I’ve been on vacation this past week, so I’ve had a chance to read a bit more. One of the big stories yesterday was on drug makers who raised the price of a cheap drug to tens of thousands a vial and then incented doctors to push the drug on the elderly, costing Medicare two billion bucks in the process. This type of abuse also occurs in orthopedics, and yesterday I chanced upon evidence of that, but those stories will never make the news. Let me explain.
The ACTH (Acthar) Story
ACTH is a hormone that is produced in the brain that causes the body to release a natural steroid called cortisol. The drug version (Acthar) was first introduced in the ’50s and used to cost $40 a vial until the company that manufactured it sold to another company. Then, over time, that company upped the price to tens of thousands of dollars. That company then sold to another who also raised the price and then realized that to maximize the billions it spent on acquiring that company, it would need to expand the market. At the time, the only use for the drug was in infantile spasms, yet because the drug was old, it had been grandfathered into having almost 20 FDA-approved indications (the diseases for which the drug can be marketed). This is unheard of, as most drugs have one or two and a company can spend hundreds of millions just adding another.
What happened next is the subject of an interesting investigative piece done by CNN. However, it seems as if the new owners of the drug incented doctors to begin prescribing the drug to the elderly, which is how Medicare ended up eventually spending two billion on a drug that most doctors agree is no better than a drug that costs ten dollars.
How Did We Get Here? Part 1
Way back when, under Bush 2, Medicare added prescription-drug coverage. That was great, but at the time, there was a quirk that the pharma and device companies added to the bill that caused our little two billion-dollar medication blip. You see, lawmakers, at the behest of drug and device companies, decided that Medicare couldn’t negotiate prices for drugs or devices. Despite every private healthcare company, like United or Cigna or Aetna, negotiating the best price it can get on everything from drugs to devices, that’s illegal for the Medicare program.
I first noticed what this quirk was doing to prices when I wanted to use a specific tool for spinal care. The tool would only be reimbursed by Medicare if it were used in a hospital, and I wanted to use it in a much cheaper and more efficient ambulatory surgery center. Since there was no coverage, I enquired about the cash price. I thought I would get quoted a few hundred bucks, as the thing was likely made in China for ten. Instead, they wanted thousands for the device! I was shocked, so I asked how they justified that price. The rep explained that they needed to keep their pricing as high as possible as that’s how Medicare determined the market rate of how to reimburse the company. Basically, they were gaming the Bush 2 Medicare part D quirk.
How Did We Get Here: Part 2
If having this Medicare quirk is like having a dry and hot forest ready to burst into flames, who lights the match? That would be the unethical system we have created to push drugs and devices on doctors by having sales reps educate them. Before I dive in on that topic, let me show you two examples from yesterday’s LinkedIn feed.
Exhibit A was a post by pain doctors from an academic institution who proudly posed with the people who had educated them about a new hyperexpensive nerve stimulator. What was interesting was that the doctors were not thanking their colleagues who had taught them about how to place and use this new stim unit used to control chronic pain; they, instead, were posing with the gorgeous female sales reps. Yes, these two women featured, who had only a bachelor’s degree and were selling the unit, were the ones educating these physicians on when and how to use this device.
Exhibit B was a video showing an incredibly complex way to fuse the ankle and the forefoot with one fell swoop. This crazy doohickey involved dislocating the big toe and inserting a rod from there all the way through the forefoot and then into the ankle bones. It then had a plate that required about ten screws. Home Depot price? Twenty to thirty bucks. Medicare price? Ten thousand dollars. Who will teach the doctor how to use this thing? The sales rep who sells it. Do we have any significant evidence that this thing will help anybody? Nope.
You see the trend, right? The people pushing the product are often the ones educating doctors about why it’s needed and how to use it. In addition, never in that equation is price discussed, because someone else is picking up the tab.
The Amount of Waste on Orthopedic Devices Is Epic
From countless pain-management devices to surgical doohickeys, the hidden cost in orthopedic care is surgical devices. What costs ten bucks in China to make is marked up 1,000% or more. The prohibition of Medicare contracting based on price keeps the costs shockingly high. Hence, while an orthopedic surgery fee may be a few thousand dollars, often the disposable equipment used bumps that price up at least as much or more. Then you add in costs related to out-of-network anesthesia care and hospital OR fees, and what seems like a surgery that should cost a few thousand dollars all of a sudden costs tens of thousands. None of that takes into account the fees that are paid when complications happen due to the invasiveness of the procedure, which each run into the hundreds of thousands.
Interventional Orthopedics Can Bend the Cost Curve Down
If we take the two examples from above, a nerve stimulator and a foot and ankle fusion, both costing tens of thousands of dollars, we can see how Regenexx Interventional Orthopedics (IO) would throw a monkey wrench into these surgical profit centers. First, Regenexx IO is outpatient and performed in a physician’s office, saving the huge hospital OR fee. For most cases, there is no anesthesia required, so that out-of-network anesthesia fee also goes away. Finally, there is no need for a ridiculously expensive nerve stimulator or a long screw and plate, each costing tens of thousands. So substitute a fee for cell therapy at one-tenth the cost (high-dose platelet-rich plasma or bone marrow concentrate). Finally, the reduced invasiveness of the procedure means fewer expensive complications. Hence, it’s not hard to see how substituting precise, image-guided orthobiologics can save big bucks by avoiding the need for more-invasive surgery. To learn more about interventional orthopedics, see my video below:
The upshot? Our medical care system is horribly broken. A drug company milking the proverbial Medicare cow for every possible dollar and buying the loyalty of doctors, convincing them to prescribe an expensive medication over a cheaper one, is only the tip of the iceberg. The graft and waste in orthopedic surgical devices make this drug company look like a rank amateur. The easy solution? Get rid of as many of these invasive surgeries as possible by substituting Regenexx Interventional Orthopedics. To find out more about how you can help your company add Regenexx IO procedures to your self-funded health plan, check out the Regenexx Corporate website.