Howard Dean and the Certainty Index for Medical Innovation

Howard Dean, Physician, 2008 presidential candidate, former Vermont governor and chair of the Democratic National Committee (DNC), gave comments about health care reform to a group of senior pharmaceutical company executives, hosted by the Gerson Lehrman Group (GLG) in New York.

Dean, who is now of counsel to the law firm McKenna Long & Aldridge, dismissed Obama ‘s position that the 2010 reform would “bend” the cost curve. Why?

According to Dean, the reason that Obamacare does not bend the cost curve is because “little has been done to change the economic incentive of providers to charge by procedure rather than on the basis of a full episode of care. Fee-for-service remains the payment bedrock of the US system.” Until it changes, Dean acknowledged that costs will continue to rise.

Consequently, Dean reiterated his view that Obamacare will accelerate a transition away from the current employer-based approach to financing health care, creating a negative incentive for small business to continue providing health benefits to workers.”

He predicted that, “once the state insurance exchanges are up and running, small businesses will opt to pay the penalty for not providing coverage and simply give workers a bonus or subsidy of a few hundred dollars to help them purchase insurance under the individual mandate.” Conversely, the largest employers are likely to keep to the status quo as they prefer to control their exposure to insurance costs.

As a result, Dean pointed out that “like so much of the reform package, the outcome is a mixed bag: there will be less diversity, flexibility and choice in the system as the government role increases, but US industry will be more competitive in global markets due to having to shoulder less of the burden of covering workers for essential health care services.”

Dean also offered his support for the 12-year period of data exclusivity agreed to by the Obama Administration, PhRMA and BIO to advance the registration of follow-on biologics. Dean predicted that despite some backtracking from congressional Democrats to push the protection period down to seven years, the pledge will be kept – at 12 years.

He also noted his support for “tort reform, the centerpiece of which should be allowance for arbitration panels as an alternative to the constitutional right of victims to trial.” 

Further, Dean “pushed for actions to raise the “certainty index” for investors in big pharma and biotech.” This includes mediating more directly between the FDA and Congress, the agency’s most hostile stakeholder.

Dean noted that, “pressures from Congress against the FDA have created an overly politicized decision-making chain on the licensing of new therapies, to the detriment of the industry’s long-term future in the US.”

The former Vermont Governor also suggested that industry focus squarely on educating around the following issues:

• That medicines actually save money, when assessed in comparison to most other health interventions;
• Explaining how the average price tag of financing a clinical trial has doubled over the past five years;
• Drug companies, not academia or the NIH, do the heavy lifting in bringing new treatments to market;
• That manufacturing the next generation of large biologics is complex, risky and expensive; and
• Why tax incentives in the US emphasize less productive short-term objectives rather than the long-term payout responsive to biotech’s development cycle of more than a decade.

He asserted that, education should begin with Congress, which is “increasingly anti-science and ignorant about what is needed to seed drug innovation.”

In response to a question about comparative effectiveness or evidence based medicine, Dean noted that “formal cost-effectiveness evaluation in deciding who gets a new drug is unlikely to find a receptive audience in the U.S.”  Additionally, Dean asserted that, “action to force suppliers to bear some or all of the risk in meeting the cost of a new treatment is a drag on innovation.”

Ultimately, Dean’s comments show that even members within Obama’s own party are skeptical of some of the positions and policies adopted in the Affordable Care Act (or health care reform).  While many of the major issues facing this monumental legislation are likely to be decided in the Supreme Court next year (i.e. the individual mandate), a number of other major pieces of the legislation are also facing significant obstacles, such as Accountable Care Organizations (ACOs).  In addition, Congress must address the SGR growth rate.

Faced with these problems, additional issues at FDA, such as drug and device approvals, make achieving some of the goals of health care reform difficult to imagine and more difficult to achieve.  If the principles and issues Dean outlined above are carefully taught to members of Congress and explained to the public, there may still be a chance to save some of the reasonable measures within the legislation.  However, whether agencies and Congress can work together during a heated debate and strict party separations is unlikely.  

Accordingly, as Dean predicted, much of the provisions in the Affordable Care Act will depend upon whether Obama is reelected, which will depend mainly on whether he can reduce unemployment and improve the economy.