 1: drugs being pulled already, So at a pace of four months,

361
00:23:03,200 --> 00:23:06,680
Speaker 1: if you multiply that out, that's nine to fifteen drugs

362
00:23:06,680 --> 00:23:11,240
Speaker 1: a year. If you continue at that trend. CBO said

363
00:23:11,280 --> 00:23:14,520
Speaker 1: ten drugs over twenty years, so that we would be

364
00:23:14,560 --> 00:23:18,200
Speaker 1: done in one year if that initial trend continues. Essentially,

365
00:23:19,000 --> 00:23:21,320
Speaker 1: so when you look at that, you're basically telling people

366
00:23:21,840 --> 00:23:23,520
Speaker 1: you are going to pay more, but you're going to

367
00:23:23,600 --> 00:23:28,000
Speaker 1: get dramatically better medicines. Being just a politician, you have

368
00:23:28,040 --> 00:23:30,720
Speaker 1: to have a little town hall meeting and have somebody

369
00:23:30,760 --> 00:23:32,240
Speaker 1: get up and say, so, what are you going to

370
00:23:32,280 --> 00:23:34,640
Speaker 1: do about the pressure of my drugs? So I think

371
00:23:34,640 --> 00:23:38,200
Speaker 1: that's a couple of things. Is what are these things buying? Right?

372
00:23:38,280 --> 00:23:41,800
Speaker 1: And then the question is do we want to subsidize

373
00:23:41,800 --> 00:23:45,520
Speaker 1: it on the consumer side, meaning the patient side? Did

374
00:23:45,560 --> 00:23:49,040
Speaker 1: the government want to subsidize it and still pay the

375
00:23:49,160 --> 00:23:54,760
Speaker 1: manufacturers a price that actually still keeps then sent him

376
00:23:54,800 --> 00:23:58,560
Speaker 1: to innovate intact. So there's a separation with what economists

377
00:23:58,600 --> 00:24:01,960
Speaker 1: called technic play, a demand and supply price in the

378
00:24:02,040 --> 00:24:04,520
Speaker 1: market when you have subsidies. The demand price is what

379
00:24:04,680 --> 00:24:07,760
Speaker 1: actually does the patient. If you take a Medicaid patient,

380
00:24:07,800 --> 00:24:10,480
Speaker 1: they may pay zero for care. That doesn't mean the

381
00:24:10,520 --> 00:24:14,080
Speaker 1: hospital get zero. They actually get revenue that's equal to

382
00:24:14,160 --> 00:24:16,680
Speaker 1: how much the government pays them. So the supply price,

383
00:24:16,720 --> 00:24:20,640
Speaker 1: how much the supplier actually obtains is way above the

384
00:24:20,680 --> 00:24:24,479
Speaker 1: demand price what the customer actually pays. In the normal market,

385
00:24:24,520 --> 00:24:27,400
Speaker 1: those two are the same, but when you have a subsidy,

386
00:24:27,920 --> 00:24:30,760
Speaker 1: they're not. So the question is how do you keep

387
00:24:31,480 --> 00:24:36,280
Speaker 1: the incentive to innovate through public subsidies or reimbursement for

388
00:24:36,359 --> 00:24:41,120
Speaker 1: these drugs intact while the patient at the town hall

389
00:24:41,240 --> 00:24:45,680
Speaker 1: meetings does not scream at you. That's kind of the

390
00:24:46,000 --> 00:25:05,760
Speaker 1: tricky part of doing this. So in the long run,

391
00:25:06,280 --> 00:25:10,680
Speaker 1: if you could wave a magic wand what would Philipson

392
00:25:11,160 --> 00:25:14,000
Speaker 1: model of health be ten or fifteen or twenty years

393
00:25:14,000 --> 00:25:17,720
Speaker 1: from now, well it would be a lot more means tested, right,

394
00:25:17,800 --> 00:25:20,760
Speaker 1: So I mean, if anything, it would be Medicaid for

395
00:25:20,880 --> 00:25:23,720
Speaker 1: all as opposed to Medicare for all. Put it that way,

396
00:25:23,760 --> 00:25:27,679
Speaker 1: I think voters want to see and therefore representatives should

397
00:25:27,720 --> 00:25:30,440
Speaker 1: push that we do take care of the poor. The

398
00:25:30,600 --> 00:25:32,800
Speaker 1: question how you do it? We can argue by what's

399
00:25:32,840 --> 00:25:35,800
Speaker 1: the most efficient way of doing that. But there's no

400
00:25:35,880 --> 00:25:39,840
Speaker 1: reason why people in the middle income and hire income

401
00:25:40,520 --> 00:25:44,639
Speaker 1: should send their tax money to Washington, d C. Having

402
00:25:44,680 --> 00:25:49,320
Speaker 1: a centralized planning system that then sends them back their

403
00:25:49,359 --> 00:25:52,280
Speaker 1: money in terms of healthcare as opposed to having a

404
00:25:52,400 --> 00:25:57,680
Speaker 1: competing market for a premium that they paid to individual

405
00:25:57,720 --> 00:26:00,920
Speaker 1: health plan. And that's also the solution. And I ultimately,

406
00:26:00,960 --> 00:26:04,080
Speaker 1: I think to our debt problem, which is very very

407
00:26:04,080 --> 00:26:07,000
Speaker 1: related because it's mostly Medicare and Social and security. Both

408
00:26:07,040 --> 00:26:10,960
Speaker 1: social and secure and Medicare will be sooner or later,

409
00:26:11,080 --> 00:26:15,280
Speaker 1: I predict means tested a lot more just by reality

410
00:26:15,400 --> 00:26:18,560
Speaker 1: kicking in. And then the question becomes, how do you

411
00:26:18,640 --> 00:26:21,560
Speaker 1: do that in a way where that will be beneficial

412
00:26:21,600 --> 00:26:24,600
Speaker 1: many times because you're not distorting the economy collecting all

413
00:26:24,640 --> 00:26:28,320
Speaker 1: these taxes for these programs that are just being basically

414
00:26:28,720 --> 00:26:31,520
Speaker 1: a worse way of providing healthcare to the middle income

415
00:26:32,080 --> 00:26:35,560
Speaker 1: enrich people. And the question becomes, how do you do

416
00:26:35,600 --> 00:26:38,520
Speaker 1: that without having too much of a two tier system

417
00:26:38,560 --> 00:26:41,040
Speaker 1: which people kind of object to. Well, I once had

418
00:26:41,040 --> 00:26:43,399
Speaker 1: a discussion with Al Gore when we were negotiating a

419
00:26:43,440 --> 00:26:46,639
Speaker 1: balanced budget. We spend days and days and days in

420
00:26:46,640 --> 00:26:49,399
Speaker 1: a room luck together talking and I said, so, let

421
00:26:49,400 --> 00:26:53,919
Speaker 1: me get this straight. You would like to cap Medicare

422
00:26:54,800 --> 00:26:59,000
Speaker 1: on the theory that if everybody could only buy a Chevrolet,

423
00:27:00,040 --> 00:27:02,560
Speaker 1: the rich people would force Chevrolet's to be really good.

424
00:27:03,720 --> 00:27:06,120
Speaker 1: And so if you can coerce everybody into the same

425
00:27:06,119 --> 00:27:09,479
Speaker 1: health system. Your theory is that wealthy people will then

426
00:27:09,640 --> 00:27:12,800
Speaker 1: insist the system be good. There was an interesting conversation

427
00:27:13,119 --> 00:27:16,840
Speaker 1: that was his position. But there is a real resistance,

428
00:27:17,119 --> 00:27:20,080
Speaker 1: much more in health than any other topic, to the

429
00:27:20,160 --> 00:27:26,040
Speaker 1: idea that a price differential leads to a outcome differential,

430
00:27:27,240 --> 00:27:29,760
Speaker 1: because people really want the sense if it's my cousin

431
00:27:29,880 --> 00:27:33,080
Speaker 1: or my daughter or whatever and they have a serious illness,

432
00:27:33,119 --> 00:27:36,359
Speaker 1: I want them to get the best care period. And

433
00:27:36,440 --> 00:27:39,200
Speaker 1: I don't think we have figured out how you structure

434
00:27:39,240 --> 00:27:43,280
Speaker 1: that into a capitalist system. Well, I think what you're

435
00:27:43,280 --> 00:27:46,480
Speaker 1: talking about al Gore's point, which I think is particularly

436
00:27:46,600 --> 00:27:51,679
Speaker 1: true for public regulation a private insurance, because once you

437
00:27:51,800 --> 00:27:56,200
Speaker 1: have minimum benefits and health plans, etc. Which the Democrats

438
00:27:56,200 --> 00:28:00,199
Speaker 1: are favoring a lot, in that case, you're forced the

439
00:28:00,320 --> 00:28:03,280
Speaker 1: port to buy a cataloc right. They're paying for these

440
00:28:03,440 --> 00:28:07,760
Speaker 1: employment based plans, but because they basically have all these

441
00:28:07,840 --> 00:28:10,359
Speaker 1: patient bill of rights and you have to include this

442
00:28:10,480 --> 00:28:12,600
Speaker 1: in the plan, you have to include that in the plan.

443
00:28:13,600 --> 00:28:17,040
Speaker 1: Ultimately that has to be financed by higher premiums, and

444
00:28:17,160 --> 00:28:19,919
Speaker 1: you're forcing people to buy a Cadillac as opposed to

445
00:28:20,000 --> 00:28:22,920
Speaker 1: having a Honda. Whatever you want, to call it plan

446
00:28:23,880 --> 00:28:27,320
Speaker 1: that has lower quality at a lower price, And I

447
00:28:27,359 --> 00:28:31,800
Speaker 1: think that's particularly dangerous once you start regulating private insurance

448
00:28:31,880 --> 00:28:34,680
Speaker 1: that way, because then you're basically pricing out the poor

449
00:28:35,400 --> 00:28:37,440
Speaker 1: out of the market, which we have seen a lot

450
00:28:37,480 --> 00:28:41,000
Speaker 1: in the US where plants are demanded to cover certain things,

451
00:28:41,000 --> 00:28:44,320
Speaker 1: and then we worry why we have so much uninsurance. Well,

452
00:28:44,360 --> 00:28:46,520
Speaker 1: as I understand, one of the big downsides of the

453
00:28:46,560 --> 00:28:51,280
Speaker 1: way they designed Obamacare is that the least expensive plans

454
00:28:51,320 --> 00:28:55,600
Speaker 1: also have the highest deductibles, so you actually minimize preventive

455
00:28:55,600 --> 00:28:58,680
Speaker 1: health and you minimize people taking care of themselves. I mean,

456
00:28:58,760 --> 00:29:02,520
Speaker 1: economists have long recognize that there's a trade off between

457
00:29:03,160 --> 00:29:08,240
Speaker 1: providing insurance and having good incentives. Right, So if you're

458
00:29:08,280 --> 00:29:13,480
Speaker 1: fully insured, you basically don't have the right incentivece. But

459
00:29:13,640 --> 00:29:16,960
Speaker 1: if you have no insurance, so you know, then that's

460
00:29:17,000 --> 00:29:21,479
Speaker 1: like the lasic and plastic surgery. You have good incentives,

461
00:29:21,520 --> 00:29:23,880
Speaker 1: but once you get hit by something, you take an

462
00:29:24,040 --> 00:29:27,800
Speaker 1: enormous financial hit, so you have no insurance. So that

463
00:29:27,880 --> 00:29:30,880
Speaker 1: tradeoff is kind of a balance, and what the deductibles

464
00:29:30,960 --> 00:29:33,400
Speaker 1: do is trying to balance that. Let's get some better

465
00:29:33,520 --> 00:29:36,680
Speaker 1: incentives in place for people to shop around under the

466
00:29:36,760 --> 00:29:42,640
Speaker 1: deductible while still having catastrophic covers so that we don't

467
00:29:42,680 --> 00:29:45,920
Speaker 1: face you with too much financial risk were you to

468
00:29:45,960 --> 00:29:49,920
Speaker 1: actually have a serious disease or cancer, or traffic accident,

469
00:29:50,040 --> 00:29:52,640
Speaker 1: what have you. So I think that tradeoff has long

470
00:29:52,720 --> 00:29:55,720
Speaker 1: been recognized, but it's the second best world you live in.

471
00:29:55,800 --> 00:29:57,920
Speaker 1: You can't have both at the same time. You can't

472
00:29:57,920 --> 00:30:00,320
Speaker 1: have full insurance and a lot of price show hopping

473
00:30:01,080 --> 00:30:04,040
Speaker 1: and at the same time have good incentives. Have you

474
00:30:04,120 --> 00:30:06,560
Speaker 1: looked much at the role of PBMs in the health

475
00:30:06,600 --> 00:30:10,760
Speaker 1: system and how they've evolved. Yeah, I mean to me,

476
00:30:11,600 --> 00:30:16,320
Speaker 1: the PBM is a mechanism for buyers to counter the

477
00:30:16,480 --> 00:30:20,080
Speaker 1: monopoly power of the drug companies who have a pattern

478
00:30:21,320 --> 00:30:25,040
Speaker 1: And you want a big buyer group that therefore can

479
00:30:25,160 --> 00:30:28,200
Speaker 1: argue down. You want more monopsony power if you want

480
00:30:28,240 --> 00:30:31,120
Speaker 1: on the demand side, meaning the buyers get together in

481
00:30:31,160 --> 00:30:35,720
Speaker 1: a purchasing organization where they have negotiation for everyone. Through

482
00:30:35,800 --> 00:30:39,840
Speaker 1: the PBMs, they do a lot of administration, etc. But

483
00:30:40,040 --> 00:30:44,280
Speaker 1: the way they get used by plans is because they

484
00:30:44,320 --> 00:30:48,440
Speaker 1: can buy drugs at lower prices than the individual plants

485
00:30:48,520 --> 00:30:50,720
Speaker 1: that are using them can do on their own. So

486
00:30:50,840 --> 00:30:55,040
Speaker 1: from your standpoint, these series of very very large intermediating

487
00:30:55,080 --> 00:30:59,720
Speaker 1: systems seem to be almost inevitable. Why. It's a consequence

488
00:31:00,040 --> 00:31:04,160
Speaker 1: to being forced with a patent monopoly that could charge

489
00:31:04,200 --> 00:31:07,200
Speaker 1: anything for you to live longer. Right, So it's very

490
00:31:07,280 --> 00:31:10,640
Speaker 1: in what economists call inelastic demand. It's very price and

491
00:31:10,680 --> 00:31:13,480
Speaker 1: sensitive demand. Once you're sick, you're willing to spend pretty

492
00:31:13,560 --> 00:31:17,720
Speaker 1: much anything to get better. And in that situation, you

493
00:31:17,800 --> 00:31:21,560
Speaker 1: can get very very high monopoly prices because there's no

494
00:31:21,920 --> 00:31:26,920
Speaker 1: distance SENTI from raising prices if customers don't disappear. So

495
00:31:27,240 --> 00:31:30,440
Speaker 1: I think a natural response to that has been the

496
00:31:30,480 --> 00:31:33,360
Speaker 1: PBMs or the large buyers as I think of them,

497
00:31:34,000 --> 00:31:37,800
Speaker 1: to kind of counter that monopoly power on the other side,

498
00:31:38,200 --> 00:31:41,520
Speaker 1: which makes in a sense, the whole concept of price

499
00:31:41,600 --> 00:31:45,880
Speaker 1: transparency almost impossible to implement because there's so many different

500
00:31:45,920 --> 00:31:49,560
Speaker 1: layers of deals and structures and give back. I disagree

501
00:31:49,600 --> 00:31:52,120
Speaker 1: a little bit that there's lack of transparency. That people

502
00:31:52,160 --> 00:31:57,000
Speaker 1: who are paying have transparency, meaning health insurance plants, et cetera,

503
00:31:57,480 --> 00:32:01,440
Speaker 1: who pay hospitals and doctors and drug companies have full

504
00:32:01,480 --> 00:32:06,120
Speaker 1: transparency over how much they're paying. The customer shopping around

505
00:32:06,960 --> 00:32:11,320
Speaker 1: does not have full transparency on its Copace, etc. For

506
00:32:11,400 --> 00:32:15,280
Speaker 1: a particular service or a particular drug that they're going

507
00:32:15,360 --> 00:32:18,280
Speaker 1: to buy, but they're a very small share. Ten percent

508
00:32:18,320 --> 00:32:22,800
Speaker 1: of overall spending roughly comes from Copace. So the real

509
00:32:22,960 --> 00:32:27,280
Speaker 1: payer is the plan and there's full transparency of the

510
00:32:27,360 --> 00:32:31,840
Speaker 1: plan how much different doctors, hospitals, etc. Charge, And that

511
00:32:31,960 --> 00:32:36,360
Speaker 1: transparency is really what matters for the transaction. So if

512
00:32:36,400 --> 00:32:40,560
Speaker 1: you were trying to develop an approach to where we

513
00:32:40,640 --> 00:32:44,840
Speaker 1: are now after the Inflation Reduction Act and the new

514
00:32:44,880 --> 00:32:49,000
Speaker 1: Congress start having hearings about the number of companies that

515
00:32:49,040 --> 00:32:51,120
Speaker 1: are simply not going to develop drugs for the United

516
00:32:51,120 --> 00:32:54,120
Speaker 1: States anymore, which you sort of outline, which is really

517
00:32:54,120 --> 00:32:59,000
Speaker 1: pretty staggering politically, how do you then back off from

518
00:32:59,040 --> 00:33:03,440
Speaker 1: the controls in order to incentivize the innovation. You want

519
00:33:03,440 --> 00:33:06,960
Speaker 1: to incentivize the innovation by the value that you bring

520
00:33:07,000 --> 00:33:09,400
Speaker 1: to market. We've done and other people have done as well,

521
00:33:09,640 --> 00:33:13,840
Speaker 1: studies of if you take the health gaves generated from

522
00:33:13,880 --> 00:33:17,840
Speaker 1: a drug and say how much is that worth using

523
00:33:17,960 --> 00:33:20,880
Speaker 1: standard metrics of how much health is worth to people?

524
00:33:21,520 --> 00:33:24,680
Speaker 1: And then you ask what fraction of that value is

525
00:33:24,800 --> 00:33:29,280
Speaker 1: captured as profits by the drug innovator. It's around ten

526
00:33:29,360 --> 00:33:33,680
Speaker 1: percent only so ninety percent of the value they generate

527
00:33:33,920 --> 00:33:37,840
Speaker 1: does not get captured as profit to the innovator. And

528
00:33:37,880 --> 00:33:40,760
Speaker 1: if you think that's a bad world in some sense,

529
00:33:41,280 --> 00:33:44,120
Speaker 1: I think people don't understand that that there's an enormous

530
00:33:44,160 --> 00:33:48,480
Speaker 1: amount of health generated which is not captured in pharmaceutical prices.

531
00:33:49,400 --> 00:33:51,520
Speaker 1: But even if you think that that's the world we

532
00:33:51,640 --> 00:33:55,640
Speaker 1: live in, that those prices are too high, it's a

533
00:33:55,760 --> 00:33:59,800
Speaker 1: separation again between how much do we reward the innovation

534
00:34:00,160 --> 00:34:03,960
Speaker 1: versus what does the customers see as a co pay,

535
00:34:04,040 --> 00:34:07,680
Speaker 1: which is really where the political fires start. If you

536
00:34:07,720 --> 00:34:10,040
Speaker 1: look at drugs, for example, they cost them a lot

537
00:34:10,160 --> 00:34:13,560
Speaker 1: less than ICUs, but no one is yelling at intensive

538
00:34:13,600 --> 00:34:16,919
Speaker 1: care units that they're too expensive because they don't see

539
00:34:16,920 --> 00:34:20,279
Speaker 1: any co pays from intensive care units. A lot of

540
00:34:20,360 --> 00:34:24,600
Speaker 1: services within healthcare are much more expensive than drugs, and

541
00:34:24,680 --> 00:34:29,680
Speaker 1: many times when drugs come online, they actually reduce overall

542
00:34:29,760 --> 00:34:35,200
Speaker 1: spending of healthcare. Antidepressants gets rid of shrinks, statins get

543
00:34:35,280 --> 00:34:39,200
Speaker 1: rid of heart surgeries, and hepatitis sea drugs get rid

544
00:34:39,239 --> 00:34:42,960
Speaker 1: of liver transplants. So many times when these drugs come on,

545
00:34:43,120 --> 00:34:46,359
Speaker 1: the drug spending goes up, but total spending goes down,

546
00:34:47,440 --> 00:34:50,600
Speaker 1: and that is also not very well understood. So there's

547
00:34:50,640 --> 00:34:54,560
Speaker 1: a policy aspect of this, I think, where we want

548
00:34:54,600 --> 00:34:57,400
Speaker 1: a lot more innovation. But then at the same time,

549
00:34:57,440 --> 00:35:01,200
Speaker 1: there's a copay aspect where the voter react acts when

550
00:35:01,239 --> 00:35:04,359
Speaker 1: they see that they're charged a lot more for cold pay,

551
00:35:04,560 --> 00:35:08,280
Speaker 1: even though it's not necessarily overall a more expensive service.

552
00:35:08,280 --> 00:35:12,400
Speaker 1: Are good. That would actually be a pretty effective campaign

553
00:35:12,480 --> 00:35:16,120
Speaker 1: to lay out a series of cases where this is

554
00:35:16,160 --> 00:35:19,080
Speaker 1: how much we're saving you, so people are geting to

555
00:35:19,120 --> 00:35:21,560
Speaker 1: realize that if you think about total package of what

556
00:35:21,600 --> 00:35:23,440
Speaker 1: you're going to pay as a taxpayer or what you're

557
00:35:23,440 --> 00:35:26,720
Speaker 1: going to pay through your insurance company, that in fact,

558
00:35:26,760 --> 00:35:31,960
Speaker 1: in many places pharmaceuticals are dramatic cost reductions, even though

559
00:35:32,000 --> 00:35:35,040
Speaker 1: at the immediate point of purchase they seem expensive. But

560
00:35:35,160 --> 00:35:37,520
Speaker 1: compared to as you point out, you know, if my

561
00:35:37,640 --> 00:35:40,200
Speaker 1: choice is taking a pill or having a liver transplant,

562
00:35:40,239 --> 00:35:43,760
Speaker 1: I'll go for the Pillah. Not only is it cheaper

563
00:35:43,800 --> 00:35:46,760
Speaker 1: in healthcare costs, it's also a better quality of life obviously,

564
00:35:46,840 --> 00:35:49,480
Speaker 1: So you know, so a lot of this, you have.

565
00:35:49,600 --> 00:35:52,520
Speaker 1: The drug bill goes up, but it goes up less

566
00:35:52,560 --> 00:35:55,240
Speaker 1: than the other costs go down, so the total costs

567
00:35:55,239 --> 00:35:58,720
Speaker 1: go down, right so that has not been understood fully

568
00:35:59,200 --> 00:36:02,320
Speaker 1: and if you actually look at the aggregant numbers, that

569
00:36:02,520 --> 00:36:04,919
Speaker 1: is what they indicate. We just had a study Universe

570
00:36:05,000 --> 00:36:08,279
Speaker 1: Chicago showing that for the last twenty years that when

571
00:36:08,360 --> 00:36:12,560
Speaker 1: drug spending increases, overall spending gets reduced, and that's not

572
00:36:12,719 --> 00:36:15,440
Speaker 1: captured enough. I think in the policy debate, there a

573
00:36:15,480 --> 00:36:18,640
Speaker 1: whole series of other kinds of costs that aren't captured

574
00:36:19,040 --> 00:36:22,080
Speaker 1: in the way we currently measure these things. There's a

575
00:36:22,400 --> 00:36:25,359
Speaker 1: big debate on how you value these products, and we're

576
00:36:25,400 --> 00:36:28,960
Speaker 1: not many times capturing the full value of them. But

577
00:36:29,080 --> 00:36:32,919
Speaker 1: even with the metrics we have, many times they turn

578
00:36:32,960 --> 00:36:36,360
Speaker 1: out to be very, very cost effective relative to other

579
00:36:37,120 --> 00:36:39,400
Speaker 1: forms of healthcare. I mean, it's kind of amazing how

580
00:36:39,480 --> 00:36:43,640
Speaker 1: much scrutiny or evidence gets brought to bear on drugs

581
00:36:43,680 --> 00:36:47,040
Speaker 1: relative to other parts of healthcare. We don't have any

582
00:36:47,200 --> 00:36:52,560
Speaker 1: cost effectiveness evaluation of procedures. For example, the procedures are

583
00:36:53,160 --> 00:36:58,600
Speaker 1: you can't patent a procedure, so therefore innovators and procedures

584
00:36:58,600 --> 00:37:02,200
Speaker 1: have no incentive to prove how good they are because

585
00:37:02,200 --> 00:37:06,200
Speaker 1: you can't own the procedure, as opposed to for medical products,

586
00:37:06,200 --> 00:37:10,160
Speaker 1: whether it's devices or drugs, where there's ownership through a pattern,

587
00:37:10,920 --> 00:37:13,279
Speaker 1: then you have an incentive to actually show that it's

588
00:37:13,360 --> 00:37:17,000
Speaker 1: high quality because you're the benefitter of the clinical trial

589
00:37:17,160 --> 00:37:20,160
Speaker 1: showing that it's actually high quality. So you have a

590
00:37:20,200 --> 00:37:24,200
Speaker 1: lot of lack of evidence in parts of healthcare which

591
00:37:24,320 --> 00:37:28,400
Speaker 1: dominates total spending, which is procedures. But no one is

592
00:37:28,480 --> 00:37:31,960
Speaker 1: kind of yelling at that. They're all yelling at the drugs. No,

593
00:37:32,120 --> 00:37:35,160
Speaker 1: that's exactly right. This has been fascinating. I want to

594
00:37:35,239 --> 00:37:37,520
Speaker 1: thank you for joining me in. I want to mention

595
00:37:37,600 --> 00:37:40,800
Speaker 1: to our listeners that in addition to reading your op edge,

596
00:37:40,920 --> 00:37:45,280
Speaker 1: you've also written several books, including Innovation and Technology, Adoption

597
00:37:45,280 --> 00:37:48,520
Speaker 1: and Healthcare Markets, which we're going to link to on

598
00:37:48,640 --> 00:37:51,279
Speaker 1: our show page at Newtsworld dot com. And I want

599
00:37:51,280 --> 00:37:53,400
Speaker 1: to thank you. This has been a fascinating conversation. I

600
00:37:53,400 --> 00:37:56,200
Speaker 1: want to encourage you to continue to develop this whole

601
00:37:56,200 --> 00:37:58,680
Speaker 1: supply side approach. And I can tell you that I'm

602
00:37:58,719 --> 00:38:01,960
Speaker 1: taking out of this three four new areas of research

603
00:38:02,040 --> 00:38:05,120
Speaker 1: and innovation in politics, and I think we'll give us

604
00:38:05,320 --> 00:38:08,799
Speaker 1: somewhat different conversation about how we move forward in health.

605
00:38:08,920 --> 00:38:11,600
Speaker 1: I'm really grateful you take the time to talk with us. Oh.

606
00:38:11,640 --> 00:38:16,040
Speaker 1: Thanks boving me. I appreciate it. Thank you to my

607
00:38:16,080 --> 00:38:19,040
Speaker 1: guest doctor Thomas Phillipson. You can get a link to

608
00:38:19,120 --> 00:38:21,839
Speaker 1: his op ed piece on our show page at Newtsworld

609
00:38:21,840 --> 00:38:25,040
Speaker 1: dot com. News World is produced by Gingwish three sixty

610
00:38:25,040 --> 00:38:29,760
Speaker 1: and iHeartMedia. Our executive producer is Garnsey Sloan, our producer

611
00:38:29,840 --> 00:38:33,560
Speaker 1: is Rebecca Howe, and our researcher is Rachel Peterson. The

612
00:38:33,680 --> 00:38:36,680
Speaker 1: all work for the show was created by Steve Penley.

613
00:38:37,239 --> 00:38:40,440
Speaker 1: Special thanks the team at Gingwich three sixty. If you've

614
00:38:40,480 --> 00:38:43,640
Speaker 1: been enjoying Newtsworld, I hope you'll go to Apple Podcast

615
00:38:44,000 --> 00:38:46,880
Speaker 1: and both rate us with five stars and give us

616
00:38:46,880 --> 00:38:49,760
Speaker 1: a review so others can learn what it's all about.

617
00:38:50,320 --> 00:38:52,840
Speaker 1: Right now, listeners of newts World can sign up for

618
00:38:52,920 --> 00:38:57,440
Speaker 1: my three free weekly columns at gingwishtree sixty dot com

619
00:38:57,480 --> 00:39:01,280
Speaker 1: slash newsletter. I'm new Gangwich. This is neutral