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Healthcare Economics: The Threats

AIDS Treatment News, Issue #311


New Healthcare Economics Threaten HIV Specialization, Patient Choice, & Quality Care

Retroviruses Conference Coverage on the Web

HIV Therapy: Retroviruses Meeting Report by Telephone Conference, February 4

Global PWA Conference in Warsaw, August 13-19

A Visit to India: Drug Prices, Research, & Global Access
New Healthcare Economics Threaten HIV Specialization, Patient Choice, & Quality Care

By John S. James

aiddollar.gif - 3.39 KEven in San Francisco, changes in managed care during the last few years have forced many of the leading HIV physicians to spend much of their time in non-HIV care in order to support their HIV practices, or to take other work and stop seeing patients altogether.

Elsewhere in the U.S., the loss of expertise in HIV care may be even more severe. While the specifics are complex, the basic problem is that many private health plans do not want expensive patients, and use grossly inadequate reimbursements to discourage the doctors who would attract them.

Persons with HIV are far more affected by this problem than those with cancer, diabetes, or other similarly expensive diseases, because unlike HIV they are recognized as requiring care within a traditional medical specialty.

One way for health plans to underpay HIV specialists is to claim that HIV disease treatment is part of primary care, which all their physicians can do--and then pay only the healthy adult capitated rate (often about $8 per month) for all office visits the HIV or AIDS patient may need. ('Capitation', the basic element of managed care, means that physicians are paid a set amount per patient per month, regardless of how much care they turn out to need.)

The doctors are expected to make up their losses on each patient with HIV by also caring for many more patients who are healthy enough to need only minimal medical care. The result of paying only the healthy-patient rate is that physicians who tend to specialize in HIV are penalized, since they will lose money on all these patients, and have few others with whom to make up the loss.

The issue here is not limited resources, but perverse incentives. It is well known that HIV-experienced physicians have much better survival and other outcomes than inexperienced physicians; a major report published March 1996 in the New England Journal of Medicine found a 31% to 44% lower risk of death with experienced HIV physicians, after adjusting for other risk factors.(1) The medical consequences of discouraging specialization are well known.

But also it is becoming clear that quality care from HIV specialists is not more expensive, and sometimes less so, than care from inexperienced physicians who are more likely to make costly mistakes.

Therefore, the policies which make it difficult or impossible to specialize in HIV care do not save money for the healthcare system overall.

Instead, they result from a "race to the bottom" in which each particular health plan can save money by creating prohibitive disincentives for physicians to offer the kind of quality care which could save lives--and which would also lead to "adverse selection" of more expensive patients into that plan, because they are attracted by the high quality of care.

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No health-insurance plan could get away with saying that cancer, for example, should be treated by primary-care physicians, instead of oncologists. But HIV care--for varied reasons, including the stigma which has surrounded AIDS and still remains, although less acknowledged today--has developed as a specialty in fact, without the protection of formal recognition within medicine as a whole.

Managed Care and IPAs (Independent Physician Associations)

Doctors can sometimes restrain managed-care abuses by organizing into IPAs (independent physician associations). But whether IPAs care much about the problems of HIV specialists is likely to depend on the politics of where they are located.

In San Francisco, the largest IPA by far is Brown & Toland, which has been a leader in defining protocols for high quality and cost-effective HIV care (see "HMOs and Quality Care for HIV--Interview with Stephen Becker, M.D., AIDS Treatment News #278, September 5, 1997). Most of the country will not be as fortunate.

Brown & Toland--which began in January 1997 as a merger of the IPAs of two major hospitals, University of California San Francisco and California Pacific Medical Center--has the clout to negotiate contracts which can force health-insurance plans to provide medically appropriate care--including viable reimbursement for HIV care.

It insists on controversial exclusivity provisions (a physician in Brown & Toland cannot also be in other IPAs, for example), and includes so many physicians in San Francisco that health plans which refused to deal with it, and therefore could not list any of these physicians, would be handicapped in selling their services to employers. Brown & Toland has made it possible for some HIV specialists to remain in practice in San Francisco and be available to patients through their health plans.

But some of the major HIV physicians in San Francisco cannot join Brown & Toland, because of action against it by the U.S. Federal Trade Commission, which suspects it of violating antitrust laws.

Because of the FTC action, which started well over a year ago, only a limited number of physicians can join Brown & Toland; particularly affected have been doctors who were already in other IPAs which they would have had to leave due to the exclusivity.

This FTC action is part of a long- existing Federal policy of aggressively using antitrust laws to prevent physicians from unionizing effectively--a policy with mixed results today because it prevents physicians from curtailing abuses of managed care.

[In a different case, unrelated to HIV, on January 14, 1999 St. Luke's Hospital sued California Pacific Medical Center, charging that it used an exclusive contract with Brown & Toland to require physicians to admit lucrative patients to CPMC instead of St. Luke's, despite higher costs at CPMC, according to the San Francisco Chronicle ("2 S.F. Hospitals Battle Over Antitrust Lawsuit," by Tom Abate, page C2).

St. Luke's accepts a disproportionate share of the poor--about half its patients are low income--and has remained independent; the larger, commercial medical systems do not want poor patients. "Cherry picking" of St. Luke's privately insured patients by CPMC, a unit of the huge Sutter Health System, could leave St. Luke's with mostly Medicaid patients, which are reimbursed at less than cost, threatening the hospital's survival.]

HIV specialists in San Francisco who cannot join Brown & Toland have difficulty being accepted by private health- insurance plans, since these doctors would attract expensive patients; therefore most patients cannot see these doctors under their employer-provided health plans.

Or the doctors may be accepted but paid only for primary care (the healthy- adult capitated rate), meaning that they lose money on every patient and have to support their HIV practice by other work.

Compounding the problem is that many PPO (preferred provider organization) health plans have suddenly been discontinued in San Francisco, forcing patients into HMOs (or into health systems such as Kaiser, if offered by the employer).

PPOs allow patients greater choice, since they can go outside of the plan and see any doctor, although at lower reimbursement than if they use doctors in the plan. Also, PPOs are usually less aggressive than HMOs in dictating what treatments will be covered. Recently many employers have discontinued their PPO plans to save money, and patients have had to leave physicians with whom they had a long-standing relationship (or not use their healthcare coverage and pay out of pocket, which few can afford to do).

The Larger Picture

In most of the country the situation is worse than in San Francisco or other centers of AIDS medicine, as usually there will not be enough physicians interested in HIV to get a powerful IPA or other medical organization to negotiate with the health plans on their behalf.

Unless solutions are found, physicians will be discouraged from developing expertise in HIV care just because of how managed care is organized--even when there is plenty of need, and a market for their expertise would otherwise exist. Patients who want to get care from specialists will have to leave the area, when such care should be available locally.

Even in San Francisco, despite the strength of the AIDS community, there has been remarkably little public discussion of these problems--even as leading HIV specialists have been forced out of private practice or sometimes out of medicine, while the number of people living with HIV and AIDS continues to increase.

AIDS activists have learned the intricacies of clinical research, but often had little interest in the details of the organization or disorganization of medical care. Part of the problem has been the great complexity of the de-facto healthcare "system" in the U.S., and the great differences between states and cities in the arrangements people have invented to get by.

There has also been some misguided sentiment that these problems belong to physicians alone--even when patient choice and quality of care is threatened due to clear "redlining" of people with HIV and AIDS by health-insurance organizations.

There are potential solutions--from public exposure and pressure against specific abuses, to establishment of official standards of HIV care which health plans cannot ignore with impunity, to joining with other advocates for broader healthcare reform.

A first step is to maintain an open and vigorous discussion of what is happening now, and options for doing better in the future.

[Note: AIDS Treatment News will continue to cover the impact of managed care on access to HIV-experienced physicians. You can help by bringing problems and other information to our attention.]


1. Kitahata MM, Koepsell TD, Deyo RA, Maxwell CL, Dodge WT, and Wagner EH. Physicians' experience with the acquired immunodeficiency syndrome as a factor in patients' survival. New England Journal of Medicine. March 14, 1996, volume 334, number 11, pages 701-706. Also note comment and discussion in the New England Journal of Medicine, August 1, 1996.
Retroviruses Conference Coverage on the Web By John S. James

aidsweb.gif - 8.79 K The 6th Conference on Retroviruses and Opportunistic Infections (January 31 - February 4, Chicago) will probably be the most important scientific meeting on AIDS in 1999. After the conference, most of the major AIDS treatment Web sites will have reports from the meeting. (AIDS Treatment News provides links to many of these sites at; click on 'Major AIDS treatment sites'.)

A few sites may have rapid reports during the conference. We do not have a complete list, but check these:

  • (a new site starting February 1),




  • (select 'Specialties', then 'HIV/AIDS'; Medscape requires a one-time registration for users to read the articles, but there is no charge).

    Searchable abstracts will be available at the official conference site,

    Also note the telephone conference on February 4 (see announcement below). And AIDS TREATMENT NEWS will cover the conference in our next two issues, #312 and #313.
    HIV Therapy: Retroviruses Meeting Report by Telephone Conference, February 4

    "What Is State-of-the-Art Therapy for HIV?", an interactive telephone conference report from the 6th Conference on Retroviruses and Opportunistic Infections (January 31 - February 4, Chicago), will take place Thursday, February 4, at 11:30 a.m. Pacific time (12:30 p.m. Mountain, 1:30 p.m. Central, 2:30 p.m. Eastern Time).

    There is no charge, but participants must register in advance; registration is limited to 200. Participants can ask questions of the panelists by phone during the teleconference, or by email before.

    Also, a tape recording will be available afterwards, 24 hours a day at a separate phone number (no registration required). And within 14 days an edited transcript will be available at

    The panelists are:

  • David Cooper, M.D., Professor of Medicine and Director, National Centre in HIV Epidemiology and Clinical Research, University of New South Wales, Sydney, Australia;

  • Roy Gulick, M.D., Director, Cornell University Clinical Trials Unit, New York City;

  • Calvin Cohen, M.D., Director, Community Research Initiative of New England;

  • Steven Deeks, M.D. San Francisco General Hospital AIDS Program;

  • Harvey Bartnof, M.D., AIDS Virus Education Research Institute, San Francisco; and

  • Ronald Baker, Ph.D., Editor-in-Chief,

    This program is supported by an unrestricted educational grant from Roche Laboratories, Inc.

    To register for the teleconference, call 800-880-5121, Monday - Friday 8:30 a.m. to 5:30 p.m. Eastern time.

    To submit questions to the panelists in advance, send them to You can also ask questions by phone during the conference.

    To listen to a recording afterwards, call 888-207-2647, access code 1967. This number is active 24 hours a day; the recording should become available within 24 hours of the teleconference.
    Global PWA Conference in Warsaw, August 13-19

    pwaconf.gif - 9.11 K The 9th International Conference for People Living with HIV/AIDS will be held August 13-19, 1999, in Warsaw, Poland. Details are available at, or by writing to Christopher Park, International Coordinator, GNP+, P.O. Box 11726, 1001 GS Amsterdam, The Netherlands; phone 011-31-20- 423-4114, fax -4224, email

    Sponsors include the Global Network of People Living with HIV/AIDS (GNP+) and the International Community of Women Living with HIV/AIDS.
    A Visit to India: Drug Prices, Research, & Global Access

    By David Scondras

    indiaaids.gif - 7.11 K [Note: AIDS activist David Scondras is also a political and public-policy expert, who served as an openly gay member of the Boston City Council for ten years. Recently he returned from a 27-day trip to India, where he met with researchers and officials on access to treatment, and on potential new research on both modern and traditional medicine. He has established a collaboration between the Boston based Search for a Cure organization and the Parkash AIDS Foundation of Mumbai, which is hoping to provide antiviral medicines manufactured in India to poor countries at cost. ]

    On average, drugs manufactured in India are between 1,000 and 4,000 percent cheaper than for the same product in U.S. pharmacies.

    Drug companies have pushed hard to stop India and other poor countries from making cheap copies of their life saving medicines by including the curtailment of these practices in the international trade agreement, the GATT [see "GATT and the Gap: How to Save Lives," AIDS Treatment News #307, November 20, 1998]. By pushing for such international agreements on trade, public agencies and our government become accomplices to stopping medicines from reaching the poor.

    The costs of medicine depends on who makes it and where it is made. At the Taj Mahal hotel in Mumbai (Bombay), you can buy Hytrin, a sophisticated anti hypertensive, for 7 cents a tablet. A month's supply of the drug costs about $4.20. At a local pharmacy in Boston, the same drug from the same company costs $44.48, more than ten times as expensive. And the Indian price is marked up on the order of 200%.

    In Boston, ranitidine (the generic equivalent of Zantac, an H-2 blocker which helps you not make stomach acid) costs 42 cents for 150 mg. The same exact product at the Taj costs less than 2 cents (1.79 cents). In other words, even the cheap, generic equivalent in the U.S. is a mere 2246% more expensive!

    In fact, most drugs, including antiretrovirals, are very inexpensive to manufacture. Their prices reflect what the market will bear, not what they cost to produce. U.S. pharmaceutical firms buy the basic ingredients to antivirals in bulk from other countries at incredibly inexpensive rates.

    For example AZT (zidovudine) in bulk can be purchased as of December, 1998 for 42 cents for 300 mg from the worldwide suppliers; this price reflects not only the profits to the manufacturer but also to the middleman bulk buyer. This drug is retailed at $5.82 at my local (CVS) pharmacy.

    This means that tableting, packaging, marketing and transporting of the medicine, plus profit, adds 1285% to the basic price, already excessive. This ridiculous price cannot be justified except in terms of what the market will bear, as it bears no real relation to cost of production.

    An Indian company, Cipla, based in Mumbai, sells AZT in capsule form for $1.42 per 300 milligrams, and according to local experts, Cipla is accruing 2-3 hundred percent profit margins with the drug. Yet they are selling it at less than a quarter of the price in the U.S.A.! This price could be reduced significantly more if the drug were packaged by India's state owned pharmaceutical firms.

    To provide antiretrovirals to the world, there would have to be a paradigm shift in our collective decision making processes. There are choices. All of them are in the arena of public policy, not medical research.

    Under the present paradigm, governments have to either pay for extremely expensive drugs at very high prices and distribute them to the South [developing countries], ignore the 95% of the world that cannot afford these costs, or take actions that would bring down the costs of the drugs.

    And before the creativity that might solve this public policy dilemma can be unleashed, there would have to be an underlying shift in will--a paradigm shift in which saving the developing world from unnecessary illness and death becomes a priority over short term economic gains.

    Thus far, each alternative has been politically too costly. There are efforts being made but they are far too small even conceptually to put an end to a world of untreated disease.

    Treatable AIDS-related illnesses will not end until medicine is made available to everyone who needs it. And this requires an imaginative reshaping of the political and economic decision making paradigms--primarily a reshaping that moves us away from a system which defines values in terms of short term gains and takes a longer view of self interest. For in the end, a world full of disease is bad for business.

    Family Values and Science

    We have designed a world in which profitability determines what will happen and what will not. Our religious and community values stress integrity, compassion toward those who are suffering, delayed gratification, honesty, sharing of resources, cooperation, collaboration, and working toward the common good.

    But our economic system stresses entirely contradictory values--self reliance, independence, competitiveness and immediate gratification. Our economic system does not allow much effort to be expended on research that will not have an immediate financial payoff--either because the people affected are too poor to constitute a market for end products, or because the people affected are too few to pay for the costs of the research.

    This is appropriate for the private sector--but for Government to stop acting as a compensating force, balancing the need for short term gain with the need for long term investment in the environment, in public health, in education, in economic stability, and in protecting society from social instability by providing a minimum degree of access to basic services for everyone--for Government to stop playing this role spells disaster for the world community.

    Our inability to stop the HIV epidemic and its myriad of problems reflects more than the limitations of science. It reflects the results of a cultural shift during the latter half of this century toward a value system that equates worthwhileness with money.

    Ignoring this is to mis-identify the cause of many HIV treatment problems in both the North and the South. In fact, many public health problems are the direct result of a system that has slowly drifted toward using short-term financial gain as its only measure of value.

    In the South, this measuring stick has led to a variety of obstacles and inequities--among them, the drug cocktails that only a very few very rich people can afford. In the North this measure short changed what science could have provided; the primary reason so little is known about drug combinations and side effects is the same reason drugs are not available at all in the South.

    For example, data now suggests that certain old antiretrovirals used together can be as powerful as the famous protease-inhibitor-based drug cocktails. Had we known this when they were first approved by the FDA, we could have saved many lives. But the drugs were made by different companies and competition between them made it financially difficult for them to test their products together.

    Who would be liable for any problems? How would company secrets be kept? Who would benefit if the combination proved successful? Who would pay for it? These questions discourage collaborations between companies. The obvious long term scientific benefits are overshadowed by the key question of short term financial benefit to the stockholders of the companies involved.

    Interestingly, an effort was made in the midst of the HIV epidemic to form a collaboration of private companies. It still exists, known by its acronym, the ICC (Inter-Company Collaboration for AIDS Drug Development), and it is trying to undertake joint efforts.

    Unfortunately, it has tended to prove the difficulty of making this research system work. Its very failure, in efforts that have been without question supported at the highest levels of each company, underlines the difficulty inherent in collaborative efforts between competitors in a market-driven context.

    Thomas Kuhn long ago identified the key elements of successful scientific inquiry. He identified the success of science as dependent upon a central value: communality. This value holds that all truth must be accessible to everyone so that science can build upon everyone's work. To have anyone withhold or add conditions would eventually lead to many doing so, effectively stifling the growth of knowledge.

    The key value of communality, however, fits poorly into corporate culture. Communality holds that all information about any subject of inquiry is to be shared with everyone. This runs completely counter to patenting and protecting discoveries, or worse, keeping them secret from everyone except those who need to know within a company.

    We have engendered a culture that increasingly values nothing but money and its accumulation. Our public actions increasingly serve the money-making activities instead of controlling and balancing them with regulations and investments in the public interest.

    So the use of old drugs in combination to control HIV was not developed. The private sector did not look at the combination, because there was no likelihood of immediate financial return to a specific company, and there were serious legal, marketing, and other problems in cross-company collaboration.

    The only other actor that could have checked out the combination was the federal government. But there was no agency empowered to find a cure to HIV--to cut the red tape, to put in place strategic plans, to force collaboration or to follow anything but academic whims and hunches that make up the basis of the efforts of the only U.S. agency directly empowered to find answers: the National Institutes of Health.

    As a result many thousands of people have died and thousands more have used up the effectiveness of these drugs in the less useful context of sequential monotherapies. Who knows how many mothers, fathers, sisters and brothers of the rest of the world have died at the hand of this new god.

    It is often pointed out that at the time 'we did not know better'. However, had our decision to stop HIV followed a strategic plan analogous to our effort to put someone on the moon, there is no question but that the value of using drugs in plausible combinations would have been investigated immediately. Instead, we allowed the 'private sector' to dictate the agenda.

    The profit motive has been a critical part of getting treatments developed. Without it, much of the effort to locate compounds with antiviral potential might not have happened so quickly. But, like all motives, it has shortcomings. To not admit this and compensate for them in a coherent, effective way is to burden the world unnecessarily.

    The two worlds of North and South are under one god--and they suffer from the limitations of that god. These result from the sociological shift from the researcher as searcher of truth and the doctor as bringer of medicine, to the researcher as part of drug development and the doctor as part of the drug sales force.

    Most importantly, both reflect the role governments have chosen: to facilitate the needs of the invisible hand that has reached the status of a god, rather than analyze what the public needs, and temper the god to serve our common interests.
    AIDS Treatment News
    Published twice monthly

    Subscription and Editorial Office:

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    Editor and Publisher: John S. James
    Associate Editor: Tadd T. Tobias
    Reader Services: Tom Fontaine and Denny Smith
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    Statement of Purpose:
    AIDS TREATMENT NEWS reports on experimental and standard treatments, especially those available now. We interview physicians, scientists, other health professionals, and persons with AIDS or HIV; we also collect information from meetings and conferences, medical journals, and computer databases. Long-term survivors have usually tried many different treatments, and found combinations which work for them. AIDS Treatment News does not recommend particular therapies, but seeks to increase the options available.

    ISSN # 1052-4207
    Copyright 1998 by John S. James.

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