Im a finishing fourth year at UCLA medical school now, and yes at the core our school is pass/fail for all of the four years. There is however a special "Letter of Distinction" that you can earn at the end of your preclinical courses or clinical clerkships - and the criteria for earning this letter is pretty much the same criteria for earning honors at any other medical school out there.
Our school even goes as far as not doing a class rank in the dean's letter, which can work against you in the application process. During my interviews this year, several times interviewers made comments about not knowing how "good" I truly was since I had no class rank, or letter grades - just USMLE scores and some letters of distinction. However, our school routinely matches people into elite programs in every given specialty, so obviously there are other factors that make up for it.
I totally agree that the system breeds excellence without you having to break your balls and be a competitive gunner jackass. I had no problem collaborating with my classmates to try to learn the material as best as possible without worrying about making the A grade in the class. The letter of distinction of course was always an option, but honestly - the entirety of my first and second years of medical school were summed up in a four sentence paragraph. I have worked with most of my classmates throughout the 3rd and 4th years and I must say that I have never run across a gunner. We're all extremely happy to have gone to UCLA for medical school, and you should give us a look if you're looking for a superb education without the strict competitive environment in a wonderful city with fun to be had every single weekend out in Hollywood, Beverly Hills, The Beach, Downtown LA, etc.
