Wednesday, 6 November 2019

Some "facts" which might get in the way of feelings. (1)

 First to explain the commas around "Facts" in the title.  Ther are in fact no facts about the future,* just predictions with a varying likelihood of being correct.  So this post is really about some perditions in the election campaign which in my view are highly likely to be correct, and which  the BBC's  "news reality check has deemed to be reasonable.

Labour's Jeremy Corbyn has claimed that, if the NHS is opened up  to the US "Big Pharma" in a free trade deal this could cost the NHS an extra £500m a week.

This, it is true, is a "worst case scenario" and I hope Corbyn said " could" rather than "will."   But the argument is that medicinal drugs in the US are priced on average at  two and a half times more then NHS currently  pays for the equivalent.  So if we become dependent on US drugs, and the US pharmaceutical  companies manage to push up our prices to the US level, this will indeed  raise costs by about £500 a week.

 News Reality Check thinks this is a reasonable estimation.  It depends, of course, on our actually leaving the EU and accepting a free trade deal on US terms, which, as argued in an earlier post, is highly likely to be the case if we do leave.

 A rise in costs of £500m a week is in  sharp contrast to the flaky claim of £350m a week saved for the NHS by Brexit.

Another  claim is from Liberal Democrat leader Jo Swinson, that if we remain in the EU the economy will grow at a faster rate than if we leave, and that the extra growth will generate an additional £50bn in tax revenues over the first five years.  The fact checkers say that is credible but, in terms of total government expenditure, it's not all that much!

Well, perhaps not, but it's better than nothing.

These figures for a million pounds here and a billion there are bandied around and, given that the overwhelming majority of us don't even a significant fraction of  £1m, (in fact , the TUC claims that the average family is £14 000 in debt, or) they perhaps don't convey much.

 However, most of us know what a second is.

It takes just over eleven and a half days to run up a million seconds.
(Stick 1 000 000 in your calculator, divide by 60 to get minutes, then 60 again to get hours, then 24 to get days.  Or, if you can remember how, do it even more convincingly by long division.)

It takes nearly  31 and  3/4 years to run up a billion seconds.

If you don't believe it repeat the above starting with 1 000 000 000  or see.

So £50bn, even spread over five years, adds up to quite a lot of decent social security payments, affordable houses built, , schools and  hospitals modernised and properly staffed,  potholes in the roads repaired, or whatever your priorities are.)

Not to be sniffed at.

Brexit supporters please note.

*  some people argue there are no facts about the past either, just different interpretations.


  1. But the argument is that medicinal drugs in the US are priced on average at two and a half times more then NHS currently pays for the equivalent. So if we become dependent on US drugs, and the US pharmaceutical companies manage to push up our prices to the US level, this will indeed raise costs by about £500 a week.

    Hang on; that's not what the BBC report says. The BBC report says:

    * The NHS in England spent an estimated £18bn on medicines in 2017-18

    * The US spent 2.5 times as much per head, according to the Organisation for Economic Co-operation and Development (OECD)

    * Multiplying £18bn by 2.5 gives an annual cost of £45bn
    * That's an extra £27bn a year or about £519m a week

    That's very much not 'drugs in the USA cost two and a half times as much as the UK'. That's 'in the USA two and a half times as much is spent per head on drugs as in the UK'. There are any number of possible explanations for this:

    * Maybe they're different drugs, and the comparison isn't like-for-like (perhaps they are better drugs, or perhaps they tend to use branded rather than generic drugs).

    * Maybe there's something about the make-up of the US population —eg, a greater proportion of it is aged / overweight which means they need more medication, pulling the total spend up.

    * Maybe Americans are highly over-medicated and take far more drugs they don't actually need than us Brits (this definitely seems to be true seeing as they all seem to be on anti-depressants all the time).

    None of these factors would be affects by any conceivable trade deal.

    As for the nonsense of the 'Remain bonus' this article puts it best:

    1. "But the argument is that medicinal drugs in the US are priced on average at two and a half times more then NHS currently pays for the equivalent."

      Sorry: I was going by what I thought heard of the 6am news on Radio 4 yesterday morning. Maybe I was still half-asleep. If I misheard or have remembered I apologise. The conclusion of about £500m a week more to pay seems to be the same either way. Their reality check regarded it as reasonable. Still a far cry from the "extra £350m" on the bus.

    2. Their reality check regarded it as reasonable

      The linked BBC article certainly does not regard it as reasonable; the only judgement I can see (as opposed to simply repeating the research report's methodology and conclusions) is:

      'In practice it's highly unlikely that NHS spending on medicines per person would end up being the same as the US's.'

      I also don't see the mechanism by which any trade agreement could cause such prices to rise, given that US drug companies would be competing for NHS contracts with drug companies from elsewhere in the world, so they would have to match the prices of those other companies or the NHS would simply buy the cheaper, non-US drugs. That is the whole point of free trade.

    3. Agreed, and note that I was careful to say that this was a "worst case scenario." However, big firms tend to crowd out or absorb smaller competitors (Walmart and ASDA for example) and then exploit their monopolistic position.

    4. However, big firms tend to crowd out or absorb smaller competitors (Walmart and ASDA for example) and then exploit their monopolistic position.

      I don't know about Walmart, but in the UK, ASDA is a terrible example of a big firm crowding out competition: the supermarket business is one of the most cut-throatly competitive there is, with multiple competitors at all levels (Lidl, B&M, Aldi at the low end, Tesco, Sainsbury's, ADSA in the mid-tier, Waitrose and… actually maybe not at the end, which is why Waitrose is so overpriced and I never shop there) all trying to undercut each other and profit margins that are wafer-thin.

      The supermarket business is a great example of how a free market benefits consumers as it is thanks to that competition that prices are kept so low.

      And in terms of the pharmaceutical markets, the same is true: Pfizer failed to acquire AstraZenica, which remains a competitor, I don't think there's much chance of GSK being swallowed…

      Of course the pharmaceutical market is skewed somewhat by the monopolies granted by patents, but nothing can require the NHS to buy branded drugs if generics are just as effective, and (I suspect) it's that preference for branded drugs which accounts for quite a lot of the inefficiency which means the USA spends more on drugs (that plus the fact the Yanks are all constantly on so many unnecessary pills they rattle as they waddle down the sidewalk).

    5. Oh, and I presume you saw Mr Andrew Neal taking this claim apart on his programme this week; among other things he pointed out that less than 10% of the NHS's drugs come from the USA, and so could plausibly be affected by any UK/USA trade deal (there is no earthly reason why any such deal should affect the prices of drugs we buy from, say, the European Union).

      So even if the reasoning behind the £500 million figure were not fallacious — and it is — the true figure could not be more than one-tenth of that.

    6. To begin with, maybe, but once they get access...?

      The mistake Remainers make is to accept the analogy of "falling off a cliff." If we leave the effects will be more like a slow puncture.

    7. To begin with, maybe, but once they get access

      I don't understand. What do you mean, 'access'? In what way do they not have 'access' at the moment? The NHS is currently free to buy drugs from the USA, currently the NHS buys about 9% of its drugs from the USA, so they do already have 'access'.

      What 'access' do you imagine they could get which would mean that the NHS would source drugs form the USA more expensively than they currently source the same drugs from the EU cheaper?

      That's like saying that if I had 'access' to Waitrose I would shop there instead of Tesco so my food bills would go up. Well, no. I already have 'access' to Waitrose and I don't shop there precisely because it's more expensive.

      What possible mechanism are you suggesting that would lead to the NHS buying drugs more expensively form the USA when it could get them cheaper, as it currently does, from elsewhere?