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richard says:

jaybird i have searched for hard data on this and it is hard to come by. here is an excerpt from a new york times article from oct. 2006

…. in the last 10 years, infor instance, 12 Nobel Prizes in medicine have gone to American-born scientists working in the United States, 3 have gone to foreign-born scientists working in the United States, and just 7 have gone to researchers outside the country.

The six most important medical innovations of the last 25 years, according to a 2001 poll of physicians, were magnetic resonance imaging and computed tomography (CT scan); ACE inhibitors, used in the treatment of hypertension and congestive heart failure; balloon angioplasty; statins to lower cholesterol levels; mammography; and coronary artery bypass grafts. Balloon angioplasty came from Europe, four innovations on the list were developed in American hospitals or by American companies (although statins were based on earlier Japanese research), and mammography was first developed in Germany and then improved in the United States. Even when the initial research is done overseas, the American system leads in converting new ideas into workable commercial technologies.

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.

Dr. Thomas Boehm of Jerini, a biomedical research company in Berlin, titled his article in The Journal of Medical Marketing in 2005 “How Can We Explain the American Dominance in Biomedical Research and Development?” (ostina.org/downloads/pdfs/bridgesvol7_BoehmArticle.pdf) Dr. Boehm argues that the research environment in the United States, compared with Europe, is wealthier, more competitive, more meritocratic and more tolerant of waste and chaos. He argues that these features lead to more medical discoveries. About 400,000 European researchers are living in the United States, usually for superior financial compensation and research facilities.

This innovation-rich environment stems from the money spent on American health care and also from the richer and more competitive American universities. The American government could use its size, or use the law, to bargain down health care prices, as many European governments have done. In the short run, this would save money but in the longer run it would cost lives.

Medical innovations improve health and life expectancy in all wealthy countries, not just in the United States. That is one reason American citizens do not live longer. Furthermore, the lucrative United States health care market enhances research and development abroad and not just at home.

The gains from medical innovations are high. For instance, increases in life expectancy resulting from better treatment of cardiovascular disease from 1970 to 1990 have been conservatively estimated as bringing benefits worth more than $500 billion a year. And that is just for the United States.

The American system also produces benefits that are hard to find in the numbers. The economist Arnold Kling in his “Crisis of Abundance: Rethinking How We Pay for Health Care” (Cato Institute, 2006) (catostore.org/index.asp?fa=ProductDetails&method=cats&scid=37&pid=1441301) argues that the expected life span need increase by only about half a year for the extra American health care spending to be cost-effective over a 20-year period. Given that many Americans walk less and eat less healthy food than most Europeans, the longevity boost from health care in the United States may be real but swamped by the results of poor lifestyle choices. In the meantime, the extra money Americans spend to treat allergy symptoms, pain, depression and discomfort contributes to personal happiness.

The American health care system, high expenditures and all, is driving innovation for the entire world.

Tyler Cowen is a professor of economics at George Mason University and co-writer ofa blog at http://www.marginalrevolution.com. He can be reached at tcowen@gmu.edu.Report