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Rejecting the Canadian way

By Sally Pipes

For years, certain American politicians have been urging that country to model its health care system after Canada's.

It's never worked on a large scale -- Hillary Clinton's national plan famously went down in flames. So now these policy-makers are trying something smaller. America's expensive new Medicare drug benefit could be cheaper, they argue, if the government set prices, as occurs here in Canada.

Unfortunately, controlling drug prices won't save lives. It will lower life expectancy and, ultimately, increase costs.

I know, because I've seen it first-hand.

I'm a Canadian citizen living in the U.S. In 1999, my uncle in Vancouver was diagnosed with cancer. He was like a father to me, so I immediately began investigating possible treatments for his non-Hodgkin's lymphoma. I hoped there was something beyond his chemotherapy that could help. There was: A new drug, Rituxan, was showing great success in fighting the disease in American patients. But it couldn't help my uncle: Rituxan wasn't approved for use in Canada.

My uncle could have driven two-and-a-half hours across the border to Seattle. But that wouldn't have been easy for an 86-year-old man battling cancer. So my uncle never took Rituxan. The drug that may have saved him is still today not on the formulary in most provinces in Canada.

My uncle's story is heartbreaking. But unfortunately, it's not an isolated case. One hundred new drugs were introduced in the United States from 1997 to 1999. In that same three-year period, only 43 of those medicines became available in Canada.

Who knows how many lives could have been saved with those 57 medications that Canadians simply couldn't buy?

But that's what happens under a system where government has control over what drugs are approved and at what price they are available. Canadian health officials delay the introduction of new -- and sometimes costly -- drugs to save the system money. That's why it takes so much longer for cutting-edge medications to make it to market in Canada -- if they make it there at all.

Before the United States' new Medicare drug benefit offered seniors savings on their drug bills, elderly Americans may have trekked to Canada by the busload to buy cheaper drugs. But plenty of Canadians travel in the opposite direction to buy life-saving drugs their government denies them, and pay top dollar for the privilege.

The United States, unlike Canada and Europe, hasn't instituted a system of price controls on prescription drugs. That's why U.S. citizens, and those who can make the journey to the States, have access to the most effective drugs in the world.

Ironically, drug price-controls don't even end up saving money. A Columbia University study by Professor Frank Lichtenberg recently found that every dollar of increased spending on newer medications reduces other health spending by $7.17 on average. In other words, increased drug costs are actually associated with lower overall medical costs. That's because cutting-edge drugs keep people out of the hospital, which is infinitely more expensive.

Perhaps that's why the Canadian system is so expensive. Canada spends more on health care than all but two OECD nations with "universal access" health care systems. Canadian physician David Gratzer reckons that Canadian medicare costs working Canadians 21 cents for every dollar earned. Canadians earning $35,000 a year thus pay $7,350 for their medicare system.

Just this month, the Canadian Institute for Health Information released a report that drug spending in Canada is skyrocketing, despite the government's price controls and restricted formularies. The average Ontarian spends $837 on drugs a year, and that number is quickly rising. At $20 billion, Canada's prescription drug bill has doubled in less than a decade, and is on track to hit $30 billion by 2010.

Meanwhile, when you look at how poorly Canada's system performs, it isn't much of a bargain. While ranking third among OECD countries in health care spending, Canada is 13th out of 22 in access to MRIs, 17th of 21 in access to CT scanners, and seventh of 12 in access to mammographs. That lack of access is why Canada has seen a nine-per-cent decline in breast cancer screening for middle-aged women.

The fact is, drug costs -- especially with the introduction of the new medicare benefit -- are simply not that big a problem for most U.S. seniors. American households whose heads are over 65 spend $955 U.S. annually on prescription drugs. That's less than they spend on gas and motor oil. All told, American seniors over age 65 spend only three per cent of their incomes on the medications that make their lives better. They spend more on entertainment.

Take it from me, a Canadian: Americans should think twice before modelling the Medicare prescription drug benefit on the Canadian price-controlled system.

Pipes is president and CEO of the Pacific Research Institute and author of "Miracle Cure: How to Solve America's Health Care Crisis and Why Canada Isn't the Answer." E-mail:

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