March 5, 2008

Pricing of Placebo Affects Efficacy

An article from JAMA, saying that patients believed $2.50 placebos were more effective than $0.10 ones.

The question isn't why does this happen.  The question is, why, in a free market, does the placebo have two different prices?

This is the wine story, redux. In that story, people thought that the more expensive wine tasted better than the cheaper one, even though it was actually the same exact wine. The important part of that story was that this wasn't an error: the brain actually perceived the wine as tastier.

The solution to this apparent human failing is that price itself is a part of taste, not just a marker of taste. A Hermes bag is more enjoyable than a knockoff, no matter how good the knockoff is. Ask anybody who has one.

What the JAMA article tells us is that the placebo effect can be augmented, fine tuned-- but this is the key-- with factors which are themselves not placebos.

The placebo pill itself-- sugar-- presumably has no effect; it is endowed with power by the doctor or researcher that the patient accepts as valid. But in this case, these placebos carry additional information that does not rely on the doctor at all-- price. The patient doesn't have to rely on the doctor's suggestion, he now has an externally valid guide to intuit a drug's effectiveness.

This works only if price is a reflection of value-- be it taste or efficacy. The problem is that, as I've previously written, drug prices are completely disconnected from their relative value, both against other kinds of medications (Nexium vs. tamoxifen) and of drugs within their own class (Zoloft vs. Prozac.)

The experiment in differently priced placebos is at the heart of what's wrong with our misguided obsession with "Big Pharma drives up prices." The public, in essence, cannot possibly fathom that a free market economy would allow, or generate, a pricing scheme that was uncoupled from quality; that allows the same object to carry different prices.  Nor that a doctor would not see through such a phenomenon, if it existed.

The public doesn't yet know that drug prices and values are in no way connected, at all. Because it's not a free market.

And so, we erroneously conclude that meds are too expensive. They're not. They are artificially priced. The average person doesn't know that you don't have to use Lipitor, especially at $7 a pill. (BTW: this is why number needed to treat is such an important concept.)  They still believe the doctor has made these value distinctions. But doctors have no incentive at all to make them. They don't have to worry about the money.

People believe that healthcare, and especially pharmaceuticals, are too important to leave to the free market.  But there are unintended consequences of slapping aside the Invisible Hand.  You may not see it slap you back.


Nice to have you back, but ... (Below threshold)

March 6, 2008 8:51 AM | Posted by Steve : | Reply

Nice to have you back, but I think you missed the real story in this month's issue of JAMA:

The editorial "Who Really Pays for Health Care?: The Myth of "Shared Responsibility" was astonishing in its analytically bizarre manner in which it arrived at this comment:

"Employers should be removed from health care except for enacting wellness programs that directly help maintain productivity and reduce absenteeism."

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Any similar studies on the ... (Below threshold)

March 6, 2008 9:46 AM | Posted by wme: | Reply

Any similar studies on the effectiveness of therapy based on cost?

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when I left my psych reside... (Below threshold)

March 7, 2008 2:10 PM | Posted by rubyvoyager: | Reply

when I left my psych residency the head of the psychopharm clinic sent me referals. he called me to ask why they were coming back to him asking for another referal when I ahdn't seen them and asked me what I was saying. They would aks if I was a psychopharmacologist and what my fee was. I would say No, just a well trained psychiatrist who understood medications well; and my fee. He said that I must answer that I WAS a psychopharmacologist, because he said so, and I must doubel my fee. I did and my practice filled with satisfied customers.

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Good question about therapy... (Below threshold)

March 8, 2008 7:59 AM | Posted by Sally: | Reply

Good question about therapy.

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most people hear the word g... (Below threshold)

March 8, 2008 3:13 PM | Posted by Stephany: | Reply

most people hear the word generic and think it equates to "cheap". it's a mindset, the expensive placebo was preferred just like the wine even though they were the same, because people believe in name brands and equate high prices to quality.

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