Why Is American Health Care So Expensive?

Why Is American Health Care So Expensive?

I've long pointed out that the models that the left wants us to follow--Britain, Canada, etc.--have their own sets of problems. But Dave over at Classical Values points out that by a number of measures of health care outcomes, the reason that our health care system is so expensive is because it works better than many of those fashionable systems elsewhere. A couple of examples that I tracked down to make sure that Dave wasn't misreading his sources.

From the September 25, 2003 Seattle Post-Intelligencer:

COPENHAGEN, Denmark -- When it comes to the chance of surviving cancer in Europe, France and Austria are the best places to be, according to new research that tracks cancer survival patterns across the region.

The analysis, to be presented today at the close of a European Cancer Conference, involved statistics on 42 types of cancer in 1.8 million adults and 24,000 children from 22 countries in Europe.

The largest international cancer survival study to date, it found the chances of surviving for at least five years after being diagnosed with cancer ranged from a low of 25.2 percent for men in Poland to 57.9 percent for women in France. Regionally, Scandinavia came out best and Eastern Europe worst.

That compares with a survival rate of 62 percent for men and 63.5 percent for women in the United States. Comparable statistics for other areas of the world were not immediately available.

Got that? The U.S. had better cancer survival rates than the best European country--and therefore substantially better than the average European country.

Who is doing the most pharmaceutical research to produce more effective medicines? From the April 2007 Nature:

For those hoping that Europe might be redressing the imbalance in R&D innovation compared with the United States, two recent reports make gloomy reading. According to a competitiveness report published in November 2006 by the European Commission's high-level Pharmaceutical Forum, the US has established itself firmly as the key innovator in pharmaceuticals since 2000. "That dominant position continues to expand... a disproportionate share of pharmaceutical R&D is performed in the US," it laments.

The discouraging conclusion for European R&D is backed up by Kenneth Kaitin, Director of the Boston-based Tufts Center for the Study of Drug Development, which released a study on drug approval times and new drug availability in Europe and the US earlier this year. He says pharmaceutical companies are increasingly submitting their new drug applications in the US long before they apply in Europe — and as a direct result, they are focusing their R&D efforts in the US too.

Of the 71 drugs receiving marketing clearance both in the European Union and the US between 2000 and 2005, 73% (that is, 52 drugs) received approval first from the US FDA (Fig. 1). On average, the FDA approval came 1 year ahead of clearance by the European Medicines Agency (EMEA).

...

The advantage of the US is almost wholly down to its lack of price controls, says Kaitin. "Investors tend to invest in places where there is less control over prices, and it is always better to do your clinical trials in the countries where you plan to market," he says.

The shift of R&D out of Europe to the US is now "a pretty robust trend," adds Kaitin. "There is no indication that it will flop back unless the US switches to a different regulatory or pricing policy."

This has made life harder for European innovators. "Things are not easy over here and haven't been for a long time," says David Glover, a clinical research expert who advises the UK pharmaceutical industry. Matters weren't helped by the TGN1412 trial disaster last year in London, which Glover suggests has delayed approval for biologics trials and induced companies to look elsewhere to conduct them.

And note that it is lack of price controls here that makes the difference. You might think, "a year's delay in introduction of a medication isn't that big of a deal." I suppose it depends whether you need that medication to survive or not. In the case of some of the antipsychotics, the newer medicines may be the difference between side effects so ugly that mental patients won't stay on them, and side effects mild enough to be tolerable. A year's delay, for some people, might be the difference between spiraling out of control or not.

It is true that Americans have some very poor lifestyle choices that make our general health poor relative to say, Europeans or Japanese. I won't argue that point. (Although the British are catching up to us on bad diet and obesity.) But that's a failure of our government to play Nanny State, telling people what to eat, how much to eat, how much exercise to get, etc.--not a failure of our health care system. If you are a liberal, of course, telling people how to live is second nature (as long as the government doesn't tell anyone how to how sex, and with whom).