Mad Dog 21/21: If It Ducks Like A Quack, Part 2
July 27, 2015 Hesh Wiener
A century ago, Thomas J. Watson’s IBM prohibited employees from drinking alcohol, even in off hours. Yet IBM was hardly alone in its penchant for probity. In 1920, America amended its Constitution to usher in Prohibition. But there was an unintended consequence: organized crime, fueled by the booze biz, metathesized. Times have changed dramatically, and now it is easier to buy dope in Denver than insulin in Ithaca. And IBM, yclept Dr. Watson, an Aesculapian bean-counter enlightened by AI, is injecting itself into medicine. As the temperance folk asked after banishing demon rum, “What could go wrong?”
IBM’s Watson brand of computing services has teamed up with top-notch partners, such as New York’s Memorial Sloane Kettering Hospital, a ganglion of cancer treatment, and WellPoint/Anthem, the Indianapolis medical insurance behemoth. IBM reaches medical patients indirectly, through services that guide medical practitioners and medical research organizations, advice that shapes decisions about therapies, and analyses that inform the companies providing medical insurance benefits. This last role can be a political hot potato, particularly if tabloid television resurrects the old headline-grabbing siren Sarah Palin and the Death Panels.
Big Blue believes it can provide superior advice and guidance to various specialists, including oncologists, extending the lives of the patients with severe illnesses. Watson may also help doctors and researchers evaluate treatment regimens that might otherwise not be put into practice. On the other hand, Watson might block some treatments if it believes they are not cost-effective. Thus far this last issue has not led to any public criticism of Watson and its clientele. But these are early days, and Watson’s advice is presumably very carefully evaluated and also made available only to the often wealthy, likely sophisticated and probably desperate patents treated by Sloane Kettering: Death styles of the rich and terminal.
So far, things seem to be heading in the right direction. But that was the way it went with Prohibition, too. At first, there was public support for the ban on manufacturing, transporting, and selling alcoholic beverages, particularly among politicians who discovered that the Dry voters substantially outnumbered their Wet adversaries. If one person can be said to have led the anti-alcohol movement, it was Wayne Wheeler. Wheeler was quite famous during the run-up to and inception of Prohibition. But by the time Prohibition ended in 1933 Wheeler had died and his name no longer carried weight.
As it turned out, even during the early days of the American experiment there were signs that the unforeseen impact of the changed laws would be quite dramatic.
For instance, before prohibition about 40 percent of the Federal tax intake came from duties on alcohol. When that disappeared, Uncle Sam had to find other ways to pay its bills, and the method was the imposition of federal income tax, which formerly simply didn’t exist. And even that didn’t work out entirely as planned, because a decade after Prohibition went into effect the American economy collapsed into the Great Depression, and with it the flow of money from income tax on which the U.S. government depended. America stumbled though the situation, amended its Constitution to unwind Prohibition and tried, without achieving sufficiently good results until World War II broke out, to get its economy back on track. Basically, America had tossed out its working, if creaking, revenue machine before figuring out how to properly assemble a new one.
IBM, like America during the 1920s and 1930s, seems to be unwinding its legacy computer business a lot faster than it can create a new one. At the moment, the company is scrambling to replace the portions of its business that have been run into a ditch. So far, the results have been promising but not at all satisfactory.
With its legacy operations in financial decline, IBM is getting into the medical business as revenues of care providers, facilities operators, and pharmaceutical companies are rising. In America, this evolution has been stimulated in part by the implementation of Obamacare, which is making advanced medical treatment more affordable for more people than ever before. Another source of growth in the med biz has been the aging of Baby Boomers. Thanks to Medicare and advances in various health sciences, Americans in their mid-sixties are able to extend their lives in ways their parents could not. A third factor adding to both longevity and the greater incidence of certain medical conditions is the trend toward richer and more varied diets, which more Americans can apparently afford. As a byproduct, type 2 diabetes has become more prevalent. So is gout. And so, too, is the incidence of systemic metabolic irregularities, such as high cholesterol and hypertension, which are exacerbated by age and gluttony.
Companies that serve the affluent or amply insured elderly are having a field day. Some of the pharmaceutical companies, for example, have found ways to exploit opportunities by compounding the yields of their research by the aggressive use of intellectual property law, a strategy IBM can recognize and admire. Patent protection for vital medications gives pharma companies considerable pricing power. Moreover, the current American business atmosphere makes it easy for big pharma to dodge the competitive process until medicines become generic, which can take several years.
The pharmaceutical companies have also found ways to extend protections of their profitable products by tying them to delivery systems. Prominently, inhaled medications for COPD have remained protected even as the patent protection for primary ingredients has lapsed. The mechanism for extending the power of the producer is the introduction of improved inhalers and related delivery devices combined with the adaptation of new formulations of aging products for use with the delivery devices. The result has been therapeutically beneficial for patients, but for the inadequately insured, this progress has come at a debilitating financial cost. It is not unusual for COPD sufferers to require medications that, if obtained at retail prices in a pharmacy, might cost $10, $20 or $30 per day. For people with moderate incomes, that is simply not affordable. The upshot is lots of opportunity for the medical profession and its institutions, along with suppliers including IBM. These entities benefit from the sale of their promising if esoteric offerings, but there little comfort for smokers, former smokers, asthmatics, miners, and many others who have damaged lungs unless they can afford the best available medications.
It’s no wonder that some people are willing to search out alternative sources of costly medications. Often these sources are Internet pharmacies that sell versions of pharmaceuticals that are very costly to Americans but more affordable for patients in Canada, Europe, Asia, or Africa. The situation emerges on the websites of support groups as members with various conditions exchange advice, information, and rumors about their experiences shopping for meds.
But not all the sellers of medicine to the self-medicating and others who, even with access to prescribing physicians, find medicines uncomfortably costly are offshore. Even relatively inexpensive medicines, such as common antibiotics, are readily available to those who do a little creative web surfing. For example, amoxicillin is sold for the treatment of fish with gram positive bacterial infections; it is the same antibiotic in the same dosages sold via other channels to people. The pills may cost about the same online as they do at the corner pharmacy, but the online seller doesn’t require a doctor’s prescription. For gram negative bacteria, the antibiotic ciprofloxacin is probably the most popular fish medicine taken by humans. Sellers of these medicines include online veterinarian supply companies and the ever-popular drug dealer, Amazon.
Among those who are inclined to buy fish antibiotics over the Internet are survivalists and families too poor to afford a doctor when somebody in the household coughs. This latter group may grow to include IBM retirees whose medical benefits have been trimmed. Those ex-IBMers may be among the beneficiaries of openly available apps that let Watson play doctor.
Even middle class Americans might be driven to surf the web for medicines if they suffer from conditions that require the regular or frequent use of medicines that are costly in the USA but inexpensive elsewhere.
Colchicine is just one of dozens of pharmaceuticals sold to Americans (and Europeans, too) who shop to locate low-cost (compared to American retail pricing) suppliers and beat the higher prices charged by legitimate pharmacies in the USA. The offshore suppliers take payments from Americans by check, credit card or wire. They dispatch the medicines through the US postal system and also by using other common carriers.
For the buyers of drugs sold online, the situation entails a variety of risks. First, the buyers must rely on the competence and integrity of the sellers. They must pay in advance and if there is a problem, they could lose their money. Even when the seller ships the medications as ordered, the goods have to cross international borders to be delivered. That can be an additional hurdle.
If American customs officers decide to inspect the buyer’s parcel as it comes in from Canada, Mexico, or elsewhere, they might decide the shipment lies outside the law. In that case, customs officers might confiscate the shipment. However, in practice, the authorities often look the other way. The de facto US policy is to allow the shipment to proceed when the incoming drugs are supplied in amounts that would be consumed within 90 days, as long as the shipment doesn’t include any controlled substances, such as opiates.
There are a number of reasons for tolerance on the part of the authorities. First, the customs officials and FDA officers who might be charged with controlling the movement of medicines into the USA are overloaded.
Consequently, they have to pick and choose their targets. In the case of medicines coming in by mail or via a private carrier, the authorities are perpetually overwhelmed by the sheer volume of shipments to be inspected. Common sense would indicate that small parcels are unlikely to contain significant amounts of drugs whether they are legal for importation or not. So, in order to provide some oversight, customs officers at ports of entry randomly select and open a small percentage of the packages flowing into the US. If they spot a violation, they address it; somebody will lose their medicines.
In addition to colchicine, a variety of other medicines are routinely imported by Americans unable or unwilling to pay the American price. These include insulin and other drugs for diabetics; remedies for erectile dysfunction including generic versions of Viagra, Cialis and Levitra; and the several families of inhalation meds used to treat COPD and emphysema. All of these medicines and many more are available via the Internet for a fraction of the price charged by American pharmacies. The imported versions of the drugs might cost 20 percent of the USA price or even substantially less.
Here is an example: Colchicine from Walgreens costs $240 for 100 capsules of a generic version. That’s a great price. The same drug is sold by CVS for $439. A Canadian web pharmacy will sell 100 pills for $65; the seller doesn’t specify the country of origin for this pharmaceutical. Between the two lies another web pharmacy that will sell Turkish colchicine for about $100.
The Internet pharmacy game seems reasonable if a bit risky in cases where the buyer orders the exact medicine a doctor prescribes as if it was to be purchased at a pharmacy in the USA. But in fact that is only a description of part of the market. There are quite a few buyers who are self-medicating and buy pharmaceuticals without the advice or consent of a physician. For some, the reason is the same one that drives supervised buyers to the Internet: cost. But there are also lots of people who import medicines that a doctor might not readily prescribe. In body building circles, for example, there are plenty of steroid takers who shop the world for muscle-boosting pharmaceuticals. They may represent themselves as experimenters and shop for medicines at companies that say they are in business to supply laboratories, although it is hard to say these firms are spending much time investigating their customers.
There is even a culture of deceit in the ranks of diabetics. People unable to afford insulin at retail may find it for a lot less than the US price at offshore suppliers. In some cases diabetics will dream up a common cover story, for instance that the buyer wants the medicine for a cat. But insulin can be very expensive and the consequences for a severe diabetic of failure to medicate or to medicate incorrectly in an effort to save money are huge. So, if customs inspectors are not totally diligent when it comes to the importation of insulin, their slippage might turn out to be merciful.
A less than rigorous attitude may also govern some of the customs practices applied to packages containing erectile dysfunction drugs. These medicines may be protected by patent laws in the USA, but in other countries the protection may have long since lapsed, or may never have existed in the first place. Based on the prominence of ED treatments advertised in spam, it’s obvious that a portion of the market consists of people taking the stuff for recreational purposes who simply don’t want to spend $20 or $30 a pill at the corner pharmacy when the same pharmaceutical is available online for $2 or $3 a dose or less. There is little sympathy for these shoppers at the borders or anywhere else for that matter. Yet it is hard for the authorities to guess whether a buyer of ED pills from an Internet pharmacy is a wildly overambitious party animal or somebody dealing with a disturbing and disabling consequence of treatment for prostate cancer.
A similar situation exists in the insulin market, where impecunious diabetics without adequate insurance or who have fallen into the “donut hole” portion of their Medicare coverage. Unlike ED drugs, which are medically optional, unlike colchicine, which for most people who take it is a way to deal with a recurring, acute condition, insulin is, for severe diabetics, a life-sustaining pharmaceutical that must be taken daily or more often. Internet shoppers may adopt a cover story about a diabetic cat to gain access to veterinary supplies of the protein. Or they may find suppliers whose geographical and legal situation places them in a zone that is for all practical purposes outside the controls that prevail in the US and elsewhere. Or they may find a middle ground, such as a Canadian supplier that will use an American prescription to build a legal foundation for a mail-order sale of insulin.
Insulin is pretty much a requirement for persons suffering from type 1 diabetes and similarly necessary for more than 30 percent of those with type 2 diabetes.
While recent pharmaceutical therapies for type 2 diabetics may be reducing the number of persons who must regularly inject with expensive insulin, some of the orally administered medicines used for type 2 therapy, such as the increasingly popular DPP-4 inhibitors, can be very costly, too, running about upwards of $400 a month for those without insurance coverage. On the Internet, the most popular DPP-4 inhibitors are readily available for about a tenth of the US list price charged by American pharmacies. The financial situation is less dramatic in other locales, such as in Canada and across Europe, where national health systems have wrestled with big pharma suppliers to bring down the cost of medication purchased from a pharmacy.
As IBM’s Watson services reach more people, which by every indication they soon will, computer-based medical diagnostic services may take on a new role, quite a different one than the support for elite cancer specialists at Sloane Kettering and other prestigious health care centers. It might turn out that many people who cannot afford the financial cost and time required to visit a doctor will try to address their health issues with the help of open Watson apps just as they now get medical advice from free websites. And if it turns out that there is a viable business opportunity in the field of online medical diagnosis, chances are good that some entrepreneurs will jump in. IBM ought to be able to maintain its leadership position, but in technology markets it is sometimes the second or third of fourth gifted entrant that emerges as the ultimate winner.
Whether there is one player or several in the game, chances are that there will be many people who benefit from online health advice . . . and others who don’t. No matter how much IBM might want Dr. Watson to take the high road, the company can only influence and not control the public. There could well be a big increase in the number of cyberchondriacs. Consequently, Dr. Watson might end up right in the middle of a maelstrom.
This will probably work out just fine for IBM and its shareholders if the opportunities that seem to be open to Watson are large and lucrative. But it is quite possible that the unwanted consequences of Watson’s technology and the simultaneous withdrawal of IBM from legacy operations will damage Big Blue the way the well-intentioned but ill-conceived scheme of Prohibition made quite a mess of America’s finances and social fabric. Whatever she is after, it’s pretty clear that Ginny Rometty doesn’t want to be the Wayne Wheeler of IBM history.