Posted on August 1st, 2009 by D. Aristophanes
Ezra Klein and Ben Domenech (!) both do a fine job of upending Megan McArdle’s widely linked, glibertarian mess of an argument against national health care.
But they leave a few basic things out, which we’ll get to.
Klein accurately breaks down the McArdle position:
Megan has two primary concerns. The first is that national health insurance would succeed in reducing health-care costs, and that would limit the rewards available for medical innovation (drugs, devices, etc), which would in turn reduce medical innovation and prevent future generations from enjoying wonder drugs. “If you worry about global warming,” she writes, “you should worry at least as hard about medical innovation.”
Second, national health care gives elites license “to wrap their claws around every aspect of everyone’s life.” Her primary example is obesity. Megan believes that national health insurance will give the government license to decide that we can never really want a second chocolate eclair. She also believes that the real reason most every epidemiologist in the country is worried about obesity is because they hate, and are disgusted by, poor people.
McArdle’s second point is standard wingnut scare-mongering over a government takeover of our lives — not really worth spending much time on. Suffice to say that Big Insurance already does plenty to penalize that second chocolate eclair, and Domenech credibly fingers Big Pharma as the culprit in our redefining of obesity downward:
As a side note: If you want to understand why in 1998 the medical community suddenly decided that you were overweight at a body mass index of 25 instead of 27.8, taking the WHO view (based on the BMIs of Africa and other developing nations as opposed to the long-held U.S. definition) and suddenly making 30 million Americans ‘fat’, just look at the makeup of the advisory panel — Pharma pushed this decision through, which had the effect of instantly adding millions of customers. But again, it’s nothing personal, just business.
But it is McArdle’s first point that is the glibertarian landmine, that long-standing trope that government provision of goods and services necessarily destroys innovation, which can only ever be fostered by the good old invisible hand. Again, Domenech (!) makes an excellent point about one particular peril with the worship of the market — big profit-making entities are not incentivized to produce better products or products that would benefit more people if doing so would possibly cannibalize or otherwise jeopardize their existing revenue streams.
Now robust competition in the marketplace can force the big companies’ hand in this regard. But there isn’t always robust competition and even if there is, the sheer size of a market leader can often delay the development and penetration of the better product for quite a long time. This is why Microsoft and Oracle continue to sell tons of expensive boxed software products despite the growing realization that hosted ‘software-as-a-service’ or ‘cloud computing’ is probably a cheaper and more efficient application delivery system for most of the market. Cloud computing is almost certain to win out in the end, but probably not before your company sinks a ton of capex into Windows 7 licenses.
McArdle also shows her bias by presenting innovation as purely the development of the next generation of wonder drugs. She rightly notes that innovation is not normally due to some Eureka! moment ‘by a mad scientist somewhere’ but rather ‘more often a matter of small steps towards perfection.’ Which is fine, but McArdle is wholly blind to an entire category of medical innovation — one that many other countries have hands-down achieved in superior ways to the United States, and it is this:
The delivery of better health care to more people at less cost.
Is this not a medical innovation? Is it not, perhaps, the most important medical innovation? Wonder drugs for future generations are great and necessary, but the delivery of better outcomes to people today must be considered equally important, if not more so. And just like the development of wonder drugs, delivering better health care to more people at less cost requires smart people and incremental steps and means-testing and a competitive ecosystem and all the criteria that McArdle might use to characterize ‘innovation’.
It’s a bit ironic, too, that McArdle chooses Wal-Mart’s supply chain management as a shining example of American free-market innovation. Because a centrally administered, regionally operated distribution network that leverages economies of scale and serves a national market is so totally opposite to what a national health care system would look like.
But perhaps McArdle is correct and wonder drugs would disappear if we were to expand national government-run health care beyond the very successful programs we already have for seniors, veterans and, with S-CHIP, children. If so, it seems clear that countries that already have such expansive national health care programs would necessarily have little or nothing in the way of wonder drug production.
A point to McArdle, but as Columbo might say, there’s just one more thing that’s bothering me:
The 50 Largest Drug and Pharmaceutical Companies in the World
By Revenue
Johnson & Johnson USA 53,324
Pfizer USA 48,371
Bayer Germany 44,200
GlaxoSmithKline United Kingdom 42,813
Novartis Switzerland 37,020
Sanofi-Aventis France 35,645
Hoffmann–La Roche Switzerland 33,547
AstraZeneca United Kingdom 26,475
Merck & Co. USA 22,636
Abbott Laboratories USA 22,476
Wyeth USA 20,351
Bristol-Myers Squibb USA 17,914
Eli Lilly and Co. USA 15,691
Amgen USA 14,268
Boehringer Ingelheim Germany 13,284
Schering-Plough USA 10,594
Baxter International USA 10,378
Takeda Pharmaceutical Co. Japan 10,284
Genentech USA 9,284
Procter & Gamble USA 8,964
Teva Pharmaceutical Industries Israel 8,408
Astellas Pharma Japan 7,850
Daiichi Sankyo Japan 7,158
Novo Nordisk Denmark 6,520
Eisai Japan 5,583
Merck KGaA Germany 5,175
Alcon USA 4,897
Akzo Nobel Netherlands 4,694
UCB Belgium 4,426
Nycomed Switzerland 4,264
Forest Laboratories USA 3,442
Solvay Belgium 3,268
Genzyme USA 3,187
Allergan USA 3,063
Gilead Sciences USA 3,026
CSL Australia 2,788
Chugai Pharmaceutical Co. Japan 2,787
Biogen Idec USA 2,683
Bausch & Lomb USA 2,292
Taiho Pharmaceutical Co. Japan 2,069
King Pharmaceuticals USA 1,989
Watson Pharmaceuticals USA 1,979
Mitsubishi Pharma Japan 1,945
Shire United Kingdom 1,797
Cephalon USA 1,764
Dainippon Sumitomo Pharma Japan 1,763
Kyowa Hakko Kogyo Japan 1,698
Shionogi & Co. Japan 1,640
Mylan Laboratories USA 1,612
H. Lundbeck Denmark 1,552