Resident Fellow  Scott Gottlieb, M.D.

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Advances in science and medicine have inspired advances that correspond to historical inflection points of rapidly improving health. These periods of medical progress have changed the contour of history. During the first period from the mid-18th to the mid-19th centuries, discoveries about proper nutrition played a large role in improving health. From the 1890s to the early 20th century, the most significant health gains emanated from our improved understanding about the transmission of disease and the public health improvements it prompted. The third phase dating from 1930s up until today is the era of big medicine--starting with the development of modern vaccines and antibiotics, and culminating in the intensive personal interventions that characterize our current drug pipeline.[1]

By many objective measures, this third phase will eclipse prior periods in both its sheer impact on health as well as the magnitude of that change. The health benefits of medical innovation are becoming more numerous and profound as we develop better knowledge about the molecular basis of disease and how to intervene on biological processes. This is especially true when it comes to new medicines. For example, looking back three decades it is clear that we had very little direct understanding of how most of our medicines worked to mitigate disease targets. Today it is rare that a new drug is developed, or approved by the Food and Drug Administration (FDA) for marketing, without a firm understanding of its likely mechanism of action. In fact, understanding how a medicine works has become a pre-requisite for funding development programs and valuing new molecules. This improved understanding is one important part of the unfolding story of biopharmaceutical innovation. It is opening up perhaps a new phase in medical progress--the fourth historical inflection point where medical care is more personal, more rational, and far more effective.

But these innovations do not come cheap. For one thing, they drive growth in health spending. This was famously shown in Victor Fuch's 1999 analysis of Medicare spending trends. Fuchs found inflation-adjusted increases in Medicare spending per beneficiary of 4-5% per year, versus real gross domestic product (GDP) increases of 1.2% during the same period.[2] He attributed these increases to new medical technologies, while acknowledging the positive impact they have on life expectancy and health status for the elderly. Fuchs found an obvious and simple truth. Many new medical technologies reduce direct health costs--delaying or precluding surgeries, for example, or reducing hospital admissions. But when they reduce costs in the short run, they often increase costs over the long run--for one thing, from people who survive acute illness and go on to live longer lives, only to incur still more healthcare costs down the road. The key component of these costs is not rising prices or an aging population. The key driver is simply more people getting more treatments combined with that longer life expectancy. One practical example of this phenomenon is implantable defibrillators. Tucked under the skin in the chest, these lifesaving devices sense when the heart's rhythm has gone awry and deliver a small electric shock to bring it back to normal. The devices save lives, but studies show they increase costs, and not only from the price of the procedure. All those patients who would have died of irregular heartbeats now go on to require additional expensive hospitalizations from symptoms of progressive heart disease.[3] . . . .

Scott Gottlieb, M.D., is a resident fellow at AEI.

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Notes

1. DM Cutler. "Making Sense of Medical Technology." Health Affairs, March/April 2006; 25(2): w48-w50.
2. VR Fuchs. "Health Care for the Elderly: How Much? Who Will Pay for It?" Health Affairs (January/February 1999):11
3. S Gottlieb. "Devices Prolong Life--But at a Big Expense." USA Today, Thursday, April 4, 2002. P. A12.