Health Care's Juicero Problem

Bad news: if you were still hoping to get one of the $400 juicers from Juicero, you may be out of luck.  Juicero announced that they were suspending sales while they seek an acquirer.  They'd already dropped the juicer's price from its initial $700 earlier this year and had hoped to find ways to drop it further, but ran out of time.

I keep thinking: if they'd been a health care company, they not only might still be in business but also would probably be looking to raise their prices.

Juicero once was the darling of investors.  It raised $120 million from a variety of respected funding sources, including Kleiner Perkins, Alphabet and Campbell Soup.  They weren't a juice company, or even an appliance company.  They were a technology company!  They had an Internet-of-Things product!  They had an ongoing base of customers!

Juicero's founder, Doug Evans, saw himself as a visionary, telling Recode: "I'm going to do what Steve Jobs did.  I'm going to take the mainframe computer and create a personal computer.  I'm going to take a mainframe juice press and create a personal juice press."

The market seemed promising.  All those people willing to pay $5 for a cup of Starbucks or $200 for their own Keurig would certainly see the value in their own juicer, especially with Juicero's own, IoT-connected Produce Packs.  Indeed, Juicero claimed to have sold over a million of the Produce Packs alone.

The ridicule started almost as soon as the hype.  $700 -- even $400 -- for a juicer?  Even for Silicon Valley, that was a bit much.  Mr. Evans was replaced as CEO last fall, but their woes continued.  The negative publicity probably reached its nadir in April, when Bloomberg reported people could produce almost as much juice almost as fast just by squeezing the Produce Packs directly.

Moral of the story: if you want to introduce products that have minimal incremental value but at substantially higher prices, you're better off sticking to health care.

Take everyone's favorite target, prescription drugs.  The pharmaceutical industry has learned how to play the system for higher prices, and profits.  They can take existing drugs and tweak them to justify higher prices, or even buy rights to existing drugs and jack up the price, as we saw with Daraprim ($13.50 per tablet to $750) and EpiPens ($57 to over $500).  Former Turing Pharmaceuticals AG CEO Martin Shkreli, who raised the Daraprim price, may be hated for his actions but he's not alone.

Consider this: studies suggest that only about 10% of new drugs are actually clinically superior to existing treatment options.

As Donald W. Light charged in Health Affairs, "Flooding the market with hundreds of minor variations on existing drugs and technically innovative but clinically inconsequential new drugs, appears to be the de facto hidden business model of drug companies."

As with prescription drugs, we regulate medical devices looking for effectiveness but not cost effectiveness -- and we don't even do a very good job evaluating effectiveness in many cases, according to a recent JAMA study.

And, as Elisabeth Rosenthal pointed out in her remarkable An American Sickness, medical device manufacturers have figured out how to game FDA regulation by claiming products were "substantially equivalent" to existing devices; "The surprising result is that today there is generally far less careful scrutiny of new devices than new drugs."

Take robotic surgery, hailed as a technological breakthrough that was the future of surgery.  A robotic surgical system, such as da Vinci, can cost as much as $2 million, but, so far, evidence that they produce better outcomes is woefully scarce.

As Dr. John Santa, medical director at Consumer Reports Health said, "This is a technology that is costing the heathcare system hundreds of millions of dollars and has been marketed as a miracle -- and it's not."

It is, of course, much more expensive.  

Proton beam therapy?  It's one of the latest things in cancer treatment, an alternative to more traditional forms of radiation therapy, and is predicted to be a $3b market within ten years.  The units can easily cost over $100 million to buy and install, cost patients significantly much more than other alternatives, yet -- guess what? -- not produce measurably better results.

The number of proton beam centers is growing rapidly, of course -- especially in the U.S.

But, in our health care system, with its crazy-quilt system of financing and delivering care, we don't need new drugs or fancy new devices to cost us more.  We pay more for pretty much everything than pretty much everyone else.

Last year Vox used 11 charts to illustrate how much more we pay for drugs, imaging, hospital days, child birth, and surgeries than other countries.  Their conclusion, which echoes conclusions reached by numerous other analyses: "Americans spend more for health care largely because of the prices."

We not only don't get a nifty new juicer from all of our health care spending, we don't even get better health outcomes from it   

Health care's "best" Juicero example, though, may be electronic health records (EHRs).  Most agree on their theoretical value to improve care, increase efficiency, and even reduce costs.  But after tens of billions of federal spending and probably at least an equal amount of private spending, we have products that, for the most part, frustrate users, add time to documentation, and don't "talk" to each other or easily lend themselves to the hoped-for Big Data analyses.

Many physicians might, on a bad day, be willing to trade their EHR for a Juicero.

Jonathon S. Skinner, a professor of economics at Dartmouth, pointed out the problem several years ago: "In every industry but one, technology makes things better and cheaper.  Why is it that innovation increases the cost of health care?"

Essentially, he believes, our health care system pays for too many things that are of too little value, because, "unlike many countries, the U.S. pays for nearly any technology (and at nearly any price) without regard to economic value."

So we can make fun of Juicero all we want, but when it comes to overpriced, under-performing services and devices: health care system, heal thyself first.