Yesterday I reported on a new Fraser Institute study by Brett Skinner and Mark Rovere, noting that the existing government drug system does not serve poor people well and claiming that the best way to fix the system is to make it harder for Canada to check whether drugs are safe and harder for poor people to afford the drugs when they are proven safe. By the way, Skinner really is a doctor, as the study says, but he is a doctor of political science, not medicine. I pointed out that the study is ethically challenged, and now it’s time to tear the substance to shreds, too.
Before I go on, let me make clear that the Fraser Institute is talking about a real problem here. But it’s not the problem they’re discussing. Right now, Canadians do not receive fair and timely access to new medications — what the Cancer Advocacy Coalition has called a “postal code lottery.” Take lymphoma, for instance. There are six important new medications that can save or extend the lives of people with this form of cancer that have been introduced over the past 15 years. In BC, you might be prescribed any of four of these medications (the two newest ones are still in review). In Ontario, by contrast, you only qualify for two. Why?
Not because the drug approval process is slow. That doesn’t help. But the real problem is that provincial drug review, unlike federal drug review, is based solely on political and economic questions of cost: in short, is the drug high-profile enough that the government should devote money to funding it? In today’s political culture, the answer is usually “no.” In any case, both problems are easily solved with exactly the same method: we need more funding for Health Canada if we’re going to approve drugs more quickly, and we need more funding for hospitals and provincial drug plans if we’re going to use them to dispense more new drugs.
The Fraser Institute, however, chooses Option B: a nifty bit of sleight-of-hand which is so unrelated to the actual problems as to be classified (by me, anyways) openly deceitful. The Fraser Institute says that we should eliminate drug safety and cost reviews and hand all drug coverage over to the private sector. The Fraser Institute points out that private extended health insurance plans available to Canadians who can afford them tend to approve more drugs, more quickly, than the provincial health plans that dispense drugs to hospitals and to lower-income people. So, the Fraser Institute says, Canadians will get the best access to the best drugs if they all use private insurance plans.
Now, this is akin to saying that people shouldn’t complain about traffic jams because, if they really cared about it that much, they would just use their private helicopters to fly to work. The reason that private health insurance more readily funds expensive drugs is because the people who can afford to buy such plans (or whose employers can afford to do so) invariably spend more money doing it. Bizarrely, I can find in this report no comparison of the cost of comparative programs, which the Fraser Institute is usually obsessed with. Ironically, just one month ago, the authors of this study published an op-ed claiming that only relative cost was a useful comparison when discussing different healthcare systems.
Let’s close this up with a thought experiment that Skinner, despite having a PhD, apparently was not capable of conducting. Let’s say the government really does hand over all drug coverage to the private sector and then hands out means-tested subsidies for poor people. Then the insurance company… does what, exactly? Runs out and robs a pharmacy? The drug price is not going to change simply because the purchaser does. That’s how markets work.
Next, the government will then have to decide how big the subsidy should be. To do that, they will have to identify all the new drugs that they think all people deserve to access, and how much that will cost. Then, they will give the money to the private sector to dispense. Since the province is still deciding which drugs are worth funding, the health outcome will be exactly the same, and so will the financial outcome, with two important exceptions. First, now you’re paying more, to cover both private and public bureaucracies. Second, in the worst-case scenario, the lag time between private price increases and public subsidy increases will be big enough that poor people will be continually punted off their insurance as the subsidies fail to keep up with the price hikes.
There are two solutions to the drug problem. We can spend more money funding drugs in the existing system, or we can force the drug companies to lower prices. Either of these are feasible options for government, and neither of them have anything to do with who runs the insurance system. As usual, this study is a simplistic bait-and-switch scheme by the Fraser Institute and its corporate backers to build a deceptive case for privatization.Tweet