Rising health care prices in the US are leading employers outside the health care sector to lay off employees, according to a new study co-authored by a Yale economist.
The study, published June 24 as a working paper by the National Bureau of Economic Research (NBER), found that when health care prices increased, non-health care employers responded by reducing their payroll and cutting the jobs of middle-class workers. For the average county, a 1% increase in health care prices would reduce aggregate income in the area by approximately $8 million annually.
The study was conducted by a team of leading economists from Yale, the University of Chicago, the University of Wisconsin-Madison, Harvard University, the US Internal Revenue Service (IRS), and the US Department of the Treasury.
“When health care prices go up, jobs outside the health care sector go down,” said Zack Cooper, an associate professor of health policy and of economics at Yale University. “It’s broadly understood that employer-sponsored health insurance creates a link between health care markets and labour markets. Our research shows that middle- and lower-income workers are shouldering rising health care prices, and in many cases, it’s costing them their jobs. Bottom line: Rising health care costs are increasing economic inequality.”
“Rising prices are hurting the employment outcomes for workers who never went to the hospital.”
Zack Cooper, Yale economist
To better understand how rising health care prices affect labour market outcomes, the researchers brought together insurance claims data on approximately a third of adults with employer-sponsored insurance, health insurance premium data from the US Department of Labor, and IRS data from every income tax return filed in the United States between 2008 and 2017. They then used these data to trace out how an increase in health care prices, such as a $2000 increase on a $20 000 hospital bill, flows through to health spending, insurance premiums, employer payrolls, income and unemployment in counties, and the tax revenue collected by the federal government.
“Many think that it’s insurers or employers who bear the burden of rising health care prices. We show that it’s really the workers themselves who are impacted,” said Zarek Brot-Goldberg, an assistant professor at the University of Chicago. “It’s vital to understand that rising health care prices aren’t just impacting patients. Rising prices are hurting the employment outcomes for workers who never went to the hospital.”
Hospital Mergers Raised Prices
For the new study, the authors used hospital mergers as a vehicle to assess the effect of price increases. From 2000 to 2020, there were over 1000 hospital mergers among the approximately 5000 US hospitals. In past work, the authors found that approximately 20% of hospital mergers should have been expected to raise prices by lessening competition, according to merger guidelines from the Department of Justice and the Federal Trade Commission. These mergers, on average, raised prices by 5%.
“We can use our analysis to estimate the effect of hospital mergers,” said Stuart Craig, an assistant professor at the University of Wisconsin-Madison Business School. “Our results show that a hospital merger that raised prices by 5% would result in $32 million in lost wages, 203 lost jobs, a $6.8 million reduction in federal tax revenue, and a death from suicide or overdose of a worker outside the health sector.”
The study also showed that because rising health care prices leads firms to let go of workers, a knock-on effect of hospital mergers is that they lead to increases in government spending on unemployment insurance and reductions in the tax revenue collected by the federal government.
“It’s vital to point out that hospital mergers raise spending by the federal government and lower tax revenue at the same time,” said Cooper. “When prices in the US health sector rise, it’s actually a net negative for the economy. It’s leading to fewer jobs and precipitating all the consequences we associate with workers becoming unemployed.”
Cystic fibrosis (CF), which is caused by a faulty gene inherited from one’s parents, is a debilitating disease requiring difficult and time-consuming treatment and resulting in premature death. CF causes mucus in the body to thicken, with often disastrous consequences in organs such as the lungs and pancreas, and triggers a range of symptoms in people living with the condition, including chronic coughing, wheezing, and malnutrition. Ongoing treatment of symptoms often requires children with CF to miss school and can make it difficult for adults with CF to hold steady employment.
Yet, a new class of medicines introduced over the past decade called CFTR modulator therapies offers new hope to people living with CF – dramatically reducing CF’s symptoms and allowing people with CF to live longer healthier, and more productive lives.
These new treatments, whose research and development benefited from significant public and philanthropic financing, have been hailed as a “miracle” for people with CF. As antiretrovirals did for HIV, the introduction of CFTR modulator therapies is transforming cystic fibrosis from a progressive, life-threatening illness into a chronic, manageable condition. CFTR modulator therapies are so effective because they address the underlying cause of cystic fibrosis symptoms – a malfunctioning protein made by the CFTR gene.
But, more than a decade after the introduction of the first CFTR modulator therapy to treat CF in the United States, no CFTR modulator therapies are yet registered in South Africa and only a fraction of patients who need this therapy have access to it, and that is only after jumping through some extraordinary hoops. As a result, the only way for the vast majority of people to manage CF in South Africa is to aggressively prevent and treat its symptoms using older therapies. This is no small task for patients and their families, as it can require time-consuming, daily physical therapy to loosen mucus in the lungs and weeks-long hospital stays to treat infections. In severe cases, treating cystic fibrosis can even require a lung transplant.
Without access to CFTR modulator therapies, people with CF in South Africa continue to die prematurely. The average age of death of people with CF in South Africa was 27.5 in 2020. People in the global North live almost twice as long. The life expectancy of people living with cystic fibrosis in the United States is now 50 and is expected to lengthen as a result of newly introduced treatments.
Why can’t people in South Africa access CFTR modulator therapies?
As a person living with cystic fibrosis, or the parent of a child with cystic fibrosis, it can be unbearable to know there is a medicine that could allow you to breathe easier, keep you or your child out of hospital, and even prevent the need for a lung-transplant or premature death, but that you can’t have it, largely due to decisions taken by one company.
As recently detailed in the New York Times, one company holds a monopoly on the manufacture and sale of CFTR modulator therapies and is choosing not to make new CF treatments available to people in the developing world through the normal channels. Vertex, the company that holds monopoly patents on all available CFTR modulator therapies, is – for the most part – not registering or marketing its CFTR modulator therapies in developing countries. Registration is typically required before a drug can be marketed in a country.
While Vertex does offer some compassionate use and donation access programmes in select developing countries, Vertex Save Us, a global coalitional of advocates seeking affordable and universal access to CFTR modulator therapies, says these efforts reach only a small minority of patients that could benefit from the treatments and are restricted to countries with which Vertex believes it can secure a reimbursement deal.
Some activists suggest that the neglect of patients in developing countries is part of a strategy to squeeze the highest possible prices for CFTR modulator therapies from health systems in wealthy countries, with which Vertex has been locked in extended negotiations. Offering lower prices to developing countries for its CF medicines could provide ammunition to wealthy countries in demanding lower prices.
“This is a really fundamental and really simple example of how unfettered profit-driven business practices basically sacrifice the lives of people, particularly those of people who happen to live in low- and middle-income countries,” says Diarmaid McDonald, medicine access advocate and Director of the UK-based advocacy group, Just Treatment.
Vertex charges over R5 million ($322 000) annually for its most effective CFTR therapy, Trikafta (which must be taken as a life-long treatment) in the United States. But researchers in the United Kingdom have shown that the medicine can be manufactured and profitably marketed at a fraction of that cost.
Does Vertex plan to register its products in South Africa?
In response to queries from Spotlight regarding whether Vertex plans to register its drugs in South Africa and what the timeline for doing this is, the company indicated that they did not plan to register their medicines but would supply them via Section 21 authorisations – a mechanism allowing for importation of unregistered medicines into the country.
“As seen in other rare disease areas, bringing medicines to patients in South Africa is challenging as the reimbursement system and willingness to invest do not support a viable path to sustainable access. Analyses show that most novel, high-value medicines targeting disease areas comparable to and including CF are not on the Prescribed Minimum Benefits (PBM) list. There is therefore no obligation for funders to reimburse the costs of these medicines even after a lengthy regulatory registration process,” said Vertex’s Director of International Communications Daria Munsel.
“Given this, we believe that sustainable access could be achieved through ‘Section 21’ (on a named patient basis), which provides the fastest and most efficient route to access for rare disease medicines in South Africa,” Munsel added. “As part of this effort, we are currently in discussions with relevant stakeholders in the private insurance system to ensure sustainable access is available to eligible CF patients in South Africa.”
However, Munsel declined to identify the local company with which Vertex has signed an agreement for distributing its medicines, saying, “We can confirm that we have recently signed a distribution contract with a local distribution partner for our CF medicine in South Africa. Given that reimbursement conversations are still ongoing, it is inappropriate for us to name other parties for the moment.”
For now, the lack of transparency about the local distributor effectively blocks the use of Section 21 authorisations for importing Vertex’s medicines into South Africa, as patients and clinicians must supply details of local distributors in their applications to the South African Health Products Regulatory Authority (SAHPRA) for authorisation to import unregistered drugs.
Vertex did not respond to a question from Spotlight regarding what price it would charge patients in South Africa able to secure Section 21 authorisations to import their medicines.
Landmark court case seeks to challenge Vertex’s monopoly in South Africa
Vertex has secured a global monopoly over CFTR modulator therapies by aggressively pursuing patents related to the class of drugs around the world. These patents prevent other companies from manufacturing and marketing CFTR modulator therapies and give Vertex wide latitude in setting prices.
Between 2007 and 2016, Vertex filed six patents in South Africa related to the CFTR modulator therapies, Kalydeco and Trikafta. While Vertex received marketing approval to sell Kalydeco and Trikafta to treat CF in the United States in 2012 and 2019, respectively – it has still not applied for registration of either product in South Africa.
What this means is that despite Vertex’s failure to take steps to register or market its medicines in South Africa years after doing so in the US, patents granted to Vertex in South Africa block any other companies from supplying the medicines to CF patients in the country.
“The bottom line is that people are dying, they need to be able to access affordable treatments,” says Kelly du Plessis, founder of Rare Diseases South Africa. “If Vertex isn’t going to be able to come to the party in South Africa, then fine. We respect their choice, but then move out the way and allow someone else to do it. You can’t maintain the market and hold it ransom, but also not do anything from your perspective to help.”
According to Fatima Hassan, director of the Health Justice Initiative, “You can’t have a system where you file your patents, [but then] you refuse to bring a product to market or you have it at such an excessive price in the country with the highest inequality in the world, but then you don’t allow any generic manufacturers to come in at a lower price.”
Cheri Nel, a woman living with cystic fibrosis in South Africa, and the Cystic Fibrosis Association have now gone to court to challenge Vertex’s monopoly. On 7 February 2023, Nel’s lawyers submitted a Notice of Motion to the Court of the Commissioner of Patents (within the High Court) requesting that the court grants a compulsory license to override Vertex’s patents on Kalydeco and Trikafta.
Nel and the Cystic Fibrosis Association are seeking a compulsory license on the grounds that the patents held by Vertex are being abused. Nel’s lawyers argue that by failing to register or supply their CF medicines in South Africa, make them available in South Africa at reasonable prices, or license other companies to supply the medicines, Vertex is abusing its patents. They further argue that Vertex’s actions are violating the Constitutional rights of people with cystic fibrosis in South Africa, including the right to health care.
If granted, a compulsory license in South Africa would effectively override Vertex’s monopoly and allow the importation of generic cystic fibrosis medicines into South Africa, as well as their manufacturing in the country.
The legal action taken in South Africa is being pursued simultaneously with broader global efforts, led by Vertex Save Us, to overcome Vertex’s monopoly on CFTR modulator therapies and ensure universal access for all people who can benefit from these treatments.
“South Africa is the only country where papers have been launched with courts to start a legal process to try and secure a compulsory license, although the process is playing out in other countries following the most logical, legal routes set out in their national law,” explains McDonald.
“Requests of the government to issue compulsory licenses [have been made] in both Ukraine and in Brazil. And in India, it’s a petition of the government requesting that they revoke the patent under the terms of the Indian patent law,” says McDonald.
Any precedent for granting compulsory license on a medicine in South Africa?
If Nel and the Cystic Fibrosis Association’s pursuit of a compulsory license on the cystic fibrosis medicines is ultimately successful, then the issuing of a compulsory license order will be the first time this type of license is granted in the country on a pharmaceutical product. While South Africa has not issued a compulsory license on a medicine, the Treatment Action Campaign (TAC) has previously used competition law to overcome patents impeding access to affordable antiretroviral medicines in South Africa.
TAC cases at the Competition Commission and the threat of ‘compulsory licensing’ resulting from these cases led several multinational companies to grant voluntary licenses that enabled manufacturing and marketing of generic ARVs in the country. Generic competition resulted in massive price decreases for ARVs and has been critical to South Africa’s success in building the world’s largest public sector HIV treatment programme.
While South Africa’s courts have not issued a compulsory license on a medicine, its own challenges in securing access to affordable HIV medicines contributed to the affirmation and strengthening of the rights of countries to issue compulsory licenses to address health challenges within international trade law in the early 2000s. Both developing and developed countries have subsequently used compulsory licensing to improve access to critical health tools under patent including for HIV, cancer, and more recently, COVID-19.
The Fix the Patent Laws coalition, a coalition of over forty patient groups in South Africa, has long called on government to amend South Africa’s patent laws to improve the usability of compulsory licensing provisions to address health challenges in the country. The landmark court case of Nel vs Vertex will provide important insight into the ongoing need for these reforms in the country.
Who can benefit from Kalydeco and Trikafta
While cystic fibrosis is caused by a defect of the CFTR gene, over a thousand different types of mutations can occur in the gene that causes CF. People with CF must inherit a mutated gene from each parent in order to develop CF illness. The type of gene mutations that each person with cystic fibrosis inherits from their parents determines their eligibility for different CFTR modulator therapies.
Vertex, which has a monopoly over the entire class of CFTR modulator therapies available for CF, currently markets six medicines made up of different combinations of active ingredients that seek to correct the faulty CFTR protein (produced by the CFTR gene).
Kalydeco, made with the active ingredient ivacaftor, was the first CFTR modulator therapy approved to treat CF, yet it is only effective in treating five percent of people living with CF. Trikafta, which was approved in the U.S. in 2019 and combines three active ingredients – elexacaftor, tezacaftor and ivacaftor – is effective in treating 90 percent of people living with cystic fibrosis.
How many people in South Africa could benefit from Trikafta?
The recently established South African Cystic Fibrosis Registry has compiled health and demographic data for 525 people diagnosed with cystic fibrosis in the country. According to 2020 registry data, 450 patients (85.7%) would benefit from currently available CFTR modulator treatments. Dr Marco Zampoli, paediatric pulmonologist at the University of Cape Town, estimates that around 35 patients are currently sourcing generic CFTR modulators in their personal capacity from overseas (see more below on how a small group of patients in the country are accessing treatment from Argentina).
While the registry counts 525 patients diagnosed with CF in South Africa, the true number of people born with CF in the country is likely far higher. Zampoli estimates (using population and genetic data) that between two and three thousand babies could have been born with cystic fibrosis in South Africa since 1999.
“We think a lot of them are probably dying from a very young age without being diagnosed with cystic fibrosis as it looks similar to other common things like malnutrition, TB, and HIV,” says Zampoli.
While improving CF detection and diagnosis can save lives and will also increase the number of known patients in the country that could benefit from currently available CFTR modulator therapies, many of the new patients identified from better detection efforts would be unable to benefit from existing treatments. This is because black Africans are less likely than people of Caucasian descent to have the mutations that are responsive to currently available treatment.
Zampoli, however, notes that research is underway that will likely deliver new treatments that benefit patients who are ineligible for currently available drugs and adds “we’re going to be facing the same issues [of unaffordability] down the line… when we do eventually license a drug that will target their specific genes.”
How do a few people in South Africa get access to CFTR modulators?
While the South African government is not currently in negotiations with Vertex, price negotiations with health systems in wealthy countries have often dragged on for years, as price remained a sticking point.
People living with severe cystic fibrosis, however, do not have years to wait as their disease advances, placing them at risk of severe complications and death. Some have joined together to start a CF Buyers Club. The Buyer’s Club supports CF patients from around the world in buying generic versions of CFTR modulators from Argentina.
Argentina has taken steps to set strict criteria for granting patents and limit the granting of patents on certain types of claims related to pharmaceutical products. As a result, Vertex has not been granted patents on its CFTR modulator treatments in Argentina, and two Argentinian pharmaceutical companies, Gador and Tuteur, are legally manufacturing generic versions of these medicines.
While the Argentinian companies producing these medicines are unwilling to export them to South Africa for fear of facing patent infringement challenges from Vertex, Argentinian pharmacies will supply medicines to CF patients from South Africa visiting Argentina.
“You need to have a doctor’s script and you need to have a Section 21 authorisation,” explains Belinda Nell, a South African advocate working to facilitate access to CF medicines in South Africa. “You’ve got to fly to Argentina in your personal capacity or have a family representative go there and collect [the medicines] and then fly back.”
South Africans holding Section 21 authorisations from SAHPRA can legally travel with up to six months’ medicine supply on them.
While the CF Buyers Club provides an important access pathway enabling some people in South Africa to access life-saving CFTR modulator therapies, this pathway is not a feasible mechanism to ensure access to the CF medicines for all patients that could benefit from them.
The cost of generic CF medicines from Argentina is a fraction of the prices charged by Vertex. They are, however, still prohibitively high for most people living in South Africa. The annual cost of generic Trikafta from Argentina is almost R1 million ($60 000) [other CFTR modulator therapies (tezacaftor/ivacaftor and lumacaftor/ivacaftor) can be bought from Argentina for around R245 000 ($15 000) annually]. The medicine costs, combined with the costs of biannual travel to Argentina, are simply unaffordable for most.
How can a CL further reduce prices?
As seen with other classes of drugs, such as antiretroviral medicines for HIV, and antiviral medicines for Hepatitis C, the introduction of generic competition is expected to substantially reduce the cost of CF medicines.
If compulsory licenses are granted in the countries that they are being sought by Vertex Save Us, or if Vertex buckles under the pressure for expanded and affordable access to CF medicines and grants voluntary licenses allowing other companies to produce generics, then prices are expected to fall.
An analysis of the costs of production of CF medicines produced by health economists shows that generic Trikafta can be manufactured and sold with a 10 percent profit margin for around R93 000 ($5700) per patient per year – 2% of what is charged for the medicine by Vertex in the United States. While supplying medicines at this price would remain a stretch for South Africa’s public health sector, the introduction of new CF medicines must be considered within the context of potential cost savings arising from reduced hospitalisation periods and fewer transplants.
“The ripple effects of an effective CL campaign and petition in South Africa would be felt globally,” says McDonald. “First of all, I think we would see increased interest from generic suppliers… that could help to… drive down prices… this would [also] show the rest of the world that… accepting the unquestioned, monopoly power of Vertex is not necessary – you can put the lives of your citizens over the profits of that drug company.”
Note:The Fix the Patent Laws coalition and the TAC are mentioned in this article. Tomlinson worked at the TAC until 2012 and was a member of the Fix the Patent Laws steering committee until 2019. SECTION27 has also applied to be admitted as amici curiae to the case. Spotlight is published by SECTION27 and the TAC, but is editorially independent – an independence that the editors guard jealously. Spotlight is a member of the South African Press Council.
Inaccurately recording the start of anaesthesia care during a procedure is common and results in significant lost billing time for anaesthesia practices and medical centres, suggests a study being presented at the American Society of Anesthesiologists’ ADVANCE 2023, the Anesthesiology Business Event.
The anaesthesia start time (AST) must be documented from a computer logged into the electronic health record (EHR), and typically occurs once the patient is in the operating room (OR). However, the anaesthesiologist meets with the patient prior to their arrival in the OR and begins tasks that are vital to the procedure, such as administering pre-medication and attaching monitors, time which is is not typically recorded. Depending on the patient and procedure, adding two to five minutes to the AST when logging it would account for the preparation and transit time, researchers say.
“These seemingly minor inaccuracies of recorded AST can cost medical centres and anaesthesia practices hundreds of thousands of dollars in lost revenue,” said Nicholas Volpe Jr, MD, MBA, lead author of the study and an anaesthesiology resident physician at Northwestern University McGaw Medical Center, Chicago. “We suspect most anaesthesiologists are unaware that they aren’t recording AST accurately. It’s not a result of negligence, but rather reflects that workflow hasn’t been optimised for accuracy.”
For the study, the researchers analysed 40 312 procedures with anaesthesia over 12 months at a single academic centre. In 68.74% of cases , AST was recorded as starting once the patient was in the OR, without factoring in the preparation time. Using the national average charge for anesthaesia time, the missing time translated to over $600 000 in lost revenue for the year, the researchers determined.*
“Logging AST is one of the many new tasks that anaesthesiologists learn when starting a new role,” said Dr Volpe. “Transitioning from an internship to clinical anaesthesia practice involves learning a significant amount of new information, and understanding the importance of an accurately recorded AST may seem like a relatively minor issue compared to important patient-care information.”
Several approaches could help address inaccurate AST documentation, including educating anaesthesiologists on how to improve their AST recording practices and providing visual reminders such as signs in the OR, Dr Volpe said. Also, an AST capture function could be built into the EHR mobile application so that AST can be noted by anaesthesiologists on the way to the OR, or the EHR could automatically add two minutes to the AST log time, he said. The researchers plan to roll out some of those initiatives in the spring and determine if they are effective.
*The projected savings are theoretical and not linked to billing at the institution where the study was conducted.
By studying medical and insurance records indicates health care costs for people with a rare disease, researchers have found that these have been underestimated and are three to five times greater than the costs for people without a rare disease.
The findings, appearing in the Orphanet Journal of Rare Diseases, provides new evidence of the impact rare diseases could have on public health, suggesting that medical costs for individuals with rare diseases are on par with those for cancer and heart failure.
“There needs to be greater public awareness of the large and growing medical footprint of rare diseases in society,” said senior author Anne Pariser, MD, director of the NCATS Office of Rare Diseases Research. “Only about 10% of rare diseases have an FDA-approved therapy for their treatment. The findings underscore an urgent need for more research, and earlier and more accurate diagnoses of and interventions for these disorders.”
Most of the 7000 to 10 000 known rare diseases disproportionately affect children, adolescents and young adults. Individually, most rare diseases might affect only a few hundred to a few thousand people around the world. Rare diseases however are collectively common, affecting an estimated 4% of the world’s population. Many of these diseases have a genetic cause, are serious or life-threatening and are hard to diagnose and treat.
The pilot study used International Classification of Diseases (ICD) codes, which designate a disease diagnosis and other methods, to determine those individuals with rare diseases and their direct medical costs for 14 rare diseases in four health care systems compared to non-rare disease patients of a similar age.
The 14 rare diseases represented a diverse set of disorders differing in prevalence, organ systems affected, age of onset, clinical course, and availability of an approved treatment or specific ICD code. These rare diseases include sickle cell disease, muscular dystrophy and eosinophilic esophagitis.
The analysis showed wide variations of rare diseases prevalence in the different health care systems, possibly due in part to geographic differences, as well as the use of public versus private insurance, which may include different patient group representation. Some genetic diseases can also have a higher prevalence in certain regions, due to demographic make-up.
With the Eversana health care system database, the cost per patient per year (PPPY) for those with a rare disease, ranged from $8 812 to $140 044 for rare diseases patients compared to $5862 for those without a rare disease. The NCATS data indicated PPPY costs ranging from $4859 to $18 994 for rare diseases patients versus $2211 for those without a rare disease.
Using patient medical records, the researchers also traced the diagnostic journeys of four people with a rare disease, including two individuals who had a form of Batten disease, an inherited neurological disorder, and two others with cystic fibrosis. These journeys provided detailed descriptions of direct medical costs, such as for hospitalisations and procedures for these diseases, and provided insights into patient clinical management before and after disease diagnosis.
Analysis of medical records also revealed that rare diseases patients often shared commanilities in symptoms (eg, seizures, infections, and developmental delay) and characteristics, which could aid in earlier diagnosis and treatmen. As many receive a rare disease diagnosis at a young age and because most rare diseases are serious conditions, rare disease patients are likely to require hospital time and incur greater medical expenses over a lifetime.
Such commonalities among rare disease patients could point to the potential use of machine learning techniques on health care system databases to improve diagnoses, said study co-author Joni L. Rutter, PhD, NCATS Acting Director.
The researchers would also like to determine whether these methodologies could be scaled to thousands of other known rare diseases.
“Ultimately, to improve the lives of people with rare diseases,” said Dr Rutter, “we need to find innovative ways, including new technologies, to help shorten the lengthy diagnostic odysseys so many patients and families experience and make more treatments available faster.”
