Disease economics: Asthma

Asthma and COPD (Chronic Obstructive Pulmonary Disease) show up as the the fifth most costly clinical category in US healthcare at $60+ Billion / yr. (see footnotes for source etc). As with prior posts in this series, I wanted to see if a deeper analysis of the economics suggested possible interesting business opportunities.

And I have recently seen several interesting healthtech startups attacking the asthma space and wanted to use these expense numbers to understand better the opportunity they are targeting.


When you drill down deeper into this category of expenditures, it turns out to be made up of several respiratory disease clinical categories, with the big ones being asthma, pneumonia, COPD, and “other respiratory disease”.

  • Asthma: $16 B/yr; clinical condition code #128
  • Pneumonia: $12 B/yr; clinical condition code #122
  • COPD: $11 B/yr; clinical condition code #127
  • Other upper respiratory infections: $8 B/yr; clinical condition code #126
  • Other upper respiratory disease: $11 B/yr; clinical condition code #134
  • Other lower respiratory disease: $10 B/yr; clinical condition code #133

This post focuses on Asthma. (Scroll to the bottom footnotes for the explanation of the color coding, and for details of where the numbers come from and what population they cover).

Asthma: Expenses & Cost per event


Observations on asthma economics

  • The big expense for asthma is drugs (light blue), representing 70% ($11B/yr) of the total asthma expense. And these costs come as a result of a large number of “events” (95 million drug purchases) at modest cost per purchase ($120).
  • The next largest expense category is office visits (13M visits at $170 per visit, for a total of $2.3 B/yr.).
  • In-patient visits add up to $1.2 B/yr. and have a high cost per event ($5,300 per in-patient stay, and 220,000 in-patient events / yr.)
  • ER visits (which get a lot of press) represent annual expenditure of $0.7 B, with 1 M events, at $690 per event.

To put these numbers in context, according to the CDC, in 2010 there were 26M persons with asthma in the USA, of which 7M were children. And a total of 14M of these people had at least one asthma attack in the last 12 months.

So, on average, each active asthma patient has about one office visit a year, spends about $780/yr on drugs, and each year there are 1.6 in-patient admissions for every 100 active asthma patients. And the average total expenditure per patient is about $1,100/yr.

Asthma business opportunities

As always, it is exciting to think of ways to improve the quality of care for asthma. However, in this post I am focusing on ways to make asthma care more cost effective. Here are some ideas that these numbers suggest to me.

More cost effective drug regimen

I wonder if there are ways to reduce the total amounts of drugs that are used, by finding ways to deliver them only when they are actually needed rather than on some time-based schedule. Or perhaps there are ways to do a better job of fine tuning the schedule for an individual to avoid unnecessary drug intake? And of course, more cost effective drugs are always interesting in this context.

Reduce office visits for asthma

Perhaps some of the new healthtech companies that focus on getting patients more engaged in management of their disease can help reduce the number of times an asthma sufferer vists the doctor each year. On the other hand, the numbers above suggest that on average each patient with active asthma visits the doctor once per year for an “asthma” visit. It’s hard to imagine reducing this number much without compromising care.

Reduce in-patient admissions (or ER visits)

Together, in-patient and ER visits account for almost $2B per year, and it seems possible that many of these visits might be avoided with improved control of each patient’s disease. If there were some “better widget” that could be used by each asthma sufferer and which would help reduce the ER/in-patient visits by 10%, the economics would breakeven if the widget cost $14 per year for each of the 14 million “active” asthma sufferers.

Ideally there would be a way to select a smaller subgroup of patients for “widget-usage” who would have a higher reduction than 10% in hospital usage as a result of widget usage. And then the widget could cost more.

Asthma healthtech startups

One can explore the product and service offerings being developed by companies like Asthmapolis and Gecko Health Innovations to see if they fit into one of the opportunity categories outlined above.

While the two companies are at rather different stages of development, and there are a number of important subtleties that differentiate the products from each other, both companies envision a solution that turns an asthma inhaler into a wireless enabled device that can track the time (and perhaps location) of its use by the patient, and then aggregate various useful data together on an accompanying website / app for the clinician and or patient to use to fine tune the management of the asthma.

In both cases, the messaging is that this new approach can improve the management of the patient’s asthma.

In the case of Asthmapolis, the website explains that the product is designed to  move patients from the “uncontrolled asthma” category into the “controlled asthma” category. And goes on to state that 60% of asthma patients are “uncontrolled”, and that “Multiple studies have shown that the cost of healthcare for an uncontrolled asthma patient compared to a controlled asthma patient is $3,000-$4,000 greater per year”. So, Asthmapolis appears to be targeting some blend of the three cost improvements I identify above.

Presumably Gecko Health could do so too. But for their child-focused approach, you can easily imagine parents finding the concept attractive for reasons of peace of mind and improved care quality, that may fall more into the category of “better medicine at a higher price”, rather than “cheaper medicine”. So, perhaps the target customer might be patients who pay for themselves rather than insurers.

It will be very interesting to watch this product category as it emerges to see whether with improved control, one might be able to optimize drug titration, and perhaps expect a reduction in total drug costs for the patient. It would seem that both these companies are developing a platform that would allow very personalized drug regimens based on tight feedback, which would be just what you would need to test this idea.

Turning back-of-the-envelope estimates into real-world numbers

At first glance, my simple back-of-the-envelope cost benefit calculation seems a lot different than one might infer from the numbers quoted by Asthmapolis. I exchanged some emails with Asthmapolis’ co-founder, David Van Sickle, who was kind enough to point me to some additional sources. Like most things, the simple back-of-the-envelope calculation is a starting point but in real life there are extra factors that need to be taken into account.

Unsurprisingly, there is a body of academic literature devoted to the question of how much asthma costs, and also to how much more it costs to care for patients with asthma exacerbations vs those without.

Barnett et al (5) also use the AHRQ dataset I have used here in their analysis of costs of asthma. They include in their paper a table that mirrors the numbers used here (but for 2007 rather than 2010), but they make the case that asthma costs are underestimated if you rely solely on the costs of healthcare that is coded as asthma as I have done. Instead, they argue that asthma patients have other additional medical costs that occur because they are asthmatic, but which are coded as some other secondary condition rather than as asthma. Taking this into account, they find incremental direct costs of asthma were $37B (in 2007 in 2007$). So more than twice the $16B (for 2010 in $2010) that comes directly from the AHRQ data.

In addition, they make the case that there are substantial additional costs such as absenteeism associated with asthma, and thus derive a total cost of asthma to society in 2007 of $56B.

From this extra reading I come away thinking that the numbers I mention above are quite useful as a general guide for illustrating where the opportunities lie, but that at least in the case of asthma, actual total costs are bigger by as much as 2-4x.

Data footnotes and References

  1. Data comes from AHRQ (details discussed in prior posts here and here). The numbers above represent an estimate of total expenditures (2010) in the USA for the different categories of disease (excluding the institutionalized and the military), not including any secondary costs like lost productivity.
  2. An Event is a “stay”/”visit” typically for clinician encounters, and a “purchase” for a drug.
  3. There are some unexplained discrepancies in the magnitude of “visits”. And all these numbers differ a bit from other sources when it comes to patient numbers and disease incidence. The strengths of this data set is that it includes expenses. I recommend some caution regarding absolute numbers and would not rely on them to better than a factor of 2. The Relative numbers are probably reasonable.
  4. Coding comes from patient self reporting, so not super accurate.
  5. Barnett and Nurmagambetov: J Allergy Clin Immunol., Jan 2011, 127(1), pp 145-152.
  6. Color coding of the expense categories is below. Note: The size of the pie chart elements is NOT meaningful. Just the colors.
Expense color coding

Expense color coding

Initial Image credits: 
Wikimedia Commons


  1. multifocal says:

    This is a topic which is near to my heart… Best wishes! Where are your contact details though?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: