One of the difficulties in formulating health policy is that the
options are constrained by an iron rectangle of four, often-conflicting
policy objectives, which seem virtually impossible to
achieve at the same time.We want human beings to have universal
access to health care; we want that care to be of the highest possible
quality; we want it to be affordable; and we want constant innovation
to ensure that our health care systems deliver the latest
medicines, devices and techniques.
The struggle to achieve these four objectives almost invariably
turns out to be a zero sum game. If you expand access, for example,
costs go up. If you reduce costs, quality goes down. If you create more incentives
for innovation, prices go up. It seems impossible to break out of the iron rectangle.
Nor does it help much to try to learn
from how others are tackling these problems.
Americans and Europeans seem
unable to get beyond seeing caricature
versions of each other’s systems. Europeans
often regard the U.S. system as
capitalism and free enterprise run
amuck. They find it barbaric that 40 million
Americans have no access to health
care. Meanwhile, big pharmaceutical
companies are depicted as gouging
prices and raising costs so high that
health care becomes increasingly unaffordable,
reducing access to it still
further.
Americans, on the other hand, believe
that the universal care provided by
government-run programs in Europe
and Canada is of mediocre quality and
has to be rationed. Government pricesetting
not only reduces standards, but
also discourages innovation by removing
the profit incentive to develop new medicines.
Neither system is quite as bad as
these superficial impressions imply. But
the caricatures at least correctly depict
Europeans as having excelled in access
and cost, while Americans have
succeeded spectacularly in quality and
innovation.
None of us has figured out how to
achieve all four objectives, although we
are trying to do so by reforming our systems.
The U.S. Congress has taken a step
toward the European approach, at gigantic
cost, by enacting a new prescription
drug benefit program for all Medicare
recipients, covering everyone who is over
65 or disabled.While this represents an
increasing socialization of our system,
we did it in a Republican sort of way –
the benefits will be managed by private
companies, not by the government. But
we have moved in the right direction.
The issue is not just about whether
the U.S. or the European/Canadian system
is better, but how they interact. This
is particularly relevant now because of
the heated U.S. political debate over
whether Americans should have access
to cheaper medicines from Canada – an
issue that is posing an enormous challenge
for health care policy makers in the
United States. Canadian medicines are
much cheaper than American because
the government sets the prices. The
Canadian government can remove a
company’s intellectual property rights to
a product if the company refuses to sell
it at the price set by the Canadian Drug
Control Board.
Many people in the United States,
particularly the elderly, have figured out
how to take advantage of the price difference,
and there are websites galore on
which Americans can order from what
they hope is a real Canadian drugstore
and have the product shipped to them.
Alternatively, they can take a bus to
Canada and bring the product back with
them. These developments have created
great tension in the U.S. system.
Populists, mostly Democrats but
some conservative Republicans as well,
argue that free enterprise means that
anyone should be able to buy a product
anywhere, and that the U.S. government
should not bar its citizens from buying
cheaper drugs from Canada. On the
other hand, President George W. Bush,
together with most Republican members
of Congress and some Democrats, say
that approach will not work. The arbitrarily
low Canadian prices are intended
to make drugs as cheap as possible for
the government-funded health system,
and no effort is made to ensure that
prices cover the costs of innovation.
“Out of every 5,000
molecules examined for
treating diseases,
only one results in
a marketable product”
In the United States, it costs $800
million on average to develop a pharmaceutical
product, and it takes ten to 15
years when biotech research is involved.
Out of every 5,000 molecules examined
or tested for treating diseases, only one
results in a marketable product. It is
clear that if cheap Canadian drugs could
be freely imported into the United
States, both the Canadians and the people
buying the medicines would benefit
in the short term. There would be nice
profits for some businesses.
Eventually, however, all the innovation
costs would be squeezed out of the
drug prices and innovation would suffer,
with enormously harmful consequences.
It is no accident that 75 percent of new
pharmaceutical products patented in the
last year or so are American, and that
many European biotech companies
involved in innovative research are
moving to the United States.
We should approach this as a trade
issue. Americans, Canadians and Europeans
have to face up to the fact that we
cannot allow a pricing system to take
hold that would destroy innovation. The
human genome project has been able to
identify the derivation of a number of
diseases on a chromosome-by-chromosome,
gene-by-gene basis.
There is a disease, for example, that
results in paralysis and severe mental depression.
We know that it is caused by a
specific gene that is supposed to have a
certain number of repetitions of a fouramino
acid set.We know now that if that
happens 37 times, you are healthy. If it
happens 43 times, you will get the disease
when you are about 75. If it happens
52 times, you will get it at 65. This
is an example of the extraordinary information
that we are going to get from the
human genome project, and that we are
about to put into application.
Someone will discover a molecule
that prevents the malfunctioning of the
gene, so no one has to go through this
hell of paralysis and depression. But it
will happen only if investors are prepared
to listen to men and women in lab
coats who say they think they can do it if
they have the necessary capital. That
capital, however, will not be available if
the pricing of the resulting product does
not ensure a proper return on the initial
investment.
We need to agree, as a global community,
that we have to share the cost of
innovation and adopt pricing policies in
all our countries that build in a reasonable
amount for innovation. This iron
rectangle of price, access, quality and innovation
appears inexorable. It seems
that you cannot achieve all four objectives,
because to make progress on one
means sacrificing one of the others.
I believe that innovation will ultimately
resolve these issues.With extraordinary
potential for innovation in
biotech, pharmaceuticals, devices and
procedures, we shall be able to reduce
the cost of health care dramatically,
thereby expanding access and enhancing
quality. It can only be done, however,
if the United States, Canada and
Europe cooperate to share the cost of
innovation.
James C. Greenwood is president of the Biotechnology Industry Organization (BIO), which represents
more than 1,000 member organizations across three major areas of research and development:
healthcare, food and agriculture, and industrial and environmental biotechnology. Until
December 2004, he was the Republican Congressman for Pennsylvania’s Eighth District in the
House of Representatives. While in Congress, he served as Chairman of the Subcommittee on
Oversight and Investigation of the Energy and Commerce Committee (2001 - 2004).
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