Wednesday, November 19, 2003

 

Jess & I went to Manchester, N.H. last night to attend a John Edwards "house party". One of Jess' close friends from Princeton is working on the Edwards campaign, and invited us up.

It was neat; he seems like a charismatic guy with Clinton-like political intelligence and empathy, and pretty reasonable positions. Or so I thought. Jess disagreed somewhat virulently with some of his positions & with his background; he's for universal healthcare, which she thinks will kill physicians and the quality of care, and before he was a Senator he was an ambulance-chasing lawyer (essentially), and Jess thinks the biggest thing medicine needs is tort reform. She also thought he was disingenuous and factually wrong when he indicted drug companies for spending too much on advertising, while claiming they need to keep pricing power in order to maintain R&D and develop new drugs.

Here's what my friend Google told me this morning:

On Merck's financial sheets there's a "Selling, General, and Administrative" line that's $6.2 Billion, annually, which compares to an R&D budget of about $2.5 Billion, annually, averaged across the last three years.

In 2000, according to an NIH study, $15.7 Billion was spent, industry wide, on 'advertising', with 16% of that, or $2.5 Billion, spent on direct-to-consumer (DTC) advertising. (Fully 50% was 'spent' on donating free samples to physicians - read: 'taken as an expense for tax purposes', as manufacturing costs are pretty tiny compared to the retail price that's tallied; this is however neither here nor there.)

Merck's revenues for 2002 were about $52 Billion, or about 1/6 of _worldwide_ drug sales ($300 Billion) , so if they advertise proportionally, their annual advertising budget should be something like $2.6-5.2 Billion, with $0.4-0.8 Billion of that spent on DTC (the range is because the advertising figures are for the U.S. only, while the 1/6 is based on worldwide pharma revenue). Even the low end of that range ($2.6 Billion) is equal to their annual R&D budget. Then again, the DTC number only amounts to 1-2% of annual revenues.

Jess' biggest issue with universal healthcare is that she thinks government price controls and mandates (combined with malpractice insurance costs, which are already huge) would make it impossible for physicians to stay afloat financially, and over time this would dissuade the most qualified potential doctors from entering the field. A big part of the equation is the up-front cost of medical school, and the crippling debt physicians carry as a result. My suggestion was that while we were socializing medical care, we could socialize medical education at the same time, for an incidental amount of money.

Something like 9,000 people matriculate in U.S. medical schools every year; the full cost for 4 years of school averages something like $200,000, including living expenses. Fully subsidizing this would thus cost about $2 Billion annually.

This is a lot of money, and then it's not so much money.

The annual NIH budget is about $26 Billion (as an aside, this is twice what it was in 1998, but Bush wants to limit annual increases to 2% annually for the next five years.)

Kuchinch, the "extreme leftist" in the democratic primary race, has a 'plan' for a single-payer healthcare system, and it looks like he's proposing annual spending of approximately $2 Trillion ($2,000 Billion).

So you could make medical school free, with stipend support, and only increase this budget by 0.1%.

This would mean more qualified people applying to med school (since it would be free) and it would mean doctors would come out free of debt, good for several reasons.

For an additional 0.1% you could double the number of physicians in training, and (for instance) let interns work 55 hours a week instead of 110. Heck, for another $80 Billion over 10 years (another 0.4%) you could pay back all the practicing physicians who have gone to medical school in the last 40 years for their costs of education (or, taking into account the fact that costs used to be lower, you could probably pay back every physician still practicing.) Both of these are somewhat loony proposals, but I include them just for the sake of illustration: lots of potential ways to improve the system are really pretty tractable, when you're talking about throwing around 2 Trillion dollars.

posted by Miles 8:39 AM