Arnold Kling  

Health Care Innovation

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Tyler Cowen reminds us that the U.S. is the leader.


In real terms, spending on American biomedical research has doubled since 1994. By 2003, spending was up to $94.3 billion (there is no comparable number for Europe), with 57 percent of that coming from private industry. The National Institutes of Health’s current annual research budget is $28 billion, All European Union governments, in contrast, spent $3.7 billion in 2000, and since that time, Europe has not narrowed the research and development gap. America spends more on research and development over all and on drugs in particular, even though the United States has a smaller population than the core European Union countries. From 1989 to 2002, four times as much money was invested in private biotechnology companies in America than in Europe.

Of course, my view is that some of this research money would be better spent determining which treatments are cost-effective. Or, as Tyler puts it, "the lack of good measures of health care quality makes it hard to identify and eliminate waste."


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COMMENTS (8 to date)
Nathan Smith writes:

Let's imagine that we track all the spillovers from US medical advances to the rest of the world. Now suppose we find a way to monetize the value of the services that foreigners receive from US-developed medicines. Now let's interpret all that value spillover as a form of foreign aid.

I wonder how that would affect the frequently-made claims that the US is stingy about foreign aid?

Bruce G Charlton writes:

I have argued that medical research funding may have over-expanded and be due for collapse - http://www.hedweb.com/bgcharlton/funding.html . It has looked for some time as if we are into diminishing returns in terms of therapeutic breakthroughs - and certainly the current rate of funding expansion is unsustainable.

Lord writes:

So I take it the problem is not we are spending too much on medicare but too little? What a novel idea.

Matt writes:

Probably cheaper to raise more babies.

Debusk writes:

Real health care innovation will not place until
regulations,laws,and licences are lifted that will allow firms and individuals to try different
ideas and methods in health care.Imagine Toyoda's
practices in healthcare,increasing productivity and quaklity.

Barb writes:

Can someone tell me how individuals benefit from the $28 billion spent by the Institutes of Health for research? It's my understanding they develop basic research, turn it over to a drug company who then finishes it and makes a fortune while pricing the drug so high basic taxpayers can't afford it.
When does the US taxpayer benefit from the billions spent by the NIH? How do we get our dividend on this?

Brian Simmons writes:

The U.S. is by far the leader of the pack in terms of biomedical research. I think that we in the U.S. take a great deal of pride in being the leader in many industries. This perhaps is one of those industries that our government feels is important enough to justify the nearly $100 billion budget. I agree that this is an important industry to invest money into, but at the same time those investments should be thought out and the cost-effective. The trend seems to be whatever the problem may be just throw enough money at it and it will eventually be figured out.

The research performed by The National Institute of Health and other like organizations is important. Who is this research important to? Well obviously the people that have disorders or diseases (and their families and friends) that are currently being researched would defend the amount of money being spent. The taxpayer’s money is being spent in large sums, but how much of that benefit from these investments does the average taxpayer see in the long-run. If the cure developed affects them or someone they know they see some benefit, but otherwise they probably see very little of no benefit (depending on their philosophy). Another issue that should be discussed is the costs associated with getting the drug after the research is finished. Once the drug is developed the research company turns the drug over to a manufacturing company that mass produces the drug and makes a fortune off of the sales. It would be nice to think that the organizations doing the research were doing it because they really cared, but even if they do they are still making large profits.

My main concern with the large amounts of money invested is the amount of thought and the level of analysis devoted to exploring an investment before diving in head-first. If the costs are justified then I see no problem with spending large sums of money on Research and Development in the biomedical field.

Dean writes:

While using money to make treatments more cost effective, it would be even better to make the treatment more effective. Quite a few surgeries have a low success rate but effective, a high success rate would make it easier for people to decide to do it. An even better thing would be if they found a way to cure things currently uncurable. Research funding would probably increase though I don't think they really need it.

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