Healthcare inflation is driven by bad medicine

According to the Commonwealth Fund (an endowment-supported US foundation), US healthcare spending has increased to 16.6% of GDP in 2014.  Other countries have seen less rapid increases in healthcare spending.  For the most part, inflation is being driven by doctors with a vested interest in pushing medical services, expensive treatments, and pharmaceutical drugs.  To my surprise, what I’ve found is that many aspects of modern medicine aren’t supported by rigorous scientific evidence.  While the FDA drug approval process superficially appears to be scientific, it often isn’t.  One way that pharma companies game the system is to prove that a drug (e.g. statins) affects a dubious biomarker (e.g. cholesterol) rather than prove that the drug causes more good than harm (e.g. lower mortality).

Unfortunately, mainstream views on science and medicine are quite ignorant of what goes on.  We are taught to only trust medical advice from “trained and licensed professionals”.  Much of society worships technology and has blind faith in the claims made by medical authorities.  I would argue that this environment is a fertile ground for the trend in healthcare inflation to continue going forward.  And if that trend continues, it is likely that American health insurance stocks will continue to do quite well.

Pharmaceutical companies researching active placebos may also do quite well.

Wait, doctors make stuff up?!

I understand that my claims may be difficult to believe.  But here’s the simplest way to prove it to yourself: a game called “is this disease chronic or not?”.  The medical profession has a nasty habit of presuming diseases to be chronic.  These views are convenient for the medical industry as it means that patients will require lifelong medication, many billable hours with a doctor, and/or repeated surgery.  The cure and prevention of disease is not as profitable as repeated treatment.  However, I think that there is obvious evidence than many major diseases aren’t chronic.

Rheumatoid arthritis is viewed as a progressive disease.  However, Mikhaila Peterson proves otherwise.  Mikhaila was the first Canadian to receive Enbrel and had two joint replacement surgeries due to arthritis.  However, her arthritis went away when she changed her diet to exclusively fatty meat (and the occasional glass of bourbon).  Her many interviews can be found on Youtube, the most viewed of which is her interview with Joe Rogan.  She no longer needs a lifetime of the blockbuster drug Enbrel.

What about “chronic” schizophrenia?  Daniel Mackler has interviewed two individuals who had very severe psychosis that went away.  One of them, Joanne Greenberg, became the best-selling author of I Never Promised You a Rose Garden (which later became a film).  If you watch the interviews, the former “schizophrenics” are very well-spoken and demonstrate no signs of brain damage or a chemical imbalance.

Or what about Type 2 Diabetes (T2D)?  Sarah Hallberg (TedX talk on low-carb high-fat), Neal Barnard (TedX talk; promotes high-carb starchy vegan), and Roy Taylor (who studies ultra-low calorie diets) are advocates of very different diets but talk about patients who have experienced a reversal of T2D.  In the 1930s, Walter Kempner was treating patients with his Rice Diet and was reversing T2D as well as kidney disease in some patients.

Or what about Type 1 Diabetes?  The team behind the Paleomedicina clinic has published case studies (1, 2, protocol description) on treating T1D with their Paleo Ketogenic Diet (a diet based on fatty meat and offal from pasture-raised animals).  Both patients in the case studies were able to safely discontinue insulin as their pancreatic cells were able to produce insulin again.

Even mundane conditions such as cavities are reversible.  While the missing bone will not grow back, the husband and wife team of May and Edward Mellanby demonstrated in human and animal experiments that the body can heal cavities.  Re-mineralization will form around the secondary dentin.  In a 1932 controlled trial, May Mellanby treated cavities with vitamin A, vitamin D, and an elimination of cereals from the diet.  Over the next several years, researchers figured out why cereal consumption led to cavities.  Phytic acid (found in foods like cereal) would often lead to the development of cavities.  Edward Mellanby and Doulgas Harrison’s 1939 paper summarizes the effect of phytic acid on rickets (and by extension, bad teeth).

A list of treatments ignored by mainstream medicine

Feel free to skim through the list below:

Talking-based therapies are viable for these conditions:

  • Psychosis disorders, commonly referred to and/or diagnosed as “schizophrenia”.  The Soteria project (mostly defunct) and Open Dialogue are some of the more notable interventions.

Paleomedicina is treating these conditions with their paleo-style ketogenic diet (adapted from the slide in 13:05 of a presentation by Zsofia Clemens and their website):

  • Autoimmune-related diseases:
    • Rheumatoid arthritis, Multiple Sclerosis, T1DM and LADA diabetes, Celiac disease, Hashimoto’s thyroiditis, Basedow’s syndrome / Graves’ disease / toxic diffuse goiter, Psoriasis, Crohn’s disease, Ulcerative colitis (colitis ulcerosa)
  • Other autoimmune-related diseases:
    • Lupus (systemic lupus erythematosus), encephalitis, anemia perniciosa, antiphospholipid syndrome, aplastic anemia, Giant cell arteritis (temporal arteritis), Guillain-Barré syndrome, idiopathic thrombocytopenic purpura (immune thrombocytopenia), myasthenia gravis, pemphigus vulgaris, primary biliary cirrhosis, Sjögren syndrome, Bechterew’s disease (spondylitis ankylopoëtica), Wegener granulomatosis, Lichen ruber planus, Alopecia universalis, Behçet’s disease, Neuromyotonia, Sarcoidosis (Boeck-Schaumann disease), Scleroderma
  • Amyotrophic Lateral Sclerosis (ALS), Polycystic ovary syndrome (PCOS), Sleep apnea, male infertility, transient global amnesia, Obesity hypoventilation syndrome (Pickwickian syndrome),  Toxemia of pregnancy (preeclampsia), gestational diabetes, coronary bypass surgery, paranoid schizophrenia, panic disorder, gingivitis, hyperactivity, ADHD, autism, chronic fatigue syndrome
  • Wound healing after surgery, intensive care, child birth, breastfeeding
  • Athletic performance (not a medical condition): football, wrestling, kayaking, canoe?, marathon running, gymnastics, triathlon, weight lifting
  • Epilepsy
  • Cancer – Paleomedicina’s approach has mixed results for treating cancer relative to other conditions, as discussed in Clemens’ presentation.

Normal people have been using ‘zerocarb’ and ‘carnivore’ diets to lose weight and treat various health conditions.  Shawn Baker, an orthopedic surgeon, maintains the website Meat Heals for anecdotal stories of carnivore success stories.  Mikhaila Peterson and her (famous) father Jordan Peterson have used diet to treat rather severe depression (see their first TVO interview on depression pre-diet and their second interview post-diet; you can also see obvious weight loss).

Ketogenic diets have been proposed as treatments for:

  • Epilepsy – The Hollywood writer/producer Jim Abrahams came across the ketogenic diet while trying to find an effective treatment for his son’s epilepsy.  Abrahams founded the Charlie Foundation, whose work has re-ignited research interest in ketogenic diets as a treatment for epilepsy.
  • Cancer.  See Thomas Seyfried’s lectures on his theory of cancer as a metabolic disease (example) and the work of the Epigenix Foundation (Youtube channel with conference presentations).
  • PCOS (example).

DISCLAIMER:

  • I am not advocating any specific dietary treatments for any particular condition.  Some of the diets mentioned in this post can be dangerous, e.g. low blood sugar from “zero”-carb diets can lead to fainting when driving or operating machinery.  They may not work.  The diets may harm you.  Vegans have been known to distort the truth as part of their evangelism.  Particular treatments could be highly inappropriate for you.
  • Please do not discontinue psychiatric drug or antidepressants without medical help.  For many psychiatric drugs, the withdrawal effects can be severe and dangerous.  Take a look at Peter Breggin’s Youtube video on withdrawal and Laura Delano’s website.
  • Please don’t ignore conventional medical treatments.  A good portion of mainstream medicine is based on sound science and could be of great benefit to you.  You should probably research them.

The influence of money

In the US, there are many industry groups that promote the interests of its professionals and that particular group’s sponsors.  The American Psychiatric Association receives much of its funding from pharmaceutical companies.  Not surprisingly, the APA website states that schizophrenia is a “chronic” disease (archive.orglive version) and promotes pharmaceutical interventions while ignoring other effective treatments.  The consensus standard of care among psychiatrists is lifelong medication.  Ironically, the standard of care likely causes more harm than good as developing countries (with low rates of pharmaceutical drug usage) have better outcomes than developed countries.

The pharmaceutical industry also funds patient advocacy groups such as NAMI (National Alliance on Mental Health), which in turn often advocate for the industry’s interests rather than patients.  Along with promoting drugs, NAMI promotes the violation of patient rights as it wants to make it easier to commit the mentally ill into an institution where they can be coerced into taking psychiatric drugs.  The late Loren Mosher has heavily criticized the APA in his resignation letter and other writings.

To be fair, money doesn’t explain everything.  Some elements of erroneous scientific consensus can’t be explained by money.  For example, water fluoridation continues to be supported even though most dentists would agree that topical fluoride makes more sense than ingested fluoride (controlled dosing, lower theoretical risk of fluorosis, etc.).  Water fluoridation doesn’t seem particularly profitable for doctors or corporations:

  • Dentists only sell topical fluoride treatments to their patients but typically don’t sell ingested fluoride therapies such as fluoride pills.
  • Toothpaste manufacturers make their money on topical fluoride.
  • The polluting industries that sell their toxic industrial waste for water fluoridation don’t seem to benefit much from it.

Water fluoridation’s continued existence seems to be an artifact of a previous generation of dentistry that embraced fluoridation, presumably because those dentists wanted the profession to be respectable and to be seen as embracing “science”.

How erroneous ideas become consensus

Money also doesn’t fully explain the rise of the diet-heart hypothesis, which is the idea that eating saturated fat leads to higher cholesterol which leads to heart disease.  The majority of randomized controlled trials on humans have invalidated that hypothesis, though there are outliers on both ends.  See this article on the Minnesota Coronary Experiment for a refutation of the diet-heart hypothesis.  The medical community didn’t seem to have much to gain from the erroneous theory.  The only obvious benefactor was Ancel Keys, an original champion of the theory.  Keys was one of the researchers behind the Minnesota Coronary Experiment.  He chose to quietly bury and ignore its results.  In 1975, Keys and his wife continued to promote the theory via the publication of their book How to Eat Well and Stay Well the Mediterranean Way.

The current medical consensus ignores the empirical data on the diet-heart hypothesis by promoting the idea that meta-analyses of randomized controlled trials (RCTs) are superior to RCTs.  The problem with these meta-analyses is that authors frequently omit RCTs that contradict their hypotheses.  As well, the authors of meta-analyses play statistical games to make the data support their hypotheses.  So, this leads to a situation where meta-analyses from different authors can come to completely opposite conclusions on the same topic, such as this meta-review that supports the diet-heart hypothesis.

Mainstream medicine also loves to promote the idea that peer-reviewed journals should be authoritative sources.  While there is some value in peer review, sometimes peer-reviewed journals are quite hostile to RCT results that challenge existing dogma.  Journal editors can simply decide not to publish a particular article, silencing any challenges to mainstream consensus.  Consensus is influenced more by politics than science.  This was particularly true for stomach ulcers, where scientists ignored the evidence that bacteria were the cause.  The research on stomach ulcers was particularly inconvenient for the medical industry as one treatment, Tagamet (cimetidine), was becoming the pharma industry’s first blockbuster drug.  Surgeons and psychiatrists also profited from treating stomach ulcers.

Similarly, there is an economic incentive for mainstream medicine to support the diet-heart hypothesis because pharma companies make a lot of money from selling cholesterol-lowering drugs (statins).  These drugs are controversial because lowering cholesterol doesn’t lead to lower risk of heart disease while statins increase the risk of diabetes.  AstraZeneca, the maker of the statin Crestor (rosuvastatin), funded the JUPITER randomized clinical trials to promote the use of statins in the broader population.  Paul Ridker published a paper on the trial results that were favourable to the company paying him: “JUPITER not only confirms that men and women with elevated hsCRP and low LDLC are at substantial vascular risk, it demonstrates that statin therapy can cut that risk by half”.  However, a response paper to the trial results rips apart Ridker’s statistical charlatanism and explains the ways in which the results (may) have been intentionally biased in AstraZeneca’s favour.  The paper provides a lot of background as to how one would go about rigging the results of a randomized controlled trial.

FDA approval

Unfortunately, the FDA approval process can be gamed in various ways.  The most obvious issue is that the FDA does not dictate trial design.  So, where options exist, a pharmaceutical company has an incentive to choose the option that maximizes the chance of approval.  For example, a promising statin drug can be primarily measured based on its effect on cholesterol (a dubious biomarker), mortality, or some combination of mortality and heart attack (myocardial infarction).  Pharma companies take advantage of these options.  There are many subtle ways in which the science can be unreasonably biased and the FDA does not do a good job in policing this behaviour.

These loopholes in the drug approval process could suggest that medical innovation may not entirely be necessary for the drug industry to make money.  While scientific risk plays a role, politics may play an equally important role.  Over the past few decades, there has been a very mild increase in the number of drugs approved per year (Google Sheet).

However, I don’t claim to have a crystal ball here.

The historical trends

Bad science and bad medicine has been going on for at least several decades.  That part hasn’t changed much.  This is especially evident in the shameful history of psychiatry, where surgeons have intentionally inflicted brain damage upon patients with their ‘psychosurgeries’ or lobotomies.  What’s changed is that the psychiatry profession has become far more respectable.  Gone are the days of bizarre theories such as Sigmund Freud’s Oedipus complex, a child’s feelings of sexual desire for his or her opposite-sex parent and jealousy and anger toward his or her same-sex parent.  Nowadays, psychiatry dresses itself up in things that seem scientific: pharmaceutical drugs, genetics, and epidemiology.  Autism (a useless scientific concept) is being taken seriously while the ideology of science worship promotes the “science” behind psychiatric drugs.  There is very little dialogue over whether psychiatry has helped patients more than it has harmed them.

Another major change is the social acceptance of giving street drugs to developing children (e.g. Ritalin, Xanax) and greater social acceptance of taking drugs for made-up medical problems (e.g. statins to treat “high” cholesterol).  While Ritalin and Xanax are clearly recreational drugs that have led to substance abuse problems, they are not seen as street drugs in a medical context.  While the active ingredients are the same, psychiatric drugs are viewed as a ‘treatment’ from licensed and trained medical professionals rather than addictive substances from drug dealers.  These drugs have been prescribed to children before the effects of such drugs on a developing child’s brain were understood.  We are also more accepting of the medicalization of normal problems such as depression and anxiety.  While there are people with severe issues with depression or anxiety, drugs are given to people who don’t have problems that require medical treatment.  Social norms have created an environment that has been more charitable to pharma companies’ profits.

American healthcare is especially broken

Recall from the very beginning of this post that healthcare inflation in the US is noticeably higher than other countries:

The key factor is the very low amount of single-payor healthcare in the US.  If you look at the cost of the Epi-pen, the American system pays more than Canada’s free market system while Canada’s system is slightly more expensive than single-payor systems.  Medical costs skyrocket because employers are forced to provide healthcare coverage to their employees at almost any price.

Less importantly, American doctors are allowed to profit from selling certain treatments to their patients:

  • Kidney doctors are allowed to profit from dialysis clinics.  This explains why in-home nocturnal dialysis is rare in the US relative to similar countries, even though it allows patients to be employed and leads to better health.
  • Audiologists are allowed to sell hearing aids to their patients.
  • Cancer doctors (oncologists) are allowed to profit from the sale of cancer drugs to their patients.  They continue to push patients towards chemotherapy even though many patients (e.g. John McCain) ultimately decide to stop treatment because their quality of life is so abysmal.

Other countries tend to have stronger laws to prevent such conflicts of interests between doctors and their patients.

Overall, America has a unique cultural and ideological landscape that has allowed healthcare costs to increase at a high rate.

Will the trend reverse?

I must admit that predicting the future is hard.  However, there is very little recognition of the major factors that have contributed to rising healthcare costs:

  1. Bad science.
  2. The tendency of medical professionals to ignore effective treatments that don’t fit into their ideology.  Doctors treating epileptic children had largely passed over the ketogenic diet from the 1920s.  (See this historical overview of the ketogenic diet as well as this one.)
  3. The tendency of medical professionals to promote unnecessary or harmful treatments.
  4. Conflicts of interests between doctors and patients.
  5. The dubious value of many popular drugs such as statins and antidepressants.
  6. Outdated and bad advice from doctors.  The WHI dietary modification trial found that trying to get women onto a low-fat diet did not help them sustainably lose weight, avoid cancer, or avoid diabetes.  This was a very expensive trial with a large sample size (thousands of women) and spanned several years.  Despite the evidence, doctors continue to give bad nutritional advice to their patients.

Conversely, mainstream ideologies often accept and entrench bad science.  The mainstream view has a dichotomy between medical/scientific authorities and quacks.  Medical authorities are seen as always engaging in good science, while beliefs outside of the mainstream wisdom are branded as quackery.  Some people refuse to question their ideology, even when there is a lot at stake.  Some people with epilepsy believe in what doctors say about the ketogenic diet (or other dietary approaches) and don’t bother to try it.

Overall, I don’t see much desire for change.  Jim Abrahams made a 1997 TV movie starring Meryl Streep to raise awareness of the ketogenic diet and, to a lesser extent, to raise awareness of the unethical behaviours of doctors that promote unproven therapies (e.g. surgery) while failing to tell patients about all of their options.  Because Abrahams was desperately trying to find an effective treatment for his epileptic son Charlie, he was not happy that doctors did not tell him about the ketogenic diet.  While Abrahams has been fairly successful in raising awareness of the ketogenic diet as a potential treatment option, he never stirred any outrage over institutionalized malpractice.  Very few people seem particularly interested in bad medicine or rising healthcare costs.  Not only is bad medicine poorly understood- many people don’t want to understand it.  They don’t want to believe that doctors are human beings that engage in social politics and unethical behaviour just like other human beings.

You could compare and contrast healthcare to defense contractors, which is quite a corrupt world that regularly produces weapons that don’t win wars.  While there has been greater awareness as to how corrupt the defense industry is with news stories about the F-35, a Time magazine cover, and Hollywood movies such as Pentagon Wars (1998)…. the defense industry has largely remained as corrupt as ever.  Relative to the defense industry, change in medicine seems far less likely.

Stocks that may benefit if the secular trend continues

Pharma

In the pharma space, the companies researching active placebos may be interesting.  An active placebo is a drug that has noticeable side effects that can cause a patient to believe that they are in the experimental group rather than the placebo group.  Active placebos may be particularly useful in “treating” conditions that are known to respond to placebo effects, e.g. many of the fictitious conditions invented by psychiatrists, depression, pain, migraines, etc.  There is already controversy over the FDA allowing antidepressants to be on the market as they may have zero medical benefit aside from the placebo effect.  Worse yet, antidepressants tend to have side effects (e.g. suicide) and many patients have great difficulty discontinuing their use due to withdrawal symptoms.  Given that the FDA still allows these drugs to be sold, it seems likely that the FDA will approve active placebos going forward.

Not only do active placebos allow patients to experience a stronger placebo effect, they can also unblind a study to the researchers measuring a condition.  Whenever these measurements are subjective, the unblinding can unduly influence the clinical trial results in favour of drug approval.

Supernus Pharmaceuticals (SUPN) seems to have the right idea.  Their extended-release technology allows them to repackage generic drugs (where there is no R&D risk from inefficacy or poor safety) and sell them for a massive premium.  Many of their current drugs and pipeline drugs target conditions where the active placebo factor may play a role.

I’m less excited about biomarker drugs like statins (many of which are blockbuster drugs), which have an effect on a theoretical biomarker but may actually cause more harm than good.  My concern is not about these drugs being pulled from the market.  Media awareness about the thaliomide scandal largely wasn’t responsible for that drug being pulled from the market; there was a lack of media coverage about the thaliomide scandal so I wouldn’t count on media coverage leading to drugs being pulled from the market.  Rather, biomarker drugs have higher R&D risk when they are developed.  Often, medical theories turn out to be completely wrong and a pipeline drug turns out to have the complete opposite effect on the human body.  As well, drug candidates may turn out to have overly negative side effects.  These risks don’t exist for drugs that have already been tried on humans.  This is why it was a brilliant move for Celgene to bring thaliomide back and turn it into a blockbuster drug- there was less R&D risk as the safety profile of the drug was well understood.

Lastly, there is a place for drugs that actually create value for society.  Gilead Pharmaceuticals has delivered generous shareholder returns while developing drugs for managing HIV/AIDS and acquiring the rights for a Hepatitis C cure (*sofosbuvir/Sovaldi is effective in curing most but not all Hep C patients).  Ironically, Gilead had received mainstream criticism over the price of its Hep C cure.  No similar backlash exists for the extreme prices of extended-release generics such as Duexis, made by Horizon Pharma (HZNP).  Mainstream criticism is often misguided.

Health insurers

Greater healthcare spending would be an obvious tailwind to health insurers, particularly in the US where healthcare inflation is the highest.  See my post on US Health insurers.

Closing remarks

You might be quite uncomfortable with the idea that doctors engage in bad medicine that is not supported by scientific or empirical evidence.  However, the stock market doesn’t care about your biases, prejudices, or ideologies.  This post is not an anti-capitalist diatribe against Big Pharma.  It is a post about Big Profit.  The medical establishment is setup so that doctors and private companies can make more money by ignoring the principles of good science while convincing the public that they practice science.  Many investors aren’t paying attention to and don’t understand the healthcare sector, where the trend towards greater profitability will likely continue.

 

*Disclosure:  Long UNH and ESRX call options, CNC.  I do not own SUPN or GILD.  I am short HZNP.  I am short various dodgy development-stage biotech companies.

 

Links

The Wikipedia page on Ben Goldacre book Bad Pharma offers a summation of his views on those topics.  He has also written Bad Science.

The story of bacteria causing stomach ulcers: the medical establishment ignored the scientific evidence for a decade before accepting bacteria as the cause of stomach ulcers.  The New York Times also has an article.

 

US Health insurers

US healthcare is worse than a free market system

The dangers of our own beliefs and ideologies

Psychiatry is mostly a scam… and why it has been good for drug manufacturers

5 thoughts on “Healthcare inflation is driven by bad medicine

  1. So many words, so few facts…
    “what I’ve found is that many aspects of modern medicine aren’t supported by rigorous scientific evidence.”
    But you think that the idea that “fake” chronic diseases is? And that your references of diet-related absence of disease is?
    I think this is an ignorant article poorly researched (or perhaps only researched one-sidedly). If you plan on investing your money this way, good luck, you’ll need it.

    • So… the Minnesota Coronary Experiment involving thousands of institutionalized people? Not a fact. “Chronic” diseases reversing in some patients? Not a fact.

      My portfolio? Going to zero, obviously. 😉

  2. Pingback: A model portfolio of large cap stocks – Glenn Chan's Random Notes on Investing

  3. I watched the entire Thomas Seyfried’s lectures. I’m actually quite skeptical about cancer as a metabolic disease, and the entire Warburg Theory. For example, why does ketogenic diet only show slight result for head&neck cancer and not others. As well, just because most mitochondria is damaged in cancer does not mean that damaged mitochondria causes cancer. I think the guy is cherry picking some of the data for his presentation (most of my medical knowledge is self taught…so to be truthful I don’t know either)

    The fact that NIH does not endorse the idea should also shed some skepticism on the entire diet approach.

    • Where are the results for keto and head&neck cancers available?

      The fact that NIH does not endorse the idea should also shed some skepticism on the entire diet approach.

      Appeal to authority is not science. Let’s place greater emphasis on good science and less weight on politics. Unfortunately, there aren’t RCTs for diets like the paleo ketogenic diet on cancer (in humans, not rats or dogs) so we’re at the stage of anecdotal evidence at the moment. The Epigenix Foundation is in the process of testing dogs.

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