Saturday, December 12, 2009

All Dirty Laundry Shall Be Washed

One of the things that I really like about the health care bill is that the debate has been so wide-ranging, so vicious, and so generally desperate on both sides that almost all the issues are getting surfaced and debated in the general public (or at least the general blogosphere, which we will use as our proxy tree-ring data for the part of the general public that sorta pays attention).

Witness the current foofooraw over an amendment to allow reimportation of drugs from Canada, which violates the as-yet-unexplored deal between the White House and the pharma lobby. We heard about this deal last April or May in vague, impressionistic strokes; now we're gonna get to see the paint smears where the artist scratched his ass.

The Democratic strategy on this bill has been that, as long as you can do it quickly, you can make it as big and obscure and convoluted as you want. The Republicans have done an excellent job of making sure that it's being done in slow motion, so many of its inherent flaws are being exposed to the scrutiny of the unwashed masses. Mind you, the GOP isn't doing this out of civic duty--it merely wants to kill the bill. But it has unintentionally produced a much better public debate than otherwise would have been possible.

As for drug reimportation, let's look at the dynamics. First, all pharma companies know, in exquisite detail, the following pieces of data:
  • The cost of bringing a drug to market, given that the cost of all of the other failed drugs has to be amortized as well.
  • The global market for the drug.
  • The country-by-country breakdown on how that market is distributed.
  • The pricing policies of each of those countries, ranging single-payer-negotiated pricing in the single-payer systems to the unregulated prices of the US.
Now they can figure out how to juggle the prices to make the gross profit that they need so they can report the net margins to the financial markets that will keep them liquid enough to stay in business.

If the US reimports drugs from Canada, then the price in the US begins to approach the price in Canada. Once that happens, the drug company has to raise the price in Canada, which has one of two outcomes: either Canada refuses to pay, which degrades the quality of the Canadian health system (assuming the drug is actually valuable, of course), or it agrees to pay, which causes the price to rise in Canada, which in turn causes it to rise in the US. Either way, the real loser is the Canadian health system, since it becomes weaker either politically or financially.

So reimportation doesn't really hurt the drug companies (which is good, since now they can continue to develop as many drugs as they did in the past) and it weakens centrally managed health systems.

A win-win.

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