Canada - Healthcare "Parasite"

[ironsides]

Everyone (most) know that Frederick Banting (Canada) gave us insulin and without him a lot of people would have died. Jonas Salk (U.S.) gave us the polio vaccine, so what. There is no point in debating who or what individual gave us what, The point trying to be made is that the major pharmaceutical companies are in the U.S. and the other little companies throughout the world cannot afford the research that goes into developing new products. Yes the major pharmaceutical companies will make big profits considering they have invested huge amounts of money into research and development. That is free enterprise at its best or worse. Yes, Michael Moore is full of crap.

 

[coldstream]

Here’s what happens. We have a (relatively) free market in the US where drug companies spend a ton to develop new wonder drugs, a non-trivial amount of which is spent to satisfy regulatory requirements.

The cost of this development is called a “fixed cost.” Once it’s developed it does not cost that much to make each pill. Here’s what happens. We have a (relatively) free market in the US where drug companies spend a ton to develop new wonder drugs, a non-trivial amount of which is spent to satisfy regulatory requirements. The cost of this development is called a “fixed cost.” Once it’s developed it does not cost that much to make each pill.

One of the great falacies of the American Health Care system is that it is a free market. It is such in only one respect, it gives privateers the right to pillage government investment in basic research for their own profits.

The cost of developing new drugs is dependent on government expenditures through research institutions in the public domain, and universities, which is then built on and claimed by proprietary licence by pharmaceutical companies. The entire health care system in the U.S. in building hospitals and health infrastructures is signicantly financed by government, which then allows rapacious private health insurers to ration and take all of the profits from it.

I saw an advertisement in the U.S. as they debate health care, featuring a disgruntled Canadian complaining about lack of access and waiting periods, etc. But that has not been my experience or that of my family. Thankfully that has been fairly rare, but both in instances of emergencies, and 'care' for parents and grand parents at the end of life, the health care has been excellent and immediate.

 

[YukonJack]

"What I am saying is that the messenger is unreliable enough not to believe anything he says."

Therefore, whatever one reads in the New York Times, Washington Post, Times Newsweek, or views on CNN., ABC, MSNBC is totally tainted with unreliability, because they are notoriously slanted towards the Left.

Or how about anything you, yourself, post? Everyone who reads these forums knows that your blind adoration of Obama renders anything you say - by your own definition - totally unreliable and subject to serious doubts.

 

[ironsides]

One of the great falacies of the American Health Care system is that it is a free market. It is such in only one respect, it gives privateers the right to pillage government investment in basic research for their own profits.

The cost of developing new drugs is dependent on government expenditures through research institutions in the public domain, and universities, which is then built on and claimed by proprietary licence by pharmaceutical companies. The entire health care system in the U.S. in building hospitals and health infrastructures is signicantly financed by government, which then allows rapacious private health insurers to ration and take all of the profits from it.

The research that goes into developing a new drug vaccine etc, can take years. Then there is usually up to a 15 year testing period. before the public gets it. Of course if there is a pandemic it will be released sooner. Some of this is paid by the goverment (which of course is us), but the large companies do support their own research, small companies cannot afford it.

"I saw an advertisement in the U.S. as they debate health care, featuring a disgruntled Canadian complaining about lack of access and waiting periods, etc. But that has not been my experience or that of my family. Thankfully that has been fairly rare, but both in instances of emergencies, and 'care' for parents and grand parents at the end of life, the health care has been excellent and immediate."

We are no different than what you said. One of the arguments going on here is whether small business's should be forced into paying something towards this new health plan for their employee's. Then there is the increased cost every person will be required to pay thru tax's, as well as being fined $1,000 per year if you refuse to take the goverment health plan. Probably others that I cannot think of at the moment.

 

[Cliffy]

We are no different than what you said. One of the arguments going on here is whether small business's should be forced into paying something towards this new health plan for their employee's. Then there is the increased cost every person will be required to pay thru tax's, as well as being fined $1,000 per year if you refuse to take the goverment health plan. Probably others that I cannot think of at the moment.

A friend of mine is an American with dual citizenship living in Canada. He said the biggest difference between the two health care systems is that in Canada if you need medical care, you do not end up with your grandchildren paying for it. He had a medical emergency last year and was very thankful for living here. He still has family in the US and is always apprehensive to visit them in case he should need medical care down there, even though he carries extra out-of-country med insurance.

 

[Toro]

Cliffy

I am a Canadian who has lived in the US for more than a decade.

I prefer the US system because I get better care.

But that is just me. Others may have different experiences.

If I were poor, I'd rather be in Canada.

 

[Polygong]

Slight anecdote to Cliffy's post, on a visit to the UK earlier this year, my daughter became ill and needed emergency medical treatment. We had purchased travel medical insurance so I wasn't worried about the cost. After she was seen to and treated, I offered up the insurance info to the people at the hospital and previously to the paramedic who first came on site. Nobody would hear of it, despite being from out of country they did not bill us for any of it. I even had to practically force the taxi driver who took us to the hospital to take the fare, he said he felt guilty profiting from driving someone with a sick child to the hospital.

Needless to say, I was absolutely moved and astonished by it all. I think it says alot about what's really important when it comes to health care. For those who don't know BTW, the UK has a mixed public/private system.

 

[ironsides]

A friend of mine is an American with dual citizenship living in Canada. He said the biggest difference between the two health care systems is that in Canada if you need medical care, you do not end up with your grandchildren paying for it. He had a medical emergency last year and was very thankful for living here. He still has family in the US and is always apprehensive to visit them in case he should need medical care down there, even though he carries extra out-of-country med insurance.

Cliffy,

I cannot see how his grandchildren will have to pay for anything. You are a individual, your family is not responsible for your debt. One Snowbird from Canada that I know, had a auto accident last year and spent some time in the local hospital, your health system paid everything. I think your friend, just has a fear of the unknown. He should be just fine if a emergency arises.

As for U.S. residents, the most they can collect a percentage of what you personally have, and they cannot leave you with nothing. For example if your only source of income is Social Security, their max. is 10% per month till bill is paid, and since your on Medicare most of your bill is paid. People with no income usually have Medicaid to pay their medical bills. Medicaid is funded by the States and Fed. Goverment and can vary. Illegal aliens even get Social Security, Disability if needed and Medicare. (They usually have not worked one day that tax's were ever taken from them.)


I you are poor as Toro mentioned, your health system is probably preferable.

 

[taxslave]

Cliffy

I think there is some truth to this. The pharma industry is pretty powerful here in America.

It is also interesting to note that Canada has every few companies producing new pharmaceuticals. If one were to take the relative size of each country's economies, Canada would be producing far more pharmaceutical products.

I don't think you are going to find a simple answer to your Question because I don't think there is one. Part is the way drugs are priced in Canada where the government negotiates the price or more like a volume discount same as wallyworld buying a car load of something from a manufacturer is going to get a far better price than joe average buying one. All the drug companies whether American or European make excessive profits anyway. They also have no incentive to cure any disease, only maintain the victim as a cure would cost them a customer.
One of the reasons for the lack of pharmaceutical companies in Canada is the small domestic market and the protectionist US and European governments that make exporting difficult.
My wife is a naturopath so we don't contribute much to their profits anyway since we have no faith in their products. Remember all these things are brought to you by the people who made Thalidomide.

 

[Francis2004]

Can anybody offer an intelligent rebuttal to this argument. "Americans are greedy idiots" is not an intelligent rebuttal BTW.

Zero Hedge: A "Criminally Insane" Cliff Asness Takes On Health Care Mythology And Pretty Much Everything Else

Ah … one of the holy myths of the “US health care sucks” crowd. This should be fun.

The general story is how you can buy many drugs in Canada cheaper than you can buy them in the US. This story is often, without specifically tying the logic together, taken as an obvious indictment of the US’s (relatively) free market system. This is grossly misguided.

Ok here is my take on this..

You must remember a few things about Canada's Health Care System..

1. It's not free
2. What you don't pay on one side you get slid the hand in the pocket on the other side for ( hence in your taxes of all types ).
3. The system is made to be Universal, so rich or poor, anyone gets the same treatment but as point 2 makes, someone makes it up for point 1.

Second I know of no business that sells at no profit. So if big Pharma US was losing money in Canada it would have left here a long time ago and pulled out. But here is my take on it..

Big US Pharma can raise a stink about it but why has it not stopped it shipments of these cheap drups to the US a much larger market then Canada ? My simple logic of viewing this is that while it can supply drugs thru Canada it can protect itself from the Super Mega Blockbuster Lawsuits it has seen in the US for Cross border "gray" market drugs for those buying them in Canada at a reduced rate and still heap in the money..

This would fall in line with California in 2004 wanting to make Canadian Drug purchases easier to buy. California has the Population of Canada alone and other States were thinking of following suit.. Why would Pharma worry about Canada and not just block entry of these drugs.. Of course the news article discusses changing drug names but have you seen that happen ?? Link

Third and most important to us in Canada when this was discussed 2004 and on. This California Drug drain alone would strain Canada's ability to supply our own country of much needed supply to support our own system. Imagine adding more States to the fray ?

And if your interested in what Canada has had to offer Medicine and Health Care ( which benefit Big Pharma ) you may want to look at this site..

The History of Canadian Medicine

As Niflmir has said, your chasing a herring..

 

[Liberalman]

It's business; drug companies have to sell their products even at a discount to foreign countries that have government healthcare.

America will pay the American drug makers their inflated price because they are patriotic citizens supporting their price gouging drug industry and the American dream and they will die for that right.

All Obama is saying to the American drug makers is to give the best price that they are giving to other countries to the American people.

America is getting out of the war business and getting down to taking care of it’s own people for once.


When Harper wins a majority then he will answer the war cry and become the new warmonger and raid the healthcare account to finance the war.

According to the latest statistics Canada is a major supplier of weapons to the worlds major conflicts.

 

[Niflmir]

Second I know of no business that sells at no profit. So if big Pharma US was losing money in Canada it would have left here a long time ago and pulled out. But here is my take on it..

Using Toro's numbers above you can show that allowing a company to sell drugs at different prices around the world instead of a single price allows them to increase their profits by a factor of 100. This "subsidization" allows them to go from making hundreds of millions to tens of billions.

The drug companies like it the way it is. If you like consumer surplus, you don't like the way it is.

 

[Toro]

Francis

Profit margins are high for drug companies, roughly double that of a typical corporation in the US at ~15%. So they are very profitable. But clipping the profits of the "greedy" drug companies would most likely lower drug prices by no more than 10%. Thus, if states started forcing down prices in the manner you suggested, there is some room for maneuver. But at some point, export prices for drugs would begin to rise if domestic prices were forced lower in the US.


Taxslave

The reasons why there is a very small pharmaceutical industry in Canada are many, but it is not because of US protectionism and the size of Canada's market. The US does not discriminate against imports of primary drugs, other than the drug must be approved by the FDA. As for size, Switzerland is a small country and has a significant pharmaceutical industry.

 

[Niflmir]

Francis

Profit margins are high for drug companies, roughly double that of a typical corporation in the US at ~15%. So they are very profitable. But clipping the profits of the "greedy" drug companies would most likely lower drug prices by no more than 10%. Thus, if states started forcing down prices in the manner you suggested, there is some room for maneuver. But at some point, export prices for drugs would begin to rise if domestic prices were forced lower in the US.

Using the numbers you gave, the price for the drug in a competitive market is $7.33, 41% of the price they would charge in the US and they would still make hundreds of millions including the startup costs. So your argument doesn't really support your conclusion.

 

[Toro]

Nope.

If the contribution margin on the product falls in the US, then the company would have to allay the fixed costs across different markets, after any excess profits are taken away.

 

[Niflmir]

Nope.

If the contribution margin on the product falls in the US, then the company would have to allay the fixed costs across different markets, after any excess profits are taken away.

Yes, of course. They would do that anyways. The point is that there would be a drastic decrease in price in the US for a pittance increase elsewhere.

 

[Toro]

Depends on the size of the foreign markets. But if countries are holding down the price of drug below total cost - and I am speaking hypothetically as I am not making that claim - then prices cannot fall below the firm's cost of capital without imperiling the firm.

 

[Niflmir]

Depends on the size of the foreign markets. But if countries are holding down the price of drug below total cost - and I am speaking hypothetically as I am not making that claim - then prices cannot fall below the firm's cost of capital without imperiling the firm.

Yes, but you didn't consider that either, so I made the assumption that the need for the drug in foreign countries equaled the need in the US.

I fail to see how your hypothetical is relevant since in my analysis this never happened, even though strictly speaking it was allowed. If you simply write out the math, and attempt to maximize profit or enforce competition, it never happens.

The point is that by allowing them to sell at $12 in the US and $7 in Canada, you are allowing them to swallow up your consumer surplus. You are getting ripped off.

 

[YukonJack]

In Canada the only medical procedure one does not have to wait nine months - but should - is abortion.

 

[Toro]

Yes, but you didn't consider that either, so I made the assumption that the need for the drug in foreign countries equaled the need in the US.

I fail to see how your hypothetical is relevant since in my analysis this never happened, even though strictly speaking it was allowed. If you simply write out the math, and attempt to maximize profit or enforce competition, it never happens.

The point is that by allowing them to sell at $12 in the US and $7 in Canada, you are allowing them to swallow up your consumer surplus. You are getting ripped off.

Regardless of where the consumer surplus is allocated, the returns across the firm must equal the cost of capital for the firm. If, because of structural issues as there are in Canada, the firm sells its products below the cost of capital in one market, the firm will require a return above its cost of capital in other markets, i.e. the US. Otherwise, the firm will stop selling its product in the lower-priced market. As you know, the firm will sell a product to the point when the marginal revenue equals the marginal cost. As long as the firm can return above its cost of capital across different markets, it will sell its product in different markets up to the point where the variable contribution is zero.