Business Trends: Canadian Healthcare, Medical Foods, Opaque Banking, FHA and Biotech

Cracks in Canadian Healthcare Poster Child’s Story

Bloomberg’s “Canadian Health Care, Even With Queues, Bests U.S.” reports that “allegations [against the Canadian health insurance system] are wrong by almost every measure, according to research by the Organization for Economic Cooperation and Development and other independent studies published during the past five years.” Canadians live longer and have equal survival rates to the US in major diseases like heart attacks and cancer, at an insured cost per patient that is 47% less.

Preventable deaths and infant mortality are both lower in Canada. Both countries ration care: Canada by wait times and the US by cost. A 2008 survey by the Commonwealth Fund showed 54% of chronically ill Americans delaying care due to cost, including both doctor visits and drugs. While Canadians typically have to wait for non-critical medical procedures and operations, they consume only one fourth as many high cost medical images as the US. The US provides financial incentives to overuse medical technology.

Both political sides can tailor statistics to make their argument, and I don’t know how the numbers would come out if the US excluded their noninsured and under insured. Canada’s system can best be described as Medicare for all regulated and administrated at provincial or state level. Doctors are mostly in private practice – hardly socialistic. Canadians are far more satisfied with their system than Americans. If Canadians were dying in the streets I’m sure Glenn Beck and the rest of the FOX News team would let me know.

Now for the fading poster child of the American right: 45 year old Canadian Shona Holmes was told she would have to wait 99 days to have a slow growing benign cystic brain tumor removed in her local hospital. If she was willing to travel 10 miles the wait would have been reduced to 56 days and only a 36 day wait for a 460 mile journey. Instead she chose a 2237 mile journey and a $97K bill to go to the Mayo Clinic in Scottsdale, Arizona. Sounds fishy to me.

Now Shona wants to be reimbursed by the provincial government because traveling within Canada was inconvenient. How many Americans can go outside their private insurer’s network and expect full reimbursement? For a slow growing tumor I doubt that time was of the essence, especially if treatment within Canada would be available in about a month. Shona wanted to go “out of network” and she deserves to pay the full cost. While we should not feel any sympathy for her, we should not exploit her either.

Shona, understand that you are being used by the American right and they will discard you when our healthcare fight is over. But Shona, you should feel shame for speaking ill of your country and exaggerating the urgency of your condition just to gain your 15 minutes of fame in a 60 second political commercial.

My message to the right is that if you are against the constraints of private or government provider networks than you should be trumpeting traditional Medicare over Medicare Advantage. The only advantage to Medicare Advantage is a severe financial spanking for going out of network. Total healthcare freedom is Medicare for all.

Can anyone tell me how long Shona had to wait for her operation at Mayo Clinic and whether she has been receiving satisfactory follow up care in Canada?

Beyond Cheerios

General Mills (GIS) got into a little trouble with the FDA for overstating the benefits of Cheerios in fighting high cholesterol. But now the French company Danone (DA) is ready to enter the world of serious medical foods. The Financial Times’ “Danone hails HIV trial breakthrough” reports the company claims it achieved a breakthrough medical nutrition trial targeted at the immune system of HIV patients. Last year Danone started a similar trial aimed at the nutritional needs of Alzheimer patients.

Given that we all have small traces of cancer kept in check by our immune system most of the time, I would like to see non-pharmaceutical methods of immune system enhancement in clinical cancer trials. Could cancers still evade a super-charged immune system? A double-blind chemo vs. nutrition study would be fascinating.

The synergies between food and medicine will raise the stature of serious research based food companies and force pharma into the business. True value adding food companies should see increasing margins, leaving the remaining package foods companies to experience continued margin decline.

Yields and Banking

The Wall Street Journal’s “Don't Trip in Your Search for Higher Bond Yields” reports that Vanguard’s customers are stretching both credit risk and interest rate risk (duration) to achieve yield in a zero-rate Fed environment. At the same time the Financial Times’ “Citadel and CME scrap platform plan” reports that investment banks have lost interest in an exchange for standardized CDS contracts being pushed by regulators. Under such an arrangement, the exchange would be the counterparty to all transactions and the participating investment banks would back the exchange.

ICE has begun clearing some CDS transactions for JP Morgan (JPM) and Goldman Sachs (GS), but the investment banks are facing the same yield constraints as consumers so protection of the opaque is critical to maintaining profits.

FHA Watching Mortgage Originators

The Wall Street Journal’s “FHA Will Tighten Credit Standards” reports that mortgage originators will have to increase their net worth from a minimum of $250K to $1M. FHA wants to make sure it will be compensated when it purchases loans that are later proven to have not met their quality standards. In addition new rules for income verification and appraisals have been implanted.

Abbott’s Gold Star belongs to Isis

The Wall Street Journal’s “The Wall Street Journal 2009 Technology Innovation Awards” selected Abbott’s (ABT) Ibis Biosciences’ T5000 sensor as its gold winner. Abbott completed the purchase of the Ibis Biosciences unit from Isis Pharmaceuticals (ISIS) on January 6, 2009 and Isis will continue to receive royalties of up to 5% on both equipment and supply sales.

The Ibis Biosensor identifies pathogens by molecular weight and mass spectrometry without having to know in advance what you’re looking for. Its development was primarily funded by the government using Isis technology. The Naval Health Research Center used the system to identify the H1N1 swine flu virus. 20 systems are already deployed including the Centers for Disease Control.

The real future market lies in hospital born viruses and bioterrorism. Since hospitals are not reimbursed by insurers for problems of their own making, early identification and remediation is critical to hospital profitability.

Disclosure: Author is long ISIS.

Comments

[diogeron:]

Well said. As an American who has lived in both Germany and the Netherlands and has travelled extensively, I'm always amused when people talk about how the "United States has the best health care system in the world." As our son is fond of saying when someone makes these kinds of claims, "Where else have you been and where else have you lived?" We do a lot of things better than any other country in the first world, but health care sure as hell isn't one of them.

Sep 23 09:28 AM

[cyberclark:]

Canadian Health is on the verge of a major upheaval. Alberta some weeks ago announced it would open the Canada Health Act to accommodate changes Alberta wants to make in delisting services in this province.

Canada Health Act is a Federal jurisdiction and any changes to it will affect all Canadians not just Alberta.

None of the other Provinces jumped on this nor did any of the political parties which leads me to believe the agreement to open and change this act happened at the last Ministers meetings.

Alberta has a large list of degregulated services made up by their Capital Health Authority which was distributed to all provinces.

Delisted services will end up in the realm of private insurance companies, probably with head offices in the US.

Alberta has hired the man responsible for the privitzation of Australia's health care. Queensland say he was "good at building bridges" which means "brough in US health to Australia"

Canadians as usual are asleep at the switch and giving their provincial governments a free reign.

I personally do not want the Conservatives to deal my health care nor NAFTA.

Sep 23 04:59 PM