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April 18, 2007

Canada vs. America

If folks aren't following the debate between Jon Cohn and David Graetzer, they should check it out. Cohn is my fellow social democratic health-wonk-in-arms, while Graetzer is a Manhattan Institute libertarian type and so they, predictably, debating who gets better care, Americans or citizens of nations with universal systems. Graetzer has tried to focus the argument on high-level care outcomes -- if you get cancer, are you better off in America or England? -- but he's done so with oddly poor timing.

Even putting aside Jon's effective rebuttals, a new study was released today comparing care outcomes in the US and Canada. It addresses, in fact, the precise disagreement between Cohn and Graetzer, and does so on grounds that should be favorable to Graetzer -- Canada is often considered a fairly mediocre system. Yet, of the 38 studies examined, 14 showed clear advantaged for Canadian patients, five suggested US care was superior, and the remainder were mixed. The studies showing the Canadian systems superiority found effects both on income -- low-income Americans with breast or prostate cancer do much worse than low-income Canadians with the same conditions -- and care effectiveness. For conditions like kidney failure or cystic fibrosis, Canadian care was simply better. You can pick through the tables with all the results here.

It's not that the data shows unbelievable advantages for Canada, to be sure. As the authors conclude, "although Canadian outcomes were more often superior to US outcomes than the reverse, neither the United States nor Canada can claim hegemony in terms of quality of medical care and the resultant patient-important outcomes." The question raised is slightly different: How can we possibly countenance a system that costs twice as much as the Canadian system but delivers slightly worse care? Even assuming diminishing returns, our expenditures should result in care outcomes at least 20% or 30% better than Canada's. Instead, they're about 5% worse, but cost around 187%. Does it sound like we're getting a good deal?

April 18, 2007 in Health of Nations | Permalink


"Does it sound like we're getting a good deal?"

True, but we (Canadians) are throne-sucking toadies (or some such) so, really, the differences are simply unavoidable. Stop trying to improve the American healthcare system. You can't get passed the ruggedness.

Posted by: moo-cow | Apr 18, 2007 12:53:37 PM

Well, also true that the US health system pays for mot medical research in the world. Which, in social democratic terms, is as it should be of course, the richest country paying for the knowledge to be shared by all.

Posted by: Tim Worstall | Apr 18, 2007 1:07:59 PM

God knows considering the state of US Health care, we're going to need all the ruggedness we can muster.

Posted by: W.B. Reeves | Apr 18, 2007 1:18:05 PM

And it's kinda clear that Graetzer is comparing the average Canadian experience with the far-above-average American one. He simply doesn't seem to notice that almost 50 million of us have no insurance, probably another 50 million have less than adequate insurance, and even the very-well-insured are only well-insured as long as they keep their current job and never get sick (and since we're all going to get sick, that means everyone pretty much is in danger of going care-less). And also a very large contingent of Americans-- the elderly and those in the military and VA programs-- already have "national health insurance".

The truth is, I have never met a Canadian thinking about emigration to the US to get better healthcare, and yet I know lots of Americans (I'm one) who are considering moving to Canada so we can have access to health care (self-employed here, with chronic condition that renders me "uninsurable" by our benevolent insurance companies).

Oh, a friend of mine is very well-insured-- works for a hospital-- and recently went through surgery for cancer. AFTER the insurance company paid what it deigned to pay, she had an out-of-pocket bill of $20K. That's WITH a good insurance policy. She's probably going to have to declare bankruptcy, and who knows how that bill will be paid, or who will pay it-- not the insurance company that has been billing her employer $500 a month for her policy for the last 25 years.

We pay the most for okay care. But many, many Americans aren't even allowed to BUY insurance. What does Dr. G say about that? Considering that our monopolistic (you can't really switch insurance companies without jeopardizing coverage, that is, if you can even get coverage) system has jacked up prices so high, without insurance, we're going to be bankrupted if we're lucky and receive no care at all if we're not. Or does he actually believe that hospitals "must" care for the uninsured? Dream on.

Posted by: petra | Apr 18, 2007 1:20:53 PM

You want to quantify the research claim, Tim? In other words, how much of that is in our per capita health spending? Any of it? None? Some? How much is publicly done through the NIH and the universities? How much of private sector R&D is on me-too drugs? Or are we just changing the subject?

Posted by: Ezra | Apr 18, 2007 1:23:24 PM


Read up on a study from Bain to get a better idea on U.S. expenditures related to US R&D.

I'd also suggest that you get off the me-too point, because if you really thought about it, you're wrong to be focused on it as an issue of any real importance.

As someone posted in response to an earlier message, there are two types of me-too drugs out there: molecules that have the same mechanism of action which are developed by a different company than the first drug-- this allows for more competition and lower prices. The second type are line extension drugs-- i.e. changes to existing drugs that allow for a new product to replace the old one after patent extension (i.e. Claritin to Clarinex). Pharma companies only produce them because people pay for them-- once people determine they'd rather take the older drug (Claritin) which cost pennies as a generic rather than pay dollars for the new one (Clarinex), R&D in this area (which is relatively cheaper, by the way) will cease to exist. The market is effective, in this case, in giving people what they want.

Posted by: Wisewon | Apr 18, 2007 1:51:07 PM


I think your example is a bit disingenuous. Do people really want newer, more expensive drugs? Or do they want to be healthier? I think you are, in effect, proving why market principles apply very poorly to health care. It is simply too complicated for the average person (or, even moreso, a poor, uneducated one) to be a rational consumer of health care. We rely on experts to tell us where to go. So people are swayed by smartly-done advertising to believe that what they want is Clarinex, when what they really want is to be able to smell dinner, which Claritin will provide at a tiny fraction of the price.

This is not the "fault" of the drug companies. Their job is to make a buck. The job of the insurance companies is to make a buck. The job of the health care "system", on the other hand, is to deliver good health outcomes. Which is why the "system" needs to go above and beyond insurance and pharma to live up to its potential.

Posted by: David S | Apr 18, 2007 2:08:48 PM

David S, keep in mind that the prescription decisions are largely made by doctors. A patient might not even say, "I need Claritan." The patient shows up, has an allergy, and is given a prescription for Claritan. And after all, that's probably what the doctor has a large stock of samples of. The "upsell" of on-patent drugs comes in part because those are the most heavily promoted on both sides of the transaction.

That said, there are medications for which small differences to achieve the same effect are useful. One could clasify the many SSRI drugs as "me-too" drugs, but frequently the diversity means that a patient can try the different variations until he or she finds one with the greatest benefit and least side effects, which vary greatly from person to person.

That said, enough with this claim that, "we pay more money because we subsidize the world's R&D." You know what? We can negotiate and we are perfectly capable of funding public research. And if universal healthcare in the US is achieved, it just means that pharm companies will have a LARGER MARKET (of the richest country in the world) to sell to. Excuse me if I'm not too worried about their plight.

Posted by: Tyro | Apr 18, 2007 2:20:30 PM

> David S, keep in mind that the prescription
> decisions are largely made by doctors. A
> patient might not even say, "I need Claritan."
> The patient shows up, has an allergy, and is
> given a prescription for Claritan.

Claritan is OTC now, but let's assume this was two years ago:

1) Patient shows up. Hardworking GP says, "Claritan is the most cost effective antihistamine, so let's start with that". Note the phrase "cost effective".

2) Claritan works well for 2 family members, doesn't work well for one, gives one bloody noses and horrifying nightmares

3) GP says, "Hmm. Let's try Zertec". Writes 2 prescriptions.

4) Drug store holds prescriptions for 3 days while arguing with insurance company.

5) Insurance company keeps GP on phone for 90 minutes (*uncompensated* time of course); agrees to allow "trial" of Zertc for bloody nose person but not person for whom Claritan just doesn't work

6) Family pays $40-$80 copay for 60-day supply of Zertec

7) 3rd family member returns to Benadryl, etc with usual unpleasant side-effects including possible car crashes from sleepiness

8) Repeat steps (4) and (5) every 60 days; gaps in supply; doctor starts to develop feelings of suppressed anger toward patient.

The kicker? Zertec is OTC in Canada at 1/5th the price as the US.


I mean, really: I take the fewest drugs I possibly can, and the cheapest my doctor can find in every category (he has a Palm Pilot program that searches automatically). I don't take drugs for fun, and I don't say "wheee - let's try that new one". I DO take the drugs that _work_, and not all of them do for all people.

Posted by: Cranky Observer | Apr 18, 2007 2:47:09 PM

Sorry Wisewon, that argument is pretty weak. Patients trust their doctors, doctors often have incentives to tell them to get functionally indistinguishable, brand-name medicines when the generics would work just as well. Advertising, obviously, plays a role too. Just because "the market" supports such scams, doesn't mean they're good. And i don't buy for a moment the idea that R&D -- which costs about 30% of what Pharmaceutical companies spend on advertising and administration -- would simply cease to exist if folks began using generics.

Posted by: Ezra | Apr 18, 2007 2:51:34 PM

Tyro, did you mean that the patient would ask for Claritin but would be prescribed Clarinex? Appologies if I'm reading your post incorrectly, but that seemed to be what you meant to me.

Posted by: Ben | Apr 18, 2007 3:03:00 PM

Ben, in my hypothetical situation, I supposed that a patient would come to a doctor and not say "give me drug X." I'd assume the patient would say, "I have problem X. Is there a medication for that?" I assume that the latter is the more likely scenario, and that the doctor, because he's had the new patented drug heavily marketed to him and has a stash of samples immediately goes for the newer drug, when the older, generic one might be just as effective.

I assumed that Claritin was the newer drug and Clarinex is the older. Apologies if I got that wrong.

Posted by: Tyro | Apr 18, 2007 3:14:45 PM


Let me respond to a few things.

1. I said that R&D for me-too drugs would cease to exist if people used similar generics, not all R&D

2. I agree patients trust their doctors. "Hey doc, this (generics) drug is going to cost me pennies, the (branded) other drug will cost me dollars. Is the difference really worth it?"

3. Advertising plays a role? You started this post saying patients trust doctors, implying the consumption decision isn't theirs but the doctors. Then you are saying advertising plays a role. Which is it? Again, for those who want to be cost-conscious rather than having "the latest and greatest"-- see #2.

Point 3a-- the "patient trust their doctors" meme (at least in terms of what you implied) is increasingly an outdated, antiquated notion (there is a large generational component here). Patients increasingly are making decisions with their physicians together, with the doctor playing the role of "expert," rather than "decision-maker."

4. Doctors have incentives? I am a doctor, and have no idea what you're talking about. Example please? (I'll help you here-- free lunch/pens and visits from a pretty sales rep. Let's pressure the AMA/drug industry to ban it, done.)

Posted by: Wisewon | Apr 18, 2007 3:15:59 PM


Sorry, I'm still not buying it. As Ezra says, doctors sometimes have incentives to up-prescribe to the still-under-patent drugs. And moreover, if I just saw a great commercial explaining the benefits of Clarinex, does my doc really want to go to the wall to fight with me about it? It's more money out of my pocket, and the insurance company's, not his. Where is his incentive to argue?
Clearly not all prescriptions are being chosen by doctors. If that was the case, pharma companies wouldn't spend money advertising on primetime TV.

Posted by: David S | Apr 18, 2007 3:17:36 PM

David S.,

See #'s 2, 3 and 3a above.

Posted by: Wisewon | Apr 18, 2007 3:18:41 PM

David S/Tyro,

To respond to David's last comment:

As I just wrote, the "incentives" comment by Ezra-- he's just wrong on that one. The rest of David's comment, i.e. patients asking about specific drugs, whether doctor will push back, impact of DTC-- that's 100% correct.

I have to mention though, the David is now arguing against himself like Ezra. First you posted that doctors make the decision, its too complicated for patients as rebuttal to my post, and then you make the complete opposite argument to Tyro.

As I said to Ezra, which is it?

Posted by: Wisewon | Apr 18, 2007 3:22:39 PM

As I said to Ezra, which is it?

That's a fairly ridiculous question: sometimes it's one, sometimes it's the other, either/or, or both.

Why on earth would there be only one decision-making paradigm across millions of people choosing to purchase drugs from experts?

Posted by: glasnost | Apr 18, 2007 4:24:31 PM

Why on earth would there be only one decision-making paradigm across millions of people choosing to purchase drugs from experts?

There isn't. Such stark oppositions have only a rhetorical existence for purposes of debate.

Posted by: W.B. Reeves | Apr 18, 2007 4:30:56 PM

Glasnost, Reeves:

Fair point, I'll take that back (it was an tangential point, rather than the substance). But let's not lose the larger point-- the comments #1, #2, #3 and #4 above still hold.

Posted by: Wisewon | Apr 18, 2007 4:51:08 PM


Points in order:

1) I'm certainly not arguing this one with you. Pharma companies aren't dumb-if nobody's buying, they'll stop researching. The problem is, people are buying.

2) I'm not a doctor, but my sense is that, while I'm sure this happens often, it also often happens that patient does, as the commercial recommends, "ask his doctor if...is right for him." See point 4 for more.

3) I think the role of 'expert' could be played by a doctor, or by a pharmaceutical company and a well-made commercial. I think this is clearly a step down from the 'old days', when the only expert around was the doctor. However, it is probably inevitable, given...

4) I'm not a doctor. My understanding, however, is that doctors are, sometimes, flown to conferences put on by Pharma companies, which pimp the company's products, explaining how an internal study showed 31% greater efficacy in treating X, Y, and Z. Or how this new version delivers 12 hours of relief instead of 8, (and at only 20x the price!) And, as I think you noted above, free samples are an excellent loss-leader to get someone started on an unnecessarily expensive med. Those are two possible bad incentives.

Posted by: David S | Apr 18, 2007 5:20:22 PM


On #2- This does happen, but like other advertisements, the consumer can still factor in cost/price just like with every other product-- but need some consultation with their physician.

On #3- While true, only one "expert" has the power to prescribe here. So the same conversation would still ultimately occur if patients wanted to tradeoff cost versus benefit-- "Hey doc, is this worth it?"

On #4- Sounds like we're in agreement here, which is that undue influence on physicians is the downfall to making #1, #2 and #3 function properly. I would note that much of the egregious gift-giving-- trips, dinners, etc. have been stopped by industry. The perception here is far worse than reality, although in my opinion there should be zero tolerance for these interactions. I've always hoped the medical profession would take the initiative to stop this, but surprisingly, pharma has been the more proactive one on this.

Posted by: wisewon | Apr 18, 2007 9:05:15 PM


I think we are quickly asymptotically approaching the same opinion here; chalk one up for rational debate. I will freely admit that a little more education and 'cost awareness vs. efficacy of generics' in patients will go a *long* way towards solving this particular issue we got caught up on (the nearly identical me-too patent drugs). I'll end by pointing out that this education hasn't happened yet, or at least not as fully as we can do it. The next question is; how do we make it happen?

Posted by: David S | Apr 19, 2007 12:12:19 AM

As long as its asymptotic, I think the fundamental laws of the blog-o-sphere will remain intact.

Posted by: RW | Apr 19, 2007 12:18:07 AM

David S,

My opinion is we need sufficient price differentials between generics and branded me-too drugs and/or formulary restrictions (not a ban) on using the latter.

Insurance companies typically are pushed back on from society when they take any action to restrict care, in perception or reality. However, in situations where we have generic and branded me-toos, it would be helpful to have health policy/wonk consensus that passing a greater portion of the cost differential/restricting formulary is good, and will encourage more of these conversations.

Add in a a system focused of consumer-directed health care (another long discussion for another time), where comsumers have the right tools to consistently review basic cost/quality information before/after meeting their physician and I think there is a solution-- one that helps this situation, along with many others.

Posted by: wisewon | Apr 19, 2007 7:05:36 AM

"You want to quantify the research claim, Tim? In other words, how much of that is in our per capita health spending? Any of it? None? Some? How much is publicly done through the NIH and the universities? How much of private sector R&D is on me-too drugs? Or are we just changing the subject?"

My point is not that it's done publically or privately. Rather, that it's done by the total US health care system. It's one ofthe reasons why that system is so expensive (only one mind, not claiming it explains all at all).

Posted by: Tim Worstall | Apr 19, 2007 7:31:00 AM

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