Pharma

Morning Read: It’s not just the health insurers

Highlights of the important and the interesting from the world of health care: It’s not just the health insurers: Health insurance companies do a lot of things that justifiably raise the anger of the American public: rescissions, denials of claims for pre-existing conditions and life-time spending caps, to name just a few. All of these […]

Highlights of the important and the interesting from the world of health care:

It’s not just the health insurers: Health insurance companies do a lot of things that justifiably raise the anger of the American public: rescissions, denials of claims for pre-existing conditions and life-time spending caps, to name just a few. All of these things surely make health care more inaccessible–and possibly more expensive, as those who’ve lost insurance fill up emergency rooms or, worse, let medical problems fester until they’ve ballooned into chronic and costly conditions.  Worse yet for the public perception of insurers, these business practices that harm patients also make insurance companies more profitable, paving the way for $20-million CEO salaries. But blaming the rapidly escalating cost of health care on insurance companies’ profits is pointing a finger in the wrong direction, writes management consultant Andrzej Kuhl at the financial blog Baseline Scenario.

Analyzing 2008 figures, Kuhl says that the top 10 insurers posted profit margins of 3.1 percent. So even if we eliminated insurers’ profits, we’d still only cut health spending by that same percentage. By way of comparison, the Top 10 pharmaceutical companies posted a profit margin of 18 percent, while those in medical products and equipment (presumably device firms) enjoyed 10 percent margins. The numbers suggest health insurance isn’t all that profitable of a business and the more that we (and President Obama) make insurance companies the whipping boy for the problem of high health costs, the more we let other industries off the hook. To be sure, insurers deserve a few lashes, but so do plenty of others.

The limits of patient satisfaction: More and more hospitals are using patient-satisfaction surveys to help evaluate doctors, but focusing too much on these numbers can be detrimental, writes physician-blogger Kevin Pho. Some hospitals tie physician compensation to patient satisfaction results, which is problematic on a number of levels. For one, two recent studies found no strong correlation between patient satisfaction and quality of care–so just because a patient feels “satisfied” with a doctor doesn’t mean that the doctor actually did a good job.

More troubling is that any direct financial incentive doctors have to obtain good patient-satisfaction scores could lead to them to prescribe drugs or treatments that won’t actually improve the patient’s condition. Rather than stand firm against a patient making demands that run against the doctor’s medical opinion, a physician is incentivized to accede to the patient’s wishes and take the path of least resistance. That could lead to unnecessary treatments and tests that drive up the cost of care for everyone, pushing medical inflation even higher. A more prudent approach is divorce patient-satisfaction scores from doctors’ salary determinants.

The future of Big Pharma’s social networking? Pharmaceutical companies better hope that Sanofi-Aventis’ recent Facebook experience isn’t glimpse of the future. As the Pharma Marketing Blog reports, a disgruntled patient plastered so many angry comments on the drugmaker’s Facebook page that Sanofi-Aventis had to close the section off from other user comments. And the company went a step further, removing all previous comments from the page. As the blog puts it, Sanofi couldn’t stand up to the onslaught so it just decided to pull the plug. The episode potentially lays a blueprint for how one angry patient can derail a multibillion dollar company’s best-laid social networking plans.

What financial reform would mean for VCs: Dan Primack of peHUB has an excellent, six-point post on what Connecticut Sen. Chris Dodd’s financial regulatory reform proposal would mean for the venture capital and private equity markets. In point No. 5, Primack points out that Dodd’s changes to the definition of the term “accredited investor” would make it more difficult for startups to find angel money.

Here’s why: By law, private limited partnerships can only have 35 non-accredited investors but an unlimited number of accredited investors. (An accredited investor is defined as an individual with a net worth of $1 million and income of $200,000.) Dodd’s bill would tie those dollar amounts to inflation and adjust them every five years, pushing them upward.  That will have the effect of pushing some previously accredited investors who fall short of the new, higher threshold into the non-accredited category, decreasing the overall number of investors. That means less money for startups and fewer opportunity for angels. And that’s why the measure is “strongly” opposed by the National Venture Capital Association and the Angel Capital Association, according to Primack.

Photo from flickr user Mike Licht

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