The coronavirus has thrust public health into the limelight: it’s prominence in the daily news is directly proportionate to the fear and confusion about its origin, treatment and impact at home and abroad.
The impact of the coronavirus in the U.S. has far-reaching implications for our health system. This report offers a summation of what we know and early indications of its impact on the system.
Per the World Health Organization, China Center for Disease Control and Centers for Disease Control and Prevention (CDC), here’s what we know as of yesterday:
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Global Prevalence: There are more than 105,000 confirmed cases and 3400 confirmed deaths in 70 countries. 97% of these are in China, Iran, Italy and South Korea where mass quarantines have been ordered and testing for the virus is widespread. In countries like the U.S., Australia, Iran, Italy and others, death rates are higher because data from widespread testing in missing (the denominator is lower). Case in point: by March 1, 100,000 had been tested in South Korea vs. 472 in the U.S.
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U.S. Prevalence: In the U.S., more than 450 cases have been confirmed in 32 states and 19 deaths attributed to the COVID-19 virus but we’re not sure. Test kits have not been available and testing by public health officials not a major priority: the CDC reports that 75,000 will be available this week and its lab network necessary to test interpretation expanded to include LabCorp, Quist and others. Though government officials were advised in January, their administration’s announcement of the coronavirus risk was delayed to February 25 and messaging about its potential impact and public preparedness inconsistent.
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Risk Factors: The Covid-19 death rate increases with age, especially for those with immune deficiencies. (i.e. 14.8% for adults 80-plus) and co-morbidities (COPD, diabetes, hypertension, cancer). 91% of deaths are attributable to acute respiratory distress syndrome (ARDS). Men are at higher risk than women (106:100). Vertical transmission from a pregnant mom to baby is negative.
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Seasonality: The World Health Organization, CDC and other agencies have advised that the coronavirus is not seasonal and likely to be prevalent through the summer. Unlike the seasonal flu which dissipates in warmer weather, public health officials think the coronavirus might continue into the fall at which time testing, treatment protocols and virus containment efforts are fully implemented.
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Impact: In the U.S., the coronavirus is likely to slow economic growth and change how companies, state and local government, public health agencies and health providers operate. Consider:
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94% of Fortune 1000 companies are already experiencing delays in their supply chains due to disruption in China’s economy.
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80% of flights from the U.S. to China have been cancelled (International Air Transport Association IATA); Amtrak has cancelled service in its popular NY-DC route and major industry conferences have been cancelled (SXSW, ACHE-Chicago, HIMSS-Orlando et al). The IATA estimates the hit to airlines will be at least $30 billion.
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Consumer spending has slowed: fears of the pandemic have taken $7 trillion of the market value of listed firms: hardest hit, transportation, restaurants, meeting organizers, hotels, and more. Meanwhile, stocks that offer alternatives and build on social distancing have spiked (Slack’s corporate messaging system +18%, Zoom’s videoconferencing +35%).
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States of emergency have been declared in Maryland, New York, Washington and others will follow: they’re seeking emergency funds from the federal government and fast-tracking legislation to prohibit price gouging by vaccine manufacturers and coverage without co-payments by insurers.
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The 12% drop in the S&P 500 in the last two weeks attributable to the coronavirus is the biggest drop in 11 years (Standard & Poors). And the market is down substantially at the open today, triggering circuit breakers to halt trading at 7% downside.
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400 companies are at risk of defaulting on their debt covenants as a result of slowdown induced by the coronavirus (Barron’s)
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Mark Zandy, Chief Economist for Moody’s Analytics, told CNN Friday that the coronavirus raised the prospect for a recession this year to 50%.
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Friday, Congress authorized $8.3 billion in emergency funding for U.S. efforts (H.R. 6074 “Coronavirus Preparedness and Response Supplemental Appropriations Act”): It passed 415-2 in the House and a 96-1 in the Senate last Wednesday and was signed into law Friday by President Trump. It includes $1 billion for local agencies–half to be distributed in the next 30 days, $3.1 billion for medical supplies and testing, $1 in loan subsidies for small businesses and non-profit organization that suffered financial losses as a result of the virus, $2 billion funds for vaccine development research and much more. The bill bans using the funds for anything besides combating the coronavirus or other infectious diseases and requires that HHS assure that vaccines and tests are available at “fair and reasonable prices”. But big questions remain:
Will this funding be enough? Because testing has been sporadic, will the 4 million test kits promised by the administration this week be enough? What have we learned from previous pandemics (SARS, MERS, EBOLA, et al) that can inform our policies and funding going forward?
Will public health become a primary concern in our system? Public health is under-funded, fragmented and politicized: only when everyday like is threatened/inconvenienced does it garner attention. Will the coronavirus move public health from the back porch to the front steps in our system?
Will consumers be able to access the tests? Will insurers waive co-pays? Will the 28 million who lack coverage be able to access testing? Will physicians and public health clinics recognize symptoms and order the tests expeditiously? How will costs be treated if patients present with symptoms of the coronavirus but test negative? Will data sharing and interoperability across public health agencies, hospitals and medical practitioners be stimulated by this crisis?
Will the vaccines work (if approved by the FDA)? How will they be priced “reasonably” and who will decide?
Will hospitals be ready? According to a survey of 6500 hospital nurses released last week by National Nurses United, 29% say their hospital had a plan in place to isolate potential coronavirus patients and 44% said they had received guidance from their employers about how to handle the virus.
Will workplaces change? Will employers make permanent the changes in their operating policies and procedures after the coronavirus is under control?
Will the coronavirus drag the U.S. economy into a recession? The combination of the expected slow-down of the economy in tandem with the Covid-19 pandemic is potentially toxic.
These questions will get heightened attention as handling of the coronavirus pandemic unfolds. For most Americans, heads are swirling. Fear and concerns are mounting. They’re seeing their favorite sporting events and meetings cancelled and being told to stay at home.
What began December 31, 2019 as 44 pneumonia cases in Wuhan, China due to an unknown cause has spiraled into a global existential threat. What’s ahead is unknown, but what’s for sure is this: the public’s health will be in the spotlight at least until this pandemic is under control.
That’s where we are.
Paul
IMPORTANT NEW REPORTS / STUDIES
The Current Issue of JAMA Features Three Articles About the Drug Industry’s Pricing and Costs:
Study: Drug company Profits Compared to Other Industries
This cross-sectional study by Bentley University (Waltham MA) researchers compared the annual profits of 35 large pharmaceutical companies with 357 companies in the S&P 500 Index from 2000 to 2018 using information from annual financial reports. Their conclusion: “the median net income (earnings) expressed as a fraction of revenue was significantly greater for pharmaceutical companies compared with nonpharmaceutical companies (13.8% vs 7.7%). Large pharmaceutical companies were more profitable than other large companies, although the difference was smaller when controlling for differences in company size, research and development expense, and time trends.”
Editor’s Note: The U.S. represents 47% of the global prescription drug market and the large drug companies in this study account for 73% of the U.S. market. Ironically in this analysis, drug company profits were higher than 10 other industries with health care services the lowest by comparison. Even adjusting for higher R&D spending, a reasonable case can be made that drug manufacturers fund their global enterprises by U.S. generated profits.
Ledley et al “Profitability of Large Pharmaceutical Companies Compared with Other Large Public Companies” JAMA. March 3, 2020 https://jamanetwork.com/journals/jama/fullarticle/2762308?guestAccessKey=17e44451-b505-43ad-95f5-c4d804da1188&utm_source=silverchair&utm_medium=email&utm_campaign=article_alert-jama&utm_content=etoc&utm_term=030320
Study: R&D investments for New Drugs Lower than Suggested by Industry
The FDA approved 355 new drugs and biologics over the study period. 2009-2018. Research and development expenditures were available for 63 (18%) products, developed by 47 different companies. After accounting for the costs of failed trials, the median capitalized research and development investment to bring a new drug to market was estimated at $985.3 million and the mean investment was estimated at $1335.9 million. Median estimates by therapeutic area (for areas with ≥5 drugs) ranged from $765.9 million) for nervous system agents to $2771.6 million for antineoplastic and immunomodulating agents.
Editor’s Note: Drug manufacturers remain secretive details of their accounting for R&D costs for new drugs. The manufacturers have asserted they cost up to $2.8 billion including a real cost of capital rate of 10.5% per year. This study by London School of Economics researchers concludes a more accurate cost is $1.3 billion, or 46% less.
Wouters et al “Estimated Research and Development Investment Needed to Bring a New Medicine to Market, 2009-2018” JAMA March 3, 2020 https://jamanetwork.com/journals/jama/fullarticle/2762311?guestAccessKey=af0e91b3-8483-41d8-bdcc-801249ab7827&utm_source=silverchair&utm_medium=email&utm_campaign=article_alert-jama&utm_content=etoc&utm_term=030320
Study: Net Drug Prices Increased 4.5% Per Year Until 2015
The University of Pittsburgh researchers analyzed list and net (after all discounts/rebates) prices for 602 branded drugs. From 2007 to 2018, list prices increased by 159% or 9.1% per year, while net prices increased by 60%, or 4.5% per year with stable net prices between 2015 and 2018. Discounts increased from 40% to 76% in Medicaid and from 23% to 51% for other payers. Increases in discounts offset 62% of list price increases.
Editor’s Note: In this analysis of branded drugs in the US from 2007 to 2018, mean increases in list and net prices were substantial, although discounts offset an estimated 62% of list price increases with substantial variation across classes. Until recently, net drug price increases were well-above their costs and inflation lending to alleged price gauging criticism and growing distrust of drug manufacturers.
Hernandez et al “Changes in List Prices, Net Prices, and Discounts for Branded Drugs in the US, 2007-2018” JAMA. March 3, 2020 https://jamanetwork.com/journals/jama/fullarticle/2762310?guestAccessKey=924bd4ec-ad5f-4953-872b-c23e071514f9&utm_source=silverchair&utm_medium=email&utm_campaign=article_alert-jama&utm_content=etoc&utm_term=030320
IMPORTANT NEWS FROM LAST WEEK
Super Tuesday Result: the Biden Bump
The Biden campaign won 10 of the 14 state contests vs. 4 carried by Sanders. Tomorrow, 5 states hold their
primaries (WA, ID, MI, MO, MS) along with the NV caucus, and March 17, AZ, FL and IL hold primaries, By the end of March, almost 70% of delegates will be pledged and the likely challenger to President Trump known.
Here’s what to expect:
Campaign Positioning around Healthcare: The Biden campaign will coalesce around improving the Affordable Care Act, especially in stabilizing the individual insurance market and protecting Medicare and Medicaid. The Sanders campaign will double down in support of Medicare for All, and the Trump campaign will argue the ACA is irreparably flawed and should be replaced while promising pre-existing condition protections and Medicare protections.
Note: The ACA is popular: in the latest Kaiser Tracking Poll, the majority of Americans believe the ACA should be improved but not replaced. But a decision by the Supreme Court might change the campaign strategies: last Wednesday, SCOTUS heard oral arguments in Texas v. Azar about whether the elimination of individual mandate makes the entire law unconstitutional. The court is expected to issue its opinion in the next term possibly before the Presidential election November 3.
