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> How can you have an entire article on .... without using the word "monopsony?"[1] Is it simple ignorance or deliberate deception? There is no call to denigra

> How can you have an entire article on .... without using the word "monopsony?"[1] Is it simple ignorance or deliberate deception? There is no call to denigrate the author for not finding a discussion on broad economic categories as central as you do. Would you feel this way about an article discussing military arms procurement that failed to characterize the situation as a monopsony ?

AnthonyMouse 7y ago
Military arms procurement generally isn't a monopsony. Weapons manufacturers also sell to both civilians and foreign governments. Moreover, the way people talk about "negotiating drug prices" is very silly. It's the patient who has to decide whether to take the drug. We're pretending there is a monopoly seller and a monopsony buyer and they have to agree on a price, but that's not actually necessary -- if Pfizer says they want $50 and Medicare says they want to pay $40, you don't actually have an impasse there, all you have to do is to say that the patient has to pay the remaining $10. The negotiation shouldn't be between Medicare and Pfizer, it should be between Medicare and the patient, and then the patient and Pfizer. The alternative is that Medicare says $40 and Pfizer says $50 and since they can't agree, the patient has to pay $50 instead of $10. Or $500 instead of $10, because the lack of any Medicare coverage at all reduces volume which increases unit costs. Or the volume to support development without insurance coverage doesn't exist and so neither does the drug. How is any of those better than the patient paying the remaining $10?
- strainer 7y ago
  I think its valid but difficult to argue that military arms procurement is not by and large a reasonable example of monopsistic negotiation (I hope thats a word :). But that it is debatable goes to show how its not valid to treat an abstract model like monopsony as though it is a factual encapsulation of certain business or issue, which is dishonest to avoid, as the parent comment put it. Absolute monopsony might be a very threatening thing to absolutely profit orientated business, but in practice here nationalised public services like Health need have no interest in forcing their commercial suppliers slowly out of business with unsustainable deals. The position could be abused if it was arranged as such but if a Nation were to choose that outcome, it would make more sense to nationalize the suppliers promptly rather than slowly degrade their value.
  - AnthonyMouse 7y ago
    > Absolute monopsony might be a very threatening thing to absolutely profit orientated business, but in practice here nationalised public services like Health need have no interest in forcing their commercial suppliers slowly out of business with unsustainable deals. They actually do, for two reasons. The first is that it's an international market, so any given country is better off to underpay and free ride on the R&D paid for by other countries. (And the consequences of this are subtle; it isn't that all R&D stops or companies lose money, it's that they shrink their R&D expenditure by not investing in high risk high reward treatments because they're no longer high reward, and you get correspondingly fewer high patient value treatments.) The second reason is that there is a conflict of interest. The person receiving treatment is not the person paying, so the people receiving treatment want to maximize effectiveness while the people paying want to minimize costs. The government is then put in the position of choosing who to make unhappy. Then each person gets one vote but there are more taxpayers than patients with severe illnesses, so the result is for governments to generally under-invest in treatment compared to the value the patient themselves would place on their own life. This is why it's much better for the government to set the price they're willing to pay rather than the price the supplier is required to charge, and let the patient make up the difference if it's more and it's worth it to them. Otherwise the government underbids on the value of your life but you can't use your own money because most of what you would have used already went to paying the premiums/taxes that were supposed to pay for your healthcare until they decided you weren't worth the cost.
    - strainer 7y ago
      >The first is that it's an international market, so any given country is better off to underpay and free ride on the R&D paid for by other countries. By "free ride on the R&D paid for by other countries" the US market bought R&D is a especial fit for this outlook, but without any hard figures to hand, it is perhaps easier to flatteringly assume its stability. Others can do R&D in their own ways, including very significantly University research besides Nationally funded research. Pure commercial health research is problematically burdened by interest in profitability of potential treatments. Its unfortunate that in this age we are to assume international competitiveness in health and all important technologies as given and unavoidable, over cooperation. Cooperation is what we do with people we care enough for. > The government is then put in the position of choosing who to make unhappy. In UKs free health service practice most of the treatment decision is made by the treating doctors, who select the best treatment available to them for the patient. The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally. This is unfortunate but such is the nature of illness. Overall, the selection of treatment to patients is overwhelmingly worked out by doctors, not the government. There is a certain delay and compromise involved in the government selecting and making treatments available to the doctors, thats a matter contested between doctors and government, not patients and government.

AnthonyMouse 7y ago

Military arms procurement generally isn't a monopsony. Weapons manufacturers also sell to both civilians and foreign governments. Moreover, the way people talk about "negotiating drug prices" is very silly. It's the patient who has to decide whether to take the drug. We're pretending there is a monopoly seller and a monopsony buyer and they have to agree on a price, but that's not actually necessary -- if Pfizer says they want $50 and Medicare says they want to pay $40, you don't actually have an impasse there, all you have to do is to say that the patient has to pay the remaining $10. The negotiation shouldn't be between Medicare and Pfizer, it should be between Medicare and the patient, and then the patient and Pfizer. The alternative is that Medicare says $40 and Pfizer says $50 and since they can't agree, the patient has to pay $50 instead of $10. Or $500 instead of $10, because the lack of any Medicare coverage at all reduces volume which increases unit costs. Or the volume to support development without insurance coverage doesn't exist and so neither does the drug. How is any of those better than the patient paying the remaining $10?

strainer 7y ago
I think its valid but difficult to argue that military arms procurement is not by and large a reasonable example of monopsistic negotiation (I hope thats a word :). But that it is debatable goes to show how its not valid to treat an abstract model like monopsony as though it is a factual encapsulation of certain business or issue, which is dishonest to avoid, as the parent comment put it. Absolute monopsony might be a very threatening thing to absolutely profit orientated business, but in practice here nationalised public services like Health need have no interest in forcing their commercial suppliers slowly out of business with unsustainable deals. The position could be abused if it was arranged as such but if a Nation were to choose that outcome, it would make more sense to nationalize the suppliers promptly rather than slowly degrade their value.
- AnthonyMouse 7y ago
  > Absolute monopsony might be a very threatening thing to absolutely profit orientated business, but in practice here nationalised public services like Health need have no interest in forcing their commercial suppliers slowly out of business with unsustainable deals. They actually do, for two reasons. The first is that it's an international market, so any given country is better off to underpay and free ride on the R&D paid for by other countries. (And the consequences of this are subtle; it isn't that all R&D stops or companies lose money, it's that they shrink their R&D expenditure by not investing in high risk high reward treatments because they're no longer high reward, and you get correspondingly fewer high patient value treatments.) The second reason is that there is a conflict of interest. The person receiving treatment is not the person paying, so the people receiving treatment want to maximize effectiveness while the people paying want to minimize costs. The government is then put in the position of choosing who to make unhappy. Then each person gets one vote but there are more taxpayers than patients with severe illnesses, so the result is for governments to generally under-invest in treatment compared to the value the patient themselves would place on their own life. This is why it's much better for the government to set the price they're willing to pay rather than the price the supplier is required to charge, and let the patient make up the difference if it's more and it's worth it to them. Otherwise the government underbids on the value of your life but you can't use your own money because most of what you would have used already went to paying the premiums/taxes that were supposed to pay for your healthcare until they decided you weren't worth the cost.
  - strainer 7y ago
    >The first is that it's an international market, so any given country is better off to underpay and free ride on the R&D paid for by other countries. By "free ride on the R&D paid for by other countries" the US market bought R&D is a especial fit for this outlook, but without any hard figures to hand, it is perhaps easier to flatteringly assume its stability. Others can do R&D in their own ways, including very significantly University research besides Nationally funded research. Pure commercial health research is problematically burdened by interest in profitability of potential treatments. Its unfortunate that in this age we are to assume international competitiveness in health and all important technologies as given and unavoidable, over cooperation. Cooperation is what we do with people we care enough for. > The government is then put in the position of choosing who to make unhappy. In UKs free health service practice most of the treatment decision is made by the treating doctors, who select the best treatment available to them for the patient. The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally. This is unfortunate but such is the nature of illness. Overall, the selection of treatment to patients is overwhelmingly worked out by doctors, not the government. There is a certain delay and compromise involved in the government selecting and making treatments available to the doctors, thats a matter contested between doctors and government, not patients and government.