Page last updated at 11:20 GMT, Monday, 12 October 2009 12:20 UK

US health reforms could hit other countries

By Gemma Newby
Producer, US Health Reform, Beware of Side Effects!

Hospital room (file pic)
Some fear changes in the US will have a knock-on effect

The US spends 16.2% of GDP a year on its healthcare, twice as much per head as the UK does, and yet the average American's life expectancy is lower.

Whilst public debate on US health reform concentrates on reforming the insurance industry, the larger debate over how to change a system that has profits at its heart has become obscured.

Last year America spent $252bn on prescription drugs, and its people paid almost twice as much as most developed countries for their medicines.

While the US spent $2.2tn (£1.34tn) on healthcare in 2007, other OECD nations spent an average of 8.9% of GDP.

US drug companies can set the prices of their drugs at whatever price they think patients will pay for them, which means that even for Americans with health insurance, medical bills can be crippling.

"We went through our savings quite quickly," said Jim Eyler, who spends over £1,000 a month on his and his wife Jackie's drugs for cancer, asthma and diabetes.

I've taken second mortgages out twice to help pay the medical bills
Jim Eyler

"I've taken second mortgages out twice to help pay the medical bills. So every month we live month to month."

Yet the Eylers still fear reform of the healthcare system, which contains the financial incentives that they believe gives Americans like them the best medical treatment in the world.

But Dr Peter Bach, former head of cancer policy for the US government-run health plan Medicare, claims that the huge prices of cancer drugs which can sometimes cost up to $10,000 (£6,300) for a week's supply of pills, cannot be justified.

"If we have a situation where we're going to pay for any innovation just because the Food and Drug Administration approves the drug, even if it doesn't, for example, prolong the life of patients with cancer then, we have a market failure.

"It makes it harder to look at the innovation cycle and say 'look, we're spending our money well'," said Dr Bach.

If the United States was to substantially decrease the generosity of payment for pharmaceuticals, the resulting decrease in innovation would affect both Americans and Europeans
Darius Lakdawalla, director of the Bing Center

Some health economists, particularly those within the pharmaceutical industry, have issued a strong warning.

They have said that imposing a system of price control like there is in the UK under the National Institute of Clinical Excellence (NICE), risks damaging not only the health of the industry but the future health of a nation.

They have warned that high prices today provide cures for tomorrow's ills.

'Sticky problem'

Economist Darius Lakdawalla, director of the Bing Center for Health Economics in Santa Monica, said: "We all use the same drugs, we all enjoy the benefits of the same innovations so I think that that is definitely the case.

"It's a very sticky problem because a smaller country invariably has incentives to restrict its own spending, with the knowledge that it really is not a big part of the market.

A medic draws up a syringe
Some think the US drugs industry is not as productive as the UK's

"It is true that if the United States was to substantially decrease the generosity of payment for pharmaceuticals, the resulting decrease in innovation would affect both Americans and Europeans," he said.

The underlying assumption is that countries where drug prices are controlled are benefiting from the US system.

Some have said that US drug prices have to stay high to ensure that those in the UK can get drugs cheaper.

But some researchers like Professor Donald Light think the US pharmaceutical industry is not as productive as the UK's.

He said that in the UK not only did the drug industry spend less on making drugs, but it also put more of its profit back into researching and developing new drugs than US-based firms.

"British prices fully recover more research and development per million pounds per sale than the United States.

The pharmaceutical industry is going to go through a very hard time over the next three or four years
Michael Rawlins, chairman of NICE

"The US industry claims 17-18% of sales go into research and development but the British scheme allows up to 23% of sales to be fully recovered in British prices plus up to 22% of profits on capital."

Either way, the status quo is not sustainable and something has to give.

Chairman of NICE, Michael Rawlins, thinks the US has to start looking at whether all these pills, potions and latest products are really worth the money being spent on them.

"The pharmaceutical industry is going to go through a very hard time over the next three or four years.

"I think 20 or 30% of their drugs are going to come off patent and they're going to lose huge amounts of income and they're all worried," he said.

"They also recognize that the world has changed and in the old days they could just charge what they thought the market could bear, and it always paid up, and now they know those days are gone."

US Health Reform: Beware of Side Effects is broadcast Sunday 11 October at 1330 BST.



Print Sponsor


RELATED BBC LINKS

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2020 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific