Europe is Freeloading on American Healthcare

Andrew Heaton (0:09)

Hello, and welcome to The Political Orphanage, a home for plucky misfits and problem solvers. I'm your host, Andrew Heaton, and I'm not diabetic, but I am from Oklahoma, and I like cheesecake, so it's really a roll of the dice at this point.

Should I contract diabetes and require insulin to cancel out all that fried cheesecake I consume, I will pay much higher prices than our friends in Canada or Europe. We pay way more for insulin than Canadians. So what gives? Why am I getting screwed just because I like an occasional entire cheesecake? Today's guest is going to make the case that Canada and Europe are able to charge fractional health care prices precisely because American consumers first do the heavy lifting and why that is. And he will also argue that were America to transform our health care system into a price cap negotiated Canadian or European equivalent, that the Canadian and European systems we aim to emulate themselves would no longer work. It's health care and, to a lesser extent, cheesecake right here on The Political Orphanage.

My guest today is David Goldhill. He is a senior fellow at the Manhattan Institute, the CEO and co-founder of Sesame, an online marketplace for discounted health care services. And he is the author of Catastrophic Care, Why Everything We Think We Know About Health Care Is Wrong. Hello, David.

David Goldhill (1:49)

Andy, how are you?

Andrew Heaton (1:50)

Very good. Very good to see you. And very excited to talk to you about this topic today.

The big thing that I wanted to talk to you about is the idea that America is functionally NATO for health care. I read an article from you in The Washington Post about three years ago that made this claim. Walk us through this.

David Goldhill (2:09)

You know, the American health care economy is very large and very different than any other health care economy. To cut to the chase on it, the important thing about being the biggest and the highest prices and the freest is that America winds up being the engine for almost all important medical innovation occurring in the developed world. Now, that's often misunderstood, so I want to quickly explain when I say the engine, I don't mean the location. There is work done on improving health care all over the world, and by brilliant people everywhere in universities and companies and all the rest. So it is not about the location of the research or the location of development. What it's about is that everybody has the same business plan. I need to make my money in America. And then what I charge anywhere else almost doesn't matter.

And that's what makes us the second NATO is in the same way that the United States military is effectively a guarantor of Western European security. And that Western Europeans have used that guarantee to spend meaningfully less on national defense than we do.

In health care, the unique size and generosity of the American health care system has allowed every other major health care system on earth to spend a lot less.

Andrew Heaton (3:31)

So, okay, we're not the engine, we're the gas tank. We're the fuel source for all global innovation in health care, or we're an alliance share of global innovation in health care?

David Goldhill (3:42)

Any of those metaphors is fine. The thing that I think most people get it with is pharmaceuticals.

So, the US is 4% of the world's population, and we're 50% of the world's spend on pharmaceuticals. And it's heavily concentrated on new pharmaceuticals, brand-name pharmaceuticals. Interestingly, when it comes to sort of generic and older drugs, we spend in some cases less than other countries do. But the bulk of our spending is concentrated on the new, the branded, the experimental.

And so, I think people see it there, right? Because what happens is major drugs make almost all of their money in the US. Some of the estimates suggest that big pharmaceutical companies make somewhere between 70% and 80% of their worldwide profits in this one country that has 4% of the world population. That's an incredible number. And with that, you can see what it means, right? I'm going to make 70% to 80% of my money in America. My business plan is about how do I get a drug sold in America. And that's my business plan, whether I'm an American company, an Indian company, a French company, an Israeli company.

Andrew Heaton (4:54)

So, okay, if we're leading like Novo Nordisk in Denmark, which is like, Novo Nordisk is such a huge part of the Danish economy that they might as well have their own cabinet minister. Like, it's a gigantic portion. And it's the ones that pioneered GLP-1s, or at least the ones that came out recently.