Politics & Policy

Do No Harm

Resisting the health-care demagogues.

Congress is back in session, and now the fun begins. Like dealing with problems such as health care.

Washington will certainly be involved. The administration seems ready to push Medicare reform, and Republicans are committed to adding a pharmaceutical benefit to Medicare. The congressional hopper is sure to fill with many bills attacking the pharmaceutical industry and probably even a few proposing to nationalize the entire medical system. After all, Al Gore, who tried to win the 2000 race in part by demonizing the pharmaceutical industry, endorsed a government-controlled health case system before taking himself out of the 2004 race.

Moreover, some states aren’t waiting for Washington to act. Maine and Vermont are trying to impose price controls on drugs. Florida is restricting the pharmaceuticals that Medicaid will cover.

In Oregon political activists pushed an initiative for a Canadian-style, single-payer system in November. Voters rejected it by an overwhelming margin, but California State Sen. Sheila Kuehl has proposed that her state adopt the same sort of plan. Bruce Bodaken, head of Blue Shield of California, wants to mandate universal coverage through employers.

West Virginia Gov. Bob Wise and others score political points by using Canada to attack the drug makers. Pharmaceutical costs are “outrageous,” he says. People are “being taken advantage of” since they pay more than residents of Canada.

Wise, though no businessman, joined the so-called Business for Affordable Medicine to lobby Congress to restrict drug patents. He acts as if whipping the latest political scapegoat makes him a profile in courage. Drug makers will be “spreading lies” in response to his attacks, he warns.

It’s an emotional litany worthy of the finest demagogue, not a state’s top elected official. Critics routinely heap abuse on the pharmaceutical industry, but only it makes new, life-saving medicines available to people in West Virginia and the rest of America.

Of course, states face real health-care problems. In Gov. Wise’s own state some surgeons have gone on strike to protest rising malpractice premiums. Rates are rising, it should be noted, because of an abusive tort system, not high drug prices. A number of Pennsylvania surgeons put down their scalpels after New Year’s Day for the same reason.

Notably, these doctors were not threatening to move to Canada. Despite Gov. Wise’s obvious misconceptions, Canadian health care is no model for the U.S. Adjust for the two nations’ differences — the U.S. has more war veterans and inner-city residents and spends far more on medical research, for instance — and medicine doesn’t look so cheap up north. Indeed, a commission headed by former provincial premier Roy Romanow, appointed last year by the prime minister to review Canada’s health-care system, has just published a report advocating doubling the national government’s subsidies.

No wonder, given the fact that Canadians routinely stand in long lines for care. In fact, the Vancouver-based Fraser Institute estimates that Canadians are waiting longer than ever before for medical services. The average delay between general practitioner referral and specialty consultation is 16.5 weeks; the time between the latter and actual treatment is another 9.2 weeks.

Delays for cancer patients run a month or two. The wait is almost seven months for eye care and eight months for orthopedic surgery.

Canadians have only limited access to new technologies. In August, reported Nadeem Esmail and Michael Walker of the Fraser Institute, “While ranking number one as a health care spender [compared to 26 largely European states], Canada ranks eighteenth in access to MRIs, seventeenth in access to CT scanners, eighth in access to radiation machines, and thirteenth in access to lithotripters.”

Total health-care outlays are determined by a “global budget” rather than medical needs; the province of Ontario closed its hospitals around Christmas 1993 because it was out of money. Explained Theodore Freedman, president of Toronto’s Mount Sinai, which was shuttered for two weeks, “This is not about health care. This is about the deficit.”

Patients flee abroad, particularly to America, to jump local queues. Provinces contract out treatment, such as for cancer, to U.S. hospitals.

The story is much the same for pharmaceuticals. U.S. politicians have organized well-publicized bus trips to Canada to help constituents purchase pharmaceuticals at lower prices. “There’s no question that prescription drugs cost too much in this nation,” claims Sen. Jim Jeffords (I., Vt.).

But international cost comparisons must be viewed with skepticism, since there is no “correct” price. Prices overseas generally reflect the lower incomes of many states and the highly politicized nature of most foreign health-care systems. Exchange-rate variations also matter: America’s relatively strong dollar make drugs priced in weaker local currencies seem particularly cheap.

Canada’s economy too, has suffered, with its dollar losing nearly a quarter of its value over the last decade. As a result, many goods are cheaper there than in the U.S.

Canadians also benefit from less, and less-expensive, product-liability litigation. Economist Richard Manning estimates that one-third to one-half of the drug price differential between the two countries is due to the higher cost of liability litigation in America. Moreover, the national and provincial) governments restrict prices, free-riding on American research and development.

Patricia Danzon of the Wharton School also points to issues involving patent protection, limited use of generics, and continuing availability of prescription drugs without prescriptions. After adjusting for such factors, she and Jeong Kim found, using 1992 data, “that the average U.S. consumer would have paid three percent more in Canada.”

More recently, Dr. John Graham, director of the Fraser Institute’s Pharmaceutical Policy Research Center, and Tanya Tabler, a student at the Faculty of Pharmacy at the University of Alberta, surveyed prices on both sides of the border. Although they found costs to be lower in Canada, Graham and Tabler observed that given price differences within countries, “a shopper can save almost as much money by bargain hunting within his own area as by crossing the border.” Indeed, reliance on U.S. list prices is itself misleading since actual transaction costs are often lower, in contrast to in many other nations.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is author of Foreign Follies: America’s New Global Empire and Beyond Good Intentions: A Biblical View of Politics.


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