A Comment on Cuba’s Biotech Sector

I was fascinated by this naked capitalism post on Cuba’s biotechnology sector: https://www.nakedcapitalism.com/2018/03/cuba-became-biopharma-juggernaut.html

This is not something we hear about in the US (you could probably write a whole book about that–may I suggest the title Ad Hominem: A Fallacy of Irrelevance?). I do not know very much about Cuba, and I know virtually nothing about the Cuban healthcare system. I do, however, have a close friend who has:

(1) worked as a practicing surgeon

(2) worked in healthcare policy here in the US

(3) visited Cuba and observed the Cuban healthcare system in action (though not the biotech sector)

I reached out to him for an opinion, and he replied with the following:

Cuba has an inexpensive system that delivers reasonably good outcomes. I thought the article was a little light on examples for exactly how the government’s control of pharmaceutical R&D delivers better outcomes. Costs are lower, in part, because they have a more favorable regulatory environment. They are also lower because the government probably maintains a single, narrow drug formulary for the entire country. With one formulary, they are able to regulate the number of drugs in each class. After all, do we really need 9 options for a medicine that gives old guys an erection? Less choice, but lower costs. You see examples of this here with Medicare Part D formularies preferred drugs.

The other question is whether they incentivize and reimburse drugs based on value. Many economists here have called for a more explicit determination of value when determining drug prices. Pharma companies can charge whatever they want for a medicine that may be no better or more effective than one that already exists, but may be within a lucrative class of medicines. Certain really important drug classes, like antibiotics, are underdeveloped in the U.S. because they are not likely to make much money, even during their exclusive patent rights period. If Cuba funded drug classes based on need and anticipated value, that would be quite smart. Some left-leaning folks have called for government to take this role here. Unclear how that would work in practice.

I am not trying to put a stake in the ground here. However, I was intrigued by both the original article and the comment and thought others might feel the same.

A Tangent

Just because some aspect(s) of the Cuban healthcare system may work well or promote decent outcomes does not imply:

  • Communism or socialism are superior economic systems to capitalist, market-based systems
  • The Cuban economy as a whole functions efficiently (or even “decently well”)
  • The economic deprivation and restricted personal freedoms of the Cuban system are acceptable tradeoffs for a healthcare system that produces some decent outcomes

(you get the idea)

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