Posted on 06/25/2006 6:34:25 AM PDT by A. Pole
Competition may be the tonic that drives most sectors of the economy, but it is bad medicine for the medical professions and their clients, [...]
"In theory, free market competition should reduce the cost of a product. But economics is as much a belief system as it is a science, and economists' theories do not always pan out in the material world. In practice, the scramble for health care dollars has proved extraordinarily expensive -- both in terms of the quality of care and in terms of its cost," Mahar writes in Money-Driven Medicine.
[...]
Because of the competition, [...] the big drug companies spend twice as much on marketing as on research and development. For the sake of short-term profits to please their shareholders, she maintains, they devote most of their R&D to imitating other products and making small-scale refinements instead of spending larger sums on long-term, pioneering research to try to find real breakthroughs.
Mahar cites a report by the healthcare consumer-advocacy group Families USA that says that in 2002 the pharmaceutical houses spent $45 billion on marketing, advertising and administration and only $19 billion on R&D. Between 1998 and 2003, she says, drugmakers increased promotional spending 103 percent and R&D spending only 58 percent.
Because of the competition, the rivals don't share research. Mahar says they waste millions of dollars and research hours turning out duplicate products -- cancer drugs, for instance, too numerous to test.
[...]
This market-driven system, Mahar shows, turns the law of supply and demand on its head. The competition generates excess supply, but that does not lead to less costly medical care. It is the cost of replicated facilities, equipment, products and services, along with millions spent on marketing and advertising, that keep the cost of medical care in this country soaring.
(Excerpt) Read more at dfw.com ...
They leave the real research to the government and taxpayers.
Nonsense. Three things keep the cost of medical care soaring: governmental interference (Medicare, prescription drug benefits, etc); a failed insurance approach (restrictions on available insurance by employers, payment only for treatments instead of preventive care, etc); and litigation.
If you want to read about the best chance to dramatically improve healthcare, I suggest Consumer-Driven Healthcare by Regina Herzlinger.
Thanks for the tip.
I recently started on a new med and instead of the doctor giving me the information, the drug company sent an "education" rep to my residence to, well, educate me. It was all a marketing and anti-litigation move. Quite amazing. I can't imagine what it costs to have several hundred of those on your payroll.
The slant of the article was set with the line "only $19 billion spent on--" It is easy to say "only $19 billion" when it isn't your money. Let socialists run the health care industry and it will run just as efficiently as the Postal service.
The reality is, most basic research is carried out by government, institutions that rely on government grants, or non-profits. Bell Labs had Nobel Prize winners back when it was essentially a government regulated monopoly. Nothing like that kind of research has happened there (now Lucent) in decades.
Polio was defeated by several dedicated research teams, most prominently at the U. of Pittsburg. At the time, they had saved the world, and not one researcher got any royalties, patents, or bonuses - just the ability to have successful research careers. For-profit companies simply cannot afford the long-term commitments to research without guarantees of returns, and fundamental research is always a gamble, by definition.
There is definitely some room for market forces in medicine: cosmetic or other "enhancing" type technologies, whether or not to remove warts or moles, etc. But not in urgent care. No one "shops around" when their kid gets critically ill, or haggles over price when they are bleeding to death.
There is also an issue of resources. There are only so many CAT scanners needed per 100,000 persons, likewise many other high-tech items, but if every hospital wants the latest for themselves, there is definitely cost duplication that's handed down to the "customer" - which is all of us, whether we ever get sick or not, because of the sky-rocketing cost of insurance.
hint: they perform best when all the players work with well-informed and well-maintained consciences.
like any other tool, a market is only as effective as the competence of the practitioners.
Enough of the "market failure" rhetoric. You never hear about "hammer failure," when someone smashes a vase, or "gravity failure," when someone jumps out of a building. No -- the tools have performed perfectly. The failure (or twisted success) was the practitioner's.
Nonsense. Three things keep the cost of medical care soaring: governmental interference (Medicare, prescription drug benefits, etc); a failed insurance approach (restrictions on available insurance by employers, payment only for treatments instead of preventive care, etc); and litigation.
Exactly, our medical system and free market have nothing to do with one another.
Yours is one of the calmer and more reasoned posts I've seen on a healthcare thread.
I've often thought that healthcare should be considered an aspect of defence, with the attitude that goes along with it.
Blaming so-called greedy corporations, pharmaceutical or insurance, is a mistake. We'd all dump their stocks in a minute if they did not pursue profits effectively.
But, at the same time, the most effective treatments might not be the most profitable and co-pays discourage early interventions and preventive care quite possibly as much as they save money on over-utilization.
His axiomatic premise seems to be that markets can't fail. Well, what we have now in the medical industry is so fouled up and impaired that it's not recognizable as a market system, or socialism or...what are the other choices? Largely what we seem to have is a corrupt 'third-party payer' system in the medical industry with little cost control.
Back to 'Hand's ideology point of dismissing 'market failure': if systemic 'success' is reasonably defined as providing medical care to all citizens at an affordable price, then we probably can have 'market failure', 'government failure', and most any other kind.
It's not just theory. It's fact.
If you were to find an area, like -- say, medicine -- where cost is going up despite competition, then you know you are not in a free market situation.
Government regulation (of medicine and of health insurance) is the cause of the problem. The free market is the solution.
hand's view is pretty clear. you don't blame the hammer for giving someone a concussion.
Cost duplication, until the hospital you take your kid to doesn't have one.
A free market solution without government interference would demand an end to monopolies in the form of patents.
Economics is a social science and therefore its theories must always depend on the behavior of imperfect practitioners for success.
Not quite correct today.
The NIH funds fundamental research at the university level, true. But in the last 10 years there has been a new phenomenon: the rise of bio-tech companies.
Bio-tech companies are the new middle tier translating fundamental research into pharmaceutical research. It is much cheaper for big pharma to allow small bio-tech firms to do the risky part of trying to develop new molecules and then either purchase them or license the molecule than it is for them to do all of their research in house.
And bio-tech firms are privately funded.
A large part of the problem is the so-called medical insurance industry, which is not insurance at all, but a third-party payment system. The analogy would be to have automobile insurance that paid Jiffy Lube every time you went in for an oil change.
In a third-party payment scheme there is no meaningful connection between the wallet and the price of service, therefore there is no incentive to control costs.
I'm apt to believe the author of the book is contrarian and skewing facts to sell hyperbole. This statement, for instance:
Because of the competition, the rivals don't share research. Mahar says they waste millions of dollars and research hours turning out duplicate products -- cancer drugs, for instance, too numerous to test. She cites a report showing that between 2002 and 2004, 395 cancer drugs were submitted for clinical trials.
- can easily be turned around to say that the system is working astonishingly well, and that competition is fueling a boon in research that will lead to some incredible treatments being developed in the future.
As with every issue, the truth is somewhere in the middle. From what I gather in the review, I think Mahar has written a purposefully disingenuous book in order to pad her own bank account.
Bravo, Mark. The purpose of insurance is to prevent large outlays of cash (or even bankrupcy) in case of serious illness or accident.
You're absolutely right. Shop for the best and most appropriate coverage before the emergency and then you won't have to scramble when the emergency arises. If you want a comprehensive benefits policy that pays from the first dollar, go get it. If you want insurance that protects against huge medical bills you should be free to choose that as well.
In my state (NYS) that's impossible because the THE STATE has mandated that all medical insurance MUST provide comprehensive benefits. I'm giving the insurance company all of my premium money ($12,000 for a family of four) up front so that they can pay my doctor $100 when I go in for a checkup.
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