Life Expectancy under the Affordable Care Act
The main problem with the Patient Protection and Affordable Care Act (PPACA) is that in order to extend healthcare to all citizens as a right the law undermines the fundamental free market basis (or what remains of it) of the entire U.S. medical system. Under PPACA, in every interaction between patients, doctors, insurers, manufacturers and researchers, the incentive to control costs and provide better service is replaced with the decree to do so. When the Affordable Care Act passed through Congress, Nancy Pelosi famously remarked that universal healthcare -- socialized medicine -- was becoming a reality "after 100 years of trying." It will be interesting to see therefore, whether the next 100 years of government-directed medical technology will compare favorably or otherwise with the dizzying advance of medicine during the last 100 years.
Today, ninety-five percent of the new drugs coming on the market are developed for sale in the United States. For years, according to a study in Nature Reviews Drug Discovery, pharmaceutical companies in Western Europe have been introducing new medicines in the U.S. before introducing them in their home countries; typically by eighteen months. This is due to regulation of drug prices in Europe that makes recuperation of R&D costs (a very high 20% of revenues in the pharmaceutical industry) impossible there. Consumers in Canada and Western Europe enjoy a free ride, buying drugs at much lower prices and thereby not contributing to the R&D costs which we in America pay. Countries like China, Russia and India essentially ignore intellectual property rights altogether and develop "knock-off" drugs with no compensation to the developer whatsoever.
This cost to the American consumer does not come without a benefit. Americans are the first to have drugs like AZT, Cimetidin, tPA and new cancer drugs. The benefit is not limited to medicines. Medical devices used for everything from medical assaying for disease tests, to high technology tools used in open heart surgery, to the latest MRI equipment are also available earlier and in greater volume in the U.S. Consequently, the cutting edge of medicine is in the U.S. and the chances of surviving a serious disease are far greater here. To give one well-known example, if you are diagnosed with cancer in the United States, you will live two years longer (on average across economic class and all cancers) than if you are diagnosed with cancer in Western Europe.
What happens when 300 million consumers of medicine and medical technology are replaced by one consumer, the government, and drug prices are regulated here?
Regulation of drug prices and assessing of taxes on innovators are not hypothetical consequences of PPACA, they have already occurred. Drug manufacturers specifically conceded $80 billion of revenue to protect themselves from re-importation of drugs in the original writing of PPACA. And the excise tax on medical device manufacturers will cost the top 19 companies in the state of Massachusetts $422M this year alone.
In the theory of diffusion of innovation, "early adopters" are a critical class of consumers that makes the spread of good new ideas possible. Early adopters, for example, buy the new iPhone earlier (and at a considerably higher price) than the bulk of consumers. The high price that they pay fuels further innovation (e.g. the next iPhone).
America is the early adopter of medical technology in the world. And the pharmaceutical industry is, if anything, more fragile than the electronics industry. Drug development involves a few hits and a lot of misses of new products. For example, the company Genzyme, which is one of the more mature high tech drug manufacturers, having been in business for thirty years, derives its entire revenue stream essentially from three drugs.
With the inevitable regulation of drug prices under Obamacare, the link between successful product development and revenue will be broken and the initiative to develop new drugs will have to come increasingly from government. The history of state control of consumer product development of any kind is not reassuring. In the former Soviet Union for example, from 1960 until around 1987, life expectancy actually decreased; even as it was increasing in the rest of Europe and most of the free world.
More than being unable to keep your own doctor or paying increased premiums, more than facing the reality of death panels, the real devastating consequence of the Affordable Care Act will be that as government regulations take over research and development in medicine, the medical miracles that we grown accustomed to for the last 100 year will dwindle and cease. This is all the more lamentable insofar as medical science is on the cusp of new discoveries that will, if given the chance and the market, lengthen and strengthen our lives. So it is not too much to suggest that the day that President Obama signed the Affordable Care Act into law, my children's life expectancy dropped by ten years. And so did yours.
The writer is a Nanoscience Researcher at Harvard University.