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Follow-up to the Heathcare topic - Why the Free Market is being abused in this case

By Andrew Pollack on 06/04/2004 at 08:49 AM EDT

I've seen comments suggesting nationalizing the healthcare in this country, and of course there's the continued arguments as there are on nationalization in general that can run on both sides endlessly.

I don't think anyone would disagree that the 'free market' approach works for the majority fairly well in terms of new innovations and research. The system breaks in a few key places however.

1. The free market for drugs isn't free -- or not as free as it must be.

Drug companies are spending fortunes to try to block importing drugs sold at lower prices overseas back into this country. This includes both Canada and Mexico, where those lucky enough to live near the border can easily drive across and buy what they want. The drug companies claim this isn't fair, because then who will pay the costs of producing new and exciting medicines if not those in higher income countries? They want to divide the market into sectors so that they can take advantage of monopoly status built on patent and copyright law as well as the availability of higher capitol in different regions. At the same time, drug companies are some of the biggest outsourcers in the world. That's right, at the same time Pfizer is telling you that they shouldn't have to compete on a world wide market for the price of their products, they are telling their employees that they must compete with the cost of hiring people in regions where the cost of living is one tenth that of their primary market. Its o.k. for them to shop around for the cost of producing the goods, but not o.k. for us to shop around for the cost of purchasing them.

This is the equivalent of a supermarket chain getting a law passed that says if you live in Beverly Hills you cannot buy your groceries in Orange County then charging as much as ten times the prices in their Beverly Hills location but hiring staff from Orange County to run the place.

The free market can only work when it is in fact a free market. The domesticated feline has escaped the confines of its flexible container, however, and the fight to segment the market is ultimately a loosing battle. If we cannot keep recreational pharmacological from the streets of our cities, how exactly will the likes of lipator be kept from being smuggled in just as easily? All we're doing is creating the rich soil for a new black market -- and one that has a high moral ground position from which to defend ones self. If I decided to smuggle vanloads of cheap tomixfan across from Canada to sell to low income cancer clinics at a small profit to me, I'd imagine a prosecutor would need to be very careful finding a jury that would convict. Black markets, of course, are the worst possible way to fill the needs of a society. The roots of organized crime in this country, the continued revenue streams that support terrorist organizations and gangs (what we call domestic terrorist organizations to differentiate them) are all derived from black market economics.

2. The free market for drugs alone is only a good solution for those ailments affecting the most people.

Taken to the extreme, it makes a great deal more sense economically to produce a drug that treats unsightly toenail fungus then advertise that drug on prime time television at huge expense, than it does to attempt to find a treatment or cure for less common but more deadly ailments like Cystic Fibrosis.

The solution to this is not, of course, to make toenail fungus drugs unprofitable. I'm all for profit and I'm sure that many people benefit from these drugs too. The solution, IMO, is to change the way research costs are applied to gross profit to reduce net profit from a tax perspective. Right now, if I make excessive profits on a drug for toenail fungus and pour those profits into research on a drug that reduces acne on the otherwise smooth skin of a Caucasian backside, I can pay little or no taxes as a corporation. That sounds right, put money into research and its a cost, so I shouldn't pay taxes on it, right? Not all the way, no. In that example, the public at large is now funding your research into the most profitable next product you can produce. Ultimately this has a diminishing return for the public.

Solution? Create a public index of conditions, managed by some combination of the NSF, CDC, WHO, MTA, BBC, and PTA which assigns a social value index based on the number of people afflicted by a condition and the impact of that condition on them. I realize this will become a very hotly contested index, but if you don't try to rank them all in order, but rather assign them to a simple scale of 1 to 10 it should be manageable. That index can become the key to a multiplier used to determine the taxability of profits from a given drug as well as the tax deductibility of the research related to it. As a result, I would get a much higher level of tax benefit from investments in a relatively rare disorder that is deadly to children and if it were successful I would be able to get an additional tax credit on profit related to that treatment. If you don't believe that the tax-cart drives the corporate horse, tell me why Bank North (now Whachovia) does things like lease the streetcars and sewer systems in some small German town and then leases them right back to the town. Its all taxes.

3. The free market breaks down when the basic needs of people are not being met.

A man who has food on his table to feed his family has a great deal more patience for a wealthier man being dined as royalty in a five star establishment than does a man who must watch his children fail to thrive as a result of poor diet. The idea that you must pay taxes because you have some moral obligation to take care of those less fortunate is true, but only half the story. The very definition of the wealth by which we differentiate that man in the fine restaurant is by comparison with those who have less. As they say, in the land of the blind the one eyed man is king. At some point, simply having more money does not make you substantially wealthier in any real sense, and the greater the disparity between wealth and poverty in a region, the less overall extravagance and comforts are available at any price to the wealthy. It does no good to have the capitol to eat in that fancy restaurant if you are not safe doing so. Soon, large amounts of that supposed wealth are spent on simply isolating the wealthy from the poor -- be it through exclusive clubs, protected bastions (oh, we call them "gated communities" now), or armed guards and security systems.

Does that sound extreme to you? Consider that hospitals in some parts of the country are now turning away all but immediately life threatening conditions for patients without insurance. No, we're not rationing health care in this country. Of course not. We're just cutting funding dramatically to those places that were making it available to those in the most need. The result is not rationing by absolute denial of services without the wealth of a health plan.

How long will before we see "exclusive" hospitals that required gates and armed guards? Oh, we already have some of those. Does this make sense to anyone? How much tolerance do you suppose a man watching his children suffer with untreated asthma will have for you when you need a health plan that covers ass-acne? What happens to the value of your health care plan, when you need it to treat the antibiotic resistant tuberculosis that you got when you went for dinner in that fancy restaurant where the dishwasher cannot afford basic healthcare?

In the great state of Maine, always one of the most forward thinking and considered political environments -- yes, you think conservative rural values, but this was also the first state to elect a woman to the senate, and continues to be first in many things looked on later as obvious, after huge battles in court a serious attempt at universal healthcare has been created as is being implemented. Its called Dirigo, and it should allow nearly every man, woman, and child in the state to attain coverage at as close to reasonable costs as I've seen.

So tell me, why was this such a fight to get through?

There are  - loading -  comments....

I believe soft money and PACs have a lot to do with the problem...By Alex Wilson on 06/23/2004 at 11:21 AM EDT
This is just a guess, but the pharmaceutical companies have a powerful lobby in Congress. They spend quite a bit of money winning congressmen over to their side. They are spending the profits they make off of us each day to keep their position strong. I did some research recently on costs of drugs. My wife and I both take Synthroid. I am able to buy the name brand stuff overseas for as low as $12 per month. Here in the US I pay $24 per month before insurance kicks in. I checked with a pharmacist overseas and it is the exact same stuff. No quality differences, same manufacturer. This is just one example. They try to justify the difference for the many reasons you stated above. Horse-puckey! Why do they need to advertise this crud to you and I, the consumer. Shouldn't they advertise it to the doctors instead? They are the alleged experts anyway. Besides, I can't buy the stuff unless my doctor gives me a prescription. Granted, I can push my doctor for a particular one, but I have a better idea... The FDA should have a web site for drugs. It would list the name, uses, side effects, and other important information about it. It would be searchable in many different ways. The drug companies would be responsible for maintaining the information on their drugs. You and I could go there to see what our options are. The drug companies could then cut their advertising in Time, Readers Digest, etc. and put that money to use to reduce costs. Granted, it will probably never happen, but I guess I can dream!

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