Canada - Healthcare "Parasite"

[Toro]

I think the article is somewhat over the top but I thought this part was interesting.

Myth #2 The Canadian Drug Story

Ah … one of the holy myths of the “US health care sucks” crowd. This should be fun.

The general story is how you can buy many drugs in Canada cheaper than you can buy them in the US. This story is often, without specifically tying the logic together, taken as an obvious indictment of the US’s (relatively) free market system. This is grossly misguided.

Here’s what happens. We have a (relatively) free market in the US where drug companies spend a ton to develop new wonder drugs, a non-trivial amount of which is spent to satisfy regulatory requirements. The cost of this development is called a “fixed cost.” Once it’s developed it does not cost that much to make each pill. That’s called a “variable cost.” If people only paid the variable cost (or a bit more) for each pill the whole thing would not work. You see, the company would never get back the massive fixed cost of creating the drug in the first place, and so no company would try to develop one. Thus, companies have to, and do, charge more than the variable cost of making each pill.[2] Some look at this system and say to the drug companies “gee, it doesn’t cost you much to make one more pill, so it’s unfair that you charge much more than your cost.” They are completely wrong and not looking at all the costs.

So, let’s bring this back to our good natured friends to the North (good natured barring hockey when they’ll kill you as soon as look at you[3]). They have socialized medicine and they bargain as the only Canadian buyer for drugs, paying well below normal costs. Drug companies that spent the enormous fixed costs to create new miracles are charging a relatively high cost in the free and still largely competitive world (the US) to recoup their fixed cost and to make a profit. But socialist societies like Canada limit the price they are allowed to charge. The US-based company is then faced with a dilemma. What Canada will pay is not enough to ever have justified creating the miracle pill. But, once created, perhaps Canada is paying more than the variable cost of each pill. Thus, the company can make some money by also selling to Canada at a lower price as it’s still more than it costs them to make that last pill.

However, this is an accident of Canada being a less-free country than the US, able to bargain as one nation, much smaller, and next door. If we all tried to be Canada it’s a non-working perpetual motion machine and no miracle pills ever get made because there will be nobody to pay the fixed costs. I’m a big fan of Canadians in general (particularly Wayne Gretzky and Mario Lemieux, who if healthy probably would have eclipsed Gretzky – but I digress), but when it comes to pharmaceuticals they are lucky parasitic hosers. Drug companies in general sell their products to Canada at low prices, making a little profit, and reducing slightly the amount they need to charge other North Americans. This does create the silly illusion that the Canadian system is somehow better than ours because our own drugs are cheaper there. They are only cheaper to the extent we are subsidizing them by paying their portion of drug development costs and, unfortunately, we cannot subsidize ourselves (or we go blind).[4]

So, what is the purpose behind those who tell tales of these cheap Canadian drugs? Obviously they seek to ridicule our freer system by putting the parasitic and socialist system on a pedestal. They seek to imply that our system is broken, and delivers only expensive drugs, when the socialist Canadian system delivers the goods for its people. Thus, they implicitly argue that we need to have socialism here. It’s not complicated.

So, repeat after me. We could go with the Canadian system and have super cheap drugs, if only we can find a much bigger, much more medically advanced, much freer country right next to us to make miracle drugs for themselves, and then we insist that we pay them only a bit above their variable cost for our share, and then they in turn agree to let us be their parasite. Mexico, would you mind helping us out?

Zero Hedge: A "Criminally Insane" Cliff Asness Takes On Health Care Mythology And Pretty Much Everything Else

 

[chanel]

That was really interesting. Will that system change under Obamacare? Was that a dumb question?

 

[Political Junky]

That was really interesting. Will that system change under Obamacare? Was that a dumb question?

I wonder why Bush didn't fix that.

 

[Toro]

I don't know if it is true or not. The author does not cite any sources or provide any numbers.

 

[Big Black Dog]

The politicians are either unable or unwilling to fix the problems with Medicare. Most care providers that accept Medicare have not been paid in months for services they have rendered. This has been the situation for a great many years going back quite a few Presidents. We're talking both Democrats and Republicans here. They say Medicare is not affordable. Understanding that our government can't even run a single program like Medicare that provides the medical care for only a select group of Americans has me thinking that they will never in a million years be able to run a system that will provide medical care for all Americans. If you don't believe this is true, please, by all means prove me wrong. Have you ever heard of the term "cluster fuck"? That's what we're talking here. I've been involved first hand in what it's like to try and receive medical care in both Canada and in England. Sure, it's free but it's also one very big hastle. Trust me. You don't want this kind of medical care for America. A big cry from the Pro Choice folks is that the government has no business inside of a woman's body. Well, if that be true, why would you surrender your whole body to the government?

 

[auditor0007]

I don't know if it is true or not. The author does not cite any sources or provide any numbers.

This is exactly the way it works. The problem is that we are subsidizing not only Canada, but the rest of the world. And not only do we pay a little bit more, in many cases we pay double, triple, or even more than what they pay in other countries for those same drugs.

As it is, these countries negotiate those prices with the drug companies, and it is the drug companies that accept those amounts. Because these drugs are not being sold in a free market situation, I think the US government needs to step in.

I don't have an answer, but what do you think would happen if the US govenment told the drug companies that they could only charge 10% more in the US than the average price they sell the drugs for throughout the rest of the world? Do you think they would just stop making these drugs? Do you think they would stop R&D on new drugs? Or do you think they would tell the rest of these countries that they have to ante up and pay more or go without?

 

[Diuretic]

It's okay for the rest of us, there are plenty of other options and I'm sure those companies would happily fill the gap if US companies stopped supplying.

List of pharmaceutical companies - Wikipedia, the free encyclopedia

But I wouldn't like to see that happen.

Here in Australia our federal government has a Pharmaceutical Benefits Scheme which works fairly well - it's not without fault I hasten to add. If the writer think that's parastical, then, okay

 

[auditor0007]

The politicians are either unable or unwilling to fix the problems with Medicare. Most care providers that accept Medicare have not been paid in months for services they have rendered. This has been the situation for a great many years going back quite a few Presidents. We're talking both Democrats and Republicans here. They say Medicare is not affordable. Understanding that our government can't even run a single program like Medicare that provides the medical care for only a select group of Americans has me thinking that they will never in a million years be able to run a system that will provide medical care for all Americans. If you don't believe this is true, please, by all means prove me wrong. Have you ever heard of the term "cluster fuck"? That's what we're talking here. I've been involved first hand in what it's like to try and receive medical care in both Canada and in England. Sure, it's free but it's also one very big hastle. Trust me. You don't want this kind of medical care for America. A big cry from the Pro Choice folks is that the government has no business inside of a woman's body. Well, if that be true, why would you surrender your whole body to the government?

Medicare is underfunded. If you look at the cost per person for healthcare in the US, it now stands at $7900 per year per person. And those on Medicare are the ones who require the most dollars per year for healthcare because as you get older, you usually get sicker, and most people get sick before they die. I've read that as much as half of all healthcare costs come from the last year of life. But Medicare only brings in around $6000 per year per person, yet the cost of healthcare for the elderly is much higher.

When Medicare was first enacted, people only lived to be 70 years old, so they didn't collect much in benefits. Now people live almost ten years longer and require much more medical care. So yes, the costs are out of control, but in the case of Medicare it is due to the fact that the money just isn't there. It has nothing to do with administrative costs as those in Medicare are much lower than in the private sector.

No matter what we do, healthcare costs are not free nor will they ever be. And if the govenrment does eventually run the bulk of our healthcare system, it will cost money, but it is money that we are already spending, and in the private sector, the increase in spending is growing at a much faster rate.

When you look at national systems such as Canada's system, keep this in mind. We know two facts. One is that they pay half of what we pay, and that is a great deal less in real dollars. The other thing we know is that they receive not so great service, and that wait times for many things are much longer than they should be. They also don't have all the equiptment they need.

The thing that we should be questioning is how much more would it cost per person to bring their system up to our standards, and I don't have the answer for that. But here is what we can do; we can figure costs as actual healthcare costs, and then the cost of administration and also profits for the insurance companies. Now, we know in the Canadian system that administration costs only around 3% of all healthcare spending. This is comparable to administrative costs for Medicare. On the other hand, private insurance administrative costs run around 25% of healthcare costs with an added 5% for profit. So 30% of our healthcare spending in the private sector goes to costs other than healthcare spending.

If we left spending on healthcare the same, but reduced the costs of administration to 3% and dropped the 5% profit margin, we would save around 27% of total healthcare costs, and we would do it without reducing quality of care.

The problem in Canada and other countries with universal healthcare is that the people don't demand that they spend more which would mean taking more of their income. But the fact is, good healthcare costs money. If Canada kept their current system, but spent an extra $1500 to $2000 per person per year, they would almost certainly have everything we have, but they still would pay about 25% less than we do, and everyone would be covered.

 

[DiveCon]

I don't know if it is true or not. The author does not cite any sources or provide any numbers.

This is exactly the way it works. The problem is that we are subsidizing not only Canada, but the rest of the world. And not only do we pay a little bit more, in many cases we pay double, triple, or even more than what they pay in other countries for those same drugs.

As it is, these countries negotiate those prices with the drug companies, and it is the drug companies that accept those amounts. Because these drugs are not being sold in a free market situation, I think the US government needs to step in.

I don't have an answer, but what do you think would happen if the US govenment told the drug companies that they could only charge 10% more in the US than the average price they sell the drugs for throughout the rest of the world? Do you think they would just stop making these drugs? Do you think they would stop R&D on new drugs? Or do you think they would tell the rest of these countries that they have to ante up and pay more or go without?

i think they would raise prices everywhere

 

[RetiredGySgt]

I don't know if it is true or not. The author does not cite any sources or provide any numbers.

You do not need numbers, it is essentially correct. Canada as a single source buyer gets medications cheaper then the numerous buyers in the States. Not because Canada is better but because Canada refuses to pay more and the medical companies still make a small profit. If they sold to every one at that price then just as the article states development and research into new medications would rapidly dry up.

That is the entire point of preventing generics for I believe 7 years after a new medication is created. to give the Company time to recoup the huge expense in development and research costs.

Some other Countries get cheap meds to by threatening to make their own generics illegally and ignoring the international community. Drug Companies then make deals with them to sell at a lower price to prevent the damage done by the generics before the company has recouped its costs.

These companies are in a business and they MAKE money. So there is always profit involved at what ever load they can bring to bear on each market. It is not a HUGE profit on most medications. And most medications do not cost a lot to buy, BUT new meds always cost more for that period when the Generic is NOT allowed to be made.

Cut that period out and only Governments could afford to research new medications.

 

[editec]

I remember watching the price of Prozac quadruple in a few years.

Why?

Whatever the market will bear, that's why.

 

[DiveCon]

I remember watching the price of Prozac quadruple in a few years.

Why?

Whatever the market will bear, that's why.

did you ever think the number of law suits against that company had any effect on that price?

 

[Political Junky]

I remember watching the price of Prozac quadruple in a few years.

Why?

Whatever the market will bear, that's why.

did you ever think the number of law suits against that company had any effect on that price?

They spend more on advertising than settling lawsuits.

 

[DiveCon]

I remember watching the price of Prozac quadruple in a few years.

Why?

Whatever the market will bear, that's why.

did you ever think the number of law suits against that company had any effect on that price?

They spend more on advertising than settling lawsuits.

you got any proof to back that up?
and i dont suppose that the law suits dont add to the cost of production at all then?

 

[Political Junky]

I don't know if it is true or not. The author does not cite any sources or provide any numbers.

This is exactly the way it works. The problem is that we are subsidizing not only Canada, but the rest of the world. And not only do we pay a little bit more, in many cases we pay double, triple, or even more than what they pay in other countries for those same drugs.

As it is, these countries negotiate those prices with the drug companies, and it is the drug companies that accept those amounts. Because these drugs are not being sold in a free market situation, I think the US government needs to step in.

I don't have an answer, but what do you think would happen if the US govenment told the drug companies that they could only charge 10% more in the US than the average price they sell the drugs for throughout the rest of the world? Do you think they would just stop making these drugs? Do you think they would stop R&D on new drugs? Or do you think they would tell the rest of these countries that they have to ante up and pay more or go without?

I know that the pharmaceutical companies, who authored Medicare D, inserted a provision that Medicare could not negotiate drug prices ... how conveeenient. Your representatives in Congress, who take money from Big Pharma, happily passed it.