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Home Publications Blogs Beat the Press The Cost of Health Care in Europe: The Debut of Professional Wrestling on NPR

The Cost of Health Care in Europe: The Debut of Professional Wrestling on NPR

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Sunday, 01 April 2012 16:52

National Public Radio told listeners that, "Like the U.S., Europe Wrestles With Health Care." If the wrestling in Europe is anything like the U.S., then we must be talking about professional wrestling. ("Hit him over the head with a chair!")

The per person cost of health care across Europe is far less than in the United States. According to the OECD, in 2009 (the most recent year for which it has comparable data), per capita health care expenditures in the United States were $7,960. In France, Germany, and the UK, the three countries featured in the piece, the costs were $3,978, $4,218, and $3,487 respectively.

In other words, costs in the U.S. were more than twice as high as in France and the U.K. and more than 80 percent higher than in Germany. While the rise in health care costs poses a problem in these countries, as it does in the United States, the impact is very different than what it is in the United States. NPR should have pointed out the huge difference in current costs instead of trying to imply that all countries face the same problem.

There is one other point in this piece that badly needs correcting. The piece quotes Arthur Daemmrich, a professor at Harvard Business School:

"In Britain, for example, a new bio-tech drug that extends a person's life on average one or two months, but costs $25,000, would not be reimbursed."

Actually, the drug does not "cost" $25,000. The British government gives a drug company a patent monopoly that allows it charge $25,000 because the government will arrest any competitors that try to sell the drug. The actual cost is more likely in the range of $5-$10.

This speaks to the incredible inefficiency associated with the patent system as a mechanism for financing drug research. However it is wrong to imply that it would be expensive to society to give patients these drugs. It would actually be very cheap.

Comments (12)Add Comment
...
written by liberal, April 01, 2012 8:57
The actual cost is more likely in the range of $5-$10.


Fair enough.

But since we're on the topic of economic rents, what's the "cost" of the unimproved fraction of a land parcel? Answer: zero.
...
written by Larry, April 01, 2012 11:09
I will not quibble that a "biotech drug" is not $25,000 in reality, but it is certainly not $5-10 either. In this sense a biotech drug is likely a protein based therapy that is much more difficult to manufacture and deliver to patients in an FDA approved manner than the typical drug that is a small molecule (often shelf stable in pill form for long periods of time). I can't speak to Britain's reimbursement of rare drugs, but whole companies here in the states go after rare human diseases with small market therapies that will cost a fortune because the R&D costs the same as if the market were potentially a quarter of Americans.

One example, Vertex here in Boston just got a treatment approved that helps cystic fibrosis patients lung function by tackling the genetic defect in a particular protein at the molecular level. However, it only helps a small subset of CF patients, who are also a small subset of the population at large. Vertex is charging a huge sum for this drug. But their market is roughly 4% of 30,000 people. The clinical trials to get the medication approved did not cost nothing. So what should Vertex be allowed to charge to recoup their investment and make a profit to continue operating? They are charging about $300k/year for the therapy. Is it worth that exact amount? I don't know. But is it worth it as a society to fund efforts like that to get to better cures? I would argue yes. But to say that all biotech therapies could cost $5-10 is highly misleading and ignorant.

http://www.cff.org/treatments/Therapies/Kalydeco/#Is_Kalydeco_only_for_G551D?

http://www.nytimes.com/2012/02/01/business/fda-approves-cystic-fibrosis-drug.html
"because the government will arrest any competitors that try to sell the drug"
written by k, April 02, 2012 3:20
actually that may be overstating -- the gov would arrest someone selling the drug without health authorization, but not, so far as I understand, for alleged patent infringement. The gov provides a legal forum for the patent-holder to sue the competitors trying to sell the drug. This doesn't gainsay the overall point, which is that it is patent protection that drives up the price of the drug, not the "cost" per se, but it's important nonetheless, because it speaks to whether public or private actors have the responsibility for enforcing the private rights of exclusion.
Healthcare Costs are Rising Everywhere
written by Michael, April 02, 2012 3:24
The OECD needs updating and quickly. Many of Western European countries are finding they can ill afford the rising costs of healthcare, like in the USA. Patients in some countries are finding it difficult to find the care they need and must go to other countries to get it. Waiting lines are long -- items that are rarely mentioned anywhere.
Doubling down
written by David, April 02, 2012 6:37
Michael, it should be clear that a growth rate that leads to twice the cost as our peers means the US system had much bigger problems than the European systems. By analogy, treating flesh wounds before a heart attack is pointless.
Costs Higher, Outcomes Worse
written by Charley James, April 02, 2012 8:46
The NPR piece also failed to mention how medical outcomes in the US are far below those in Britain, France and Germany. Along with "enjoying" the highest costs, America has the highest patient re-admission rate among developed nations and the greatest patient dissatisfaction with their health care.
...
written by kharris, April 02, 2012 9:24
To the extent that the OECD price quotes are current, the OECD figures do not need updating, as they have to do with cost, not access. If there is a problem with access in Europe, well there is a problem with access in the US, as well.

NPR did get around to the crux of the matter with this bit:

"...with critics charging that the Conservative-led government is trying to privatize the more than 60-year-old system in an effort to cut the nation's budget deficit."

The debate over the cost of health care provision has been underway in Europe for some time, but is now coming to a head because of the austerity push. Health care is a large budget item for most advanced-country governments, so any austerity effort (however misguided - see: http://www.interdependence.org...-Paper.pdf) will take a look at cutting health care costs.
cost, price and value...., Low-rated comment [Show]
Drug Companies spend much more $ on marketing than research
written by Phoenix Woman, April 02, 2012 10:00
The drug companies’ expenditures on research and development are a little more than half of what they spend on advertising:
A new study by two York University researchers estimates the U.S. pharmaceutical industry spends almost twice as much on promotion as it does on research and development, contrary to the industry’s claim.
The researchers’ estimate is based on the systematic collection of data directly from the industry and doctors during 2004, which shows the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US$235.4 billion.
But drug companies have long spent far more money on sales and marketing than on research, as this 1969 publication shows.
I hate CEPR's comments system
written by Phoenix Woman, April 02, 2012 10:08
Since this bizarre system stripped out my links and HTML, I'm trying it again:
-------------------------------------------
The drug companies’ expenditures on research and development are a little more than half of what they spend on advertising. From http://www.sciencedaily.com/re...140107.htm :


A new study by two York University researchers estimates the U.S. pharmaceutical industry spends almost twice as much on promotion as it does on research and development, contrary to the industry’s claim.
The researchers’ estimate is based on the systematic collection of data directly from the industry and doctors during 2004, which shows the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion, versus 13.4% for research and development, as a percentage of US domestic sales of US$235.4 billion.


But drug companies have long spent far more money on sales and marketing than on research, as this 1969 publication shows (http://www.jstor.org/discover/...5985279423).
...
written by j, April 03, 2012 9:18
Just read an article on the ACA oral arguments and how it was unfair to pounce on the Solicitor General. I would buy that if the government had used all its tools. They didn't even make an argument in their "brief" under the general welfare clause for ACA. You have a person like Scalia that construes the constitution literally and you don't make that argument. It doesn't make any sense. It was a missed opportunity. Perhaps, the argument would have failed but we will never know because the most obvious argument was never attempted.
Sorry, Phoenix Woman
written by cepr, April 03, 2012 9:19
But the comment system has a lot of checks in place for keeping spam out. Otherwise, we would be overrun with shoe ads.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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