Two Takes on Reining in Health Care Costs

In the U.S. doctors are cutting the price of medicine by reducing the doses that they offer patients. This tactic is understandable because some medicines cost several hundred thousand dollars per year.

In Thailand, the health ministry is recommending that the government ignore patents.

Zamiska, Nicholas. 2008. “Thai Ministry to Recommend Ignoring Patents on Cancer Drugs.” Wall Street Journal (11 March): p. A 16.

http://online.wsj.com/article/SB120515886199824251.html

“Thailand’s new health minister announced that he would urge the Thai government to continue to ignore patents on several cancer drugs, disappointing big pharmaceutical companies that had hoped Bangkok might roll back a policy of overriding patents in the name of public health.”

“Ever since a bloodless military coup in Thailand in September 2006, the military-installed government had been battling big pharmaceutical companies, threatening to sidestep their patents on drugs for AIDS and other diseases if they didn’t drop the price of their medications. The Thai government argued that since the country’s poor population couldn’t afford the lifesaving drugs, and the government didn’t have sufficient funds to cover their cost, drug companies should put public health before profit and cut the cost of the medications.”

Pollack, Andrew. 2008. “Cutting Dosage of Costly Drug Spurs a Debate.” New York Times (16 March).

http://www.nytimes.com/2008/03/16/business/16gaucher.html?ref=business

“Cerezyme, used to treat a rare inherited enzyme deficiency called Gaucher disease, costs $300,000 a year. Sales of Cerezyme totaled $1.1 billion last year, making it a blockbuster by industry standards.”

“Shauna Mangum, of Farmington, N.M., began treatment in 2000, at a cost of more than $400,000 a year. The next year, the premiums for everyone in her insurance pool went up by $180 a month.”

Doctors are considering cutting the dosage to save money, setting off a strong debate about the practice.

3 comments so far

  1. Susceptor on

    but…what about the invisible hand an laissez-fare economics! if they cant afford those drugs they should keel over and die. kidding.
    I dont think medicine can be a for profit business. helping sick people is a public good like providing police or fire trucks. When you make it a for profit venture you inevitably deny some people access. A really good example of that is fire services in the late 19th century in the US. fire companies used to be all there was, and people purchased their services. each house had a plaque with the name of the company responsible for protecting the home from a fire. So when a house caught on fire that was not insured by a particular company, the fire trucks from other companies would just ride past the house, letting it burn. So logically people thought this was insane and asked that the government provide this as a service for all people. Of course at that time there were people just as there are people now, who argued that economic theory and free markets were so much better and more logical that a government service would be a mistake. I see health-care in the same ballpark. health is the firetrucks issue of the 21st century.

  2. Libertarian Girl on

    “I dont think medicine can be a for profit business. helping sick people is a public good like providing police or fire trucks. When you make it a for profit venture you inevitably deny some people access.”

    If it wasn’t a for-profit business, we wouldn’t have these drugs in the first place. Some of them take billions of dollars to bring to market… but you might say, Well, the government can pay for that. Yet, our government is about $10 trillion in debt as it is, and other governments aren’t much better. We simply don’t have the money.

    A public health system thinks about the greater good. To provide $400,000 a year in drugs to Ms. Mangum, that might mean that 10 other people can’t have life-saving surgeries, so Ms. Mangum might be forced to do without totally. There are many cases of this happening in the NHS and other socialized systems.

    With our free market of drugs, we subsidize other countries which give away the drugs for free. It’s unfortunate for us, but it allows the citizens of those countries to have that kind of system while the drugs are still being made. If we went to that system as well, Grandma might die because the new cancer drug simply never comes out.

    As far as the fire departments go, I disagree with the above poster’s recounting of things. Private companies were actually successful at fighting fires, but unlike what the commenter writes, they were in fact too eager to get the fire extinguished first– they’d get in fights at the scene among each other. It was because of the resulting violence, not the lack of firefighting, that many cities decided to create public programs. It’s doubtful that companies today would resort to fistfights to put out fires– that would be bad publicity for them, so it wouldn’t happen with the media the way it is today.

    In fact, many cities have contracted out their fire services to private companies today with great success. Most of Arizona is covered by private firefighting companies, as is half of Denmark.

  3. Bialystock on

    Libertarian Girl, the profit motive as the indispensable incentive runs into problems very quickly. The basic research and primary work on drug development offers little monetary reward. The ROI is frustration, some slender potential for enhancement of professional reputation and rare breakthroughs. The large sums needed to even get started are a gamble that few are able to undertake on their own. Most of the work will never follow a bright line from the lab to the shop shelf. Pharmaceutical companies have to justify their capital allocation decisions to people — investors — who can’t or won’t be satisfied with good intentions. Some of the investors are contractually required to produce returns. A high risk undertaking is out of the question for them. This is why the pharmas rely heavily on purchasing the intellectual property rights to work that is near finished, or already marketable. That work is already paid for and subsidized by the deepest pockets in existence, a general public subscription, enforced by Big Government. When the pharmas get to make use of my money, and skim off a chunk of my capital to insure their risk, for a host of endeavors that will never offer me a direct benefit, the least I want back is the indirect benefit of a generally healthier society. Otherwise there’s nothing but an illegitimate, state-coerced transfer from me to them.

    Private fire fighting services are contracted by the government and regulated by them. They can do a fairly good job. Road services are arranged that way too. However they cost much, much more. There’s a slim public benefit from creating an indirectly administered public works program, but they remain dependent on the state for income and infrastructure maintenance. Left unregulated they compete for turf and undertake more responsibility than they have the capacity to handle. This is basic moral hazard stuff and, again, a state-enforced transfer of my capital in gross excess of what’s needed to cope with a problem. I’m already paying through the nose for the idealism of market reductionists. I see no point in handing over more.


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