April, the cruelest month (Musings on transfusion costs)

This month's blog is slightly different than most - a potpourri of loosely related tidbits on transfusion-related costs. It's April and money matters seem apt. The blog discusses 3 recent news items and ends with why April is the cruelest month. The blog's title comes from The Waste Land, a poem by T.S. Eliot.

#1. Tidbits on Biotech Profits

Immucor, a US-based company that sells instruments for testing donated blood and pretransfusion patients, recently released financial results for its fiscal 2010 third quarter.
The buzz among laboratorians has always been that companies that sell instrumentation make their money on reagents, not instruments (which occasionally are supplied free of charge).

Immucor's latest financial results are instructive:

• Overall gross margin* = 69.2%
• Traditional reagents: $510,000 revenue (gross margin* = 77.4%)
• Capture** reagents: $18,080,000 revenue (gross margin = 80.2%)
• Instruments*: $10,277,000 revenue (gross margin = 12.2%)

* Gross margin is short for gross profit margin
Gross Profit Margin Percentage = (Revenue - Cost of Sales)/Revenue
** The automated instruments use Capture solid phase technology

Example: If a company sells a computer for $1000 (revenue) and the cost of sales (materials, labor, shipping costs, etc.) is $200, then the gross profit margin = 800/1000 = 80%. For more, see

• Gross margin
• The bottom line on margins

Immucor's margins are higher than many others in the biotech supply industry.
Tidbit #1 musings

Using Immucor's data (sample size=1), the long held lab buzz about where instrumentation companies make their profit appears correct. And a gross profit margin of ~80% is high compared to many companies in this general business sector. No doubt managers consider ways to leverage this tidbit to their advantage when negotiating instrumentation contracts.

Should we care that a supplier's profit margin is high? How does it impact transfusion costs?

#2. Tidbits on Cost of IVIG
Canada has a high per capita rate of IVIG use, in 2008 more than twice as high as the UK, and marginally higher than even the USA.

• Source: Nahirniak S, Hume H A. Guidelines for the use of IVIG for primary immune deficiency and solid organ transplantation. (editorial) Transfus Med Rev: 2010 Jan; 24(1, Suppl1): S1-S6. (select Sample issue online)

Other Canadian-related tidbits from this editorial include

• CBS supplies IVIG to hospitals free of charge. In fiscal year April 2008 to March 2009, the total cost of IVIG use in Canada was $244.2 million.
• This cost represented ~18.9% of CBS's entire budget (budget for all blood component and plasma protein products, human-derived and recombinant).
• An IVIG dose of 1 g/kg for a 75-kg person costs ~$5000.
• Without a formal system of accountability for IVIG use in most hospitals, mechanisms to ensure optimal and appropriate IVIG use are important to develop.

And that's what CBS in collaboration with NAC has been doing since 2004:

• IVIG hematology & neurology guidelines
• Guidelines for the use of IVIG for primary immune deficiency and solid organ transplantation

For interest, I looked up the gross profit margin of one of the major IVIG players in Canada, Talecris Biotherapeutics. For the 4 quarters ending Dec. 2009 Talecris's gross profit margin averaged ~41%. Of course, IVIG is but one of their major products.
Tidbit #2 musings
Because CBS is publicly funded, IVIG costs Canadian taxpayers $200 - $300 million/year. No matter where we live and regardless of who pays, both as citizens and as health professionals, we all have a vested interest in seeing that the cost of such products is warranted in terms of clinical outcomes.
3. Tidbits on TM-related Economics Research
An editorial* in the April Transfusion discusses a paper ** that investigates the cost of red cell transfusion in surgical patients in 4 hospitals (2 in the USA, 1 each in Austria and Switzerland).

* Custer B. The cost of blood: did you pay too much or did you get a good deal? (editorial) Transfusion 2010 Apr; 50(4): 742-4.
**
Shander A, Hofmann A, Ozawa S, Theusinger OM, Gombotz H, Spahn DR. Activity-based costs of blood transfusion in surgical patients at four hospitals. Transfusion 2010;50:753-65.
The research was funded by SABM, made possible by grants from suppliers of various brands of synthetic erythropoietin. Weirdly, a company called Masimo, not listed as funding the study, put out a press release on its outcomes:

• New Published Study Finds the Cost of Blood Transfusions is Significantly Under Estimated, Establishes True Cost at $522 to $1,183 Per Unit

In his Transfusion editorial Custer makes the following key points (summarized):

• Although the basic purpose of health economic research is to link money spent to outcomes to help select expenditures that have the greatest benefit for individuals and/or society, there is no consensus on whether studies should try to answer questions that maximize benefit for individuals or society as a whole.
• Patient outcomes are critical to whether blood safety and transfusion are worth the cost.
• If outcomes for similar patients are better at hospitals that use more blood or have the highest transfusion costs, then the premise that transfusion costs are too high is invalid.

This last one got me thinking. According to the author's logic (taken to its logical conclusion), if a transfusion alternative like erythropoietin or autologous red cell salvage costs more than transfusing donated human red cells, but has improved patient outcomes (shorter hospital stays,etc.), then a premise that its increased cost compared to allogeneic transfusion is too high is invalid. Unfortunately, health economics research is more complicated and difficult to evaluate, as the author goes to great lengths to explain.
Regarding the study by Shandler and colleagues, Custer concludes:

• "Does a cost between $500 and $1200 per RBC unit transfused represent a good use of resources? Once again there is no single answer."

Tidbit #3 musings
As noted in an earlier blog (Dr. Strangeblood or how I learned to start worrying and hate the numbers), which also involved a paper by Custer*:

• One of the main challenges with [cost effective analyses) is, as the computer nerds say, GIGO, Garbage in, garbage out....

* Custer B, Hoch JS. Cost-effectiveness analysis: what it really means for transfusion medicine decision making. Transfus Med Rev 2009 Jan;23(1):112.
Which is not to say that cost-analysis researchers input garbage. It's just to realize that, depending on the study design and inputs, you can claim almost any outcome you want. Unfortunately, when critically analysed, study results may not mean much.
Summary
As shown, the potpourri of tidbits all deal with money, a relevant topic for April when income tax is due, at least in Canada and the USA:

• Immucor's gross profit margin on instrument reagents is 80%. Should we care and how can we best use this factoid?
• Canada has a high per capita rate of transfusing IVIG, a costly plasma derivative, motivating CBS and NAC to produced evidence-based guidelines for its use. This we should care about.
• The cost of transfusion has been under-estimated but what does it really mean?

As usual, I think we can all benefit by getting back to sufficient costing basics to allow us to assess these economic studies effectively.
April - The cruellest month
On 11 April 1969 the Beatles single "Get Back" was released, and an alternative version became the closing track of Let It Be (1970), released just after Paul McCartney announced he was leaving the band 40 years ago.
As T.S. Eliot wrote in his poem The Waste Land:

April is the cruellest month, breeding
Lilacs out of the dead land, mixing
Memory and desire, stirring
Dull roots with spring rain.

Addendum: I'm still curious why Masimo would pay for a press release for a study that it did not fund. If you know the connection, please write.

Comments are most welcome BUT, due to excessive spam, please e-mail me personally or use the address in the newsletter notice. 

We can work it out (Musings on public vs private health systems)

This blog muses on how transfusion medicine (TM) in the USA compares to the rest of the developed world, particulary Canada, in terms of overall cost, efficiencies, and clinical outcomes.

As a Canadian, monitoring the U.S. debate on health care is frustrating. Particularly annoying is hearing our system regularly trashed on U.S. cable shows, mostly be those who do not have a clue about Canadian health care, and occasionally by Canadian physicians heavily invested in private health care.

• See Canadian health care slurs dismissed as "rhetoric" (CMAJ, 13 Oct. 2009)

Of course, like any system Canada's is not perfect but it provides universal coverage (like the rest of the developed world) and we're trying to improve it.

Nonetheless, to me the lies and distortions south of the border are galling. The blog's title derives from an old Beatles tune that I hope comes true:

• We can work it out

Don't worry - This blog is not going to delve deeply into the U.S. - Canada health care debate, where views tend to be as passionately held as religious convictions.

The idea for the blog came from this journal article & news item (featured in TraQ's November newsletter):

• Schoen C, et al. A survey Of primary care physicians In eleven countries, 2009: perspectives on care, costs, and experiences. Health Affairs 2009;28(6): w1171­w1183.
• U.S. physicians lag behind those in other countries in IT use

The journal paper made me wonder if anyone had similarly researched TM in the USA and Canada, or TM in the USA vs TM in other countries with universal health care and a national blood service in which users do not pay for blood and blood products, i.e., the public pays via taxes and the burden does not fall to those unfortunate enough to get sick and require transfusion.

There have been reports published comparing such aspects between countries as blood donor screening criteria and overall structure and organization. And Vox Sang has international forums (fora for purists), which survey the basics of blood systems around the globe and international practices on just about every type of practice, e.g.,

• Autologous blood salvage
• Clinical indications for various blood components
• Hemovigilance
• Massive transfusion protocols
• Technical topics such as electronic crossmatching, routine Rh typing, hemolytic disease of the newborn serologic analysis

The types of studies I have in mind would compare TM-related costs, efficiencies, and clinical outcomes in various developed countries. Such costs are incredibly difficult to identify with validity. But in countries with national blood services, these figures should be determinable, albeit with many assumptions, provisos, limitations and perhaps even a glut of 'weasel words' as often appear in cost studies due to the many variables involved.
For example, Canadian Blood Services has only three testing facilities and 12 manufacturing facilities to serve all of Canada except Quebec. Canada is the 2nd largest country in the world, just behind Russia and just ahead of the USA in territorial size.
CBS's annual reports include an incredible amount of hard data:

• Report to Canadians (2008 - 2009)

Some tidbits from the report above:

• Whole blood collections: 915,858
• Staff costs constitute ~60% of total 'Transfusable Products' expenses
• Cost per unit* for year ending 31 Mar. 2009: $377.11
• *ratio of total expenses to shipments of all products

A few possible comparisons for international studies:

1. Relative cost of the overall blood system
We know that Canada's health system is less expensive than the U.S. system, because the administrative costs are less when there is a single payer. Indeed, The U.S. spends more per capita on health care than any comparable country. Does this apply to the blood system too?

2. Average cost per RBC transfused
In Canada, CBS and Hema Quebec collect and process all whole blood donations intended for allogeneic transfusion.What does a typical unit of RBC cost to produce in Canada and how does it compare with the same average cost in the USA, UK, Australia, etc.?

3. Utilization management of blood components and blood derivatives according to whatever clinical guidelines exist

For example, do countries with national blood services and government -supported provincial blood offices achieve equivalent or better clinical outcomes and financial savings compared to the USA? See

• BC PBCO
• Transfusion Ontario

ADDITIONAL MUSINGS
In the mid-1990s in Alberta, the Canadian province where I reside, the government decreased financing of the laboratory system by ~40%. Among many results, students in the MLS program where I taught had difficulty finding jobs in Canada. However, because they wrote the ASCP MT exam at the end of their program, many obtained employment in the U.S., including in transfusion service labs.

Canadian grads were amazed at the U.S. system in which an incredible amount of their time was spent on what to bill for various lab tests, something that was not required in Canada. Yet this emphasis on fees and cost did not result in more evidence-based test rationales.
Grads often reported that the U.S. labs they worked in were still routinely performing tests that had been abandoned in Canada in the 70s and 80s, tests that contributed little, if anything, to treatment or clinical outcomes.

Granted, it's a small sample, perhaps the anecdotal reports of a few dozen graduates. But even so, publicly funded TM laboratories in Canada had managed to implement evidence-based test rationalization before many American counterparts.

And government programs such as the BC PBCO have made impressive improvements in utilization management of blood and blood components.

Can a public system of transfusion medicine, and universal health care in general, possibly be equivalent, or even superior to, a private one? We can no doubt work it out, eventually.

Additional Resources
For more on health care comparisons in general, see:

• Comparing medical costs and results
• Sick Around the World - a profile of health care in 5 countries

As always, views are mine alone. Comments are most welcome BUT, due to excessive spam,  please e-mail me personally or use the address in the newsletter notice.