Saturday, February 26, 2011

Uncle Sam and trial lawyers loot the medical sector as Naderites cheer: The capital strike on the healthcare sector--and our health--continues and worsens.

The pharmaceutical sector needs capital.  Not so the industry can get richer, but rather so that we can get better.    It's not shareholders we should be worried about--it's us.

Everyone is free to criticize "Big Pharma," and muckrakers will sometimes make powerful and condemnatory points.  But as we listen to the critics who have made a career out of Pharma-bashing, we should keep in mind a basic point: Nobody ever was cured through criticism.   Medicine is life-improving and life-saving technology; by contrast, exposes, regulatory findings, and lawsuits are at best a means to an end.  In the end that is, somebody has to figure out how to fix abuses and make healthcare processes cleaner, better, and more effective.  And that's never the lawyers.

And yet today, the medical system is seriously out of kilter; it has, in  word, been "lawyerized."  Not just "regulated," which is fine, because the way our system works, but "lawyerized" in the sense that the real whip hand of regulation is not the career lawyers in the government, but rather entrepreneurial trial lawyers who form a new layer of regulation on top of the "alphabet soup" federal agencies and can make personal billions as they do so.  That is, the lawyers and regulators are gaining, while the scientists and doctors are waning.   This state of affairs might please the activist graduates of elite law schools, but in the long run, it's not going to please medical patients and their families.

To put it another way, we've had a decades-long experiment. The experiment was this: How best to advance personal and public health: Should the leaders be lawyers and regulators, or doctors and scientist?   And the results are in--we are getting both higher costs and less medicine.   The worst of both worlds.

Back on February 10, we took note of an important piece by Michael Milken noting the existence of what could be called a "capital strike" against the pharmaceutical industry--which is to say, of course, a capital strike against our future health.  A "strike," we might add, in the sense of a stoppage, but also a "strike" in the sense of an attack--like a hammer coming down.

For many of us--indeed, for just about all of us--it's the existence of medical drugs that spells the difference between a healthy future and a future of pain, disability, and premature death.   And so here at SMS hwe  we have augmented Milken's argument, because there's plenty of evidence that a combination of negative forces--the role of the FDA, the impact of the trial lawyers, Obamacare price controls, and a general lack of leadership from Washington--have all conspired to ratchet down the pharma industry and thus to dry out the new-drug pipeline, as well as the medical device pipeline.  This dolefully downward phenomenon adds up to what we have called the Serious Medicine Crash.

Now another piece of evidence comes from the Health Research Group at Public Citizen, the Ralph Nader-inspired activist group.  It shows clearly how governments are taking billions away from the Pharma industry:
The Public Citizen/Health Research Group (HRG) report finds that fines against the Pharma industry levied by the federal and state governments--mostly the feds under the False Claims Act--have jumped from $10 million dollars in 1991 to $4.4 billion in 2009.  (2010 data are only partial.)   Have a look: 
Needless to say, the HRG celebrates this spike in fines as a triumph of their left-litigious ideology.  Naderite activism rules; lawyers overwhelm corporations, even corporations engaged in activities that have much more to do with the public interest than left-wing lawyers substantially funded by the tort bar, which uses Naderite activism as the battering ram for billion-dollar cases.  As the website Trial Lawyers Inc. observed of Public Citizen back in 2005, "Public Citizen Foundation's board looks like a Trial Lawyers, Inc. leadership meeting, including Lisa Blue of plaintiffs' firm Baron & Budd and Joseph Cotchett, who's also on the Association of Trial Lawyers of America board." So low-paid activists and high-paid tort entrepreneurs find common cause in lawsuits.  The Naderite presumption is that corporations are evil, and that the antidote is a stern dose of regulation and litigation; while the trial lawyer presumption is that great wealth is fine, so long as it is made by suing other people. 

In the meantime, HRG, ever true to its Naderism, writes, 

While the defense industry used to be the biggest defrauder of the federal government under the False Claims Act (FCA), a law enacted in 1863 to prevent defense contractor fraud, the pharmaceutical industry has greatly overtaken the defense industry in recent years. The pharmaceutical  industry now tops not only the defense industry, but all other industries in the total amount of fraud payments for actions against the federal government under the False Claims Act.   

You can read the whole report here.  To sum up, though, in the minds of the HRG authors, the issue is  simple and easy to solve: As with every other problem in America, the answer to any possible Pharma abuse is another lawsuit, another big judgment, another contingency fee, and then maybe a new bureaucracy--preferably with criminal enforcement power.   

As a national political cause, we might note that this Naderite vision crested back in the 70s--the idea that we could litigate and regulate our way to a better society was firmly repudiated by Ronald Reagan in the 1980 presidential election--but as politicians have chosen to concern themselves with other issues, the trial lawyers have been free to enrich themselves in certain sectors, aided, of course, by the Naderite activists.   As the report says in its conclusion:

Over the past two decades, there has been a marked increase in the number of settlements between pharmaceutical companies and the federal and state governments as well as in the size of the accompanying financial penalties paid by these companies. The reasons for these increases are unclear, but are likely related to a combination of increased violations by these companies and increased enforcement on the part of federal and state governments.  Despite increased  government enforcement, illegal pharmaceutical company activities continue to endanger public safety and rob the government of increasingly scarce state and federal resources. These offenses require a more robust response. Given the small size of current financial penalties relative to these companies’ profits, we believe that both significantly increased financial penalties and criminal prosecution--including jail--of company leadership would provide a more effective deterrent to this unlawful behavior. 

Yet at the same time, we might step back and ask:  Why it is that fines against the industry have jumped 44000 percent in less than two decades?   Are we really to believe that Big Pharma is 440 times as corrupt as it was in the early 90s?  Or are we to believe that something else is at stake?   

Many observers think that the Justice Department, across presidential administrations, has found an easy way to make itself look good.  That is, it can win these kinds of cases, and thus up its "batting average."   In addition these cases are an easy way to raise revenue.  Indeed, as a former Member of Congress told me, "The Department of Justices sees these cases as a guaranteed piggybank."  That is, DOJ brings cases, and the Pharma companies pay up--or else.  So they pay up, and a mutant form of "public sector entrepreneurialism" prevails.  

A further part of the problem is the abuse of the so-called "whistleblower provisions," which have been greatly expanded in recent years.  In recent years,  whistleblowers have taken home as much as $96 million for their efforts.  And of course, of that sum, trial lawyers' contingency fees might well total 40 percent, or nearly $40 million.  Is that really a good way to regulate drugs and to protect the public safety?   Of course not.  Indeed, the retrospective nature of whistleblowing can actually hurt public safety. 

In the words of attorney Marty Robins, the huge rewards for whistleblowers actually seem to encourage employees to ignore mistakes or wrongdoing until it "ripens" into a lucrative case to take to the government:  

What the new incentives for whistleblowers will do is at the least encourage and cause more whistleblowing and probably more -- not less -- wrongdoing. What is optimal for society is to deter and stop wrongful activity by business before it starts and not after it comes to fruition and does its damage. Giving people 10-30 percent of fines and settlements resulting from wrongdoing encourages those who become aware of such incipient wrongdoing to wait until it "ripens" to the point that a fine or settlement is in order. It also provides no deterrent for the firm in question if the fine or settlement is a fixed amount which is shared by the SEC and whistleblower.

Is this really the way that we are going to raise capital to produce new medicines and cures?  Or is this just an example of why investors are shunning the Pharma sector, as Mike Milken says?   The answers to those questions, respectively, are "no" and "yes."  

No wonder the Serious Medicine Crash continues.  

Anyone familiar with this blog knows that the point of Serious Medicine Strategy is not to defend the Pharma industry.  Instead, the goal is to push for medical advancement.   Here at SMS, we are open to ideas for private, public, or private-public cooperation.  We also think that the international community should be much more involved in the effort, especially when leaders in other countries realize that the US pharma sector is no longer the dynamic and robust force that it once was.  

That's a daunting process, to be sure, and yet it must begin with a clear-eyed understanding of where we are right now.  And the Public Citizen Health Research Group points to a big part of the current problem. 

New York Governor Andrew Cuomo joins the fight for Serious Medical reform--UPDATED

New York Governor Andrew Cuomo obviously means business when it comes to reducing his state's budget deficit, and its overall expenses.   As part of that effort, he is pushing to reduce Medicaid spending, and of course, any comprehensive review of such spending will have to include a targeting of costly malpractice litigation.   As explained in many places by many experts, including Walter Olson of the Cato Institute, much or most of the money being siphoned out of the healthcare system by trial lawyers spells no good for the healthcare system--it only damages the system and enriches trial lawyers.

So yes, Cuomo is absolutely right to seek to cap pain-and-suffering damages at $250,000, which could save $209 million a year--and every little bit, or not so little bit--of savings will help the newly inaugurated chief executive reduce a deficit estimated to be $11 billion.

And yet as the New York Daily News' Kenneth Lovett explains, Cuomo's meritorious effort is certain to be opposed by the Speaker of the New York State Assembly, Sheldon Silver.   Silver, who has led the Assembly since 1994, is a longstanding opponent of any kind of tort reform, for reasons not limited to his lucrative association with the buccaneering law firm of Weitz & Luxenberg, one of those law firms you see advertising on TV, angling for clients.    Here's a look at Silver in his legal oeuvre:

If the screengrab above, the words "ACT NOW!" are prominent--here's a closer look, at a blatant pitch for business:
So let's wish Cuomo luck in this effort--and take note of his courage, taking on a powerful constituency, not only in New York State, but within his own party.   After all, the tort bar is a linchpin of the Democratic Party's political and financial structure.   Yes, it's strange that the self-styled party of working people has also made room for millionaire and billionaire trial lawyers, but that makes it all the more impressive that Cuomo is doing what he is doing. 

If Cuomo succeeds, we might add, the effect could be to inspire similar efforts in other political jurisdictions.   And the result would be both lower healthcare costs and better medicine. Estimates of the cost of medical malpractice range from $55 billion to $200 billion.   Yet as noted here at Serious Medicine many times, the real cost of trial lawyers is not the cost of paying malpractice bills, it's the damage done to R&D.  

A big unanswered question is where the Cuomo administration will aim the scalpel if its savings projections fall short, which they are expected to do. Unless providers shrink costs on their own, Mr. Cuomo would have freedom to change rates, levy surcharges, and eliminate services—and choose which sectors would shoulder the burden.  

A reminder that the fiscal devil is always in the legislative details.  More than one politician has declared a target, and gotten credit for that target in the political here and now, and then arranged to be somewhere else when the reckoning for an unmet target came to be paid.  

Yet even so, Cuomo's malpractice reforms, which are the most relevant to the cause of advancing Serious Medicine, do seem to be real--real proposals, that is.   Now we must see whether Cuomo can prevail over Silver.

Thanks to Fred Siegel for this update. 

Thursday, February 24, 2011

Metrics for Future Health: A Way Out of the Inputs-Outcomes Conundrum

Published by the Manhattan Institute: Full text here

Serious Medicine Strategy comes to Fox News

That's me on Fox News Watch "Bias Bash" this morning, holding up an edition of Wednesday's Washington Times, which included an editorial, "Obama's race against the cures," which focused on the scary numbers about medical innovation in my  February 19 blog posting, "The Serious Medicine Crash."

The Serious Medicine Crash--update

The Wall Street Journal's Pui-Wing Tam reports on the continuing drought in venture capital funding for healthcare, even as other vc sectors recover.    As we can see from this chart, venture capital funding for electronics is up, vc funding for healthcare is down.  (Energy vc funding is down too, presumably because the "green jobs" bubble has burst.)

But what's more important to all of us--not just entrepreneurs and vc's--than health?

Wednesday, February 23, 2011

Mike Mandel provides more proof of the Serious Medicine Crash

Mike Mandel has been writing persuasively about how technological stagnation endangers America for years--first at Business Week and now as a senior fellow at the Progressive Policy Institute.   His work, which echoes the work of Robert Solow, William Baumol and many other economists, reminds us that the single biggest driver of  economic growth is scientific discovery and technological innovation.   A recent post from his blog, Innovationandgrowth, shows how the decline of US innovation has real consequences--the chart above shows how the once-steep decline in the death rate of Americans aged 45-54 has been basically flat for the last decade.    We might that Americans aged 45-54 are likely to be in the prime of their working and child-rearing lives. So these premature deaths are not only personal tragedies, but they also represent an enormous loss of human capital.

As noted here at SMS, the Serious Medicine Crash  is not just an abstruse dispute--it has real consequences.

So what to do?  Mandel offers some concrete suggestions, such as a Regulatory Improvement Commission  
to operate the same way as the BRAC process.    As Mandel puts it, "If we want growth and rising living standards, we need to avoid adding on well-meaning regulations that drive up the cost of innovation." 

Indeed.   And we'll live longer and better, too. 

Sunday, February 20, 2011

Serious Medicine Crash Update--Hospitals running out of Serious Medicine

A startling report from The Chicago Tribune's Bruce Japsen, outlining shortages in life-saving drugs.  It's interesting that this is happening less than a year after Obamacare was signed into law.  And it's just as interesting that the federal government has had other priorities all this time.   Here are some excerpts from Japsen's report

Hospitals across the country are running out of key drugs used in surgeries and to treat some diseases, including cancer, causing doctors to turn to older treatments.  In some cases, hospitals are paying higher prices to get their patients necessary care because wholesalers are hoarding needed medicines.  . . . 

"These are the worst shortages I have ever seen," said Thomas Wheeler, a hospital pharmacist for three decades and director of pharmacy for Advocate Illinois Masonic Medical Center on Chicago’s North Side. "The most troubling aspect is that it is critical drugs for which there are limited alternatives. Many are involved in cancer care and surgery." 

There are about 150 drugs — triple the number from just five years ago — that are in short supply, according to the American Society of Health-System Pharmacists, a trade group that works with hospital pharmacists on ways to deal with the shortage.

Next, reporter Japsen outlines some of the problems.  As might be expected for any complicated event, there's more than one possible cause: 

Drugmakers say they are obliging tougher safety rules put in place by the U.S. Food and Drug Administration, which has intensified scrutiny to avoid allowing unsafe medicines on the market. The FDA came under fire for its role in monitoring the blockbuster pain pill Vioxx, which was pulled off the market in 2004 by its manufacturer, Merck & Co., after the drug was linked to heart attacks and strokes.  

The drug shortage is being exacerbated by consolidation in the pharmaceutical industry, which leaves fewer companies making drugs. For example, Teva Pharmaceuticals Ltd. makes generic forms of certain cancer medications. So when quality issues temporarily closed its plant in Irvine, Calif., in April, medical professionals were faced with limited supplies of an array of cancer drugs.

As noted, the Obama administration seems to be AWOL, at least as far as this story is concerned, but some politicians are taking notice: 

The drug shortages have gained the attention of members of Congress. Last week, Sens. Amy Klobuchar, D-Minn., and Bob Casey, D-Pa., introduced legislation that would require drugmakers to give the FDA an early notification "when a factor arises that may result in a shortage," according to a joint statement.

"Several major hospitals in our state have experienced shortages that are jeopardizing patient care, and this bill will provide the knowledge required to help address and prevent future shortages," Casey said. "Knowledge is one of the most important tools for combating problems associated with drug shortages, which are a growing threat to public health in Pennsylvania and across the U.S."

We might note that Sens. Klobuchar don't seem to be offering any solution--they just want to be notified.  
That might be the beginning of a good response, but for now, all we know is that while Uncle Sam was busy trying to assure that everyone in the country had insurance, the supply of drugs was faltering.  As noted here at Serious Medicine many times, there's not much point to insurance if there aren't drugs and other kinds of treatments and therapies to consume. 

Note to Sen. Simpson: Hurling insults is not the way to cut spending. Technology is the key.

A piece I published in The Washington Examiner on February 13, headlined, "Note to Sen. Simpson: Hurling insults is not the way to cut spending.  Technology is the key," seems to keep disappearing off the Examiner website, so here's the text:

On Sunday, former Sen. Alan Simpson (R-WY) told CNN that budget-cutting efforts have been the equivalent of “a sparrow belch in the midst of the typhoon.”    Unless Washington was willing to confront the “big four,” Simpson added--Medicare, Medicaid, Social Security, and defense--there wouldn’t be much federal cutting.   

Simpson should have learned by now that merely hurling colorful phrases and insults is not an effective budget-cutting strategy, either.  Yet in terms of dollar numbers, he has a point: Those four categories alone account for almost two-thirds of federal spending.   

And yet there’s a basic reason why all federal spending is so hard to cut: Baumol’s Law, sometimes called Baumol’s Cost Disease.  Decades ago, William Baumol, a New York University economist, observed that cost savings rarely occur in labor-intensive industries.  The example he used was classical music: A piece written two hundred years ago for a quartet still takes a quartet today.   In other words, if something is labor-intensive, it will be expensive.  

Let’s take healthcare as an example.  Some 14.3 million people work in the healthcare sector;  yet which political party wants to start laying off healthcare workers?  Even Sen. Jim DeMint (R-SC) has said he doesn’t want to cut Medicare,  and the Medicare-voucherizing “road map” of Rep. Paul Ryan (R-WI) is not exactly front-and-center on the GOP agenda.  

But there’s a cure for Baumol’s Law, which Baumol himself identified: It’s called “industrial revolution.”  For centuries, the American economy has advanced because technology displaced human labor, both cutting costs and freeing up labor for new and more productive uses.   In his 2002 book, The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Baumol calculated that 90 percent of the GDP of America today can trace its origins to the innovation and productivity gains of the last three centuries.  

Today, we can look around our society and see the difference in cost between “revolutionized” sectors, such as manufacturing, and “craft” sectors, such as healthcare, which is still labor intensive--lots of doctors doing their Hippocratic thing, patient by patient, lots of labor-intensive hospitals and other care facilities.  

So can we industrialize medicine, replacing the kindly GP with a robot?  Probably not.  Thus we need to find other ways to inject technology into the healthcare sector.  One way is through medical cures; the polio vaccine, after all, obviated the need for many physical therapists and iron-lung tenders. 

Today, what’s the parallel opportunity--both health-giving and labor-saving?  We might consider  the case of Alzheimer’s Disease, which costs $172 billion a year; both incidence and costs are rising fast.    If we could find a cure for Alzheimer’s, or even push back its onset by a few years, we would not only save on Medicare, but we might also be able to raise the retirement age--another huge win for the treasury.   

So a crash effort against Alzheimer’s could pay for itself, by curing not only Alzheimer’s Disease, but also Baumol’s Disease--reducing the need for labor-intensive nursing homes.   But could we really make scientific progress against Alzheimer’s?  There’s no guarantee, but our track record as a nation--not only in polio, but also in AIDS--suggests that we could solve such problems. 

And besides, we don’t have a choice other than to try: Simpson’s angry verbiage aside, if people get sick, we will pay for their sickness, out of one pocket or another.   So let’s industrialize medicine in a humane way: by mass-producing new cures.

Saturday, February 19, 2011

The Serious Medicine Crash

Editor's note: the charts in this post have been updated since original publication. 

We are in the middle of a crash in Serious Medicine--a steep decline in the number of medical devices approved, an even steeper decline in the number of drugs approved, and a drought in venture capital.

And yet few are noticing, at least not those engaged in the public policy debate, or those covering it.   A case in point is this article in Friday's Wall Street Journal, "J&J, FDA Clash Over Device." 

Two points to be made here:

First, note the verb in the headline: "clash." Undoubtedly, that's exactly what Johnson & Johnson and the Food and Drug Administration are doing: They are clashing over a device called Sedasys, which, as the Journal notes, "is used to mildly sedate patients about to undergo routine medical tests."  OK, fair enough.  But not all clashes are the same; in a private land dispute, for example, few outside observers might have any interest, or curiosity, in the outcome. But in the case of medical devices, if there's a clash between the government and an equipment maker, we all have an interest.  So it's unfortunate, if appropriate, that the headline doesn't quite capture the reality that we, the people, have a stake in the outcome of this case--because we want more safe medical devices--don't we?

I am not saying that the FDA should, or should not, approve Sedasys.   Instead, I am arguing, on behalf of all of us, that we want the most robust possible market for new devices (and drugs, and anything else that heals and cures).  And if, for example, the Obama administration, which has declared its determination to control healthcare costs, even as it expands healthcare coverage, is in any way putting its thumb on the scales to say "no" to new devices, well, we should know about that.   Because, as we shall see, the real story here is not the "clash" between J&J and FDA.  The real story is the crash of Serious Medicine.  

In fairness to the Journal, there's no way that a straight-news headline could capture our larger collective interest in the case, to say nothing of my own suspicions about a rationing-mindsetted FDA/HHS.  Happily we all can all be an interested party--and interested commentator--in this case if we wish to.   Of course, raising our voices is easy; making our voices heard is harder.  More on that in a bit. 

Second, if you look closely at the chart in the story, you see the recent history of the FDA's approval of new medical devices.  The overall trend of submissions to the FDA is down, slightly, and that's not good.  But the black part of each riser, at the top, is undoubtedly the most important, because it shows the number of new devices approved by the FDA each year, going back to 2003.  You might need a magnifying glass, but the chart shows that the number of devices approved has fallen.   But the chart obviously does not highlight that fall.   So here's another look at the number of new devices approved by the FDA, going back a decade, to 2001, according to the FDA:

Not encouraging, huh?   For those interested in the details, the fall from 60 approvals in 2001 to 27 in 2010 is a 55 percent drop.  As noted, we all have an interest in more medical technology. 

But perhaps, one might speculate, the fall-off in medical devices is a one-off.  Actually, the fall-off is part of a larger trend--a crash we might call it.  FDA approvals of new drugs (new molecular entities and biologics) is showing an even steeper falloff--63 percent--as shown, once again, by the FDA, with some additional data from Pharma Strategy.   Here, take a look at this chart:  

So we se the same trend, across three Presidential administrations and Congresses controlled by both parties.  A grim trend, to be sure.  

But of course, the fall-off in both drugs and devices should not be surprising, because as Rick Merritt of EE Times reported last fall, as many as three quarters of healthcare venture capitalists are leaving the field. 
So we can sum up the life-prospects situation that we all confront: The number of approved new devices down by 55 percent, the number of approved new drugs down by 63 percent, and the number of venture capitalists down by 75 percent: 

That's the Serious Medicine Crash.  And it's a matter of life and death to all of us. 

So what will it take to turn these baleful trends around?   How could we get a boom in Serious Medicine?  It would take a host of changes, of course, and that's the overall topic of this blog.  But the first mission is for all of us to point out what's happening to us.  And if enough of us do, the Journal, and other publications, will cover the story.   And that will be the beginning of the turnaround. 

* Drugs defined as new molecular entities + biologics. 

Friday, February 18, 2011

The Manhattan Institute's Paul Howard illustrates how Serious Medicine becomes Routine Medicine--and thus becomes both less expensive, and better

As the marquee title of this blog indicates, the emphasis here is on "Serious Medicine"--that is, the medicines and other treatments that make a decisive intervention in the course of an life-threatening or debilitating illness.   Serious Medicine is heroic, the stuff of drama--and a key part of that drama is the mystery as to whether or not Serious Medicine will work in any given instance.   That's not in any way a criticism; in fact, it's praise.  Serious Medicine is the cutting edge.

But there's a second category of medicine, which partially overlaps with Serious Medicine, and is just as important--perhaps even more important.  That second category is what we can call "Routine Medicine."   Routine Medicine has been proven to work--there's no drama, just routine functioning and healing.  Routine Medicine provides the medical "shoulders" on which all doctors and medical professionals stand.

We learned in the 18th century, for example that vitamin C prevents scurvy.  Once the secret was discovered, we learned to take our fruits and vegetables, and our teeth no longer fell out.   Problem solved--like flipping a switch.   And we have been thinking about vitamins, and their benefits, ever since.  In the same vein, if you take iodine and you won't get goiter.  Taking vitamin B9, also known as folic acid, can dramatically reduce spina bifida.  And so on.

Aspirin is another great example of Serious Medicine that evolved into Routine Medicine.   Developed in the 19th century, it was the wonder drug of its time: Serious Medicine.  More recently, we have learned that in addition to easing aches, an aspirin a day can have on heart attacks.  More wonders.   And yet because aspirin is long ago generic, it is cheap.

So we can see the pattern: Each one of these Routine medicines was Serious at one time; that is, until the science was worked out and it became Routine.  That science, of course, was expensive and iffy, but then it was accepted.  Medicine is Serious until it became proven safe and effective, and then it becomes Routine.  In the words of the British mathematician and philosopher Alfred North Whitehead, “Civilization advances by extending the number of important operations which we can perform without thinking of them.”   Yes, we take Routine Medicine for granted, but that's OK, because it creates space for new thinking--even as it provides an enduring platform for future medical progress.

And Routine is cheaper--not a small consideration in this world.   Routine Medicine is not only cheaper because its once-esoteric secrets are widely publicized, mass-produced, and then widely distributed.  In addition, Routine Medicine is cheaper because if it can sold on the competitive open marketplace.   Whereupon the virtuous forces of competition and consumer comprehension--that is, consumers armed with adequate information--will serve to increase efficiencies and drive down prices.

Indeed, driving down the cost of Routine Medicine is an implicit topic of an important new study from the Manhattan Institute's Paul Howard, "Easy Access, Quality Care: The Role for Retail Health Clinics in New York."   As Howard explains, "retail  clinics have the skills and organization to serve as convenient and cost-effective providers of basic health-care services." Provided, that is, "troublesome and unnecessary regulatory barriers are lowered or removed."

So here we see the real beauty of Routine Medicine: Not only has it been proven, long ago, to work, but in addition, it can be produced and sold at commodity-level prices, as people learn to comparison-shop.  Competition works, when consumers are at roughly the same plane of information as the producers--more on that later.  But on the subject of Routine Medicine, Howard is exactly right: If the market is allowed to work, it's a win for everyone but monopolists.

(And thus, we might add, we further see the folly of rationing schemes: The more production of medicine there is, the more the price will ultimately come down; indeed, it is only mass production that makes things both widely available and widely affordable.)

Although Howard confines his argument to New York State--where he calculates that the full utilization of  retail clinics would save $350 million over the next decade--we can readily see that the same free-market idea could be extended to the rest of the country, generating savings in the billions. As Howard puts it:

*Retail clinics offer readily accessible, high-quality care for a relatively limited set of basic health-care ailments ranging from minor skin infections to sore throats and earaches. For the services they offer, quality appears to be at least equal to—and, in some cases, superior to—that offered by other types of providers.

*Total costs (to insurers and patients) of care at retail clinics appear to be significantly lower than those incurred by other types of providers such as physicians’ offices, urgent-care centers, and emergency rooms. Much of the lower cost can be attributed to the lower overhead associated with their retail location and widespread use of less expensive “mid-level” practitioners such as nurse-practitioners to provide care.

*A significant percentage of emergency-room visits could be safely and effectively redirected to retail clinics, saving millions of dollars annually.

*Patients are seeking care at retail clinics for appropriate conditions, and the availability of retail clinics does not seem to be increasing the utilization of such clinics for unnecessary care.

*Patient satisfaction with the care that they obtain at retail clinics is very high.

The whole report, here, is well worth reading, because it shows how market forces can improve public health and consumer welfare.

But we must note that at present, there are limits to the efficacy of the free-market model.   In a nutshell, the free market is only guaranteed to work for Routine Medicine.  For Serious Medicine, other complicating factors enter in, clouding up the promise of free markets.  One such factor is "asymmetric information,"  as Nobel Prize-winning economist Kenneth Arrow demonstrated back in 1963, in a landmark article for the American Economic Review.  If your doctor tells you that you need open-heart surgery, what are you going to do?   You can seek out a second opinion, or even a third, but in most places, the supply of surgeons is relatively finite, and each consultation is, of itself, expensive.   Consumer empowerment is great, but in the case of an arcane subject such as Serious Medicine, consumer enlightenment is not feasible.) 

(As an aside, we might note that you should certainly hope that as you are shopping around, seeking to maximize your welfare, that the doctor is not putting profit-maximization as his or her top priority--that is, volunteering to cut your chest open because he needs the money.  That's where the Hippocratic Oath comes in--a non-market mechanism if there ever was one.  The Hippocratic Oath is not always observed, of course, but the abiding spirit of that Oath, in the minds of most doctors, is what separates and exalts the medical profession from other professions.  Doctors would lose that cachet at their peril, as well as ours.  And in any case, especially in the realm of Serious Medicine, we all--patients and taxpayers alike--need regulatory protection against the fraudulent abuse of that information asymmetry.) 

And besides, returning to your hypothetical open-heart surgery prescription, even if you were to shop around for the best possible price on such surgery, the price still will not be cheap, because it's a complicated procedure with a long recovery time.   Open-heart surgery, we can say, is inherently Serious.  Yes, techniques have improved, but it's always risky, as well as expensive.    

It's hard to see, for example, open-heart surgery ever being seen as "Routine," because even if the operation could be performed entirely by robots, the mere fact that the surgery involves opening someone's chest makes it complicated, subject to medical Murphy's Law. 

And yet more heart treatment has become Routine--because it has evolved into new forms.  The need for open-heart surgery has been obviated in many cases, by newer procedures based on newer technologies--angioplasties and stents, for example.  And these newer procedures come pretty darn close to Routine.  

Two summers ago, former President Bill Clinton, who has had open heart surgery, was hospitalized within chest pains; after a couple stents were implanted, he was released the next morning.  Now that's the power of Routine Medicine.  Clinton's life was immediately better, and compared to major surgery, whatever was spent on him during that less-than-a-day stay was a bargain.   

Down the road somewhere, as those sorts of heart procedures become even more routine, perhaps they, too, could be performed at retail clinics, just as with, say, the Lasik eye procedure.   Indeed, some kinds of surgery, aka laparoscopic or minimally invasive surgery, are becoming more Routine as more and more patients receive them on an out-patient basis,  This is the process of "Routinization" occurring--that is, as the procedure gets easier to do--often with the aid of technology, such as cameras, lasers, and even robots. The more Routine a treatment is, the cheaper it will be.  And, by the way, the treatment will likely be better, as medical science works out the kinks over a "scaleable"population.   Our cell phones, for example are better because they have produced in the billions.   

Once again, we see the pattern: Serious Medicine is inherently the costly preserve of  doctors, medical suites, and hospitals.  And that's why it stays expensive, as argued here.  Routine Medicine, based on equalling out of Arrow's information asymmetry, is out in the market, hopefully, and so it becomes cheaper and better.  

And of course, statin drugs, such as Lipitor and Crestor, are cheaper still.  They have saved millions from costly heart procedures--and even more costly death.   And as statins can be mass produced and as they go generic, the cost of those life-saving pills will eventually fall down to aspirin-like levels.  You can get those Routine Medicines at any pharmacy.   And that's a good thing.

So if your doctor says you need open heart surgery, you have a Serious problem.  But if he says you need to go a blood-thinning statin, you have a Routine problem.   

Routine is good.  As Whitehead reminded us, we live by Routine.  And, as the Manhattan Institute's Howard reminds us, Routine is cheaper.  

Wednesday, February 16, 2011

Michael Milken warned us: The capital strike on the healthcare sector--update

In a Wall Street Journal opinion piece entitled, "Health-Care Investment--The Hidden Crisis," Michael Milken warned us that the relatively weak performance of the pharma sector was a "ominous" sign for all Americans.  After all, the health of the pharma sector has a direct bearing on all of us--for the obvious reason that we all depend on medicines.  Pharma is not just another industry creating (hopefully) jobs and wealth.  It is an industry we rely on to create health, too.   And yet now we see still more confirmation that Milken was right to raise the alarm.

The headline atop Joe Weisenthal's story in The Business Insider today is bold, and encouraging about the stock market and the overall economy:  "BofA/Merrill Issues Big, Bullish Report On Tech, And Says To Buy These 10 'Titans' Of The Industry."  The 'titans" cited include Google, Oracle, and IBM.   

Once again, that's great for those companies--the bulls are becoming bullish once again: The gray risers show the old "weighting" for stock portfolio holdings, while the blue risers show the new weighting.  In other words, the new blue risers show that tech should be up, relative to other holdings.   But now take a look at where the health sector ranks as possible stock portfolio holding--as the chart shows, it was down before and even more down now:  

That's healthcare over there in the chart, on the far right--in negative territory.   Such a negative rating for the healthcare sector may be justified on the economic fundamentals; after all, the continuing crisis of regulation and litigation--plus now Obamacare--does make prospects for the industry seem dim.  

But as Milken observed, if the economics of the business are worsening, then prospects for our own long and healthy lives are worsening, too.  

UPDATE: Ilana Mercer points me to this EE Times article from last September 17, headlined, "Regulations rise as VC's exit health care."  In other words, there's more than one way to provoke a recession in the healthcare sector.  Capital not coming in, that's one way.  But why is the capital not coming?  One big reason is the climate of regulation and litigation.  There are simply easier ways to make money. 

As reporter Rick Merritt noted in his EE Times piece, "As many as three-quarters of venture capitalists are exiting the health care field as the total pool of venture capital decreases and regulatory hurdles increase."  Here's some more from that scary article: 

Medical electronics companies face increasing hurdles getting funding and regulatory approval to bring new technologies to market, according to executives at a medical device event here.  "We're in a bit of a perfect storm right now with some of the worst things I've seen in 30 years," said Eamonn Hobbs, chief executive of DelCath Systems and chairman of the Medical Device Manufacturers Association (MDMA), host of the event.

As many as three-quarters of venture capitalists are exiting the health care field as the total pool of venture capital decreases and regulatory hurdles increase, said Kevin Wasserstein, managing director of Versant Ventures (Menlo Park, Calif.) which focuses on health care.

"Even entrepreneurs have started to retreat from pursing big ideas [in health care], and we risk as an industry evolving to incrementalism and safer projects," said Wasserstein.

Some of the about 100 medical devices executives gathered here complained about what they said was an increasingly conservative and slow-moving U.S. Food and Drug Administration. The chief executive of one medical device company said his product is approved for sale in Europe, but is still waiting on an FDA OK to begin clinical trials.

"The conversation in the hallways is about how we are off-shoring our medical innovation," said one attendee in a Q&A session with FDA principal deputy commissioner Joshua Sharfstein.

Tuesday, February 15, 2011

How to reduce Social Security and Medicare--AND be re-elected

Everybody is noticing that the rival Democratic and Republican budget plans both skip over the plumpest targets for savings: Medicare and Social Security.   And for the best political reason possible--such cuts are extremely unpopular with voters.    Republicans have attempted such cuts many times over the last few decades--1981, 1986, 1995, 2005--and each time have been knocked back.  And Democrats who favor such cuts all seem to have one common characteristic: they do not hold elected office.   
Practicing politicians, eyeing their own re-elections, have gotten the message; the “third rail” is still the third rail.  Indeed, according to a November poll, by an 81:18 margin, voters would rather raise taxes than cut Medicare. For Social Security, the results were nearly identical--78:21.

Those are daunting numbers for even the hawkiest deficit-hawk.    Courage is virtue, but courage that amounts to guaranteed political suicide is a rare virtue--especially when there’s no chance that President Obama will agree to such cuts between now and the 2012 re-election.   Democratic politicos are not going to let their president throw away a perennial winning issue--“Save Social Security and Medicare”--for the sake of making Paul Ryan or Pete Peterson happy.  But then, of course, come the equally crucial 2014 elections, and the 2016 elections, and on and on.  

So is the situation hopeless?  Are we doomed to slide down into Greece City?  Let’s hope not. Better yet, let’s match that hope with some new thinking.  Let’s make the voters a better offer: If we can cure Alzheimer’s Disease (AD), or even push back its onset by five years, then we can cut entitlements.   Instead of cutting the supply of money to Social Security and Medicare, let’s try cutting the demand--fewer incapacitated oldsters.   Would Democratic politicos join up with the professional leftists at AARP to fight such a raising of the retirement age?   Maybe.  But they would lose to rank-and-file seniors, and future seniors, who want to know their grandchildren.    

A “moonshot” approach to AD would require much more than more NIH funding.  The mobilization needed would necessitate reform of the FDA, of product-liability and intellectual property laws, and new mechanisms for leveraging private capital.   That’s a lot of work, but at least that approach would offer the hope of real entitlement savings that the voters would accept, as well as better health for all of us.  

Sunday, February 13, 2011

The need for foolproof, tortproof medical records--and even a Tricorder

As discussed many times here at Serious Medicine Strategy, safe and effective medicine requires an enormous amount of data.    And for that data to flow freely, the information must be easy to move around, the system must be technically reliable, and the entire system needs to be "tort proof."

Thanks to Peter McBrien for catching this.

Thursday, February 10, 2011

Michael Milken outlines the capital shortage for pharma. That is, the "cure-recession" that threatens all of us.

Michael Milken, chairman of FasterCures, a Washington-based center of the Milken Institute, published important ideas for advancing Serious Medicine in The Wall Street Journal yesterday. 

Milken has been a visionary advocate of improved health and medicine for more than a decade, and his piece hits many key points--from reforming the NIH and FDA to encouraging wellness.  

But one Milken point in particular needs emphasis:  The reality that we are in the middle of what might be called "capital strike" in the healthcare sector.    That is, investors are looking elsewhere, away from the healthcare sector, for good returns on investment.  And that’s obviously "ominous," as Milken puts it, for our long-term health, as well as the longterm solvency of healthcare programs, including Medicare.   Perhaps Milken is being polite in his word choice.  Perhaps a better word than ominous is "disastrous," or even "catastrophic."  

Yet the real issue is the reality of the status quo, not this word or that word.   In his piece, Milken contrasts the stock-market valuations of various kinds of companies against the valuations of the pharma companies and concludes that the market has assigned a lesser value--more precisely, a lesser price-earnings ratio--to the pharma sector.  Here’s an excerpt of Milken’s piece: 

Consider companies that make consumer products—things like soft drinks, detergent, cosmetics and beer. While their price-earnings ratios will vary, in today's market their average will most likely be in the neighborhood of 20. But the average P/E of the largest American pharmaceutical research companies (Abbott Labs, Bristol-Myers Squibb, Johnson & Johnson, Eli Lilly, Merck and Pfizer) was recently near 10. Investors must have concluded that pretzels and eyeliner produce faster profit growth than prescription medicines.

Lower pharma P/E ratios are a recent phenomenon. A generation ago, drug firms regularly topped magazine lists of the most-admired companies in America, a reputation usually reflected in their stock prices. But facing the specter of regulated returns, enterprise values dropped sharply during debates about proposed health-reform legislation in 1993. When the proposals failed in Congress, valuations eventually recovered. In the last decade, pharma P/E ratios dropped again.

So we might ask: Is it really in America’s national interest to be assigning so little value to the pharma sector?  We can further ask: Which is more important--potato chips and soft drinks, or new cures and new treatments?  A few market-fundamentalists, to be sure, might insist that the free market has decided that snacks are more important than life-saving pills, and thus defend the wisdom of the market.  The answer to that assertion is that the healthcare market has been badly distorted by excessive regulation and litigation.    

And in any case, the overwhelming majority of Americans would disagree with libertarian purity.   Americans think that the market should work for them, not the other way around.      

Indeed, we can further conclude that the average American probably has no idea that so little is happening in the pharma sector--that the number of new drugs has fallen by two-thirds over the past 15 years.  The American people might not care much, or at all, whether or not the pharma sector is making money, but they do care about the drought in cures.  And so if they could be persuaded the capital drought is leading to the cure drought, there’d be a change.   If folks were to know, for example, that the number of new drugs coming through the pipeline has fallen by two thirds, they would demand action.  
Because the deep perversity of the current incompetent system is that there is enormous public demand for new medicine--for new cures.   For Serious Medicine.  Just turn on a TV and watch the news: The “health” category is full of stories about new treatments and cures--in utero surgery for spina  bifida being the most recent heartening example--as opposed to health insurance. 

The question, then, is why the supply has been choked off?   Why can’t demand be matched by supply?  We can that mismatch a “cure recession.”  And so where did that cure-recession come from? 

This cure recession is very strange, because the permanent torrent demand for healthcare is there. And that should make for a permanent boom in the sector.   The late Nobel Prize-winning economist Paul Samuelson’s spoke of “insatiable” demand for just about everything.  That’s certainly true for Serious Medicine, the stuff that improves our lives and keeps us alive.  

But that demand has not been met by supply. 

To be sure, the supply numbers sound impressive at first glance--that is, the supply of money.  The Pharmaceutical Research and Manufacturers Association (PhRMA) reports that its members invested $45.8 billion in 2009 in discovering and developing new medicines, and that industry-wide research and investment reached a record $65.3 billion in 2009.  

That sounds good, but at the same time, as we have seen, the number of new medicinal drugs approved by the Food and Drug Administration has shrunk by two-thirds in the last 15 yearsWhat could be driving this?  One factor is the extraordinary cost of a new drug.  According to Pfizer, the cost has risen five-fold over the past two decades, to $2.4 billion for each “new medical entity.”  Thus we see a disastrous “scissoring” of trends--more money being spent, but fewer drugs coming out of the medical-industrial pipeline.    So the seeming abundance of pharma capital is actually, on closer inspection, a scarcity.  

A common and accurate term for this diminishment is “drought,” but that word, useful as it is, suggests there’s something natural about it.  But in fact, there is nothing natural about this slowdown--indeed, the slowdown runs counter to the innate enthusiasm of people for more and better cures--so we can call this slowdown by a name that connotes its man-made origins.   And that term is cure-recession.   Or even planned cure-recession--planned by people who think, for example, that we spend too much on healthcare.    Some specific causes of this cure-recession are over-regulation and over-litigation.   But we can also note a simple explanation: There’s not enough money--chased off, of course, by the regulators and price-controllers.    And that shortfall, of course, is the result of of some wrong-headed thinking about where to spend the healthcare dollars that we do spend.  In a nutshell, we spend too much after the sickness hits, and not enough before.   

A basic conundrum of our health system is that we spend so much on care and yet so little on cure.  Once again, it's as if our healthcare system were designed to benefit such labor-intensive industries as nursing homes.    America’s R&D budget for medicine--the money spent by the federal government, the pharmaceutical companies, medical institutions, philanthropy--is  approximately $113 billion a year.  That's a big number, but if, as we have seen, each “new medical entity” costs $2.4 billion, then that $113 billion doesn’t stretch that far.

Moreover, $113 billion is only about four percent of the $2.6 trillion that the US spends on healthcare every year.   In business terms, we can think of the $2.6 trillion as operating expenses, while the $113 billion is the capital budget--a puny amount.   And for  further perspective on that $113 billion, we can note that Americans spend about $40 billion a year on weight-loss programs and products, and about $400 billion a year on sports of all kind.   No doubt the P/E ratios, or other economic equivalent, for those industries, is much higher. 

So once again, if the pharma market were more functional and more robust, capital would come flooding in, and the cure-recession would be over   Such an influx of capital would probably help the existing pharma companies, but the real beneficiaries would be the American people.  Plus, of course, whatever medical geniuses might be lured into the field, or might find themselves empowered to actually make their cure-vision a reality.  

Yet we might ask: Where is this money going to come from?   As we consider the relative amounts of capital needed for Serious Medicine, we might step back and think about larger sources, in keeping with the larger challenge-sources from around the country, and around the world.   

We might say, for example, that the $113 billion R&D figure should be compared to America’s overall Gross Domestic Product (GDP), which is approximately $14.5 trillion.  In that case, R&D spending comes to less than one percent of GDP--eight-tenths of one percent, to be precise.  Is that all we’re worth to ourselves?  Is it right that just one dollar out of every 125 that we generate is spent on developing medicines for our health and our lives?  Is that really the right ratio? 

As we survey this capital shortage for Serious Medicine, we can think back to the lingering and cumulative impact of the Seventies Scarcitarians: They decided, long ago, that we were spending too much on our health and well-being, and they have been everything they can do to vindicate their judgement--basically an aesthetic judgment, driven by anti-technological impulses.  

Meanwhile, when we see that tiny number for medical R&D, next to the enormous potential supply of money for such R&D, it’s a sure sign of underinvestment--some might call it a “capital strike.”  But a more neutral term from economists is “market failure”; in the current environment, capital simply cannot find enough worthy projects to be invested in.  Hence the cure-recession. 

Indeed, we might go further, noting that the net worth of the country is about $55 trillion, and so annual medical R&D amounts to just .2 percent of our wealth.  Finally, we might note that the net wealth of the world is around $200 trillion, and people everywhere, rich and poor alike, are interested in cures--and they would eagerly contribute to the cure-effort, if they could.  By these multi-trillion-dollar denominators, the numerator--the $113 billion the US spends on medical R&D--seems puny indeed.   

Thus, to invoke economic terms, when demand-siders--that is, Keynesians such as Samuelson--say that robust demand is paramount, they are correct.   And when supply-siders--such as, say, the late Jack Kemp--maintain that robust supply is paramount, they, too, are correct.  

What we have described above is the definition of a demand-side recession, and current prospects for the cure-sector seem bleak, as Obamacare-ish price controls kick in, or even threaten to kick in.   Medical R&D, presently receiving sparse demand, is being sparsely encouraged to invest in research.  In order to convince the cure-sector to invest, we must see a greater demand for cures.  Yes, that can be seen as a Keynesian argument, but  century-and-a-half before Keynes, the same argument was made by Adam Smith, who wrote in The Wealth of Nations that it is “perfectly self-evident” that “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer.” .  So perhaps we can conclude that both Keynes and Smith were wise in their words--and wisdom, of course, transcends left and right.  As the New America Foundation’s Michael Lind observes, “To consume, one must be alive and preferably healthy.  H  ow health is a cost upon production is bizarre, unless you think we live to make widgets for their own sake.”

And here we might add, that there has been an overemphasis on alleviation, as part of the general trend away from medical-scientific solutions in our society, and toward nursing and long-term care.  (The fact that nursing and longterm care is more labor intensive, and thus more voter-intensive, might have something to do with this trend.) 

Perhaps that argument--away from technology, toward care--sounds like a strange argument to make, given the obvious enthusiasm that we have for the latest "app," but of course, iPhones and Droids are a different field.  As we have learned from the late Stephen Jay Gould et al, evolution of all kinds is episodic, including scientific and technological development.  Evolution stops and starts and stops again.  The jargon phrase for this phenomenon is punctuated equilibrium.    So while computer science is rocketing along, other fields are stagnating.    And as Milken helps show us, Serious Medicine is stagnating. 

So what’s needed is a strategy--a Serious Medicine Strategy to not only get capital into the drug-making process, but also to get those new drugs into the hands of doctors and patients.    

Here's the text of Milken's valuable article: 

Health-Care Investment—The Hidden Crisis: When the stock market values companies that make cosmetics and beer far above pharmaceutical companies, you know that incentives are out of whack.

Since 1820, world per-capita income has risen more than eightfold, thanks in part to the spread of democracy, open trading markets, and the rule of law. But a less-noted source of growth—improvements to health that have given us longer, more productive lives—has produced as much as half of the increase in the global economy over the past two centuries, as research by the late British economist Angus Maddison suggests. It would be logical to assume that companies whose products make us healthier would be among the most valued enterprises on the planet, but this assumption is wrong.

Consider companies that make consumer products—things like soft drinks, detergent, cosmetics and beer. While their price-earnings ratios will vary, in today's market their average will most likely be in the neighborhood of 20. But the average P/E of the largest American pharmaceutical research companies (Abbott Labs, Bristol-Myers Squibb, Johnson & Johnson, Eli Lilly, Merck and Pfizer) was recently near 10. Investors must have concluded that pretzels and eyeliner produce faster profit growth than prescription medicines.

Lower pharma P/E ratios are a recent phenomenon. A generation ago, drug firms regularly topped magazine lists of the most-admired companies in America, a reputation usually reflected in their stock prices. But facing the specter of regulated returns, enterprise values dropped sharply during debates about proposed health-reform legislation in 1993. When the proposals failed in Congress, valuations eventually recovered. In the last decade, pharma P/E ratios dropped again.

Contributing to these lower valuations are patent expirations, regulatory complexity, uncertainty about litigation exposure, and high U.S. taxes on repatriated foreign income. These factors undoubtedly influenced the decision by Procter & Gamble to leave the pharmaceutical business entirely in 2009 and concentrate on consumer products.

Procter & Gamble responded rationally to clear market signals that discouraged development of life-saving drugs. But for people whose health, and perhaps survival, will depend on these medicines—that includes you and me—the implications of the disparity in market valuations are ominous.

We can remove some of the barriers to growth in medical research through several public-policy steps:

*Match the inducements of other countries. Many nations offer generous tax incentives, easier recruitment of clinical-trial subjects, strong government partnerships and far less litigation. We cannot and should not stop American biopharmaceutical and medical-device manufacturers from expanding overseas operations. But we can reduce needless bureaucracy at home, implement tort reform, and restructure taxation of foreign income.

*Recognize the return on investment in federal health research. We clearly need spending restraint in Washington. But smart budgeting will factor in the economic gains that come from longer, healthier life spans and the savings from improved therapies. One 2006 study by Kevin Murphy and Robert Topel of the University of Chicago showed that life-expectancy gains since 1970 added $3.2 trillion per year to America's national wealth. A mere 1% reduction in cancer deaths would be worth $500 billion, they noted, and the present value to future generations of a full cure is a nearly incomprehensible $50 trillion—more than three times today's GDP.

Congress doubled the budget of the National Institutes of Health (NIH) between 1998 and 2003. It was money well-spent, and we're now seeing exciting announcements from the nation's medical research centers, including 39 new cancer drugs that have been approved since 2004. In our view at the Milken Institute's FasterCures, the past year has produced the greatest progress against cancer since I first began working with the research community in the 1970s. Progress is accelerating on a range of other diseases as doctors gain traction by using rapidly evolving technology and by collaborating across disciplines.

But the prospects for continuing this discovery bonanza are threatened. NIH funding has trended down in real terms since 2003. Current budget realities portend severe future cuts that will cause some younger medical scientists to either change careers or take their work to places like Singapore that put out the welcome mat for promising researchers. Whether continuing breakthroughs emerge from U.S. laboratories or somewhere else will profoundly affect America's role among nations in the 21st century.

*Support prevention. There's great concern with rising health-care costs, yet too often we overlook that the single best way to contain them is to keep people from getting sick in the first place. That starts with recognizing that lifestyles, not genes, are the biggest contributors to disease. Public and corporate programs aimed at even slight reductions in obesity, tobacco use and other damaging behaviors pay large social and economic dividends.

*Give the FDA adequate resources. At a recent New York conference hosted by FasterCures, Food and Drug Administration Commissioner Margaret Hamburg told me that imports of products subject to FDA inspection have increased to 20 million from six million shipments in a decade. In fact, an estimated 25% of the U.S. economy is affected by FDA oversight. And the new food-safety legislation that Congress passed in December further expands the agency's responsibilities.

Given all this, the FDA soon won't be able to keep up with the pace of innovation in such areas as medical-device development and regenerative medicine—the use of stem cells to repair damage to tissues and organs. That will further slow the movement of effective drugs and devices from laboratory to patient.

As they seek to bring deficits under control, Republicans and Democrats will disagree on which investments in education and medical research make the most sense to secure our future. But they'd better start agreeing on something soon. A 2009 study by the Information Technology and Innovation Foundation, "The Atlantic Century," benchmarked the U.S. against Europe on several measures of innovation and competitiveness. Although the U.S. currently ranks sixth out of 40 nations (down from first in previous studies), it's slipping and making the slowest progress toward what the report characterizes as a knowledge-driven, high-innovation economy.

Improved public health translates directly into greater national productivity, which underpins all economic growth. So let's get our priorities straight. America's economy used to be the sun—the gravitational center—in the "solar system" of leading nations. In the future, we'll no longer be the sun. But by investing in our own health, we can help solidify our position as Jupiter, the largest planet.