Episode 5: Access to Advancement
Essentially Medicines Podcast
Note: Transcript is for informative purposes only, has not been edited for clarity or accuracy.
Interviewer: Thank you so much for joining us. So just to get started we have a few questions about just your background coming into the work that you are in now. So you studied international trade at University of Economics in Prague and your Masters in International Affairs at Georgetown. What led you to pursue a PhD in policy analysis with specific focus on health policy?
Jakub P. Hlávka: Well, it’s so nice to be part of this project and initiative, and congratulations on all of your work so far. I actually never expected I’d be sitting here and talking about health care. I think for me the journey from studying at a business school, and then studying international affairs to policy analysis was - as many journeys are - not straightforward but was very interesting. Basically, when I was wrapping up my program at Georgetown, I realized that I really enjoyed getting into the details of policy questions and issues. I spent some time at the RAND Corporation doing a summer internship and that was amazing. I really liked my time at RAND. I was actually based in the European office in Cambridge in England, and during that time I was able to meet some of the researchers from the U.S. office. And so, I learned about the PhD program at RAND and learned about the multidisciplinary aspect of that program.
I didn’t really come into RAND thinking I would only do health care. As you know, I had a strong background in security affairs and trade policy, but I was very open to doing additional research. When I came to RAND – I think in the first year I pretty much didn’t do health care at all – and because all the PhD fellows are asked to work on different projects. By virtue of luck, I joined a project on drug pricing, and having a background in applied economics I was very curious how prices work for new drugs. And of course, it’s a big debate in the U.S. and throughout the world. And over time I got more and more interested, I got more experience. And then when I was starting to decide my dissertation topic, I realized -' Wow! This is really exciting. I can do work that might even help some people in the future. It might provide better access to medicines, and will also allow me, I think, to work across different countries.' I really was drawn to this international aspect of the work. And I think that’s one of the amazing things about health policy that we’ve got so many labs and so many experimental opportunities here because we can look at other countries and what they did and how they handled different issues and kind of see what the outcomes are. And even between American states you can compare different outcomes. So there’s a lot of amazing opportunities to do research, to produce recommendations, and ultimately to help patients.
Interviewer: And so, as you talked about drug pricing being a big point of discussion in the U.S. How was that transition to studying the U.S. health system? And more importantly, how would you describe the U.S. health system to our listeners?
Jakub P. Hlávka: I think most listeners would be aware that it’s a very complicated system that even all of us who work at it usually focus on one part of it. To understand the whole system takes more than just a PhD. I think it takes a lifetime of experience and working on different projects. I think one of the biggest differences between the U.S. and other countries, speaking about developed countries here, is in how fragmented the U.S. is. Other countries might have private insurance companies, it’s not to say that there’s always one government entity that decides pricing, but there tends to be much more regulation around the ceiling prices. So you might be able to charge as much to any patient as you would be here because here pretty much in many situations the smaller health care plans have to negotiate prices from a much weaker position than the bigger health care plans. Even for the same drug, the same type of patient, you might have prices that vary from a few hundred dollars to a few thousand dollars per dose. And so, that’s one big difference.
And I think that leads to issues also around not just regulation of pricing but also excess and competition. So in many U.S. states, and especially in many rural areas, you don’t really have a lot of choices, and the lack of competition sometimes results in price gouging and poor access. So I think that is one of the biggest differences between the U.S. and other health care systems.
Interviewer: As you described the variation in kind of the negotiation power between state holders, what we’d like to kind of move towards is more learning about how economists really think, and what is the economic motive part when it comes to this. So my question would be, how do economists and health policy experts think about issues of access to treatment? And particularly, is the focus on maximizing social welfare? Or are there other areas of concern?
Jakub P. Hlávka: I don’t know if I can actually represent the whole field of health economics. I would say it’s actually quite broad. There’s also some political leanings people have. For somebody equity and access might be a greater emphasis than, for example, maximizing total social welfare. There are pretty different perspectives here, but I would say it’s mostly, from my standpoint, see as the biggest decision that everybody’s thinking about is the trade-off between the incentives for innovation; so incentives to bring new products, new medicines to market, and pay enough so that there’s more of those in the future, and access and affordability. Of course, the more we pay for innovations, the more venture capital and other type of funding will get into research and – most likely – more medicines and innovations will become available. With that comes the question of cost-effectiveness: is it always cost-effective? That’s something that we can talk more about. But, of course, the more money you put into something, the more you tend to get out of that endeavor. And again, I’m not saying it’s the optimal return investment but it’s just that one side of the coin.
The other side of the coin is the more we have to pay the less access there will be, for especially patients from the poor socioeconomic backgrounds. You can think about that as this very fragile balance. And many countries have tried to accomplish it by having their national bodies that basically do this balancing, so they try to set basically what the ceiling prices would be using some cost-effectiveness thresholds. So for example, if the patient lives another year longer relative to not receiving the therapy they might be willing to pay 30,40, or 50 thousand dollars, or pounds, or whatever currency more for it. So they have some thresholds that they use internally, which they don’t really have any scientific rationale necessarily. There’s no way of saying thirty thousand is better than fifty thousand. You know the lower the threshold the less you’re willing to pay the fewer the therapies will ultimately reach the patients; partly because drug manufacturers will aim at markets where they can get more for the same drug. So I think it is this tension.
There is this principle trying to achieve Pareto efficiency where hopefully nobody will be worse off, but at least we can make some people better off. I think some of the innovative payment models are being introduced, that’s – I think – the idea. And also, we might not be able to reduce overall spending. We are trying to improve how much of a utility, how much of a welfare gain we can get from this spending. I think in that area we can see a lot of innovation and a lot of thinking these days. And I think it will continue to improve. I’m quite hopeful, but of course some of these big issues about the U.S. health care system cannot be solved by any single economist.
I think a lot of this will require a national level health care reform, and hopefully that will be on the agenda. It’s not just a political issue. I think it’s also a social and a moral issue: how comfortable are we with maybe half of the U.S. population not really having the same access as most of the developed world has, and in my view it might actually be more than half. You’ve got pretty much parallel systems in the U.S. where the rich people and those that have great insurance plans have always the best access to medicines and health care anywhere in the world. But you’ve got a big fraction of the U.S. population that is much worse off than the average European, for example, so I think that’s something that needs to be discussed. And you know it’s not necessarily just for politicians to debate, but I think health economists need the political will and the political debate to implement some of these new solutions.
Interviewer: Fantastic! I’m really glad you brought up the issue of access and cost, which is exactly what we want to highlight. So moving forward, you already kind of touched upon this, but new therapies are expensive, obviously, especially in the space of oncology. So how do companies developing these therapies really view access to treatment for patients?
Jakub P. Hlávka: It’s actually very interesting. In oncology or any disease area there tends to be an overall increase in the per unit or per pill cost, but the one thing we have to keep in mind is that we should always compare it to the value of that therapy. So maybe in the past we had maintenance therapy that only costs a few hundred dollars per year, and now we’re spending 30, 40, or 50 thousand dollars say in oncological treatment or immunotherapy. And those are vastly different approaches. And so, when you think about the valuation of that, I think it’s fair to say that we should be willing to pay more for something that helps the patient more. So when we think about the value that is brought to the patient, and sometimes in very few cases, but in some cases even in oncology, it can result in what looks like a cure. It might not be completely curable but it can go into remission basically. That is something extremely valuable where just five, ten, fifteen years ago those patients would be left to die or have much lower quality of life.
I think the absolute increase in prices and spending, that’s for sure a concern, but I would say that’s less of a concern than the potential increase in price gouging when it comes to paying for the same type of benefit. And so, actually Alice Chen here at USC, she recently produced a great analysis and has published a paper on the average price per QALY: how have prices in oncology changed over time and how much we’ve been paying for cancer drugs; and one of the takeaways is that in the last few years there has actually been some plateauing in the prices per QALY. So I think there is more competition, and manufacturers are being very careful these days with pricing their therapies so as not to encourage even more stringent regulation, but also I think because of the competition now that we have many more immunotherapies, there’s more choice that providers and patients have. So that’s keeping those prices in check. I would say overall spending for sure is a concern. Increasing prices are a concern, but I think we always need to make sure that we compare apples with apples. And so we’re looking at how much we are paying for some kind of gain or benefit that the patient experiences.
I would also say that the drug manufacturers are being very strategic, so what they tend to do when they look at clinical trial populations is they usually select the patient population that is most likely to benefit from that treatment. And so, that’s where they would likely show the biggest gain, the biggest benefit. And therefore, they could price it accordingly to that gain. So that sometimes results in very strange issues. For example, patients who might still benefit from the therapy, but not as much as this primary patient population, might not get the drug at all or they might be overcharged for it because it’s not really easy for drug manufacturers to pull off differential pricing strategies usually because of what they call the Best Price guarantee for Medicaid, there are issues that pertain to what the lowest price that they charge means for the rest of the Medicaid population. So basically, the government would buy the drug at the cheapest price that the manufacturers charges anyone in the U.S. So, there’s a little bit less room from a regulatory standpoint to experiment with differential pricing for a patient, but you can think about it as one of those opportunities for innovation. In many cases it’s called indication-based pricing, where maybe a patient who looks different may be charged a different price than the patient who maybe gets a much bigger benefit but would also be charged more.
Interviewer: And so, before we move onto the next question. You mentioned QALY. Can you please explain to our listeners a bit or just maybe define briefly what QALY means.
Jakub P. Hlávka: Quality-adjusted life year gain basically means that we multiplied the number of extra years of life that the patient receives because of the therapy by the quality of life multiplicator. For example, if you imagine somebody with dementia, somebody who already has a much lower quality of life maybe because they’re in a nursing home, you would say that even if they live in absolute numbers another year longer, because their quality of life is let’s say 0.5, so it’s about 50% less than the healthy individual. You would say the QALY gain was only about 0.5 years; so that would basically say we adjust the absolute gain in life expectancy by the quality of life that they have during the time, and that’s based on questionnaires and there are some rigorous methods of basically surveying people and asking how they would assess their quality of life. But that has implications for drug manufacturers because of course they will always try to see how much they can increase the QALY gain, and that could be potentially a little bit higher with people who started a higher baseline.
Interviewer: And, as you described - whether it’s price gouging or another kind of market failure that exists in the health care space. What do you think is the role of other stakeholders: patients, providers, and payers in accelerating access? And also, if you could explain what is often meant by there being incentives that are faced by these stakeholders being misaligned.
Jakub P. Hlávka: I think every group that you named so patients, providers, and payers is quite heterogeneous so I don’t want to necessarily lump them altogether. So even when it comes to patients you can imagine that a patient who is not necessarily prescribed the medicine but could benefit from the medicine will put pressure on payers to cover the therapy, even if it wasn’t tested in trial. So there could be different pressures, even coming from different patient groups. I think the intention of a clinical trial is just to always show that the drug works for that patient group and it’s worth paying at a certain level and it’s safe, and it’s efficacious for that patient population. Now you can also see what we talked about before is that the drug might only be tested in a small patient group, so other patient who could potentially benefit, but we’re not included in the trial would say, “Well, we would like to have this therapy covered as well.” There are issues even in that distinction but generally speaking, patients will want to pay the least and get the greatest access and options available to them. I think that’s a very fair starting point. That’s what all of us basically are – we’re potentially patients. We all have to keep in mind that while we talk about patients for a specific therapy, it could be us one day.
For providers the incentives are a little bit different. They receive incentives in terms of payments for their services, and sometimes those can be misaligned in a way that maybe we are paying as a percentage of the value of the therapy and that’s got to be an issue. For example, the infused therapies in the cancer, so maybe the biologic therapies if they cost more the percentage, say they get 2, 3, or 5% of the total value. A percentage of that higher cost is more, and so they might get an incentive to prescribe or provide the higher cost therapy to the patient. The thing here that we have to keep in mind is that the providers really are agents - in economic language - agents for the patients. They’re helping or helping make decisions on behalf of the patients. When we talk about skewed or misaligned incentives it really has to do with the fact that if they make or recommend a certain decision they might benefit from it, even if the patient would not necessarily benefit or would be worse off. And so, I think it’s almost like a conflict of interest where they really are under a lot of pressure. There might also be misaligned incentives when it comes to volume incentive in the hospital. So, for example, if you see more patients you might get…
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So it’s a little bit tricky, and yet I hope that we’ll continue to do the research on the incentives for providers.
And when it comes to payers, again for them and in most cases, they’re for-profit payers, at least the private companies, and so they’re really trying to maximize the spread between how much they pay and how much they gained in premiums and you know that means they want to pay the least, and they want to charge the highest insurance premiums, and to do that they always try to think about the formulary design: how do they negotiate with manufacturers, what kind of bulk pricing they can accomplish so that they can pay per unit the lowest price they can, and they might charge patients as much as basically the patients are willing to pay in a given geography. Now there are some regulations I think especially with the ACA that there are some reasonable profits that can be made, so especially if the insurance plans end up saving much more than they expected at the beginning of the year, they would be asked to return some of that to the patients. But of course, it’s a profit motive driven field.
And I would say that’s actually one of the additional differences that we can think about between the U.S. and other countries where profit is much less of a component and a decision point for the national systems, especially in Europe where if you have private insurance plans they are mostly government-funded because there’s universal coverage, and so there’s much less of an incentive or concern to make profit rather than to balance the books. And I think for them they don’t want to be in deficit for sure, but I think in the U.S. since this is very capitalized and a strongly competitive system everybody’s trying to make more of a profit than the other company. And so, that definitely leads to misaligned incentives in some ways, at least from an ethical standpoint. When you talk about the business standpoint that’s really the nature of their industry, and so the industry would have to change dramatically if we wanted to remove the profit motive.
Interviewer: Then really fast just kind of touching a little bit about access and how we can improve access. I know one novel approach to improve access is mortgage for health care, which has been proposed by Professor Andrew Lo. What do you think about such approaches? More specifically, are you concerned about the assumptions that these models make?
Interviewer: I’m familiar with that proposal, and the paper that I read there was some discussion about what it might mean for sustainability. I think the authors, Professor Lo and others, are very aware that if we’ve got mortgages then the patients who are poor, who don’t have as many assets. It’s similar to buying a house, the poor people won’t be able to buy as big of a house as the rich person. We could think about the same thing in health care where the poor person would not be able on their own to afford say a gene therapy but could maybe be able to afford a biologic or even just a small molecule, or maybe a less innovative therapy for the same treatment. I think without insurance there will be major concerns. I think mortgages could be somewhat of a solution, but I’m really concerned that it would bypass the fact that when we have insurance we don’t have to worry about whether I will personally be at a risk of spending half a million dollars for care in the future. I think I’m ultimately uncertain what this would accomplish. I think what the benefit or takeaway from that approach is that sometimes we need to spread payments over time, and I think that is also something that I’ve been working on, and that is basically related to installment payments and how to deal with the fractured U.S. health care system where patients do not stay with the same insurance companies, so even if there are some installments.
So let’s say on average the patient stays with the insurance company for three years, those installments would have to end at the end of three years or would need to go with the patient to the next payer. The concern there is that the next payer might not consider installments to be fair price because maybe they had a lower negotiated price with the manufacturer. So long story short, I think this is a very interesting and complicated issue. To implement something like this, to have installment payments that are either through a mortgage or through some kind of installment plan, the one thing that I believe would be important is some nationwide understanding on what makes a fair price for a specific drug. So maybe thinking about introducing, even if it’s not binding, but introducing some kind of European style HTA agencies. So some institution that would say the fair price for this type of treatment - let’s say there’s a new Alzheimer's drug - the fair price for that would be $5,000 per year. And so, you would see that if the patient gets the treatment with insurance A, and then they move to Medicare or they move to insurance B, their installments would still be related to the $5,000 price and not two wildly different prices at the beginning. So, there would be some understanding of what is the maximum price that we are willing to pay as a society and across the different health care plans. The second thing that I think would be needed aside from the HTA, the Health Technology Assessment agency, would potentially be some kind of clearing house, so an independent agency or institution that tracks all these installments, all these contracts, and would also be able to resolve any disagreements or discrepancies, and would also make sure that the data are good quality data. There’s no gaming of the system. If you want to pay installments you pretty much have to track patients, and in many cases you will want to track their outcomes as well. So you don’t want to be in a situation where the wrong outcomes are reported, for example.
I think some of these solutions, installment payments for example, are mortgages, but I’m a little bit skeptical about them being implemented in the current health care system, which of course does not mean that we shouldn’t be thinking about them, that we shouldn’t be thinking about reform that would allow for these innovative solutions to come to place, especially for these highly expensive but highly beneficial potential cures like gene and cell therapies that we could give to a patient once, or maybe one, two, or three infusions. And then for the rest of their life they would pretty much benefit from that one-off treatment. And so for that we do need innovation and payment, but we also need the right regulatory incentives.
Interviewer: Thank you for the insight. We’re going to switch it up a little bit now, and for the next part of our interview we have a series of rapid questions and answers. So feel free just to answer these basically in 30 seconds or less is the idea.
Jakub P. Hlávka: Okay.
Interviewer: Our first one is, what is the role of universities and research institutes in ensuring access to health care?
Jakub P. Hlávka: I think many of them do provide an independent unbiased voice, and they can really help advance the debate, and I would actually say it’s a very amazing part of the U.S. research landscape is that there’s a lot of involvement in health care policy, and that’s one thing that not all the countries even in Europe has. Such rich and vigorous debates about the right way to approach a specific problem. I think they can have an amazing contribution, and I also hope that the public funding will continue to support this type of debate and research.
Interviewer: Which country has the best health care system and why?
Jakub P. Hlávka: The best you said?
Interviewer: Yes.
Jakub P. Hlávka: Very good question. I think if you think about that you would probably want to look at the average patient rather than looking at in extremes because as I mentioned I think the U.S. provides amazing health care to people who have great insurance or who can pay out of pocket, but it’s really tricky for the average or less than average patient. I think in many countries, in central or northern Europe, you can see very few or virtually no medical defaults. Nobody is going bankrupt because they cannot afford care. And in countries like Switzerland, or Denmark, or the Netherlands you pretty much receive timely care when you need it. You’re not asked to spend a big part of your income or savings. And especially, you don’t have to put in your children or other dependents into a bad situation down the line. So I think places where there’s a lot of equity but where there’s access to innovation – I think in my mind personally, subjectively speaking, those have the best deal.
Interviewer: Fantastic. This one’s a little bit more fun. Would you rather swim to work, bike to work, or run to work?
Jakub P. Hlávka: That’s very tricky because I’m training for a triathlon, so all three are my favorite sports, but I think I would probably like to bike the most. When I came to LA for two years I didn’t have a car, if you can believe it, and I was biking to my PhD program and to my orchestra rehearsals and whatnot. So I like being on a bike, and I think when I got a car I became a little bit lazy, so I probably need to rethink my commute options. But, of course, these days it’s not on the table anymore, so we’ll see what happens in the future.
Interviewer: Okay. Which technology is most promising in the health technology space?
Jakub P. Hlávka: I do think it is our understanding of the human genome, and actually the understanding of how different diseases start. That is very tricky. For most diseases we don’t really know what triggers a specific pathway, what triggers a specific disease progression. I think the more we can understand the disease biology and the more we can prevent even patients from getting a specific disease you know the better for everyone. I think some of that is really bench science that is showing amazing progress, but with that comes the question of are the incentives right. Are we actually willing to pay for these potential cures even if it costs more money than treating something chronically where maybe in the short-term it doesn’t cost as much, but when you add it up over a patients’ lifetime it may be more than a cure would even be, and the quality of life is much lower for these chronic treatments. So, I think as we move towards precision medicine, and all these innovative solutions, therapies and whatnot, we’ll have to think how we incentivize them and whether we pay enough for those therapies, so they can keep coming on but also so we don’t bankrupt the health care system for the future generations.
Interviewer: Great. And then last but definitely not least, what is the best place to live in your opinion? Los Angeles, Washington D.C., or Prague?
Jakub P. Hlávka: I have enjoyed all those places, and actually none of these places are where I was born. So I lived in all of these cities with an open mind, and I realized that one of the benefits of being a young person in our generation is that we can actually see the world. These days we can work in different parts of the world. I would actually say LA, surprised me the most. I had many preconceptions about how Los Angeles looks, and how it works, and what people do and whatnot. I was most pleasantly surprised, but I have to say I’ve made some great memories. Maybe because I was in graduate school in all these three places, and so it’s very hard to rank them in any way; but when it comes to the climate, the people, the diversity and the research opportunities, I would say that Los Angeles is pretty amazing.
Interviewer: Very interesting. I guess you’re pretty blessed to be in LA then. Our last section is just a little bit about students and how they can get involved. So our first question for you is why should students have an intersectional understanding of health care, especially when it comes to access to medicines. So for our podcast we really want to emphasize social determinants of health, access, how universities have a role, how students play a role in access, and how we can be advocates. And so, why should students have this intersectional understanding of health care is our question for you.
Jakub P. Hlávka: One thing that I would say I’ve noticed even as I’ve been working with students myself is that they really enjoy the different perspectives that come from different fields. For example, we’ve been recently working on a paper related to measuring cognitive and functional decline in dementia patients, and I’ve been working with some students who would potentially in the future like to go to medical school. And we’ve been debating or discussing how some of the insights that we have made on the social science side can inform their clinical practice, especially when it comes to best practices because many clinicians, for example, might be trained to do one procedure or do one cognitive screening test, but they might not be aware of the different tradeoffs that apply to the different patient populations. Even if they are amazing clinicians sometimes having awareness of what is being published on the economic side, or policy side, or social sciences side more broadly, that can really inform how you treat patients. And I think that is so important. We also see it with current debates about COVID and disparities. And we see that people who are poor or who live in lower socioeconomic status areas, even in zip codes, they tend to have worse outcomes. So there are definitely concerns about are we funneling the resources into the right places. And you can definitely see that has so many implications. It has implications for public budgets. It has implications for hospital administrators. It has implications for physicians and how they think about whether their patient will actually go and pick up their prescription, adherence to medication. So I think having that awareness and interdisciplinary approach is important. And of course – finally – with universities, all the things that we do at universities is done, hopefully, with the intent to help people or to advance our understanding of a certain issue. Without universities and without a very strong research background, or focus or emphasis on it in the U.S., we would not be where we are, and so I think that’s where my hope is that NIH funding, and other public funding sources will continue to support this research so that we can have more and more of these connections between disciplines.
Interviewer: And what advice do you have for students who are interested in the field of health policy?
Jakub P. Hlávka: Like I’ve mentioned, I’ve been working with some students over the summer, and I think a lot of health policy faculty might be open to working with someone who is interested in pursuing a research project, so don’t be afraid to approach someone who is working on something that could be interesting to you and try to get that first-hand experience. Sometimes it’s good to read articles, sometimes it’s really great to have debates academically with your classmates. It’s very hard to replace the experience of doing health policy research firsthand, and I think it teaches you a huge dose of humility. Sometimes you realize that when you’re trying to solve a problem somebody has tried it before and it’s been really hard, and you can only advance the field a little bit. Many times it relies on how much more complex the issue is than what you thought before. Maybe it looked black and white but now you see all the different shades and colors. But also, you get to publish and be a part of the debate rather than just being an observer and somebody who watches what’s happening. You are now a part of the debate, and you can bring in your voice. I would say many students these days are very active, and I’m super encouraged by that, and I hope they translate that engagement, that interest into also being active participants in these debates whether academic or policy debates. And of course I would say academic research is one potential career, but even with whatever degree you have, bachelors or masters or doctoral, you can do so many more things and you can go into policy advocacy. You can become a policy maker. You can work on the private sector side and make sure that the incentives, or the rules of the road are well defined and adhered to. So there’s so many career opportunities. I wouldn’t actually say that academia is the only thing to do, and we need great people in all those different sectors.
Interviewer: That’s great advice. Thank you. And our last question for you is how can our listeners reach out to you or follow your work?
Jakub P. Hlávka: I would say for most academics these days a lot of us have Twitter, so you can definitely follow people on social media. For me, I’m based at the USC Schaeffer center for Health Policy and Economics. So you can look up the website and also see other researchers. Actually USC has probably the biggest health economics department in the whole U.S. I think by at least the number of publications, we probably are in the top two or three. So the health policy research at USC is just amazing. And you can also look up other great universities and that work in this field including UCLA. I would say online is the easiest. And then, if you have any questions about something I’ve done in the past or about future ideas, you can always email me. You can find my email on the website.
Interviewer: Perfect. Thank you so much, Professor Hlávka, for taking the time to be a part of this interview and be a part of this podcast.
Jakub P. Hlávka: I have been really delighted to be a part of it, and I wish you all the best. Thank you so much.