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Why South Carolina’s health care industry faces a ‘watershed moment’

Krys Merryman //February 14, 2024//

Inspects vials and ampules for particulates in liquid and container defects. Pharmaceutical automatic inspection machine. Pharmaceutical Manufacturing.

Inspects vials and ampules for particulates in liquid and container defects. Pharmaceutical automatic inspection machine. Pharmaceutical Manufacturing.

Why South Carolina’s health care industry faces a ‘watershed moment’

Krys Merryman //February 14, 2024//

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Is health care actually affordable to Americans?

At the 2024 annual SCbio conference, panelists discussed the state of the health care system and why consumers believe it to be “unaffordable.”

President and CEO of the South Carolina Hospital Association Thornton Kirby said at the conference that he has three observations for why Americans struggle with the cost of health care:

  • Health care is not like the other products and services we consume, in the sense that with most major purchases, like cars and houses, people intuitively go into it thinking about what they want to spend, but that’s not what we do when it comes to health care.

“As a former hospital lawyer and executive, I’ve taken many calls from people who say, ‘My family member has been diagnosed with X. Who is the best doctor to take care of them? In all my years, I’ve never had a single call from someone who said, ‘My wife was just diagnosed with breast cancer, so where’s the cheapest place to get that treated?’ That’s how we approach health care. It’s always about the best care. So Americans want the best and aren’t price shopping when it comes to health care.”

  • The second issue is “Americans want the best health care in the world. They want someone else to pay for it, and they don’t want to be asked to change their behaviors. If you think about trying to solve this equation, that’s pretty tough.”
  • The third issue is in America, the health status of citizens continue to decline.

“So, we aren’t just talking about the unit cost of care, but the volume, how much we consume as Americans. If we think about obesity, which is exploding in prevalence, well that drives heart care, cancer, many other disease states that are expensive to treat.”

The co-founder of Small Business Roundtable and executive director of venture capital advocacy group  Incubate, John Stanford, said it’s important to look within the United States’ health care system to pinpoint what works, while also looking at international health care systems and what works there, and whether those systems can be integrated into the U.S. system.

“Instead of letting common sense win the day, we’re letting limited timeframes or perverse incentives guide our entire system and then we say, ‘How did we get in this place where nothing makes sense?’” said Stanford.

Congress last year passed into legislation the Inflation Reduction Act, which aims to lower prices of prescription drugs that contribute to higher health care costs for millions of seniors and people with disabilities, among other efforts to lower health care costs for millions of American families. Many decades buried within the system is a provision that says, “We basically value biologics significantly more, roughly twice as much, as we value small molecule drugs,” said Stanford.

“You take the politics aside and go to any scientist, and they’re going to say the science should determine what kind of drugs they develop, not some policy out of Washington,” he added. “But more importantly, you go to any economist and say you have a choice in your health care system between more small molecule drugs like pills, or biologics, in which someone has to go to a hospital or clinic and be infused, the economist is saying you should want more of the small molecule drugs. This is just one example. We have totally stacked the deck now against small molecule companies and their development, and we’re patting ourselves on the back for the quote-unquote savings.”

Kirby said hospitals feel like they are being asked to do extra work to make sure people don’t consume certain products and services.

“You don’t see that in other industries,” he added. “BMW isn’t working hard to make sure you don’t buy their cars. So why are hospitals having to work hard to make sure they don’t do the things they get paid for?”

The cost of failing systems within a failing system

The ordering of non-value-add care is also significantly on the rise and detrimental to patients’ pockets, said Kirby. There are many physicians who will tell you they order things in two categories — those that are medically necessary and those that are legally necessary, he added.

“Because they fear being questioned later on why they didn’t do an abdominal CT on a patient that presented belly pain,” said Kirby. “They figure that if they miss it, they will get in trouble so might as well order it for all patients. That’s a massive amount of unnecessary care across our system. We need to have a conversation for our tolerance for only ordering things that are medically necessary for the specific presentation of that patient, but we have a legal system that penalizes physicians for a miss, even if it wasn’t warranted.”

Ever since the Affordable Care Act went into effect, which had a lot of pro-patient provisions, Americans have seen the rise of high deductible health care plans where now the vast majority of Americans with insurance are on plans with deductibles as high as $20,000-$30,000 a year for families, while the average family has an average of $500 in savings, said Stanford.

“So, insurance really isn’t insurance anymore.”

Let’s think about how the patient starts their year off year after year, Stanford proposed. If a patient has a chronic illness, he said, the first thing they are doing come Jan. 1 is filling a prescription they are accustomed to taking.

“Maybe that price went up year over year, but maybe it didn’t. Regardless, that’ll be the first dollar out of their wallet,” said Stanford. “Every year. And it’s not covered by their insurance, because they have to hit that deductible first. And we wonder why there’s so much ire driving this conversation about affordability. It’s because we’ve exposed the patient to not just the first dollar in, but the first $20,000 of health care costs. That is unaffordable. And we have to get back to making insurance, insurance. I don’t subscribe to the belief that these are cost containment methods. I don’t know any chemo patient that is choosing to take that medicine. We need to get back to where the cost is borne by society, and we have the discussion as a society. If we are just putting the cost on the patient, everything breaks down, and you almost can’t have a reasonable conversation anymore.”

It’s critically important to remember that the U.S. is the economic powerhouse in this space, said Stanford.

“So, why are we destroying the one thing we are absolutely beating the rest of the world in?” Stanford posed. “One of the consequences coming out of Washington is everything’s going to feel tighter. Investors feel tighter. The acquisitions by large Pharma will have to be smaller. There’s going to be more pressure, and we are going to have to do more with less.”

What Stanford is talking about is not hyperbole, said the vice president of state government affairs at the Biotechnology Innovation Organization, Patrick Plues.

“This is a watershed moment for our industry,” said Plues. “We’ve already seen companies shedding research and therapies, because of the way the Inflation Reduction Act is set up. So patients are going to lose out on medication. Dollars will be very tight for a lot of companies. We are seeing this convergence of federal and state governments reigning in the cost of drugs.”