Can Our Innovation Pay for Universal Healthcare?

Only five patients were cured of lymphoma months after a cancer cure became available. We’ve had a cure for Hepatitis C for years.  But only now is it becoming more widely available. It’s the price.  The Hepatitis C cure costs about $26,000 and the cures for childhood leukemia and lymphoma is about half a million. Yet, according to some estimates, the National Institute of Health (you and I) spent $200 Billion to cure childhood leukemia. Why then is it beyond our reach?

Part of the answer is a little-known law called the Bayh-Dole Act that was passed in 1980. This bi-partisan legislation (Bayh was a Democrat and Dole a Republican) allows universities and non-profits to patent their inventions.  It works like this.  University researchers receive grants from the National Institutes of Health to develop a cure for leukemia.  Their research shows tremendous promise.  The university sells that research to a company that does the clinical trial and manufactures the drug. In this case the university sold the research to the Swiss pharmaceutical company Novartis.  Novartis patents a drug now called Kymriah and the university and researchers keep part of the profits.  It works out for everyone.  Except patients.

If you were a researcher who helped develop Kymriah, you probably got a substantial bonus.  However, if God forbid, your family member were to get leukemia, odds are he or she would not get the treatment you helped create. It’s too expensive.

Congress passed Bayh-Dole because in 1980, only 5 percent of healthcare innovations were getting to the market. Bayh-Dole changed that. Today, the United States has more clinical trials than any other country. In 2016, Scientific American ranked us first in overall innovation.

Money, of course, decides what gets invented. Margaret Blume-Kohout and Neeraj Sood found that when Medicare covers specific types of drugs, pre-clinical and clinical trials for those types of medicines increased. Pharmaceutical companies patent drugs for which we are willing to pay a lot of money. Trouble is that when these miracle drugs are developed, they are so expensive most of us can’t afford them.

The Medicare Payment Advisory Commission (MedPAC) reports that Medicare’s drug expenditures are unsustainable.  It’s not just Medicare.  The Congressional Budget Office projects that the federal government will pay $3.7 Trillion in 2018 to subsidize work-related healthcare coverage.  A lot of that is because premiums have been going through the roof.  According to America’s Health Insurance Plans (AHIP), 23 percent of the premium increase is due to drug costs.  When you consider that every cancer drug that was brought to market in 2017 costs $100,000 or more, that makes sense.  Just as it makes sense that insurers would ask that cancer cures be classified as treatments rather than drugs. Insurers don’t have to cover treatments; they do have to provide Medicare and at least some Medicaid beneficiaries with access to medicines such as cancer cures. Nor is it surprising that researchers question whether commercial insurance and certain Medicaid plans will cover cancer cures at all. This, even as the Food and Drug Administration reports that as many as 500 cancer tests and/or treatments may be in the pipeline.

All of which begs the question: who will pay for these treatments? At this rate, no-one. In 1980, too few inventions were getting to the market.  Today, the treatments, let alone cures, that do get to the market are so expensive we can’t afford them.  And not all cures get to the market. At least some (we have no way of knowing how much) research is stifled. Spend any time on “healthcare twitter” and you will meet analysts who worked on a cancer cure. But when that cure showed tremendous promise and was sold to a pharmaceutical company, research was shut down. That’s because as Goldman Sachs forthrightly put it, curing patients is not a sustainable business model for a pharmaceutical company.  If you cure patients, they don’t need your drug anymore.  The only way a pharmaceutical company can deal with that is by raising the price of its drugs thus making them inaccessible or not bringing them to market in the first place.

But why does the pharmaceutical company have to develop the cure? Why can’t pharma concentrate (as Goldman Sachs advises it to) on maintenance drugs?  Margaret Blume-Kohout and Neeraj Sood’s research shows that it doesn’t matter who pays for the research so long as someone does.  Why can’t the federal or state governments buy the cures and sell them to fund universal healthcare and still more research?  The federal government doesn’t have to worry about going out of business if it cures “too many people”; it doesn’t have to worry about shareholders. It can afford to charge less for a cure. If the government had sold Kymriah (a cure for childhood leukemia) it might have been priced at $160,000; not $500,000.  That would still have made a profit.  A profit that, had the government made it, could have been placed in a fund that was then used to subsidize more research and universal healthcare.  Develop and sell enough such drugs and we have the money for healthcare for all, including maintenance drugs when a cure is not available.  We also should have enough money to speed up the research and development for a whole host of cures.

Bayh-Dole solved an innovation problem.  An amendment directing the federal government to buy the rights to cancer cures, finish developing and selling those cures at a profit could give us universal healthcare.  Why can’t we use America’s incredibly innovative medicine to fund universal healthcare?

Why not?

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