November 15th, 2005

Brad @ Burning Man

Reminder: The Root Cause of 99% of America's Health-Care Screwup

When I wrote my sane, practical suggestion for the easiest, cheapest, least controversial thing we could do to the American health care system that would improve the most lives, I admitted that I don't have a solution for the bigger problem. When I wrote my analysis of Wal-Mart's new health-care proposal, people asked me what I would do instead, and I admitted I don't have a solution. But unlike most people who don't have a solution, and unlike nearly all the people who think that they do have a solution and are wrong, I know why I don't have a solution.

We have employer-paid health care in America specifically because health care used to be cheap. They were offered by companies during a short-lived (and unsuccessful, and dim-witted) experiment in national wage and price controls, as a way of offering stealth raises to attract and keep better employees. But the real reason why this particular benefit was chosen is that it cost next-to-nothing to offer. And the reason that it cost next-to-nothing to offer is that in those primitive times (when my parents were young) there just plain wasn't anything we'd call modern medicine. Other than antibiotics, which were now cheap (thanks to a government program during World War II), what they had for the most part was just aspirin, the ability to put a cast on a broken limb, and very rudimentary surgery to remove diseased organs. If those couldn't solve your problem, the doctor gave you a placebo and sent you home, hoping you'd get well on your own. Then came two breakthroughs, one scientific and one engineering. The scientific one was the discovery that most chemicals that act on the human body do so not because of their chemical properties, but because the shape of the molecule interacts with the shape of the targeted cell. Then came the engineering breakthrough, in 3-D modeling computer software, that made it possible for chemists to design new molecules to fit specific shapes. In the intervening 20 years since those two breakthroughs, almost every medicine we use today has been invented.

But even so, we still don't fully understand what we're doing. The pharmaceutical chemists can sort of tell what the shapes of receptor sites are using photographic X-ray microscopes. They can figure out the shapes of the body's own existing chemical signals. But because the body's chemical signaling system is so complex and poorly understood yet, when they design a new molecule, they have no way of knowing for sure what it's going to actually do in vivo without actually trying it. So each new hypothetical medicine involves coming up with a new theoretical molecule, finding a way to synthesize it, and then running it through tens or hundreds of millions of dollars worth of tests to find out whether or not the new molecule actually cures the disease it was aimed at, and even less predictably, what else it will turn off or on while running around in your bloodstream. Because we don't really know what we're doing yet, most of those experiments fail, nearly all of them.

So there you have it. We're still exploring the options that were opened up to us by 1980s breakthroughs in molecular biochemistry, but every experiment costs millions of dollars and nearly all experiments fail. However, each new molecule that doesn't fail cures yet another previously incurable disease, or cures a previously curable disease but with fewer unpleasant side-effects. We will set aside the issue of research that is done just to find almost-identical molecules and delivery systems specifically for the purpose of replacing an existing drug whose patent is about to expire with a new, no better drug that can be heavily marketed. For one thing, it's an issue I'm too angry about to discuss rationally.

But more importantly, that's a symptom of the greater root problem, which is this: if we want to keep coming up with cures for more diseases, and better cures than the imperfect ones we have now, who is going to perform those experiments, who is going to fund those experiments, and how are we going to get the money from the people who fund them to the people who perform them? Because we're Americans, the world's original pioneer in intellectual property law, we have a built-in bias in our Constitution towards using an intellectual property law solution. Private inventors (nearly all working for huge corporations) perform the experiments at their own expense, absorbing the losses. (Or at least, we keep lying to ourselves that they're doing it at their own expense, pretending that the refundable research and development tax credit isn't a taxpayer subsidy.) But when they find a new molecule, they get the exclusive right to manufacture and sell it under US patent law for a long time. The intent is for them to earn enough money from that government-protected short-term monopoly to fund the research that will pay for the next drug, and for the duration of that monopoly to be roughly the amount of time it will take them to do so.

When you take a medication that is still covered by a patent, you pay through the nose. (Or whoever is paying for it on your behalf pays through the nose, but for the purposes of discussing prescription costs, it's the same thing.) A trivial couple of percent of that cost pays for the manufacturing and distribution. A larger but still small chunk of that money goes to pay the salaries of everybody involved in selling it, from the manufacturer's advertising and sales reps down to the pharmacist who fills the prescription. But the vast majority of that money is being spent, not on your disease, but on some other disease. You've got cancer? Your new cancer drug is paying for what they hope will be the cure for AIDS. You're taking a new AIDS medication? Your AIDS medication is paying for the next baldness cure. You're using an expensive new baldness cure? Your baldness cure is paying for a hypothetical breakthrough in ovarian cancer. And so on, and so on.

Implicit in this bargain, though, is the idea that only wealthy people get the latest cures. Everybody else makes do with the cures that are old enough that their patents have expired. Which creates the impression, fairly or unfairly, that wealthy people's lives are worth saving but the poor and the middle class should just stay sick, die, and as the unreformed Mr. Scrooge said, "reduce the surplus population." The real health care crisis in this country is that we don't want to put up with that seven to ten year period where a disease is curable but only for wealthy people.

(More tomorrow.)