Penn's Emanuel on high-priced drugs, high-priced technology, including Penn's

Ezekiel Emanuel, chair of the department of medical ethics and health policy at the University of Pennsylvania, is not afraid of delivering difficult news.

Speaking to biotech and health executives at an invitation-only event Monday in Philadelphia, he said he was invited as a counter balance to other speakers, whom he described as "techno utopians," people who are gung-ho on medical technology and are less vocal on the costs to the entire health care system.

The event was the Klick Ideas Exchange, sponsored by Klick Health, a digital marketing agency. Veeva Systems and the Biotechnology Industry Organization were also sponsors. BIO, the Washington-based trade association, is holding its annual convention at the Pennsylvania Convention Center this week, attracting 15,000 people.

"A lot of these technologies fail, don't work," Emanuel told the audience. "They might be great but never get adopted and some aren't great. A lot of drugs we have are pretty high cost for low or marginal value. They wanted someone to balance out the techno uptopians. You got me - and there are many of us."

Bill Clinton was scheduled to open the conference but weather delayed his arrival so Emanuel and others spoke before the former president. A link to Tuesday's Inquirer story is here.

Emanuel told the audience, then in post-speech interviews with CNBC correspondent Meg Terrell and the Inquirer that pharmaceutical companies have the highest profit margin of any sector in the health care economy.

"We don't have a system," Emanuel said in the Inquirer interview, referring to controlling the cost of drugs in America. "It is basically pharma setting its own prices but you can't replace that with nothing, so we need to do something about having the right pricing model. It's clear it (the current process) is not based on cost-effectiveness because they (pharma companies) are not trying to justify it with cost effectiveness. It certainly doesn't hold in my field, cancer."

Medicaid, which provides health insurance for low-income Americans, is financed by federal and state governments. Medicare is handled only by the federal government.

Laws allow Medicaid officials to bargain for lower drug prices. But with lobbying money from drug companies, Congress has passed laws that prevent Medicare from bargaining directly on price.     Would applying the Medicaid laws to Medicare help?

"That might solve the government problem, but it won't solve The Problem because then drug companies will raise the prices on private payers," Emanuel said, referring to insurance companies and the patients they cover through drug plans. "We need a broader solution."

Emanuel imagines one imperfect "perverse back door," solution occurring, if enough states and health systems - 4,000 by his count - all begin negotiating more forcefully with drug companies.

"They," Emanuel said, referring to drugmakers, "might think a national system where we all know the rules might be a better system."

Emanuel, who served in the White House under President Obama and helped formulate the Affordable Care Act, was asked what he would urge Hillary Clinton to do with health care if she is elected president.     It probably won't comfort drug industry executives, but specific controls on drug prices were not in his top four list of suggestions, though they might be part such ideas.

"The top of my list would be to push really hard on payment reform for the whole delivery system," Emanuel said. "You have to change how you pay doctors and hospitals. That is Nos. 1, 2 and 3, because it is really important we do that."

Though it has started to change, doctors and hospitals still work on a fee for service system, which results in them collecting more money without necessarily achieving better results for patients.

"A second suggestion is a pet peeve of mine," Emanuel said, " It would be a combination involving jacking up the federal tax on cigarettes. We know the number of smokers has plateaued and we should increase the tax 50 cents a package, so that will drop by 3 or 4 percent the number of people who smoke. That will have big benefits for the country and I would use that money for early childhood innovations.

"We have very good data that says those programs are effective and give the best ROI (return on investment) for the government, in terms of the health benefit of both groups."

Emanuel would look to states for good solutions.

"The third thing is to incentivize the states to control costs," Emanuel said. "We have a lot of interesting experiments going on now, in Massachusetts, Arkansas, Tennessee and closer to home, in Delaware with bundled payments. This is a plan we suggested in the Center for American Progress, that whatever states do, they would get half of the federal savings in terms of subsidies, Medicare and Medicaid, and the decrease in costs. That is a hundreds of millions, if not billions, of dollars to the states for the benefit of handling health care costs."

Emanuel kept going.

"Another thing is that I've been a big advocate for malpractice reform, not because it will save money but because it will change the psychology of doctors and you need doctors and hospitals to change how we deliver care and that is the best way to get there," Emanuel said.

Malpractice reform generally involves capping financial payments to patients and plaintiffs' attorneys who file suit against doctors and hospitals. Because of those costs to doctors, hospitals and their insurers, doctors sometimes order expensive tests or procedures just to provide evidence that they tried everything possible to help a patient, in case that patient later sues.

"Republicans keep claiming they are for it," Emanuel said of malpractice reform. "Hillary Clinton has been for it since she wrote an article with Barack Obama on it in the New England Journal of Medicine in 2006."

Emanuel's current employer, the University of Pennsylvania and its medical system, uses plenty of very high-tech and very expensive equipment. The Roberts Proton Therapy Center cost $144 million to build, according to several Inquirer stories. A Philadelphia Daily News story from 2008 suggested the electric bill for the tumor zapping device would be $10,000 per day.

Emanuel was supportive of that Penn Medicine technology - but only to a point and he was consistent with what he told the audience Monday about the value of technology.

"We will always need cutting edge research and places that need cutting edge care," Emanuel said. "I do think we need to be careful about their roll out and show they really work. Proton beam therapy works for kids with brain and spinal chord tumors. But for men with prostate cancer? No data. Does it work for women with breast cancer? No data. We need data before we do these things and cover the cost."

A link to Emanuel's page on the Penn Medicine website is here.