Felix Salmon

Roger Bate has a curious op-ed in the NYT today. He’s the lead author on a study which bought 370 drug samples from 41 online pharmacies around the world, and then tested their authenticity. The results? With the exception of Viagra bought from non-verified websites, every single drug was 100% authentic. But you’d never guess that from his op-ed:

In 2007-8, when counterfeit versions of heparin, a blood-thinning drug, were shipped from China to the United States market, 149 people died. In the last few months, bogus versions of the cancer drug Avastin, apparently shipped from the Middle East, have surfaced in clinics in California, Illinois and Texas. Thankfully, so far as we know, they haven’t killed anyone, but more and more cases of dangerous fake drugs are being reported by the Food and Drug Administration. Numerous incidents surely go unreported, the evidence swallowed, the deaths incorrectly attributed to natural causes.

Fighting the fake drug menace is like playing whack-a-mole. It is technically illegal for individuals to order drugs online from other countries. And yet no sooner does the F.D.A. shut down one dubious online pharmacy than another pops up. According to the National Association of Boards of Pharmacy, only 3 percent of the 9,600 online pharmacies it has reviewed complied with industry standards. Many were based overseas, so their sales to Americans were illegal; others did not require doctors’ prescriptions. And some were very likely peddling dangerous counterfeit drugs.

This is all highly alarming — but also highly misleading. The “more and more cases” of fake drugs being found by the FDA? The FDA’s counterfeit medicine page lists exactly six cases in the past 24 months, of which just two — Tamflu in June 2010, and Vicodin ES in March 2012 — were linked to online pharmacies. The bogus Avastin, by contrast, was being distributed through legitimate channels by two distributors: Quality Specialty Products (QSP), a/k/a Montana Health Care Solutions, and Volunteer Distribution in Gainesboro, Tennessee. It had nothing to do with online pharmacies at all.

Realistically, the US simply doesn’t have a “fake drug menace”. Yes, fake drugs exist, and they’re not all that hard to find if you’re based in, say, Ethiopia. An earlier study by Roger Bate found that 7 of 36 drugs bought by secret shoppers in Ethiopia failed a stringent authenticity test. (On the other hand, 100% of the drugs bought in Turkey were legitimate, and Brazil, Russia, and China all performed very well in the test.)

What’s more, even if the US did have a fake drug menace, which it doesn’t, the menace would not be coming from internet pharmacies. As Bate himself has found, internet pharmacies sell authentic drugs at low prices; the only exception to this rule is unlicensed sites hawking Viagra.

But Bate doesn’t seem to believe the evidence of his own eyes. Instead, he relies on urban myths: his July 2011 paper, for instance, said in its second sentence that “according to the World Health Organization, substandard and counterfeit drugs have been found in both developed and developing countries, accounting for more than 10% of the global medicines market and over US$32 billion in annual earnings.” This is a classic bogus counterfeiting statistic: if you go to the WHO page he links to, the WHO in fact makes no such assertion at all. Instead, it attributes the factoid to the FDA, with no footnote.

I’ve been trying to track down these statistics to their source for years, and I’ve never yet found one with a solid empirical grounding. Certainly Bate’s own studies would seem to disprove this assertion, but that doesn’t stop him, in his op-ed, talking authoritatively about “criminal networks” which “launder billions in profit”. As far as I can tell, no such network has ever been identified, and while there might be billions of dollars of profit in illegal drugs, that money is much more likely to come from marijuana and cocaine than it is from fake pharmaceuticals.

And in any case, concentrating on fake drugs is itself dangerous, because it diverts resources from the real problems with US drugs — legitimate drugs where there has been either a flaw in the manufacturing process or which have degraded because they’ve been stored badly or for too much time. Fake drugs are dangerous; real drugs can actually be more dangerous, just because people aren’t nearly as worried about them.

Still, Bate does at least appreciate that if you’re buying drugs from a licensed online pharmacy, those drugs are going to be authentic. As such, he says, that behavior should not be criminal. But he’s still a very long way from the logical conclusion, which is that there should be a free market in authentic drugs:

Buying drugs online from overseas isn’t for everyone. It should remain a limited option for desperate cash buyers — sick people with limited resources and insurance coverage — not a way for well-insured patients to reduce their co-pay. American health insurance companies should not be required to reimburse consumers for these drugs, because that would effectively import foreign governments’ price controls into the United States and undermine American companies’ research and development budgets.

This really doesn’t make sense. If authentic drugs are perfectly good for “desperate cash buyers”, why can’t they be used by the rest of us with health-insurance plans? There’s no reason why I would want to reduce my co-pay when buying drugs online; I’m perfectly happy to make exactly the same co-payment when buying at a Canadian online pharmacy as I would when buying at the drugstore down the street. But my insurer would save money, and maybe, ultimately, that would reduce the total cost of healthcare and health insurance in this country.

Yes, if the cost of healthcare and health insurance comes down, that might mean — that should mean — lower profits for Big Pharma. But would lower profits mean lower R&D budgets? And would lower R&D budgets mean fewer great new drugs coming to market? No one knows; all we know for sure is that Big Pharma’s R&D expenditure is enormous, and is increasingly bad at creating great new drugs. In general, if you want to look for billions in profits, you should be looking to the big pharmaceutical companies, not mythical organized-crime syndicates. And it’s definitely worth asking why and whether we have a societal interest in protecting those profits instead of opening up the market in US pharmaceuticals to a modicum of competition.

What we’re faced with here is a tradeoff. On the one hand, there are clear financial benefits to letting Americans and American insurers buy their authentic drugs wherever those drugs are cheapest. On the other hand, there are extremely vague worries that were that to happen, some hypothetical new future drug might fail to make its way to market. Given the massive economic and fiscal costs of healthcare price inflation, it’s surely a no-brainer to go for the option which unambiguously saves money. Especially since, as Bate himself has demonstrated, the drug-safety risks of going down that road are essentially nonexistent.

A week or so ago, Matt Richtel wrote a long and glowing profile of the Waldorf School of the Peninsula, looking into the apparent irony that a Silicon Valley school is decidedly low-tech; he quoted one parent, Alan Eagle, a senior Google employee, as saying that “I fundamentally reject the notion you need technology aids in grammar school”.

But there’s more to technological progress than iPads. And I wonder what Alan Eagle would say if he knew that fear of life-saving technology at the Waldorf School is exposing his children to a much-heightened risk of painful, untimely, and easily-preventable death.

The first thing to say about this tragic chart is that both Los Altos city and Santa Clara county have extremely low immunization rates. The right level of immunization is 100%, and rates of 90% or 94% are very dangerous indeed.

But 23% is positively evil.

This is a very dangerous level of immunization–the level where herd immunity gets lost, disease reservoirs are established, and children emerge from their school to infect infants, immunocompromised adults, and people whose vaccinations didn’t take or have waned, with potentially fatal diseases.

No responsible parent would ever let their child attend a school with a 23% immunization rate. And indeed there’s a strong case to be made that public-health officials should simply refuse to allow any such school to open its doors unless and until that rate improves. I’ll be charitable here and assume that Richtel didn’t know this number when he wrote his piece — but still, the NYT owes its readers something of an apology here for leading them to believe that there might be something admirable about this sinkhole of highly-dangerous fear and ignorance.

By far the best book on this phenomenon is The Panic Virus, by Seth Mnookin; I can highly recommend it. He tells of how when public-health officials try to work out which areas are at highest risk of fatal outbreaks, one thing they do is look at a map of Whole Food stores — it’s the crunchy-granola college-educated liberals who are by far the worst offenders when it comes to putting their own children and everybody else’s at risk. And they love to eat up pseudoscientific claptrap about “immature thymus glands” when it’s published by outlets like the Huffington Post.

It’s a statistical certainty that children die, unnecessarily, when immunization rates fall. The Los Altos parents sending their kids to the Waldorf School of the Peninsula are at best misguided and at worst downright malign. No matter how skeptical they are of technology, school administrators have an overriding moral duty to do something about this. Now.

Update: I should have put this in the original post, sorry, but the chart comes from the Bay Citizen’s immunization pages, which show that “at Waldorf School Of The Peninsula, 72.73 % of kindergartners weren’t fully immunized in the 2010-11 school year due to their parents’ personal beliefs”. The data comes from the California Department of Health.

Update 2: A fascinating comments thread, which is worth reading, or at least skimming through. Thanks in particular to LaraR, who notes that kids can’t enroll in public schools in Santa Clara unless they’re immunized. Which seems to have had the unintended consequence that parents who don’t want to immunize their kids all end up sending their kids to the Waldorf School, with potentially disastrous consequences. There’s already a pertussis epidemic in the county.

Deleveraging is painful. It’s so painful, indeed, that it can actually be lethal:

Foreclosure is not just a metaphorical epidemic, but a bona fide public health crisis…

The N.B.E.R. study found significantly more suicide attempts in high-foreclosure neighborhoods. For every 100 foreclosures, it found a 12 percent increase in anxiety-related emergency-room visits and hospitalizations by adults under 50. Losing a home disrupts social ties to neighbors, schools, jobs and health care providers — ties that under better circumstances promote good health. Neighborhoods suffer, not just homeowners.

This is a problem that’s going to get worse before it gets better. No matter how many refinancings and principal writedowns we get, the number of foreclosures is bound to rise sooner or later. There are 11 million homeowners underwater; those people have to deleverage somehow, and foreclosure is, sadly, top of the list of ways for them to do so. The only other way of getting a principal writedown, these days, is a short sale — but given how long it’s taking banks to foreclose, it makes sense to just sit in your house and wait for the bank to kick you out, rather than going to all the effort of trying to find a buyer just so that you can be forced to live elsewhere that much sooner.

I worry too about Ireland, in particular, where foreclosures haven’t even started yet, mainly because underwater homeowners there have been surprisingly diligent about making their mortgage payments. That’s partly a cultural thing, and partly a function of the fact that Irish mortgages are all recourse: if you default on your mortgage, the bank will seize essentially everything you own. But develeraging is even more necessary in Ireland than it is in the US, and again it’s hard to see how it’s going to happen without defaults and foreclosures.

The “great haircut” idea where everybody sees their debts written off simply isn’t going to happen: there’s not enough capital in the banking system, for starters. And for as long as Ireland remains in the euro, it’s hard to see how the country can deleverage through inflation. But that’s more of an option in the US — the more we inflate our way out of our excessive debt burden, the healthier we’ll all be. Literally.

If you haven’t read Sharon Begley’s wonderful Newsweek cover story on how less healthcare can mean better health, I’d urge you to do so now — it’s one of those articles where I just want to quote pretty much the entire thing. All manner of medicine, it turns out, from CT and MRI scans to antidepressants, have a habit of making people not better but worse.

The good news is that Big Medicine seems to be getting the message, and that’s having a real effect on Medicare cost inflation. Here’s Peter Orszag:

Partners HealthCare has used its health IT to be more selective about which patients should have diagnostic imaging tests, such as MRIs and CT scans. The cost to Medicare for imaging tests nationwide roughly doubled from 2001 to 2009. And such tests are not only expensive but potentially dangerous. Frequently imaged patients face an increased risk of cancer because of exposure to excessive radiation.

Doctors at Partners now order imaging scans through the computer system and are automatically queried about the patients’ characteristics. For each case, the software then provides an “appropriateness” score, reflecting evidence- based protocols for the image requested.

In a follow-up column, Orszag looks at another hospital, Mt Sinai, where he recently joined the board — a focus on reducing readmissions rates there has helped reduce its Medicare billing inflation to 2% — vastly lower than the 12% annualized inflation rate in Medicare costs that we’ve seen on average over the past 40 years or so.

The big question here, raised most promiently by Maggie Mahar, is why we’re seeing this unusual slowdown in Medicare costs right now. Mahar and Orszag say that a lot of the reason is the Affordable Care Act: a rare instance of a piece of legislation actually having its intended consequences. The act is designed to pay more for outputs and less for inputs — that is, to encourage the use of medical procedures only if they improve health outcomes, and to discourage them if they don’t.

I buy that. And if the healthcare industry broadly takes to heart the lessons of Begley’s article, then it’s easy to imagine a world where we can have our cake and eat it — lower healthcare costs (or, at least, lower healthcare-cost inflation) along with improved health outcomes.

The problem here is the incentives. From a public-policy perspective, there’s no doubt that getting doctors to order fewer harmful drugs and procedures is a really good idea. But from the point of view of the doctors and hospitals, they’re going to be leaving money on the table. Recent legislation includes some financial carrots and sticks, in a pretty well-designed manner.

Under the first stage of the HITECH Act, doctors who adopt electronic health records can receive incentive payments of as much as $44,000 from Medicare or $63,750 from Medicaid; hospitals can qualify for payments of $2 million or more. As of early August, Medicare providers had received $400 million in incentive payments for health IT, and much more is in the pipeline. Surveys suggest that while the first-stage incentives are available, at least two-thirds of American hospitals will adopt new systems.

Starting in 2015, the Medicare subsidies for adopting health IT systems are to be replaced by penalties for not doing so.

But it seems to me that the jury’s still out on whether these incentives are going to bend the famous cost curve over the medium to long run. Medical cost inflation is volatile and unpredictable, and downticks often just result in mean-reversion upticks the following year. The way to make sure these effects last is to get Begley’s message out to the population as a whole — and then to give them some amount of skin in the game when it comes to the cost of the procedures they do undergo. When people pay even a tiny amount of their direct healthcare costs, they become much more conscious of what those costs are. And the one thing this country really needs is much more cost-consciousness when it comes to healthcare.

The NYT’s new-look Sunday Review led this weekend with a big essay by Peter Kramer, the author of Listening to Prozac. But for all its length and detail, it’s very hard to read — at many points, doing so feels like listening to one half of a telephone conversation. Which makes sense when you consider Kramer’s opening paragraphs:

In terms of perception, these are hard times for antidepressants. A number of articles have suggested that the drugs are no more effective than placebos.

Last month brought an especially high-profile debunking. In an essay in The New York Review of Books, Marcia Angell, former editor in chief of The New England Journal of Medicine, favorably entertained the premise that “psychoactive drugs are useless.” Earlier, a USA Today piece about a study done by the psychologist Robert DeRubeis had the headline, “Antidepressant lift may be all in your head,” and shortly after, a Newsweek cover piece discussed research by the psychologist Irving Kirsch arguing that the drugs were no more effective than a placebo.

I’ve included, here, all of the links that Kramer provides. Which is exactly one, to the NYT topic page on antidepressants. If you want to find Angell’s article, or the USA Today piece, or the Newsweek cover story, you’re on your own: Kramer and the NYT won’t help you. And Kramer, clinical professor of psychiatry at Brown University, takes care not to even mention part two of Angell’s two-part series, where she talks at length about how psychiatry has been captured by drug companies, who “are particularly eager to win over faculty psychiatrists at prestigious academic medical centers”. (After reading Angell’s second essay, you’ll certainly wonder why Kramer doesn’t disclose how much income he gets from pharmaceutical companies.)

In any case, if you read Kramer’s piece and wondered what on earth he was talking about, then I would highly recommend you now read Angell, both part 1 and part 2. In general, the NYRB is a bit harder to read than the NYT, but not in this case — Angell’s essays are models of clear and powerful empirically-based argument, while Kramer’s looks positively messy and incoherent in comparison.

Here, for instance, is Angell:

For obvious reasons, drug companies make very sure that their positive studies are published in medical journals and doctors know about them, while the negative ones often languish unseen within the FDA, which regards them as proprietary and therefore confidential. This practice greatly biases the medical literature, medical education, and treatment decisions.

And here’s Kramer:

Not long ago, I received disturbing news: a friend had had a stroke that paralyzed the right side of his body. Hoping to be of use, I searched the Web for a study I vaguely remembered. There it was: a group in France had worked with more than 100 people with the kind of stroke that affected my friend. Along with physiotherapy, half received Prozac, and half a placebo. Members of the Prozac group recovered more of their mobility…

Surprised that my friend had not been offered a highly effective treatment, I phoned Robert G. Robinson at the University of Iowa’s department of psychiatry, a leading researcher in this field.

Kramer knows Angell’s argument, of course — his essay is a direct response to hers. Yet he still feels comfortable cherry-picking a single obscure French study — which, again, he doesn’t link to — in order to prove that Prozac is “highly effective” in stroke victims. I would love to know what Kramer thinks of this xkcd strip; for all that Kramer complains about “the news media’s uncritical embrace of debunking studies”, the fact is that it’s the outlier studies that never get replicated which tend to get the most press.

Angell’s main argument, expounded at book length by Irving Kirsch, is that antidepressants are, amazingly, even worse than placebos; the main evidence for this is a massive database of FDA trials, which was obtained by Kirsch and his colleagues via the Freedom of Information Act. Kramer’s response to this is to say that the FDA trials are flawed, and that some large number of the subjects weren’t depressed at all.

Or, to put it another way, lots of people were diagnosed with depression and put onto a trial of antidepressant drugs, even when they were perfectly healthy. Which sounds very much like the kind of thing that Angell is complaining about: the way in which, for instance, the number of children so disabled by mental disorders that they qualify for Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) was 35 times higher in 2007 than it was in 1987.

And it’s getting worse: the editors of DSM-V, to be published in 2013, have written that “in primary care settings, approximately 30 percent to 50 percent of patients have prominent mental health symptoms or identifiable mental disorders, which have significant adverse consequences if left untreated.”

Those who would defend psychopharmacology, then, seem to want to have their cake and eat it: on the one hand it seems that serious mental health disorders have reached pandemic proportions, but on the other hand we’re told that a lot of people diagnosed with those disorders never really had them in the first place.

To a first approximation, I know nothing at all about psychiatry, psychopharmacology or the optimal treatment of depression. But as a lay reader with a decent understanding of statistics and as someone whose sister is one of those very rare people whose PhD was a negative thesis, I can tell you that Angell’s articles are vastly more compelling than Kramer’s attempt at a rebuttal.

Does that mean I now believe that antidepressants do no good at all? No — as a good Bayesian, I’m not going to let a single article do that. But I was looking forward to a strong response to Angell. And the weakness of Kramer’s essay only serves to confirm my suspicions that Angell and the anti-antidepressant crowd really are onto something.

Caroline Graham’s interview with Bill Gates has lots of interesting nuggets, but this bit in particular, about the amount of money his children will inherit, got me thinking:

He won’t specify what they will get, but the reports that they’ll receive ‘only’ $10 million each can’t be far off, because he concedes, ‘It will be a minuscule portion of my wealth. It will mean they have to find their own way.

‘They will be given an unbelievable education and that will all be paid for. And certainly anything related to health issues we will take care of. But in terms of their income, they will have to pick a job they like and go to work. They are normal kids now. They do chores, they get pocket money.’

He is determined that his family life should be as unaffected as possible by his fortune.

It probably goes without saying that if you want your family to be unaffected by your fortune, you probably shouldn’t bring up your family in a $100 million house and invite your friend Bono to stay the night when he’s playing a local gig. And that if you have $10 million in the bank as you’re just entering the workforce, your investment income is almost certainly going to vastly exceed anything you can earn from picking up a job and going to work. So if Gates wants to force his children to “find their own way,” he’ll either have to give them much less than $10 million, or else encrust that money with so many restrictions on how it can be spent that the absolute amount doesn’t really matter anyway.

Still, the bit which stuck with me was where Gates said that “anything related to health issues we will take care of.” I have no idea where to even begin answering this question — so maybe one of my readers can help. Here goes:

How much would it cost for Bill Gates to buy a lifetime’s worth of gold-plated health insurance for one of his daughters, covering any conceivable medical expense, in full, not only for her life but also for any future spouse and all future children she may have? Assume this is a single-premium deal, where he simply writes a check today and his daughter and her hypothetical future family are covered for the rest of their lives.

While there’s a certain amount of moral hazard here — his daughter could turn out to be some kind of sanatorium addict — let’s assume for the sake of argument that the kid is perfectly healthy and well-adjusted today. If you were a big health insurer, how much would you need to charge before taking on that kind of liability?

It seems to me that this is a product which would be of interest not only to Bill Gates but also to many other high net worth individuals looking to ensure that their kids are medically looked after for as long as they live. Is the problem that it would be too expensive for even a billionaire to buy? Or is it just that no insurance company would ever dare write it?

Two highlights of the Kauffman Bloggers Forum were the presentations on the broken nature of the pharmaceuticals market. And they came from opposite ends of the left-right spectrum: Megan McArdle went first, followed by Dean Baker.

McArdle’s talk was narrowly focused on antibiotics. The problem here is resistance: even before antibiotics start being tested, resistance to them starts showing up. McArdle’s thesis is that this isn’t just a problem of drugs and biological science, but is a market problem too.

The size of the problem of multi-drug-resistant bacteria is immense: more than a million cases a year, many of which end in death. And the cause of the problem, McArdle says, is that “all of the incentives are bad”.

For one thing, the suppliers of antibiotics — doctors and farmers — have no incentive to reduce the quantity of antibiotics they hand out. At the margin, for the individual patient or cow, there’s no great harm in feeding them antibiotics even if they don’t need them. Some patients even explicitly ask for antibiotics “just in case” the infection turns out to be bacterial. But in aggregate, this behavior is exactly what’s causing the rise of multi-drug-resistant bacteria. The way McArdle puts it, “pharmaceutical profits in Europe are marginal, and they’re volume-driven. And in antibiotics, the last thing you want is volume-driven profits.”

Taxing antibiotics would reduce their over-use, at least at the margin — but would also reduce the incentive to develop new antibiotics which can be used where old ones are useless. Stockpiling new antibiotics might also be useful — but again that reduces incentives to develop new ones.

And the patent system is very much part of the problem as well. The way it works, the clock start running out on a new drug the minute it’s invented, even before it enters hugely expensive and time-consuming testing. So drug companies have every incentive to sell as much of a new antibiotic as possible as quickly as possible, while they still have a few years left with their patent in effect. After that, generic copies come on the market, and the price falls dramatically — which again is not necessarily a good thing, in the realm of antibiotics.

Baker’s talk picked up on the problem of pharmaceutical patents, and looked at it more generally. We spend about $300 billion a year on prescription drugs, up from essentially zero a few decades ago. That brings drugs out of reach of people who can’t afford them, and results in people cutting their dosages. It encourages companies to spend billions of dollars developing copycat drugs in order to chase patent rents. It discourages companies from doing R&D on diseases which aren’t tractable to cure by pills. And it means that an enormous amount of valuable of scientific research is kept secret.

Baker’s alternative to all the distortions created by the patent system is simple direct public funding for medical R&D and education: the costs of such a scheme would be lower than the amount we’re already paying on publicly-funded prescription drug benefits, so it would save money on a fiscal basis. All patents and research results would go into the public domain, which would generate huge global benefits.

Both presentations raised more questions than answers: for one thing, it’s politically impossible to enact a wholesale restructuring of pharmaceutical patent rules. These things are path-dependent, and we’ve gone far too far down this particular path to be able to make the enormous leap to something completely different. But even pharmaceutical companies will concede the current system isn’t working: McArdle’s slides came from a researcher for Pfizer, who is desperate to get the word out about how screwed up the current system of discovering, manufacturing, and distributing antibiotics is. Something, clearly, must be done. But I fear that in reality, nothing will be.

The WSJ puts a lot of time and effort into its leders—those long, exhaustively-reported front-page exclusives about topics which might not be breaking news but which are still very important. So why is it that when a story is based on information found online, the WSJ still can’t seem to link to it? Today’s leder is a good one, about possible waste in the world of spinal surgery. But it could definitely do with a few hyperlinks:

Medtronic began releasing information about its payments to surgeons on its website in June, after coming under intense scrutiny from Sen. Charles Grassley (R., Iowa)…

Medtronic’s website shows that the company paid Dr. Vaccaro $1.28 million in royalties in the first three quarters of 2010…

Dr. Foley has had royalty-bearing agreements with Medtronic since 1996. The company paid him more than $27 million from 2001 to 2006, according to internal Medtronic documents reviewed by the Journal. On its website, the company discloses paying him another $13 million in royalties in the first three quarters of this year alone.

The failure to link to Medtronic’s website is part of what makes this story more confusing than it needs to be. There’s also a cryptic reference to a court ruling which is preventing the WSJ from printing everything it knows:

The Journal mined hospitals’ Medicare claims to see what proportion of fusions performed fall in this category. Due to a three-decade-old court ruling guarding the confidentiality of physician information, the paper is barred from disclosing what it found regarding the five Norton surgeons.

Critics of the court ruling and of the privacy policies of the federal Medicare program argue that making such information public would help taxpayers understand where their money is going, and potentially deter abusive or wasteful practices.

A couple of hyperlinks would be great here, too: which court ruling, exactly, are we talking about? And which critics? I’m sure their criticism is online, under their real names—so why not link to that criticism, rather than wave vaguely at it before moving on to something else?

The bigger problem is that the WSJ makes it very hard to separate two different stories. The first story is that Medicare is paying lots of money—$2.24 billion in 2008—for spinal surgeries, many of which might not be necessary or even desirable. The second story is that Medtronic is paying lots of money to a select group of surgeons who perform a lot of such surgeries.

The first story is reasonably clear, although it would have been helpful to compare Medicare with private-sector insurers: if everybody’s happily paying for these surgeries, then the problem doesn’t really lie with Medicare. The second story, however, is murkier. The WSJ is aggressive chasing it:

Corporate whistleblowers and congressional critics contend such arrangements—which are common in orthopedic surgery—amount to kickbacks to stoke sales of medical devices.

The official statements from both surgeons and Medtronic make the kickback allegations seem a bit of a stretch. But look how the WSJ follows those statements with an explicit reprise of the kickback theme:

Dr. Foley responded in an email that he doesn’t receive any royalties from Medtronic on devices he has contributed to when they are implanted in patients by himself, members of his practice or hospitals where he has admitting privileges.

Brian Henry, a spokesman for Medtronic, says the company applies that policy to all its collaborating surgeons, thereby eliminating the temptation for them to do more surgeries to earn more royalty income.

Two former Medtronic employees have alleged in separate whistleblower lawsuits that the royalty agreements are intended to disguise the fact that the payments the company makes to surgeons are really kickbacks for using Medtronic devices.

The paper says it “reviewed” a copy of one of the lawsuits—again, this is something it would be great for them to have posted. And more generally, it would be great to see some mathematics on the alleged kickbacks: how do the payments to surgeons compare to the profits that Medtronic makes from their work? Are the payments linked in any way to the number of surgeries they perform? What proportion of spinal surgeons get these payments? Is there evidence that surgeons getting paid by Medtronic use more Medtronic devices than their colleagues?

My gut feeling here is that Medtronic is quite deliberately paying large amounts of money to key spinal surgeons, who as a result become well-disposed towards the company and the kind of of surgery which involves its products. In turn, their enthusiasm spreads across their hospitals and their region as a whole, since these surgeons are senior, respected physicians who are emulated by their peers.

But that kind of thing is a kickback only in the most conceptual way: if the surgeons help to make a certain procedure more popular among their peers, then they’ll eventually get larger royalty checks. What I’m not seeing is any evidence that if certain surgeons funnel money to Medtronic by using Medtronic products in their operations, then some of that money ends up getting kicked back to them.

My larger problem with the WSJ story is that by concentrating on kickbacks and Medicare, it downplays the bigger picture—that surgeons around the country are getting paid millions of dollars by Medtronic and performing lots of unnecessary surgeries, with the cost coming out of everybody’s rapidly-rising health-insurance premiums. If there’s a scandal here, it would seem to be one endemic to the healthcare industry. I don’t understand why the WSJ would narrow its focus so specifically onto Medicare.

(Cross-posted at CJR)

Social Workout has photos from inside Goldman’s spanking-new 54,000-square-foot gym, but leaves the most interesting factoid in the comments. It turns out that being a Goldman employee might be necessary to gain entrance to the gym, but it’s not sufficient: you also need to cough up a monthly membership fee in order to gain access to those standard-issue Russell Athletic t-shirts and gray shorts. If you’re a managing director or higher, the fee is $132 a month; vice-presidents pay $75 a month; and everybody else pays $51 per month.

I’m wondering what the logic is here — is it a Pigovian tax aimed at minimizing the number of healthy employees? Is it an attempt to stop the unfit from complaining about having to cross-subsidize those who work out? Is 54,000 square feet not enough for the whole company, and the charge an attempt to keep numbers down? Or is it some misguided attempt at saving corporate cash, from a company which spent $2 billion on the shiny new building, including $5 million for a Julie Mehretu mural? All very odd.

Financial services companies can take advantage of the cognitively weak in general, and the elderly in particular — especially elderly people suffering from Alzheimer’s disease. More generally, people who want to be in full control of their finances today might well want to put in place protections which remove them from full control of their finances in future, if they know that they’re going to get Alzheimer’s.

So now that a test looks likely which will predict with high accuracy whether you’re going to get Alzheimer’s or not, will we find people lining up to find out if they’re going to get the disease, and creating structures for other people to take control of their funds before symptoms appear? It seems reasonable to me. And will we find hedge fund managers, especially once they get to be a certain age, publicly releasing the results of their spinal-tap tests?

This is all very murky, in bioethical terms, but in financial terms it’s crystal clear: no investor wants someone with Alzheimer’s running their money, and few of us even want to be control of our own money once we come down with the disease. Whether that’s enough to make us find out whether we’re going to get it, of course, is another question entirely.

Abby Ellin finds some interesting body-weight literature:

A 2008 study in the Journal of Economics and Human Biology examined data from 12,000 men and women ages 18 to mid-40s. Compared with when they were single, the body mass index (or B.M.I., a height-to-weight ratio) of married men increased by 1.5 percent above and beyond what they would normally gain as they aged, and that of women shot up 2 percent…

The B.M.I. of couples who lived together without making it legal increased by only about 1 percent…

If the relationship disintegrates people tend to lose weight. According to Professor Argys, divorced men usually revert to their pre-marriage B.M.I., and divorced womens’ B.M.I.’s are actually 2.5 percent lower than when they married.

The abstract is here; an ungated version of the paper is here. One big question, of course, is how come obesity has been rising even as fewer people have been getting married. Of course you want a pretty chart:

I’m surprised that women are so much heavier on their wedding day than they were one year earlier. That doesn’t conform with what I’ve seen.

Frank Hansen has put together this chart from OECD data:

(Via Gelman, who earlier found something similar putting life expectancy on the y-axis.)

Vehicle emissions are a major public health issue. We already know that the best thing you can do if you want to bring your crime rate down is to switch to unleaded gasoline and then wait for 20 years. Now we’re learning that if you want to improve the health of babies (and healthy babies become much more productive members of society when they grow up), simply installing an EZ-Pass tollbooth has a large and significant positive effect: the resulting improvements in congestion and emissions more than make up for any excess emissions from cars crawling through the toll plaza itself.

The negative externalities from driving, then, are significantly greater than the ones that the likes of Charles Komanoff calculates — and those are $160 per trip, in Manhattan. If we want to become a happier, healthier, more prosperous nation, then we have to wean ourselves off our car addiction. It won’t be fast, and it won’t be easy. But it’s profoundly necessary.

(Via Wessel)

Update: The E-Z Pass study can be found here; the link in the WSJ blog is broken. Thanks to Charles Kenny for the pointer.