This Won’t Hurt a Bit

Narrator: Health care is an enormous piece of the global economy. And the amount of money spent on it is growing, as people live longer and companies develop new drugs and treatments. Governments worldwide are struggling with how to provide the best possible care for patients. And how best to pay for it. At the University of Chicago Booth School of Business, researchers are applying fresh thinking from fields such as economics and operations management to these challenges. Their work, some of it done in partnership with medical researchers, is producing practical suggestions for policy makers, doctors, and patients. Here are a few of their ideas. (groovy mid-tempo music)

Matthew J. Notowidigdo: We look at how your happiness changes when you are faced with chronic illness, and we compare that change in happiness across different groups of people, depending on their wealth or their income. And the main summary of the finding is that the happiness levels drop more for people who are wealthier, or who have higher income. 

So if you experience the onset of an illness, such as lung disease, or heart disease, we see that your happiness falls more if you’re wealthier. And we interpret that as evidence that at the end of the day, money matters more when you’re healthy than when you’re sick.

Narrator: This may be a theoretical question and conclusion, but it has very practical implications for anyone who pays for health insurance. If people are offered, and opt for, policies with lower premiums and higher deductibles, they’ll be happier overall by having more money to spend when they are healthier.

Matthew J. Notowidigdo: The main policy implication from our paper is that people should have more income and more wealth available when they’re healthy, and less when they’re sick. So if you get sick and you need to go to the doctor, our research suggests that then consumers should be paying relatively more to see the doctor at that point and relatively less up front, in terms of premiums.

Narrator: Cancer is a leading killer, responsible for approximately one-third of deaths. But pharmaceutical companies haven’t been creating cancer-prevention drugs, instead focusing far more on cancer treatments, often late-stage cancer treatments. According to Eric Budish, at least part of the reason is due to a flaw in the patent system. Because every innovation receives patent protection for the same length of time, and because firms have to file for that patent protection relatively early in their research and development process, there’s less incentive to create technologies like preventative drugs that take much longer to bring to market than others.

Eric Budish: If you have a patient pool that’s got six months left to live, and you have a drug that’s going to extend their lives to seven months left to live, you can figure out, in about seven months, whether your drug’s working as advertised. Then you have a lot of patent life left. Whereas a drug or other kind of technology that’s aimed at preventing cancer from occurring in the first place would take decades to prove the efficacy of. And by the time you prove efficacy, most or all of your patent clock is gone.

Narrator: But Budish has a few recommendations. Among them, he suggests tweaking the patent system to give more protection to drugs that take a long time to bring to market. He also says government should allow more drug approvals to be made without full clinical trials that could take years or decades to conduct.

Eric Budish: Currently, we’re awarding much less patent protection for things that take a long time to bring to market. Our research suggests that, if anything, those technologies should get more patent protection.

Narrator: According to Budish, this recommendation and other changes to the process for developing new technologies could dramatically increase the life expectancy of cancer patients.

Eric Budish: It’s a back-of-the-envelope exercise, but we estimate that it’s on the order of 890,000 life years per cohort of cancer patients. So 890,000 life years per year. A way to think about this number is it’s roughly one year of extra life per new cancer patient that we think we could extend life by, by getting this additional R & D.

Narrator: The issue of drug development raises a related question. When there are new drugs, why do some doctors adopt and start using them more quickly than other doctors do?

Pradeep K. Chintagunta: Pharmaceutical companies routinely introduce new drugs, and so one of the things that physicians need to be able to do is to learn about the quality of these drugs. Mainly, the source of information are the detailing activities that pharmaceutical companies engage in. So, essentially, these are salespeople who show up at the doctor’s office and talk about the various characteristics of the drugs. The other way in which a physician can learn about the quality of the drug is by actually prescribing the drug.

Narrator: Chintagunta learned that when doctors expect a salesperson to visit soon to talk about a new drug, they are less likely to experiment before the visit by prescribing that new drug to their patients. The finding suggests that some drug companies should change their marketing plans. Or change how they publicize them.

Pradeep K. Chintagunta: What pharmaceutical companies should do is to try to not provide this information about how much detailing they’re going to be doing well in advance of actually engaging in such activities. Because as soon as they make it clear to the physician that they’re going to show up in their office, perhaps a month from now, there’s less incentive for the physician to actually prescribe the drug in this intervening period because they’ll simply wait for the detailer to show up at their office.

Narrator: What else could be improved inside doctors’ offices and hospitals? Rodney Parker and his coauthors used data to examine how doctors diagnose and treat prostate cancer.

Rodney Parker: We knew there was a real problem with urologists trying to discern between small and insignificant, and small and significant cancers. That is, the small and insignificant ones are pretty much safe. Most men have some cancer in their prostate at some point in their life, and may not die of it, but will have some cancer. But the small and significant cancers are the ones that you may wish to treat.

Narrator: Using a simulation of a prostate biopsy and probability theory, Parker’s research suggests that using more needles during the biopsy process can help doctors reach a more accurate diagnosis.

Rodney Parker: When you have a biopsy done, what you will find is that the typical method is inserting six needles simultaneously, the so-called sextant method. However, what we show is that if you insert additional needles at that time, you can gain more information. By better discriminating the patients who truly need treatment from those who do not, we reduce the unnecessary treatments, and the repercussions of those are very significant. And then we can better identify the ones who truly need them, and we can do, the urologists can treat them in whichever way they deem necessary.

Narrator: Data also can help doctors and their patients who are waiting for organ transplants. In addition to his prostate-cancer research, Rodney Parker also looks at how to create a more efficient system for people waiting for kidney transplants.

Rodney Parker: There is great differences across the geography of the United States with respect to kidney transplantation. The waiting lists in some areas are longer, and the waiting times are much longer in some areas, such as California and New York, and much, much lower in some other areas, such as Tennessee.

Narrator: Reorganizing the method for distributing kidneys, and offering some of the available organs regionally or nationally earlier in the process could help dozens more patients receive transplants each year. These organs may be rejected by people who are holding out for better quality organs, and yet there may be willing recipients in another region or service area.

Rodney Parker: If you offered it regionally, immediately, those lowest-quality organs, an additional 66 kidneys per year, would be procured. Or nationally, immediately, an additional 138 kidneys would be procured every year.

Narrator: And when is the right time to go forward with an organ transplant? For a person who needs a new liver, the choice is often to wait for a liver to be donated by someone who has died, or to accept an organ from a liver donor, usually a relative.

Burhaneddin Sandikči says people are moving too quickly to get a liver transplant from a living donor, despite the risks involved.

Burhaneddin Sandikči: The question for this patient is, how long should he delay the living donor transplantation option? And the logic in delaying is to possibly get a higher-quality disease donor from the waiting list. The patients, indeed, are not delaying their transplants if they have a slowly progressing disease, compared to a rapidly progressing disease. So what that means is that they are going in a rush to transplant, even though they are less severe, they have a less severe condition.

Narrator: The decision to rush ahead with a transplant means some patients are dying prematurely. Sandikči looks at people with a particular type of liver disease called primary biliary cirrhosis.

Burhaneddin Sandikči: For these patients, on average, we found that the suboptimal decisions are costing them about seven months of their lives. And some patients are even losing about 1.4 years of life. The single most significant recommendation is exercise the living-donor option cautiously. Don’t rush through going through the living-donor operation.

Narrator: From an economists’ perspective, the health-care industry is similar to any other industry in terms of basic productivity. Chad Syverson, who has studied productivity in many industries, gained insights by applying his methodology to hospitals.

Chad Syverson: The question that we wanted to answer was: Is health care systematically different than any of these other industries like manufacturing, where we know, you pick any manufacturing market, you’re going to find big differences in productivity. We wanted to see whether that was true in health care too. 

We found that, just as you find in manufacturing, the customers, the health-care sector, systematically seek out the more efficient producers. So to put that in plain language, patients go to the better hospitals when they have a choice, and we look in particular at what happens when they’re having a heart attack, so this is not a situation where you’ve got a lot of time to sit and do research about which provider might be better than others. You have to react pretty quickly, given the situation, and we see that patients somehow know where to go ahead of time, systematically, and they end up going by hospitals that are closer to their house, in fact, more often than not, to seek out the hospitals that are more efficient.

Narrator: These are only some of the suggestions that research is producing for doctors, policy makers, and all of us who benefit from better health-care systems. Research from Chicago Booth faculty also has suggestions for how better to fight the spread of flu, and how to improve care for hospice patients. Academics from economics, marketing, and operations management may not themselves have medical expertise, but their insights can help supplement doctors’ knowledge, improve the practice of medicine, and deliver effective health care throughout the world.