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Is European Medicine Possible without American Research?
Bernie Sanders said during the debate that he wants to give America a Scandinavian-style medical care system.
As my Scandinavian and Italian relatives attest, medical care in Denmark and Italy is comparatively easy to access, inexpensive, and excellent. My niece received splendid care for a concussion and shattered ankle in Rome, and my uncle only had to pay for a $25 fee to get a copy of her records transferred to her doctors back home.
Once she got back to the States, having the follow-up care here in the U.S. (even with health insurance) set my uncle back ten grand.
Here’s my question: If I imagine my niece’s care as consisting of various medications, diagnostic tests (MRIs) and surgical techniques (e.g., laparoscopy) performed by Italian doctors, how much of this would be possible in the absence of the research, development, and innovation that takes place in the US?
Is there evidence that our system, retaining as it does a profit motive for medical innovation, produces more than its share of innovation and invention?
Published in General
The problem with statist health care is that incentives become progressively skewed against innovation as government control supplants free market forces.
Under capitalism, medical entrepreneurs seek out underserved groups to offer new and better insurance, health care delivery, medical device, and pharmaceutical products. If, say, 40 percent are dissatisfied or underserved in some way, this represents an enormous opportunity for a new entrant–and the very possibility of competition provides corresponding pressure on the incumbent to improve.
Even a few thousand patients with a deadly untreatable disease can warrant the attention of hundreds of brilliant minds and the investment of billions of dollars. The reason? Patients are the customers. They will be willing to expend their resources for an effective therapy. In a market system, this desire is reflected through private insurance contracts.
Many Americans are not receiving expected free market benefits, and the system is becoming less effective overall, but this is a result of our half-socialist health care system. Government regulations often make it illegal or too costly for entrepreneurs to offer patients the latest-and-greatest. Of course, the socialists point to these ills to justify more socialism. Failed government policies, to Bernie Sanders and his ilk, are features, not bugs–provided that the failures can be blamed on capitalism.
But full socialism is much worse. Under a democratic socialist health care system an individual is only worth his vote. 60 percent approval is an electoral landslide. Who cares about the disgruntled 40 percent? Not the politician. In 2009, Barack Obama distilled the politician’s response to an underserved minority to two words, “I won.”
But aren’t socialist health care systems popular? Well yes, they often are … just not with actual patients.
Relatively few voters are actually ill at any given time. Therefore, in a political context, the illusion of health care coverage is far more important than delivery of actual health care. Maintaining the façade does require the smooth delivery of certain services. Every voter is aware that he could be in a traffic accident or suffer a ruptured appendix, and the happy mirage will be punctured if these services are not delivered.
But what happens when you or a loved one is diagnosed with multiple myeloma? How complete are the options you are offered when diagnosed with critical coronary artery stenosis? In many cases the patients literally don’t know what they are missing; if they do know, they may be unhappy, as will the few thousand doomed to an early death from an obscure disease. But these people are electorally irrelevant.
While your coronary stent or bypass operation is too expensive–you will be very happy with your free nitroglycerin tablets before dying a few months hence–vast sums in the aggregate will be lavished 0n unnecessary free services for healthy voters. Unlike the rationed invasive cardiology services, these programs will be highly visible and connected to your smiling incumbent politician.
It is no accident that virtually the first move of the Obama administration after the passage of the Affordable Care Act [sic] was to mandate free contraceptives for all.
Socialist health care neatly inverts the very meaning of the word insurance.
I find the anecdotal comparison in this thread interesting: European healthcare (at least north/western European countries) seems to do a better job at routine care, while American healthcare seems to do a better job at detecting/treating diseases which treat seniors.
That observation correlates well with the fact that European countries tend to have comprehensive state-directed systems which emphasize “rational” distribution of resources, while in America we have a huge, generous quasi-single-payer system for seniors.
I must also admit that, on the whole, I would rather live under the German system – where it might take a few months to get an MRI, but it only takes a few minutes to get antibiotics for a sick child at 2 AM on a Saturday – than in the US, where cancer patients get great care but any unplanned event means waiting for hours in a noisy ER waiting room.
But then again I’m not a senior.
Indeed I do, and am privy to a fair amount of the deliberation regarding strategic development and markets. But the industry is very large with many varied facets, so it’s conceivable for your relative and I to have vastly different experiences.
I do think one point should be obvious and uncontroversial: One of the biggest single payers on the planet is Medicare, and Medicare is much less strict about negotiating down prices than most any other single payer. It should not be a surprise that many companies thus focus on products targeted to Medicare recipients.
Why’d they change it?
I can’t say,
I guess they liked it better that way.
Israel is doing amazing things in medicine, here’s some more.
https://www.youtube.com/watch?v=xo0X77OBJUgv
You can get excellent care in Europe. For that matter, you can get excellent care in many developing nations that have American or European-trained doctors. For the 1% of cases where something more cutting edge is required, you are better off seeking treatment in the USA. But here again, you would have to choose a hospital that is at the cutting edge, maybe a teaching hospital like Weill Cornell in NY, not your typical US hospital.
As to R&D, as in so many things, Europe is riding the coat tails of American innovation. Sure, there is some innovation in Europe, but less than in the US. The French, Swiss, Brits and Germans are quite good in pharma; the Scandies in medical devices and technology. The point of the matter is that even European innovation would not find sufficient profits to survive if it had no access to the US market. So when you pay ten grand for something in America, you are indirectly subsidizing the European who is only paying one grand for the same thing.
Our costs are not just inflated by the profit motive, but more significantly by tort law.
Elsewhere on this site is a comparison between the innovation in the scuba-gear industry – non government-regulated – and the small aircraft industry – tightly (and thoughtlessly) government-regulated.
One cannot help but think about health care while reading it; its ludicrous cost (to someone – nothing is “free”) is explained.
As to innovation, sure, Americans have had incentive to develop all that we currently see. But Obamacare and all its top-down control is just getting started. Cessna here we come . . .
When did the US last enjoy or suffer from a market system in health care? There are restrictions and regulations covering every aspect, and most care itself is paid for by government or government authorized and restricted cartels. Creation of medical professionals is held way below free market numbers, drugs are controlled by the FDA, etc. Moreover, few people object to most of the restrictions that have driven costs up to astronomical levels. With modern information technologies, a market based system is probably more feasible than ever and would radically transform the quality, abundance and costs, but it’s probably impossible to get there.
I frequently work in Denmark. I don’t have any knowledge of the care they get through their medical program. However, I do know they pay 50% income tax, a 25% VAT (like a sales tax but calculated a little differently), and 180% tax on cars (buy 3, take home 1).
Medicare does not negotiate prices directly with Pharmaceutical companies because Congress has banned it from doing so. If it were allowed to negotiate these prices directly, perhaps the prices would be lower?
Israel’s system for delivery of universal health care looks pretty good too.
Except that it covers abortions, which introduces a corrosive principle into healthcare.
Healthcare that isn’t grounded on, ordered to, and constrained by reverence for the dignity of each and every human life is healthcare in danger of degenerating into utilitarianism and worse.
It’s not for nothing that the Hippocratic oath explicitly prohibited abortion. Without “first, do no harm,” medicine does harm.
I have relatives in Spain where they have socialized medicine. Emergency Room treatment is good. If you need surgery or treatment that is not considered life-threatening (according to a bureaucrat), they put you on a waiting list for years and prescribe pain killers to shut you up.
Our healthcare system is flawed because we don’t have true free-market competition, but socialized medicine is not the answer. If you really want to understand which systems are better for various types of care, study the patterns in medical tourism.
I have read that many surgical procedures in India are much cheaper than they are in the U.S. Maybe we should study what they are doing.
There is no inherent link between where a medical product is developed and where it is sold. The FDA doesn’t particularly care (and often probably doesn’t even know) where a drug was developed.
The reason drug and medical device companies do research here is because the conditions in the US lead to better research outcomes. And one of those conditions is the fact that many of the best researchers in the world are already in the US – the companies are coming to them. This is why, like the tech industry, many companies have large research facilities close to academic hotbeds (Cambridge, MA, Bay Area, north shore of San Diego).
So the underlying theme is that we rule the private sector research world in large part because we rule the (government-funded) academic research world. It’s not something any of us here like to hear, but having worked on both sides of the research fence I can attest that this is one of the main driving forces.
Again, we gotta compare apples to oranges.
Clearly, no single European nation can match the US for innovation, simply because European countries are way, way smaller than the US.
What I want to know is how innovation in the entire EU compares to innovation in the US. That’s a slightly better comparison.
Alternatively, one could compare individual EU nations to their equivalent US state. How does Luxenbourg’s (pop 562,000, GDP per capita $103,000) medicine compare to that of the District of Columbia (pop 658,000, GDP per capita $105,000)?
One difficulty with this question (and even the entire post) is how we conceive of “innovation”.
The way the question is framed portrays innovation as some discrete process – a brilliant leap of an idea conjured up by a genius at a lab bench or a group at a company somewhere.
In reality, at least in the pharmaceutical world, most “innovation” is incredibly distributed and occurs over a very long time and in very small steps. There is a great deal of interplay between academic and private sector research when it comes to true innovation (as opposed to standard product development), usually involving people on different continents (and always by people educated in different countries). As such, it is often difficult – at least in modern times – to pin down a single “innovative” event. And in many cases, several different companies/teams will come up with the same innovation in parallel.
And this is a good thing, because it means advances in healthcare are not dependent on a unique visionary like Steve Jobs. But it also makes it nearly impossible to answer the question of “where” innovation is taking place.
I think there is a “yes” answer and a “no” answer. Having dealt with healthcare agencies, what will likely happen is that Congress will grant HHS the right to negotiate with a pharma company and make reaching a “reasonable price” the basis for any reimbursement to any provider for prescribing that drug. The pharma company will then provide whatever price in order to simply sell the product.
As with most any False Claim Act or other healthcare claim, the government starts by stacking the deck. If you ever lose any claim somehow related to fraud, you are then kicked out of participating or having your products reimbursed by any government healthcare program. Your choice is to fold or risk being forced out of business. I have no doubt the government would do the same for negotiating drug costs.
The back side will be the secondary effects that will flow from that position, such as reduced innovation, R&D, etc.
One thing to keep in mind with US healthcare is that there is no such thing as a free market and that is not a condition since the Accountable Care Act, but goes back decades. Hospitals and other providers do not have a supply chain for government-paid patients and another for private-pay. As a result, government regulations control all healthcare transactions (the Stark Act as between a Medicare doc and any other provider, the anti-kickback statute as between any provider and any vendor, the civil monetary penalties regulations between any provider and any patient). The result is that things like joint ventures are declared to be illegal in healthcare because of incentives for referrals.
So innovation ends up requiring a permission slip in the form of an advisory opinion from the regulators.
One fundamental problem with health care reform is that we complain about the price of things and never do anything to affect the price of things. The Accountable Care Act was only focused on paying the invoice, never about reducing the amount of the invoice.
In the area of healthcare supply chain there is very little transparency, particularly for medical devices. About a decade ago there was litigation driven by a device manufacturer against a consultancy engaged in market benchmarking.
The US healthcare system is often characterized as a free market system that is a dysfunctional market. In reality, it is a dysfunctional market with no relation to free market practices.
This sounds like a great example of “You didn’t build that,” except said in the direction of Europe.
Then ask, “Why didn’t you?” I think the answers will speak for themselves what a great economic system we have to foster medical and technical innovation. This is something neither we nor the rest of the world can afford to have destroyed by the ill-considered designs of our federal bureaucracies.
An instructive read on the problems with American healthcare can be found in Daniel Goldhill’s Catastrophic Care which is not about Obamacare but about the underlying dysfunction within our system (though he adds that Obamacare does nothing to fix this and indeed is additive to the problem). He writes:
Katie,
I would expect that if we do not zero out O’care it will be here for you and I to be put to sleep. If you follow some of the sub currents in the “ethics” community (think Dr Ezekiel Emmanuel) they have been probing the public conscience to get a level of acceptance that is it your duty to die (see C Buckley humous take of the inevitable). Why they are doing this is number driven. We spend ~550 million/annum on Medicare, about 30% is during the last 6 months of your life. You don’t have to be an account to see where this is going (hence the mobile death wagons)
Most of you are missing the point of the original posting. Would European health care exist without American innovation?
No.
Absolutely not.
In my fields of gynecology and endocrinology there are almost no innovations that are not from America. Even when not, the number of institutions doing biomedical research dwarfs Europe’s and results in European innovation being brought to fruition in the US. IVF was invented in Britain but brought to serious results by Norfolk and Yale and private firms here. Robotic surgery came from Holland (I think, don’t quote me) but has been matured here. Use of novel drug therapies in gynecology has been almost entirely from American institutions.
While I realize that my point of view may be biased by my primarily reading American medical literature, the major journals are also international in scope.
European medicine is heavily indebted to our R&D.
This is exactly right. Something generally left out of the healthcare equation is business model innovation.
Most healthcare innovation is aimed at new treatments and procedures–improvements in absolute therapeutic capability. Very little is aimed at improving how that therapeutic capability is translated into value-for-money patient care.
In fact, most such innovation is either illegal or tied up in ossified and overlapping regulatory and reimbursement constructs.
Consider that in most of life innovation means better and cheaper; in healthcare it inevitably means better and more expensive. One reason: labor productivity remains extremely low because the Way Things Are Done is viewed as a constant.
Consider that Apple did not invent the MP3 player or the mobile telephone, but it certainly changed how people get their entertainment. Ditto for Amazon. The innovation was a new business model, which restructured existing industries and yielded efficiencies for the general public.
The burgeoning digital health industry is grappling with these issues even now, which is why health care is pretty much the last major area of life waiting to be utterly transformed by your smartphone.
There are ways to measure these things although you may have to go looking hard to find the information. But all these things get studied. For research, you can look at the number of publications by country. For decades, in my field, the US was way, way ahead of all other countries, but there has been a relative decline with increasing US regulation over the past 15 or 20 years. Sorry I don’t have firm data, but this is generally what I have been told. Oddly, in my field there’s a strange assortment of countries that are contributing more, including many you might expect but some, like Turkey, that are more surprising.
I am sure that for devices and for drug development there are also objective metrics, but I don’t know what they are.
This is a ridiculous argument on both sides of the fence. For progressives: there is no reliable way to predict which six months are the last, therefore no way to ration care during that timeframe. For conservatives, see above.
I think the Dutch have found a way to more reliably predict which six months are the last.
Sure they are not just deciding for folks? (Only half kidding.)