At this event, he asked why we do not see any of the signs of an innovation boom in health care that we saw with personal computers and the Internet. No spectacular new companies. No surge in demand for life sciences knowhow comparable to the surge in demand for computer programming skills. As he wrote last year, he believes that the FDA’s requirement that new treatments be more efficacious than old ones has the effect of stifling disruptive innovation, in which new products first gain traction on the basis of lower price rather than better quality.
Others at the panel pointed out that it may not be the FDA that dictates the innovation pattern. It may be the fact that third party payments dominate American health care. Patients who are not paying for their own health care are not going to provide a market for radically cheaper treatments. And insurance companies are not going to want to pay for radically better treatments that cost a lot. So the only innovations that survive are incremental ones.
However, I want to go back to the original question of why we do not see an innovation boom. My thoughts:
1. My guess is that we have not yet reached a point where all the pieces are in place to produce an innovation boom. Remember that it took several decades to go from the invention of the transistor to the appearance of the personal computer.
2. We do not have an institutional breeding ground for biotech innovation. No equivalent of Bell Labs, or Xerox PARC or the Homebrew Computer Club.
3. Someone in the audience asked a provocative question about whether some other country provides a role model, which country provides a role model for health care innovation? If you thought that the only roadblocks were American customs and regulations, health care innovation would take place in other countries.
It would be a failing business model. The difference between price and marginal cost is so great, the cost advantage of any inferior solution would be wiped out at the stroke of a pen making it uneconomic to develop. As it is, patent expiration brings this about faster at no cost than investment would. A useful patent already owns the market and no lowering of cost will increase volume if they already have access to a better solution. Such an innovation could be useful for third world countries but they already have the advantage of ignoring patents, undermining any rationale for their development.
Laser eye surgery and cosmetic dentistry exhibit all the wonderful innovation we see outside of the healthcare field. Every year procedures lead to better outcome, at a cheaper price, and are less error and complication prone.
How are these fields different from the rest of healthcare?
Consumers spend their own money, with no insurance or government intermediary in the middle.
Consumers can easily and instantly just the results of their procedures.
These are elective procedures, so consumers can easily search for information about specific providers.
These are outpatient procedures and entry costs for providers are realtively low.
Providers can easily grow their businesses and can quickly profit from success.
If you could bring these attributes to the rest of the healthcare industry, you’d get the same results.
Not sure about #3. Sorta seems like once a country’s rich enough to devote substantial resources to healthcare research and product/service development, it has already developed the institutions to strangle that research in its crib. Maybe I’m being overly pessimistic, though.
Maybe you and Mandel haven’t been looking closely enough? or didn’t understand what you were looking at?
The thing is, federal funding of scientific research made a big big switch back during the Nixon administration, away from physics and engineering and into biology and medicine. Today for example, the National Institute of Health has a 30 billion dollar budget — almost twice the NASA budget. In 1970, the NIH budget was about one billion bucks, or one-fourth the NASA figure.
Granted, we haven’t seen a Magic Pill that would eradicate cancer, but the impact has been large. I shudder to think how the country — the world — would have reacted to the AIDS virus if our understanding of genetics in the1980’s had not much improved over our understanding in 1970.
Other aspects of medical/change that tend to be overlooked? Reduced air pollution, especially reducing exposure to lead in automobile exhaust. Vaccination for common childhood diseases. Anti-smoking measures. Airbags and other measures to protect automobile passengers. Improved water treatment and other sanitation measures. Improved earthquake safety requirements in California and elsewhere. OSHA.
The country’s changed in a lot of ways since 1970, and many of them had an impact on health and quality of life. They’re not as visible as say flying cars, and many of them are behavioral shifts or the “intrusive federal regulation” that upsets conservatives so much. But they’re there, and they’re a large part of the reason life expectancy continues to rise.
I think this sort of stuff is more obvious to older Baby Boomers than to people born after say 1960, who tend to take it for granted.
That innovation may be incubating as you write. You simply don’t see it now.
Survival rates for various cancers are much improved over the last few decades. But it’s been more like incremental improvement in diagnosis and treatment techniques than some new innovative medicine or diagnostic device.
http://progressreport.cancer.gov/graphs-jpeg/lsu1.jpg
Slow and steady improvement in care is not necessarily of lesser importance than some particular invention. Perhaps you are not old enough to remember the Vic 20 and the Commodore 64? Mosaic and Netscape Navigator? Tim Berners-Lee and CERN? The first “Window”?
It may seem today that there were one or two innovations that “surged” the need for computer skills, but if you look back on the history of computer hardware and software development you will find numerous bodies left along the trail: ideas and companies that didn’t make it, but that represent the same [relatively] slow and incremental improvements, like those that led to Google and Microsoft and YouTube, as those (without name) that result in more cancer patients living longer than the 5-year survival goal.
My take: It’s hard. Unlike computers, you can’t do it sitting in front of a computer sipping coffee programming a lithography printer. Except, ironically that is exactly what I do. But cells don’t replicate like transistors.
However, like my guess about math in economics, biology uses simulations and tries to emulate the computer boom because that is where the “paper productivity” is. But that does not as readily translate into real productivity.
So, to put a finer point on it, when medical research achieves something analogous to the feedback loop where it is easy to double transistor density (I’m not a computer person) every 18 months (and it won’t be 18 months in medicine btw) then we will get the Moore’s law translation (but it won’t be a full doubling and again it will be years not months). My guess is this is coming pretty soon with some of the new high precision and high throughput techniques automated with those fast CPUs.
But I think the fact that bioinformatics has become a field unto itself tells us it is going to be a lot harder inherently. That is not even counting that you aren’t allowed to do trial and error on people.
Also, computers seems to be more of a one problem problem conducive to distributed division of labor. I agree that there has been medical progress, but it appears, for example, that developing one vaccine does not rapidly feedback to others. Or if we cure breast cancer it will be different from curing lung cancer (even though breastfeeding cancer can end up in the lungs). Medicine seems like a collection of one-offs relative to computer innovation.
d’oh Jesus. When is Obama going to address the autocorrect crisis?!?
Guffaw. And here I thought you’d discovered a new cancer!
Id call it more of a fad than a cancer!
The thing is, I fixed it the first time auto correct broke ut. (Sic) Then it broke it again. We officially work for the machines.
Arnold, I think you are mistaken as why there is not yet an innovation boom. I think the audiences comments (stated in paragraph 2 of your post) and Commenter CMOT have hit the nail on the head. The third party payment system seriously distorts the incentives. I worked as both a consultant and then an investment banker in the healthcare sector for 12 years, and this element of the business drove me bonkers. In my experience, the companies that succeeded are the ones who successfully gamed Medicare, Medicaid and other third party payors. True innovation had little to do with their success. The exception were those sectors of the healthcare that were dominated by private payors (e.g., cosmetic surgery, dentistry, etc.).
I’m with CMOT and Various. I have 12 years in healthcare experience in pharma then consulting then provider sector (academic). There are four major stakeholders: patients, providers (clinicians), facilities (hospitals), and payers. They have different objectives, criteria, and decision processes. Getting material innovations imbedded requires concurrence from at least a couple and often three or four of the stakeholders. Coming up with innovations that (1) work, (2) have evidence of the type that the different stakeholders respond to, (3) have an economic model that keeps all stakeholders at least whole if not better off is really hard.
Complicating factors include:
* Key parts are highly local & fragmented (providers and facilities)
* Heavy regulatory overhang (FDA is one of many constraints)
* Low margins in some sectors means higher barriers to change (don’t rock the boat, esp given the high % of stable-ish gov’t payers)
* Little data to measure & compare real functional outcomes (vs. process outcomes like infection or readmission)
* The science is hard. Cancer is a hundred little diseases depending on what processes break, even within a disease site (e.g., breast). ‘Curing’ one doesn’t touch the other 99. (And it’s hard to prove that you ‘cured’ that one)
In a fully open market environment, we might make progress on some of these issues. In the current one? It’ll be slow.
But it’s hard to have a fully open market environment when the starting point isn’t balanced. How do we manage patients born with high cost-to-treat genetic diseases?
So yeah, it’s hard and the regulatory/economic environment makes it much harder.
The human body is a complex system. We don’t understand the behavior of complex systems, such as a body – or an economy – nearly as well as we think we do.
By contrast, a computer is a relatively simple system – and one that has been designed entirely by humans. To me, it is not remotely surprising that medical innovation has lagged behind that of tech.
Sure, regulatory and payment issues may play some role. But all of our excellent success playing checkers (tech) does not imply that we should be Grand Masters of Chess (medicine). B
I think health care is similar to education, where costs increase faster than inflation and innovation is mediocre. Education and health care have much in common: heavy government and politician involvement, a high degree of third party payments, under appreciation (or warped sense) of competition all because a belief that the product is too important to be left up to the markets.