What is missing from the debate in the US about a universal healthcare program is reflection on what has worked and what has not worked in other countries.

Canada is often cited as an example of a system that works for all citizens; there is no discussion about how it does not work and why, for many Canadians.  I think Americans should take a close look at the limitations of the Canadian health care system (1) and avoid them.

America has an opportunity to establish a functional healthcare system ensuring that key issues that have befuddled other national healthcare programs in the delivery of healthcare are avoided.  This is key to a better cost-effective delivery system.

So far America has been in one big screaming match and the voices of reason are being ignored.  This will inevitably lead to a flawed solution assuming something finally gets done.

I can remember when the previously unknown Tommy Douglas (a Baptist Minister turned politician in Saskatchewan who could mesmerize an audience and overwhelm opposition in his socialist government) introduced the first provincial healthcare plan in Canada.

He had the right idea, although most of the medical community opposed him.

In those days physicians provided free services or bartered with those who could not pay for them.  They also created a health insurance scheme (Physicians Services Incorporated) which was swept aside in the process of launching Provincial Healthcare in Saskatchewan and later  in other provinces as the Liberal Government in Ottawa imposed Tommy Douglas’ healthcare model  across Canada.

(The federal government passed the law, pays for it on the basis of a formula dictated by the Canadian government, and the provinces are responsible for managing and financing it).

In Ontario in 1966, the Conservative government  implemented a similar plan and the world changed for all people in our communities. Suddenly there was coverage for everyone and there was flexibility for the many stakeholders who wanted to opt out.  There was something for everybody. It didn’t last long.

The people who were managing delivery of healthcare (physicians) in those days warned the Government of Ontario that it would bankrupt the province. Their argument was that the system was working well and that most people were being looked after. Their advice was to make adjustments but not to change the whole system.

They were ignored. This was a government-driven political movement and the baby went out with the bath water. The democracy of the debate depended on what side of the issue you were on. And things have continued to evolve in Ontario — the best Province for the US to examine closely before leaders make hasty changes to any legislation. They should try to get it right just as Houston Mission Control keeps its space shuttles on the launch pad until the risks are understood and addressed .

If NASA does that for the shuttles, with six or seven astronauts on board, why not government– for the whole country?

I admire the vision of providing healthcare for those who need it and cannot obtain it. What I think America will learn is that building a healthcare delivery system is like building a wall, one brick at a time.

Resources have to be deployed, remuneration, infrastructure, personnel, administration of the Plan all have to be changed. These and many other details need to be carefully considered before the US legislature does anything.

If the US does not analyze and plan this carefully, it will spend significantly more money than is projected no matter what anyone says and get less for it including the kind of failures Canada’s government-run health care system (2) has experienced.

Worse, Americans will have an “entitled” population that will demand service where none can be provided. The lawyers will have a hay day.

Step number one, then, is to remove liability (3) for the system — there should be no ability to sue the government or healthcare workers, and that includes physicians. It will be a tall order given the number of lawyers in the legislature in most countries including the US who are determined to prosecute their agenda in spite of the cost to the system. The legal community makes the laws and everyone pays the lawyers as a result. This should be stopped.

A lot of people north of the 49^th parallel would like to see the US create a better health care system than Canada has created and improve on the mistakes in Canada, its provinces and other countries — but, there is no sign of it happening yet. Too many special interest groups already work the halls of Congress with the single minded purpose of demanding or blocking progress on this better health care system. It is distracting the legislators.

I grew up in the healthcare system in Ontario and Canada and have watched as it has been changed, dismantled, modified on many occasions, restricted for some participants, and grown in cost beyond reason.

I would like to share my experiences with how what I call “Douglas Medicine” works today in Canada, 50 years after “ social medicine” was launched here. My opinion is that it doesn’t work very well but no politician has yet shown the courage to address changes that common sense dictates (4) and are long overdue in Canada.

The US should avoid this paralysis.

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                       RELATED INFORMATION FOLLOWS

(1) Limitations of the Canadian health care system

http://www.gazette.com/opinion/gazette-63072-american-medicine.html

Doctors and nurses in Canada receive uniform compensation rates by the government. Pay has no connection to performance. Because work as a physician carries no promise of wealth or prominence in the community, Canada suffers a physician shortage.

Canada’s Fraser Institute keeps a constant watch on the effectiveness of Canadian health care and reports the average wait time, between referral and an appointment with a specialist, averaged 28.8 weeks in Saskatchewan. British Columbia had the lowest wait times, averaging 17 weeks. The average wait for orthopedic surgery, in all Canadian provinces, was 19.8 weeks in 2008. Doctors and nurses in Canada receive uniform compensation rates by the government. Pay has no connection to performance. Because work as a physician carries no promise of wealth or prominence in the community, Canada suffers a physician shortage.

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(2) failures of Canada’s government-run healthcare system

http://www.businesswire.com/portal/site/buffalonews/?ndmViewId=news_view&newsId=20090921005350&newsLang=en

The Fraser Institute: Sustained by Rationing, Wait Lists, and High Taxes, the Canadian Health Insurance System is an Example of What America Should Avoid

TORONTO Sept. 21-2009 –(BUSINESS WIRE)–As America grapples with reforming health care with an eye to introducing a public option, a new book published by the Fraser Institute, one of Canada’s leading economic think tanks, details the failures of Canada’s government-run health care system and serves as a warning to U.S. policy-makers.

“The Canadian health care system is a textbook case of government failure in medical insurance and medical services. All available evidence indicates that Canadians are paying more but getting less from our government-run health insurance system,” said Dr. Brett Skinner, Fraser Institute director of bio-pharma and health policy and author of C anadian Health Policy Failures: What’s wrong? Who gets hurt? Why nothing changes.

The peer-reviewed book paints a troubling picture of a country whose public health expenditures have persistently grown at unsustainable rates, while the health insurance system has failed to provide the access to and quality of medical services available elsewhere in the world.

“No other developed country in the world has adopted the Canadian approach to health care where governments effectively ban private-sector funding of hospital and physician services and prohibit competitive provision of publicly funded services,” Skinner said.

“Most other developed nations have chosen a pluralistic health care system that involves a mix of public- and private-sector involvement in medical insurance and delivery of medical goods and services.”

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(3) Liability reform

http://www.lansingstatejournal.com/article/20090921/NEWS04/909210331

Malpractice liability cap popular issue in efforts to reform health care

Cost of ‘defensive medicine’ among concerns raised

WASHINGTON – Medical malpractice costs are getting more attention in the health care debate, despite studies that show capping jury awards in malpractice cases would do little to lower health care spending.

Thirty-six states – including Michigan – already limit the compensation patients can get for medical errors.

But the issue is popular with doctors and Republicans and has been cited as a way to bring Democrats and Republicans closer on health care reform.

“I have a real difficult time understanding why liability reform is not on the table,” said Dr. Kenneth Elmassian, an anesthesiologist from the East Lansing area who is on the board of the Michigan State Medical Society. “As a practitioner, I know people do practice defensive medicine … just to kind of cover yourself.”

Republican lawmakers have long touted federal tort reform as way to bring down health care costs.

“For too long, trial attorneys have looked at doctors as ATM machines and have filed countless frivolous lawsuits,” said Rep. Candice Miller, R-Harrison Township.

President Barack Obama recently raised the issue as an olive branch to Republicans, directing the Department of Health and Human Services to spend $25 million to help states and health care systems try alternative methods of resolving malpractice allegations. He’s also open to addressing the issue in a health care reform bill, according to his spokesman.

Obama said defensive medicine might lead to unnecessary tests, but he also has said changing medical malpractice laws would not dramatically lower health care costs. To the disappointment of Republicans and the American Medical Association, Obama has ruled out supporting a national cap on malpractice awards.

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(4) changes that common sense dictates

http://economix.blogs.nytimes.com/2009/07/20/should-canadas-health-system-become-more-like-americas/

Should Canada’s Health System Become More Like America’s?

The Harris/Decima survey found that 70 percent of the 1,000 Canadians that it interviewed thought their health care system was working well and that 82 percent believed it was superior to the system used in the United States.

But Michael Rachlis, an advocate of public health care who is a physician and adjunct professor at the University of Toronto, said that the public’s enthusiasm for the system was, in itself, a problem.

“Because medicare has been so popular, it’s been difficult to change it, even for the better,” Dr. Rachlis said, using the informal name for Canada’s public health system. “So we still have this archaic, Marcus Welby, system based on one or two doctors working in family practice. The reason we have problems in our system is because we didn’t go far enough in the public reorganization of delivery.”

As I mentioned earlier, Canadian health care is mainly delivered by the 10 provincial and 3 territorial governments through different systems that sometimes vary within the provinces themselves. Within that, most Canadian physicians are not government employees. Instead they bill governments for their work, which they perform with a high degree of autonomy.

While Dr. Rachlis is no fan of the American system or of for-profit medicine, he does acknowledge some American approaches — like Kaiser Permanente — have an advantage in delivery over Canada in that they operate as cohesive systems.

Dr. Rachlis sits on one end of the health care debate in Canada: the side that contends that the system’s problems do not stem from public insurance but are related to its structure.

Dr. Rachlis cites the Saskatoon Community Clinic in Saskatchewan, the province where public health care began, as an example of what a systematic approach can achieve. According to Dr. Rachlis and others, the clinic offers patients same-day physician appointments.

There have always been bits and pieces of private medical care in the Canadian system. People on the other side of the debate from Dr. Rachlis argue that a hybrid system, in which privately financed health care competes against the public system, is the answer to problems like delays.

Prominent among such advocates is Brian Day, the founder of a private surgery clinic in Vancouver, British Columbia, who is the past president of the Canadian Medical Association.

“The private-public rhetoric on health care is a relic of tedious and tiresome propaganda,” Dr. Day, who is an orthopedic surgeon, said in a speech to the medical association last year. “Those who relentlessly argue against and demonize the private sector need a reality check.”

As I wrote in another installment, the federal government shut down the ability of doctors and hospitals to bill patients for most services by threatening to cut off health financing to provinces allowing the practice. There is a general concern in Canada that allowing people with means to buy their medical care would erode the public system and create, as Canadians call it, “two-tier” health care.

But in 2005, a ruling from the Supreme Court of Canada opened the door to private medical insurance for hospital services and private payment, if in a qualified way.

The case was brought by two plaintiffs: a patient who believed that waiting times for treatment in his home province of Quebec were unreasonable, and a surgeon who had been seeking a license to start a private hospital.

By a one-vote majority, the court ruled that:

the appellants have established that in the face of delays in treatment that cause psychological and physical suffering, the prohibition on private insurance jeopardizes the right to life, liberty and security of the person of Canadians in an arbitrary manner.

In effect, the court said that private insurance payments can be used to cover treatment when the public system is unable to deliver it promptly.

The controversial ruling applies only to Quebec. And to date, its impact has been relatively limited. Private insurance can be purchased in that province for a small number of procedures including knee and hip replacements. Such policies have so far found few buyers.

The province, in turn, now offers patients facing delays in knee, hip and cataract surgery several options, including paying for their treatment at a private clinic. At the end of September, however, the list of conditions for which patients can avoid delays by paying for treatment will expand to 56 entries.

André Picard, a health writer for The Globe and Mail, wrote in a column last week that the province is making “sweeping changes to how medical care is delivered under the medicare system, and it is doing so with little scrutiny.”

Mr. Picard proposed that the province start a “vigorous debate” about those changes. While political skittishness and interprovincial rivalries make it unlikely, many Canadians with opposing views on the issue do agree on one thing: after four decades, a review is more than overdue.

© William J. Gastle for What I Think, 2009. | Permalink | No comment

In my experience in biotechnology, many companies invest in a single product opportunity or technology idea and raise funds necessary to get to a “major milestone”.

If they make it, the additional funds needed to complete the development can be raised. This necessarily means that most of these businesses are development companies and are in the “all or nothing” business.

There are many high profile examples of the ones that didn’t make it. I am not comfortable in that kind of business. I like to have products in development, not product in development.

A majority of financing comes from sharing the risk and the upside with partners through licensing. Together, as partners, they complete the work to the market. They provide the capital and expertise in regulatory or marketing, we provide the technology and manufacturing expertise.

This model also has hurdles and risk. Balancing the risk by having more than one product in the development pipeline puts me in the comfort zone.

No matter what, these development activities require financing. It can be achieved in two ways that I have found successful.

The first is to build a base business with products that can generate revenue in a market that requires lower technical and regulatory hurdles. That business can be grown and supply cash for the larger development activities and real upside in the business.

It also provides some protection for those periods when timelines are stretched or products in the pipeline don’t make it to the end zone. This happens in all biotechnology companies. There is always risk in what biotechnology companies do. But a base business lowers the risk by providing an ongoing business as well as a training centre for new employees and new technologies. A number of the biotechnology survivors follow this model.

Development of novel products always involves risk, and senior managers have to have some courage and confidence when making decisions about whether to make the investment or not. Besides the obvious cost of development, there is always the “other opportunity” management passes on. Is there a business case? Is it technically feasible? Is there proof of concept? So what is the risk?

I have found that I am most comfortable averaging down the risk with a portfolio of products, any one of which could increase the value of the company tenfold. That is why I operate a company that has three products with large potential. We took a number of years to reach the point where we now have three promising products/technologies that can be worth hundreds of millions to the shareholders once in the market. All of these products are now in a late stage of development and so may convert into value for shareholders soon.

My colleagues and I used a combination of base business profits, partnership fees, equity financing (only two small financings) and debt to fund these developments. This has preserved much of the value for shareholders especially those that have a significant holding in the Company. We have always managed cash conservatively and lived on modest salaries. I personally don’t earn options which allows other senior managers with a smaller position in the Company to share in the upside. We do not have lavish offices and we ride in the rear of the plane. This has translated into a vast majority of the funding for our development activities being derived from non dilutive sources.

We don’t focus on share price although we all work to increase it. We are building a business that creates wealth and the only way to do that is by executing the plan. We have had some success and have experienced our share of disappointments. But we have continued to put ourselves in a position to win.

We have had large companies take illegal action against us to protect their market. We have successfully licensed our products to partners that have the financial capacity to complete the projects with us, but have changed priorities part way through the development process and disconnected the relationship (we kept their investment). These sorts of events slow us down but because of our profitable base business, we have been able to continue and protect the downside risk for the business.

At some point all this progress will lead to the objective. If you have the staying power and the management team is willing to make the sacrifices to get to the finish line, then the probability of success is high. But you have to be good at science, you have to have some luck and you have to deal with all the business distractions without losing focus on the plan. One large market product launched and you accomplish the objective.

© William J. Gastle for What I Think, 2009. | Permalink | 6 comments

This blog gives me the opportunity to share my views on a broad range of issues that affect both groups. You will see that I look at things differently than you will find in the “official” world of the biotechnology and pharmaceutical industries and the business of being a public company. In the “unofficial” world, maybe I find myself in good company. I think it’s worthwhile to provide these views, not as a regular published column but rather as a source for my opinion on things I usually don’t discuss.

My door is open.

© William J. Gastle for What I Think, 2008. | Permalink | One comment