Kicking the Can (17 page)

Drummond counted first. “Fifteen two, fifteen four, fifteen six.”

“If citizens of our country are not willing to have this debate, the hard choices will fall to ACOs. We can frame the discussion in the context that this situation is unacceptable, but the federal government will not be the arbitrator.”

Lowsley counted. “Fifteen two, fifteen four.” He turned over the crib and counted. “Fifteen two, fifteen four, and a run of three makes seven.”

63

P
eter Lowsley dropped the stack of iron plates on the Nautilus machine, finished with his second set of leg extensions.

“Despite what people believe, the root cause of cross-national pharmaceutical pricing, the prices citizens in different countries pay for the same prescription drug, is a function of income differential between nations,” Lowsley said.

“Wealthy nations pay more. Brand name drugs cost thirty percent more in the US, but generic drugs are priced on par with other countries, according to the literature,” Drummond said.

“The brand name pricing structure in the US is conducive to earning a return on invested capital for research and development. America has been the purveyor of pharmaceutical research and development for the world, and those costs have been borne disproportionately by the US health care system and nations with higher incomes,” Drummond said. He was standing two machines away, performing tricep extensions.

“The problem with implementing a ‘most favored nation’s clause’ is poorer nations can’t afford drugs. Access
in poor countries is choked off because of monetary barriers.”

Vogel, who was stretching on a floor mat, walked over. “Investing in biotechnology stocks has been a source of consistent returns for my clients. Research is expensive…Many blockbuster drugs cost a billion dollars to develop and receive FDA approval…Higher risk-taking necessitates the potential for higher returns,” Vogel said.

“The conundrum is how to balance continued incentives for research and development and reduce cost.”

“My solution was to ‘skinny up’ the cost structure of Big Pharma,” Drummond said.

“Take Biological Sciences, Inc., insanely profitable, nineteen percent operating margins, but if you drill down into their cost structure, it’s evident opportunities exist to pare costs without compressing margins. Last year’s cost of goods sold was twenty-two percent of revenues. A mere thirteen percent was spent on research.”

Drummond sat down on a row machine and adjusted the tension.

“Here’s the kicker—thirty-two percent of revenues were spent on selling, general, and administrative expenses. They ought to be embarrassed.”

Drummond extended his legs and pulled the handle to his chest. As the machine recoiled, Drummond’s body slid down the bar, his legs bending as his knees came to his chest. He grunted as he exhaled, extending his legs and pulling the bar to his chest again. He settled into a
cycle of twenty-nine pulls per minute, burning 740 calories per hour, according to the digital readout.

“Our proposal should reduce the cost structure of drug manufacturers by disapprobation of marketing expenses. We leave the patent structure and brand name pricing differential in place to incent drug development but reign in prodigality.”

64

P
resident Cannon was being briefed by his defense secretary in the Oval Office. Premier Tong had been quoted in
China Press
two hours ago denouncing the United States for participating in the Cobra Gold military exercises off the coast of Thailand. An annual exercise, the Strait of Malacca—a geography of high strategic importance—was a key “choke point” because it was the shipping lane used by China to transport oil from the Middle East. Premier Tong warned that if Uncle Sam continued naval and air force maneuvers in the area, it may precipitate an accidental military clash. He was reminding the United States of the history of “inciting incidents” and world wars. Tong communicated his intention to have China’s aircraft carrier patrol the region from the Persian Gulf to the Bay of Bengal. His defense secretary was dismissing it as saber rattling but suggested he flank the Joint Chiefs, whom, he believed, would be chomping at the bit to defy the Chinese by expanding military maneuvers.

65

P
eter Lowsley pushed the button on his wrist to activate his stopwatch, and they started running. At 6:15 a.m., it was already seventy-two degrees. The still morning air was perfect for running. By midafternoon the breezes were steady, until dinnertime when they tapered.
Thump
,
thump
,
thump
…The sound of rubber soles echoed off the boardwalk. Drummond lengthened his stride to match Lowsley’s gate.

“Once FDA approved, new technologies diffuse rapidly, often gaining a toehold in Medicare before adoption in the commercial market. Medical device research and development costs are borne by the US health care system—the same arc as the pharmaceutical industry.”

They were nearing the north shore. They ran past a trailhead leading to the beach, and Drummond made a note to check it out. He liked this side of the island because of the rock bluff.

“The widespread use of expensive technologies inflates our health care spending,” Lowsley continued. “According to OECD’s data, we perform ninety-one MRI procedures per one thousand population, compared to a mean for other nations of forty-one per one thousand.

“We either trust a market-based system or not. Prescriptive approaches—quality assurance, referrals protocols, certificate-of-need schemes, require resources to administer and are often not effective.

“My inclination is not to engage in separate regulation—let the market determine the true cost-benefit threshold for technology adoption. I say we rely on ACOs and risk-based contracting. It’s our default position. That’s why we chose a structure that supports a market-based approach.”

Drummond saw the aquatics building in the distance.

“I’m going to drop off at the fountain,” Drummond said.

“I’ll turn a couple more laps—see you at breakfast.”

66

B
ent at the waist, placing his arms on his thighs, Chris Drummond needed time to recover from the run. A productive session, but he noticed Lowsley had a tendency to quicken his pace each successive mile—the last one, sub 6:30. Standing upright, he placed his hands on his hips, inhaling, to enlarge his rib cage in an effort to slow his respirations. He was walking toward the beach to cool down when Dain came into view. His back was to Drummond, crouched, shoveling sand into a nylon bag. The bags were stacked in rows, two wide, eight feet long, and three feet high, resembling cords of wood. His quick math estimated each stack was around a hundred bags. Drummond closed to seventy-five feet when Dain called his name over his shoulder.

“Aren’t you a tad old to be making sand castles?” Drummond said.

Dain finished filling a bag and tossed it to the side. Standing, he brushed his shorts to wipe off sand that was caked to his moist hands. His body was drenched in sweat.

“Ahlam said they use the bags to control flooding…tropical storms in the summer—not hurricanes, but high winds. Nylon, woven mesh, and self-sealing. Dain pointed to a plastic zip-tie sewn into the nylon at the open end.
He picked up a partially filled sand bag and held it between his knees. Using his thumb and index finger, he zipped the bag shut.

“Variegated sand—where they dredged the material is coarse, whereas the natural beach sand is fine.

“I’m still working on configuring the perimeter sensors,” Dain said.

“Did we have visitors last night?”

“No. The sensors were green—all quiet. But I started night patrols.”

“Sorry about the sand castle crack; I recognize our situation is serious. How will you explain the sand bags to the others?” Drummond said.

“I’m not going to explain it…unless they ask.”

“And if they ask?”

“It’s a new cross-training workout—one I learned in the military. I’d be happy to proctor a cardio workout for anybody who feels left out. They can bring yoga mats down to the beach…take the stress off their knees.”

“What’s your assessment of English law?” Drummond asked. “You live in London.”

“I keep a P.O. box in London. I live wherever the job takes me. I can tell you the yellow pages aren’t filled with personal injury advertisements.”

“Lowsley and I were discussing medical malpractice tort reform. We’re leaning toward a recommendation for modification of English Rule—losing party pays all attorneys’ fees but the rule only applies to those who initiate suit.”

67

C
hris Drummond flipped through the pages of the schedule Baturina prepared, counting the days left to the mandatory reporting deadline. The contest regulations required each team to submit an interim proposal. They had four days to submit. The regulations were sparse—left to the discretion of the team of what to include with the first submittal. Drummond was looking for a natural break in content. He made the decision to limit their initial proposal to developed ideas. It was important for the team to make a strong showing out of the gate, and Gupta needed time to work his magic. Drummond made a note to have Gupta explore the login procedure. The instructions said to log onto the secure website, enter the access code Drummond received with the dossiers, and attach any files. He didn’t expect a problem, but….it was technology. Drummond drained his third cup of coffee and headed to the bathroom to brush his teeth. His session with Lowsley started in ten minutes.

“If we tackle behavioral risks this morning, I’ll include our write-up with the initial filing. I reviewed the master schedule. My feeling is we need to turn over what we have
completed to Gupta by noon today. He was vague about how much time he needed.”

“It was in my notes to raise that question also,” Lowsley said.

“Lifestyle choices—obesity, alcohol, tobacco, and recreational drug use result in higher consumption of health care resources, at greater cost. Health care premiums ought to price in higher premiums for known risk factors. It’s no different than higher life insurance premiums for tobacco users. They can build a nomogram to price risk by performing a regression analysis using claims data,” Drummond explained.

“For example, thirty-five percent of US adults are obese, compared with seventeen percent for other countries. Obesity is a risk factor for hypertension, high cholesterol, diabetes, cardiovascular disease, and respiratory and musculoskeletal problems. The slope for morbidity risk turns curvilinear once you cross the obesity threshold,” Lowsley remarked.

“It’s an area we need to emphasize more. These people need a better support system,” Drummond said.

“What are the policy considerations if we propose behavioral-risk insurance underwriting?”

“The carrot approach works better than the stick approach. We offer incentives to change behavior along with formal interventions—dietary and nutritional education, exercise, and cessation programs.”

68

T
he team, minus Rakesh Gupta, had met three consecutive evenings to debrief. Gupta had locked himself in the Satwa conference room after Lowsley and Drummond gave him the files. The team was pinched to make the first reporting date, twenty-two hours from now, and pressure was mounting.

“You need to be more assertive with Gupta,” Baturina said. “According to housekeeping, he’s not slept for three nights. That can’t be good for his health.”

“I hear you, but I’ve broached the subject, twice. The last time he stuck his finger in the air and made a circular motion and muttered ‘vamp till cue,’ which I interpreted as let him finish. He sounded agitated and never took his eyes off the computer screen. He told me to leave him alone…it’s how he does his best work. Why shouldn’t I believe him?”

“Do you know how many empty cans of citrus-flavored Rock Star energy drink and V-8 Cala has removed from the garbage can? He puts the receptacle outside the conference door in the hallway when it’s full.

“Twenty-nine…and forty-two power bar wrappers. He’s barely touched the hot meals she’s delivered.”

“What do you want him to do?” Dain joined the conversation. “He’s an adult; besides he’s young; you’re superhuman when you’re twenty-three. When I went through survival training, we lived off the land for thirty-seven days. I slept two, three hours a day. I didn’t take a crap for fourteen days, if that helps put things in perspective. Gupta’s record is sixty-four hours of sleep in nineteen days. He went on a bender—the inspirational period that led to his breakthrough software development at Informatics Systems. When he crashed, he slept for thirty-seven hours straight.”

“Hyperbole, he had to hydrate…and relieve himself,” Lowsley said.

“Bullshit, his girlfriend at the time was a medical student…fixed him up with intravenous hydration and a catheter. He didn’t move for thirty-seven hours—hardcore.”

“I’ll check on him again in the morning,” Drummond said and excused himself from the table.