If you never had it in the first place..........

Megan McArdle at the Atlantic has written an interesting post on the developing (or perhaps ossifying) dogma in the Democratic party that holds that good and universal health care will not only be good for the people that have it, but will also be cheaper. This "have your cake and eat it too" notion may be, as she points out, reasonably compared to the notorious "Voodoo economics" of the Laffer curve. There is one way that medical costs might well (unfortunately) end up being controlled however.

A very large percentage of these national health care systems around the globe (and most developed-world health care systems are substantially nationalized) negotiate low costs for medications because drug companies take cost-of-additional-production + profit as a basis for pricing drugs sold to national systems. Cost of research and development is commonly not included in the price or at least is not included fully, and national health systems are able to enforce this preferential pricing, which externalizes the cost of developing medicines, by not making available all of the medicines on the market.

The structural reluctance of a national health care system to add new drugs to the national formulary is countered by observation of the success of a given medicine ELSEWHERE. It is difficult to deny medication and treatments that are well demonstrated to be useful and effective in another nation, but such a system naturally tends towards stasis, and is quite dependent on external benchmarking of medical quality for PARTICULAR treatments. Low-cost but high-quality treatment in unitary health care systems is thus quite dependent on non-unitary health care elsewhere.

The United States has been, for many years the non-unitary market of choice, and indeed is the market of choice for drugs and medical devices altogether. Medical research and development efforts around the globe, including in unitary markets, will generally take for granted that any drug or medical device that is effective and improved is likely to repay its research costs if it is approved in the US. Comparisons between the US and a unitary health care system will naturally cause American health care to seem thoroughly overpriced, because a unitary system that takes the natural and obvious steps to control drug costs becomes a free rider on the research, development, and effectiveness evaluation of other nations. The US, due to lack of comprehensive coverage, is not a great standard bearer for quality medicine when all the people who lack coverage (or who lack good coverage) are included, but the role of the US medical system in determining which TREATMENTS work, is vital.

If something changes in the US to interfere with the new-medicine introduction cycle however, then everything changes everywhere. Where in the world, if not in the US, will new, and likely expensive medications or treatments be offered the chance to demonstrate their effectiveness?

The nightmare scenario would thus be that the US would adopt an 'off the rack' national health care model that would seek out preferential pricing, and which would not allow new drugs into the national formulary until they had a well established record on the market. This scenario would create a sort of 'lockout' with the formulary systems of the world excluding all or most new drug introductions, and preventing new medications from proving themselves.

In fact, a Canadian or British unitary and single-payer system is not required to squelch medical development however. Even if EVERY new drug were allowed, but allowed with a delay, then drugmakers would have less time when they would be able to recoup their costs (which includes costs for drug development that did not pan out) before the opportunity to do so was truncated by patent expiration. A limited trial period when drugs would see a limited introduction would likewise slice into the period when a drugmaker is protected by patent monopoly.

For most national health systems, a delay in introducing a drug to the national formulary causes injury to the extent that such patients as are denied the medication suffer its lack for a few years. This can be lethal to the affected individuals, but their numbers are limited. Due to the crucial role of the US in the global drug market however, the effects of a delay or other market alteration are likely to be more lasting, and could eliminate new treatments altogether.

The Obama administration has put a good deal of emphasis on the creation of an agency that would evaluate the "effectiveness" of particular drugs and treatments, and an agency of this sort could easily provide the justification for excluding new medications, whether it is a government program or private insurance that would actually pull the trigger. If new medical treatments are introduced less and less often, then the costs associated with new medical treatments will drop. It will be hard for people to miss treatments that did not ever exist in the first place.