As a growing pantheon of Democratic politicians pledge their support for “Medicare for all” and its variants, the pharmaceutical and biotechnology industries are gearing up for an epic and expensive battle to kill these proposals.
As someone who has worked at the highest levels of the pharmaceutical and biotechnology industries, I think this opposition is a huge mistake.
Without a greater government role in health insurance, many of the discoveries emerging from the labs of these industries will never reach patients. Why? Gene-based treatments that save someone from dying 20 years in the future have no chance of being embraced by private insurers whose business model depends on annual renewals.
It doesn’t make sense for them to buy a costly, high-tech intervention that pays off years or even decades after its recipients stop paying premiums.
This growing disconnect explains why genetic research will soon make Medicare for all, or something similar, all but inevitable. The time horizons for medicine on the one hand and employer-based health insurance on the other have simply moved too far apart.
When employers began offering health insurance in the middle of the 20th century, jobs were expected to last a lifetime and nearly all treatments worked within weeks. Paying a modest sum to treat sick employees with penicillin or tetracycline, the technological wonders of the day, so they could return to the factory floor for another 20 years made obvious financial sense.
Today, jobs in the gig economy last months or a few years, while medical interventions may take decades to bear fruit. How many employers view sparing a woman from breast cancer 20 years hence as a sound investment in their labor force?
A new wave of genetic tests and treatments promises to make this disconnect an almost unbridgeable chasm. Fifteen years after the sequencing of the human genome, pharmaceutical and biotechnology companies are poised to offer cures for a host of deadly genetic abnormalities, including spinal muscular atrophy and sickle cell disease.
Beyond these highly targeted treatments, scientists are uncovering genetic patterns that place millions of Americans at higher risk of heart attack, stroke, cancer, and other serious diseases. Patients and their doctors will soon be faced with myriad decisions about the tests and treatments needed to stave off potentially life-threatening events that may not manifest themselves for decades.
But prices for some new treatments already hit $500,000 and will likely soon exceed $1 million. The justification for such eye-popping sums is that the interventions offer patients decades of new or disability-free life. And in a newly interconnected health care system, the treatments could substitute for less-targeted but equally expensive care options, saving money over the long term. These are the great promises of precision medicine and value-based health care.
But the key idea here is “long term,” a time period that neither employers nor insurers are interested in anymore. Nowadays, only governments have the financial and political wherewithal to invest in keeping people as productive and taxpaying members of society over their lifetimes.
To be sure, insurers have long paid for preventive interventions like measles vaccines, cholesterol-lowering drugs, and annual checkups. But many of these are modest measures intended to prevent catastrophic events in the near future.
Genetic screening will vastly expand not only the range of diseases targeted but the time period for preventing them.
Insurers, devoted to short-termism, are bound to respond to ever-higher treatment prices with ever-higher copays, severely limiting access to expensive new drugs. How many people can afford a $1 million copay? Why would anyone in the pharmaceutical and biotechnology industries welcome such a future?
Nations with cradle-to-grave insurance systems will be able to take advantage of the discoveries not only to rescue and improve lives but to capture savings, widening the health gap between the United States and other industrialized countries.
Medicare for all may not be the only solution for the worsening short-termism of employer-based health care. If health insurers are faced with a rational long-term government alternative, they may respond competitively with their own long-term insurance products. Perhaps they could sell separate policies for genetic treatments. As the popularity of Medicare Advantage plans demonstrates, lifelong insurance guarantees need not be wholly government administered.
Whatever the solution, science will soon offer the chance to glimpse and change our distant health futures. We will need a payment system that encourages such foresight.
Rather than oppose every Medicare for all proposal, the pharmaceutical and biotechnology industries must help guide Washington toward a future made inevitable by their own astonishing discoveries.
Jim Tananbaum is the founder and CEO of Foresite Capital, a San Francisco-based biotechnology investment firm.
Nice article Jim. It would seem most everyone agrees at some level that today’s system won’t support tomorrow’s healthcare delivery and therapies. Yet which businesses will go first to create something new. Biopharma companies, payers and employers, hospitals, physicians? As was mentioned by one pharma exec this week on Capitol Hill, it will take some form of gov’t regulation to break the log jam and keep the playing field level. I like the idea of long term financing (provided by the biopharma co) to pay for expensive therapies in rare diseases particularly. The “monthly payment” moves to the next payer when the patient moves from one to another employer/commercial plan or to Medicare/Medicaid.
Why would they want to go down to only a single customer? Once you are down to one customer, they own you. The same thing happened to all those WalMart Suppliers in the 90’s.
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