Showing posts with label costs. Show all posts
Showing posts with label costs. Show all posts

Thursday, April 30, 2015

The staggering social costs of gun violence in the US

This was a good interview about a Mother Jones article on the indirect costs of US gun violence: http://www.kqed.org/a/forum/R201504300930

The author's team performed an established economic analysis to estimate the total costs of gun violence - not just the direct costs of law enf., ER visit, and justice/penal system processing, but also lost productivity and diminished quality of life from long-term disability, incarceration, and death (affecting not just the victim but their family, workplace, and community). The article estimates that of the ~30K gun murders each year, on average it costs America $500K each. Add to that the ~80K cases/year of serious injuries from guns, and the total price tag is over $200B/year. That is 1/3 the value of Apple's stock, and more than US medicine spends on obesity each year. It's freaking huge.

But we're not talking about this because the NRA and others make the data so hard to access. And if people do try to study it (like the CDC and Harvard School of Public Health and Obama's recent nominee for Sgn. General), the gun lobby paints them as gun-control activists with a political agenda. Conservatives want to cut waste and spending left and right (social programs, research, etc.), but somehow the military and guns are exempt?

BTW - the study also found a correlation between states with weak gun laws and higher gun violence costs per capita (LA, WY are the worst, while HI and MA are some of the best - also with stricter gun laws). It's a no-brainer to us, but the 2nd Amendment crowd clings to the myth that more guns make you safer. They might also argue - what about the economic savings from all the crimes prevented by conscientious citizens with guns? Well there's just no data to support that claim, if it's even true (which is doubtful). You're much more likely to hurt yourself or a loved one than prevent a crime with your gun.

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This is pretty heartbreaking stuff about the effects of violence on Oakland's youth:

http://ww2.kqed.org/news/2015/04/29/violence-causes-ripple-effects-for-thousands-of-oakland-students

For a kid who turned 18 this year in Oakland, he or she lived through 111 kids getting killed in that city, not to mention the trauma that caused for everyone else. At least Alameda County is deploying more mental health resources for them now - but really this is an issue that no kid should have to deal with. Especially if they're under 10, children often can't deal with the difficult emotions generated from experiencing violence, so their ability to learn is impaired and they may lash out in negative ways.

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NPR did a story based on this article and the most persuasive outcome, to me, was that there needs to be science and data applied to this stuff.  One of the guests was talking about the idea that if you even ask for data you are anti gun.  That there is this all or nothing approach.  Why wouldn't the dates show all the loves being saved if guns are great?  Couldn't we also find that, for example, people with lots of gun training have better outcomes related to fun violence?  It seems weird to assume data can only be anti gun.

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Agreed. I guess it's like climate change and cop racism issues - if one side of the argument is confident in their position, they should have no problems whatsoever with full data transparency. When you are "trying to hide something" and suppressing info, that is a tell-tale sign that your argument has a problem. Actually if those folks really love gun rights and "freedom", then they should welcome data transparency to help improve gun use and gun culture in America (like a majority of NRA members favor better background checks, but NRA leaders don't). Or do they think that everything is OK? Don't they know that the most successful (legit) companies and gov'ts in the last 50 years are obsessed with data to help them succeed and improve?

Bottom line, the gun industry/lobby's only goal is to sell more product. Gun ownership in the US (as % of households) is on a huge decline since WWII, partly driven by urbanization, less interest in hunting, and I would like to believe social progress. But the # of guns in circulation may have gone up, so someone is buying them. There are fewer gun owners now, but they own more guns (and more deadly ones) per capita. Police departments upgrade their guns more frequently, and lord knows where their used guns go (I think there are accounts of cartels/gangs using former US police firearms).

So to accomplish their goal, the gun lobby has to oppose anything that would potentially hurt sales, and of course social costs data is a big threat. And when the costs are so obvious (even without hard data), they pull the freedom and liberty card. Sure guns are destructive, but the costs are "worth it" because we have to sacrifice to keep the communists from taking our freedoms. We have to tolerate the side-effects of guns because I need to protect my family from the bad guys. And when it's poor/black people shouldering most of the costs, it's easier to ignore - until incidents like Columbine and Sandy Hook happen, which affected affluent whites and jarred the nation.

I use data to put food on the table, so I'd like to think that I have some sense of "data ethics" and best practices. When the pro-gun side decides to actually use data in their arguments, I can honestly say that they are the worst in terms of ethics and rigor. Total intellectual dishonesty (or maybe ignorance). I have not read any NRA white papers (if there are any non-laughable ones), so I am basing my judgment mostly on the sound bites you hear in the gun debate.

Examples:
  • "Chicago has strict gun laws, but they still have plenty of gang violence and murders, so gun laws don't work!" Because we don't have borders. Thugs just have to buy a gun 30 miles away in easier places like Indiana, and then drive back to the city to shoot someone.

  • "Since the Brady Bill/Assault Weapons Ban expired, there have been fewer mass shootings, so assault weapons in the hands of 'the good guys' is an effective deterrent." Not enough sample size to assess a trend, and what defines a "mass shooting"? Public mass shootings are fortunately still pretty rare (it's much more common for someone to slaughter their family in a private residence). But Mother Jones and Harvard ran a statistical analysis to handle rare events, and they concluded that mass shootings are actually more frequent after the loosening of gun laws. Of course correlation is not causation, but it invalidates the pro-gun claim.

  • "Guns don't kill people; people kill people - address the mental health and anger issues instead." But guns kill people A LOT more effectively than a knife or bare hands. Yes there will always be a baseline level of violence and murder intent in any society, but if you restrict access to the murder tools, people won't be able to carry them out as effectively. Look at AUS/UK vs. US. Fairly similar culture, demos, etc., but we have all the guns and murders. Canada is an exception (many guns, few murders), but there will always be outliers.

Monday, December 30, 2013

Measuring the Return on Investment (ROI) of College



http://www.payscale.com/college-education-value-2013

I think the study's methodology is weak and does not prove causation. For the "return" part of ROI, they look at the median pay of grads for 30 years of working, adjusted to 2013 dollars. They project out pay increases by looking at grads from 1983 to 2012 (i.e. the earlier grads are later in their careers, and forecast what recent grads will earn at the same age). But of course that is fraught with problems, because universities could change a lot in quality and student composition over 30 years. And the economy changes a lot over time, so an older person may see very different wage changes from 1990-2010 vs. a recent grad from 2010-2030 (especially for degrees that saw a lot of industry growth or contraction). Also, I am not sure if they were looking at total earnings or just base pay, because we know that some jobs may have lower base pay but make up for it with better benefits, equity, or pensions. Students who went on to graduate/professional education were excluded, but that could be a problem too since some universities have a high % of students with those career aspirations (and those jobs tend to pay higher).

Also, are we measuring the ROI of the school, or the ROI of the students? University is not the only factor determining a person's future salary. Some Stanford students would still make similar money if they attended higher or lower ranked schools because of their abilities and ambition. But that is what the study should try to answer - if Joe Smith went to Cal vs. Stanford vs. Caltech and studied the same subject and pursued the same career path, how would his pay differ? This would be expensive and maybe unfeasible, but to control for student quality variation, they should have looked at each decile of US high school students (by general aggregated admission criteria), mapped out which college they attended, and then looked at their earnings over the first 5 years after graduation (30 years is overkill, entails too much uncertainty, and recent grad wages are a good predictor of late career wages anyway). But still, variation in regional pay and career choices would still confound the results.

This info would be tough to obtain as well, but possibly a cleaner way to answer the question would be to query employers. Do their compensation departments place a premium on various schools for certain job roles? Same with grad schools - do they give bonus points to students who went to undergrad at certain places (and convert that to a $ value)? Also repaying student loans has an opportunity cost, and there is value in the networking and relationships that one obtains in college. So it would be nice if they could incorporate those factors into their model as well. What do you think?

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In this case, though, it's a little hard to separate out the reputation effects vs. the quality of education vs. network effects.

I.e. do Stanford kids earn more money because we graduate with a good education or because of the Stanford name premium or because we just happened to make friends at a school where there is a lot of smart people.

If it's because of the quality of education, then you could say Stanford is worth it. If it's because of the network effects, then maybe yes maybe no. An expensive networking program for sure, but maybe not replicable by any other experience (and thus worth it). If it's the reputation effect, then Stanford should be concerned, as companies could potentially test for real skills some day, undercutting the reputational aspect of our degree.
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I agree that those factors are heavily linked in such a data set and it's pretty hard to draw any meaningful conclusions about ROI.

Another interesting question: are Stanford students successful because they went to Stanford, or is Stanford successful because of its students? I am sure it is symbiotic, but maybe that is why the top US schools have been locked in an "arms race" to recruit star profs, improve the student experience, etc. to woo the top talent. I guess they realize that a key to their success is the general quality of their "customer base" (but the spending is also partly irrational pissing contest). Though I am pretty sure that most students accepted at Stanford would become professionally successful no matter what university they attend (a testament to the merits of the admission process), even dropping out and going Zuck style. But if Stanford and say Ole Miss (sorry for offending any alum) do a "trading places" student body swap, I think that plenty of Ole Miss students would not be able to capitalize on the Stanford experience as effectively, leading to lower outcomes. And if the avg. quality of one's peers decreases, that may have negative effects on one's performance. But on the flipside, the sudden infusion of Stanford-caliber students to Ole Miss would have profound benefits for that institution on many levels.

So I guess college students should have much more bargaining power vis-a-vis university administrators. They could form a union haha and demand lower tuition or face a walk-out. But that threat is not credible, unless all of them can join startups the next year, or the Ivy League is able to take in the thousands of striking Stanford students en masse. Plus Stanford would replace them with eager "scab" students from US public schools and Asia - probably lower quality students, but "passable" to keep the place running. Therefore, it seems that the top schools are engaged in a certain degree of price fixing and cartelization (i.e. why is the tuition at Stanford pretty similar to that of Carnegie Mellon or Columbia, despite massive geographic and programmatic cost differences?). Unlike Wall St. and Si. Valley, they refuse get in a self-destructive price war, or steal away top talent from each other with cash/other incentives. Maybe that is illegal, but if absolute student body quality is the goal (as it pertains to national rankings or other metrics that administrator bonuses are based on), then it's worth it (and their endowments can justify it). But really, just imagine how that would affect recruiting if Stanford decided to slash its tuition by 1/3? 50% of undergrads are on some sort of financial aid anyway, so it wouldn't be such a shock to their finances. Well, no one ever suggested that higher education was an efficient market. :)

Friday, November 29, 2013

Is Black Friday even worth it to our society/economy?



http://news.yahoo.com/blogs/sideshow/-walmartfights-sparks-a-trend-on-twitter-193622540.html
http://en.wikipedia.org/wiki/Black_Friday_%28shopping%29

As we know, scheduled promotions like "Cash for Clunkers" many not generate new transactions, but merely shift them to a specific date (i.e. I would have bought a TV for Uncle Bob at some point before Xmas, but I might as well go on B.F.). Sure, while you are frantically trekking through Walmart, the mob mentality and "holiday spirit" make you less responsible with the wallet, so you might be inspired to get some other items (which is incremental revenue), but it's really hard for businesses to measure if those purchases are totally due to B.F. With the "arms race" of fierce retail competition, and marketers whipping consumers into a frenzy (and now mobile broadband and social media make it even easier to learn about "great deals"), companies have to take a loss or break even on certain products just to earn some eyeballs (they likely will have to pay more for ads due to more competition). Of course they may only have 5 super-cheap TVs per store, but clearly they are pricing competitive items lower than they'd ideally want to, and likely below what the customer's normal willingness-to-pay is (sans B.F. expectations).

That is a risk too - customers are expecting great deals, so if they are sold out by the time they get to the shelves (even for folks who waited for hours in the cold), that will cause a lot of anger, and the retailer runs the risk of creating a detractor who badmouths them on social media. And that's if they're lucky - shortages may lead to riots and deaths, as we've unfortunately seen in the past. Imagine all the man-hours of extra associates, police, and other emergency responders needed to handle the B.F. madness and possible incidents. Imagine the carbon footprint of all the traffic jams and the utilities from the extra hours that stores are open (and it's getting earlier and earlier - some stores opened at 8PM ON THANKSGIVING... by 2020 Black Friday will be on Labor Day). B.F. may not drive many purely incremental sales, but it sure as heck will create many incremental traffic accidents, injuries, etc. The employees that have to deal with the insanity may get overtime pay, but they also will experience elevated stress and possibly employer resentment, which are documented to affect workplace productivity, personal relationships, and health (not to mention all the stress and panic behind the scenes where non-store employees have to rush to meet the B.F. related logistics, marketing, product launches, and other deadlines). I am pretty sure some folks at Sony and Microsoft would have liked a few more weeks to iron out the bugs associated with their new gaming consoles, but they had to get them on the shelves in time for B.F. And as far as I know, no one is getting B.F. or Xmas bonuses anymore for their extra efforts.

On the consumer side, the post-Great-Recession US shopper spends on avg. $400 during B.F. weekend (with 200M+ unique shoppers). People may not behave very rationally during B.F. (understatement of the year), so they may make inefficient and imprudent purchasing decisions that will have negative consequences on their economic viability (and that of their dependents). There are socioeconomic costs associated with frivolous spending: credit default, back taxes, late rent payments, etc. Some opportunists make money off things like that, but there will be preventable economic losses too. Also, the more we spend on shopping, the less we have to donate to charities (or even buy more medicine and healthier food). The fatigue, emotions, and sleep deprivation associated with B.F. shopping will affect shopper health, relationships, and productivity for weeks - especially during the winter time of bad weather and virus spreads. Adding all this up, I can imagine that the social costs of B.F. could easily top $1B in the US. I am not sure how much incremental profit B.F. generates (for scale, wiki says WM gets $5B from B.F., and it is ~3% of all US retail sales), but clearly it should be discounted if we want to make a fair, holistic value calculation.

Even Cyber Monday could have social costs by reducing workplace productivity and tying up bandwidth that could make pageload/latency times worse and important/emergency messages slower.

Monday, February 25, 2013

"The price of incivility [at work]"

http://hbr.org/2013/01/the-price-of-incivility/ar/1

This builds on our past discussion on stress and health. These authors suggest that a disrespectful culture at work (often promulgated by a manager, who learned it from his boss, and so on and so forth...) can infect an entire dept of previously nice people, and cause health issues. We follow our leaders, right?

And here are the costs to employers and the economy: intentionally lower effort/output/creativity, reduced productivity worrying about the issue, complaining, and avoiding the culprit, HR costs of turnover (firings, recruiting costs, etc. can be $10K's per head), taking frustrations out on customers/clients, and of course the intangible reduction in team spirit and camaraderie. The effects of bad behavior may eat up 13% of a manager's time, which is also $10K's of costs per head. Cisco (generally regarded as a good place to work) did a conservative analysis and the total ran up to $12M/year. This led them to start a global workplace civility program. But of course many employers don't, and even pretend the issue isn't there. Maybe they will send out some BS employee satisfaction survey, but not act on the responses. That is even more demoralizing.

Simple fixes for bosses (though problem bosses are unlikely to try): walk the talk, show appreciation (so feedback is not always negative), ASK for feedback in a way that the worker is protected and comfortable to be honest, and change hiring/training practices to encourage civil behavior and keep out jerks (but of course asshole bosses may hire assholes who are like them). Also everyone is responsible to speak out when they see bad behavior, but often we keep our heads down for fear of retaliation. Changing culture takes time (if it ever happens), but when people see the "right way" to behave and people getting rewarded for it, they may follow. And similarly, bad apples have to be called out just like any other form of underperformance - even if the culprits are your rainmakers. In this sense, a jerk can be even more costly to your org than an underperformer, because at least others can cover for a slacker. A jerk often affects everyone, and in hard-to-measure ways.

Lastly, monitor that things are getting better (or if not, why?). Google does this fairly successfully with its manager metrics program where they have gotten horrible bosses to improve, but of course they are more data-driven and cutting-edge.

http://www.nytimes.com/2011/03/13/business/13hire.html?pagewanted=all&_r=0

Sunday, February 24, 2013

Health care reforms

http://www.interfluidity.com/v2/4013.html

Thought you might appreciate this. The author is a pretty intense econ blogger (much of it right at or beyond my ability to understand the arguments), but here he just unloads in response to the recent Time article about health care costs.

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I haven't read the Brill article yet, but based on the blog post - I get his argument for collective action. But as with most market failures, the public is just so ill-equipped because of asymmetrical info and influence with policymakers.

We've chatted about this issue during the Obamacare debate and other times, but as you said, most of the "proposals" are marginal improvements - and even those are unlikely to pass because of entrenched interests. You probably have thought about more comprehensive fixes, and I'd love to hear about them. From what little I know about healthcare economics, here is my initial list and let me know what you think:

1) Shift from fee-for-service to fee-for-outcome - and along these lines, empower consumers to refuse unnecessary or excessive care. Just as we are constitutionally guaranteed to legal defense, maybe we should be guaranteed a health advocate who represents our personal interests vs. the healthcare providers (who also care about us, but also care about other things)

2) Related to (1) is tort reform because medical malpractice much more lucrative and widespread in the US, compelling some providers to over-prescribe. But along those lines, there should be lawsuits and penalties for over-prescribing too.

3) This one is the most controversial and hardest to achieve (if it's even a good idea), but change the nature of demand - it's amazing that people can live longer and enjoy life more. But we are part of a society with some zero-sum aspects. Keeping an elderly person on life support for a year affects other needy patients. We are constitutionally entitled to pursue our happiness (which usually involves avoiding death), so no laws can apply here. But maybe people should reconsider their life expectations and their resource allocation impacts on society. It's OK to get sick and die when you're old. It's OK to "tough out" non-critical issues. A "good life" does not mean being top performing and discomfort-free all the time. Unless you have a high-deductible crappy plan, over-using resources doesn't hurt the patient, but at scale it does to everyone else. In other words, tragedy of the commons. 

4) market-based pricing & more buyer power - there has to be a supplier out there who is willing to sell us gauze for less than $77/box. And for medicare, the VA, or even Blue Cross with thousands of members should be able to negotiate better rates (the whole point of HMOs according to Kaiser and Nixon). But providers and vendors have local monopolies so there is little to no market. Also switching costs can be high, especially for employers choosing insurance. The health-care exchanges won't help much (if at all) because the pools are small and some of the most high-cost customers.

5) Harmonize state laws and health benefits admin - a lot of waste, bureaucracy, and delays regarding the different laws relating to privacy, insurance, benefits payout, taxes, etc. As part of this, there has to be more layoffs and pay cuts in the industry. It's ridiculous that health is 15-20% of the economy (just in the US, and maybe sub-Saharan Africa). It doesn't really make sense today to have >5 major airlines in the US, so why would we have dozens of insurers?

6) Incentivize hospitals and providers to have excess capacity, not fill empty beds with less sick people. Pay them to NOT treat people (when appropriate), because treatment also increases the risk of medical error and infections. This may free up resources to help underserved areas. Like with public schools, shut down or take over poorly performing hospitals and reward the good ones (measured by health outcomes per $ spent, not revenues).

7) Shift medicare spend from end-of-life emergency treatment to daily maintenance and preventative care (do this for younger patients too). Seniors sometime go to the doc mostly because they're lonely, yet we're cutting in-home services. If they feel socially connected, there is some data to suggest that their health improves too. And there will be someone there to take care of the small things before they get big, and take pressure off the elder's family.

8) Change the research grant structure - those who financially benefit from the research should pay back the gov't (at a low interest rate), even nonprofits. Along those lines, shift the emphasis from public-subsidized medical high-tech research to efficiency & outcomes research. Yes, future innovations are sexy and amazing, but probably not cost effective and affordable to many. It's better to focus on using our current proven tech in better and smarter ways. Even improving IT and data collection/analysis would be huge, and much cheaper than the next specialty drug that extends a sick person's painful life for 2 more months. Many docs and hospital admins are notoriously horrible with data. Again, this will cost jobs, but will save lives for less $.   

Tuesday, October 13, 2009

How "direct to consumer" marketing inflates health care costs

http://www.npr.org/templates/story/story.php?storyId=113675737

CorrectionThe audio and a previous Web version of this story mistakenly said that between 1992 and 2008 the average number of prescriptions that Americans get increased by 58 percent. The actual increase was 71 percent.

Part 1: Doctor Decisions All Things Considered, Oct. 8

In the mid-1970s, an unconventional health researcher named Jack Wennberg discovered an unusually high rate of hysterectomies in a small town in Maine. If the rate continued, nearly 70 percent of Lewiston women would be without their wombs by age 70. That was just one of a series of studies conducted by Wennberg that led him to a very surprising conclusion about health care: A large portion of the medical care Americans get is unnecessary, and the structure of the health care system is the reason why. The system can push doctors to prescribe care that doesn't improve patient health.Read this story.

Part 2: Patient Behavior Morning Edition, Oct. 12

The behavior of patients in the U.S. health system has changed dramatically over the past couple of decades. We've been transformed from passive patients who almost blindly follow doctors' orders into active and aggressive consumers of health services. A look at how that change came about, and how it affects the behavior of doctors. Read this story.

Part 3: Marketing Sickness Morning Edition, Oct. 13

Prescription drug spending is the third most expensive cost in the U.S. health care system. The average American gets 12 prescriptions a year, and this number only seems to grow larger. There are more medicines on the market today than in 1992, with Americans now spending $175 billion more per year. A look behind these numbers and what drove the increase in prescription drug consumption in America.


October 13, 2009

David Couper went to his doctor after watching a small green creature jump up and down on the nail of an infected toe.
For Anne Nissan, a 17-year-old in Prescott, Ariz., the image that stayed with her was of a party. Women were on a roof in a city, pimple-free and laughing, utterly unbothered by the cramps that immobilized her once a month.
And then there is Samantha Saveri, a transportation planner in Baltimore. She remembers bunnies and the promise of digestive regularity.
Three different people in three different places were all driven to contact their doctors after watching an ad for a prescription medication on television. Each walked into a doctor's office with a specific request, and walked out with a prescription for exactly the medication he or she desired.

The Rise Of Prescription Drugs In America
Prescription drug spending is the third most expensive cost in our health care system. And spending seems to grow larger every year. Just last year, the average American got 12 prescriptions a year, as compared with 1992, when Americans got an average of seven prescriptions. In a decade and a half, the use of prescription medication went up 71 percent. This has added about $180 billion to our medical spending.
While there are more medicines on the market today than in 1992, researchers estimate that around 20 percent of the $180 billion increase has absolutely nothing to do with the number of medications available, or increases in the cost of that medication.
To understand this change, one place to look is Wilder, Vt. There, in a tasteful housing complex on the side of a mountain, is the home of Joe Davis.
Davis is retired now, but in his speech and manner it's easy to hear the breezy salesmanship that made him so successful. Davis was an adman: "I was trained — or I was toilet-trained as we like to say — in packaged goods," Davis says. "General Foods, Procter & Gamble — that kind of thing."
Until the 1980s, the kind of people who sold stuff like packaged goods were completely different from the kind of people who sold stuff like prescription drugs. In those days, drugs ads were for doctors, not the public. They were designed by people who worked at these small, technically minded medical advertising companies and targeted this small, technically minded audience.
"Nobody had ever thought that these drugs should be or could be advertised to the patients. It was just outside of people's brains," Davis says. "They thought that only doctors could understand the products. They're technical products. They're scientific products."
But it was more than that. There was a fear — shared by doctors and drug companies alike — that advertising drugs directly to consumers could be harmful. Both the drug companies and the doctors worried that even though consumers couldn't really evaluate whether or not a drug was appropriate, they might become convinced by an ad, and pressure their doctor to prescribe it.
Not only might doctors end up passing out inappropriate medications, but also, drug ads could disrupt the doctor-patient relationship — a relationship that, at the time, was mostly a one-way street. Davis tells this story about his own mother, a sophisticated woman whom he found fumbling with a bottle of pills one day. When he asked what she was taking:
" 'Well,' she said, 'I take a yellow pill, a green pill and a white pill.' I said, 'That's great. What are they for?' "
His mother had no idea what they were for, Davis says. All she knew was that her doctor had told her to take them.
"It was very passive from the patient standpoint," Davis says. "The patient just took whatever orders were given by the doctor."
An Advertising Revolution
It used to work like this: Doctors decided what to prescribe. Drug companies — through medical advertisers — tried to influence doctors. Patients did what they were told.
The only problem, says Davis, was that the system wasn't working out for the drug companies. For them, the system was much too slow.
Because doctors exclusively held the keys to the kingdom, drug companies spent enormous amounts of time and money trying to get their attention. To give you a sense, the average doctor got around 3,000 pieces of mail a year from the drug industry, and to break through this noise often took years.
And so Davis, who had previously only sold packaged goods, approached William Castagnoli, the then-president of a large medical advertising company. The two came up with a solution: They would advertise directly to the patient. They'd get the patient to go in and ask the doctor for the drug. "Pull the drug through the system," Davis says with a certain amount of glee.
There was only one small problem with this solution: It was almost impossible to do.
In the early 1980s, FDA regulations required that drug ads include both the name of a drug and its purpose, as well as information about all the side effects. But side-effect information often took two or three magazine pages of mouse print to catalog, and this wouldn't do for a major television campaign. As Castagnoli says, "We couldn't scroll the whole disclosure information over the television screen — OK?"
But then, in 1986, while designing an ad for a new allergy medication called Seldane, Davis hit on a way around the fine print. He checked with the Food and Drug Administration to see if it would be OK.
"We didn't give the drug's name, Seldane," he says. "All we said was: 'Your doctor now has treatment which won't make you drowsy. See your doctor.' "
This was one of the very first national direct-to-consumer television ad campaigns. The results were nothing short of astounding. Before the ads, Davis says, Seldane made about $34 million in sales a year, which at the time was considered pretty good.
"Our goal was maybe to get this drug up to $100 million in sales. But we went through $100 million," Davis says. "And we said, 'Holy smokes.' And then it went through $300 million. Then $400 million. Then $500 million. $600 [million]! It was unbelievable. We were flabbergasted. And eventually it went to $800 million."
Pharmaceutical companies took note.
Today, drug companies spend $4 billion a year on ads to consumers. In 1997, the FDA rules governing pharmaceutical advertising changed, and now companies can name both the drug and what it's for, while only naming the most significant potential side effects. Then, the number of ads really exploded. The Nielsen Co. estimates that there's an average of 80 drug ads every hour of every day on American television. And those ads clearly produce results:
"Something like a third of consumers who've seen a drug ad have talked to their doctor about it," says Julie Donohue, a professor of public health at the University of Pittsburgh who is considered a leading expert on this subject.
"About two-thirds of those have asked for a prescription. And the majority of people who ask for a prescription have that request honored."
Whether the increase in the number of prescription drugs taken is good or bad for patient health is an open question. There's evidence on both sides. What's not up for debate is this: By taking their case to patients instead of doctors, drug companies increased the amount of money we spend on medicine in America.

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So yeah, totally buy that brand-name pills are a huge source of unnecessary cost. There's certainly value in making drug research profitable so people have an incentive to do it, but it's well beyond that.

The two things I thought were most interesting from this bit: First, the average American has twelve prescriptions per year? Holy hell. I can't even fathom that. I assume that's probably inflated by short-duration prescriptions (docs don't like giving you a prescription for more than a couple weeks of Vicodin at a time), but still. Twelve is the *average*?

The second was the comment about drug ads "disrupting the doctor-patient relationship". The relationship they describe, where the woman takes the pills with nfi what they're for, sounds pretty dysfunctional. For really common, obvious medical cases maybe that's fine, but if your medical situation is even slightly complicated, the only way you're going to get good care is by talking with the doctor and understanding your situation.

Ultimately it seems like you need to get the doctors properly incentivized so when someone comes in asking for a drug, the doc can explain why it is/n't appropriate, what the options are, and all that. We're obviously not going to get that in a broad systematic way from this administration, but at least encouraging people to ask their doctors questions is a step in the right direction.

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Yeah the numbers are pretty scary. As you said, 12 Rx/year on average? Damn. So for all the reasonably healthy people out there with 1-3 Rx per year, they're cancelled out by the hypochondriacs with 20 Rx/year. Probably many of the culprits are the obese, the depressed, and seniors. They take pill A for some disease, but they need pill B for pill A's side effect, and then pill C for pill B's side effect, and pill D enhances the efficacy of pill C, and so on. I guess that's why in Holland and probably other universal health care nations, doctors are actually given cash bonuses for prescribing cheaper generics when available. If a generic is 10 Euros and brand-name is 15, the doctor can pocket like half of the difference. People need to remember that pain is part of life. Your body can't feel perfect all the time. Don't they say "just tough it out" and "whatever doesn't kill you makes you stronger"?

Especially for seniors who complain about every little discomfort - it's irresponsible and maybe even harmful to them (drugs may help but cause side effects, long-term addiction, reduced efficacy over time, etc.). Some seniors have a huge pill case like a tackle box full of daily meds, and some have doctor's appointments like 3x/week! The psychiatric drugs really concern me. Sometimes you're sad, and sometimes your kid is hyper at school. That doesn't mean you have clinical depression and your kid is ADHD. Yet they get medicated all the same, every day, at huge cost. I know some people have legitimate mental conditions where drugs really improve their quality of life, but most of us would believe without data that such drugs are over-prescribed in America.

Apart from the short-term drugs, I think some of the big money-sinks are the "daily until you die" drugs like Lipitor. These "lifestyle" drugs are shortcuts for healthy living. I know some people have legitimate cholesterol issues and need statins to be healthier. But for the elderly or lazy folks who don't want to exercise and eat right, popping a statin will make up in part for your bad habits. Lipitor cleared nearly $7B in the US in 2004, which is more than the GDPs of many nations. And 66% of Lipitor's worldwide sales are to Americans, even though we're only 5% of the world's population. I know Americans are more obese on average, but come on.

The other top-selling drugs are here: http://www.forbes.com/technology/2004/03/16/cx_mh_0316bestselling.html

As you can see, they are mostly "dailies" for chronic diseases like depression, asthma, ulcers, circulatory issues. I think the penis drugs make a lot of money too, though not sure if they are covered by insurance. Viagra topped $1.6B in 2005.

http://money.cnn.com/2006/01/05/news/companies/sexdysfunction/index.htm

Obviously DTC ads play right into this problem. You have a discomfort or are not feeling right about some aspect of your body. Then the TV says a magic pill just makes it all better and you will be like the happy, pretty people in the commercials. But people haven't done the research about side effects, which patient sub-population would benefit most, cheaper alternatives, etc. And doctors may not have time to discuss in detail (15 min per patient at Kaiser, or so the rumor goes), or don't want to say no because they worry about angering customers and losing them to competitors who will prescribe anything they want. Jeez - 2/3 of patient-requested Rx's get honored? I guess 2/3 of people deserve honorary MD or PharmD degrees. As you said, marketeers get in the way of the doctor-patient relationship. People become consumers instead of patients, and we all know Americans don't consume very responsibly. As you said, the doctor is ultimately responsible because he or she signs the Rx. So if we can incent or threaten them to be more austere with Rx's, maybe it will get better. Like if we chart doc Rx habits and see that some are several standard deviations above the mean, then they get a fine or whatnot. And we can combine that data with patient outcome metrics to see which drugs deliver the most bang for the buck, and which docs are managing resources most efficiently. Some of this is already going on behind the scenes, and now our data collection, stats, and computing power align for more thorough analyses. So if we can build on that, and reward the docs who use drugs most effectively for their patients, then maybe some behavioral changes can happen. Because obviously we can't count on the patient to make the right choices, just as we can't trust children to own a gun or drive a vehicle.