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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

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
    > Others can do R&D in their own ways, including very significantly University research besides Nationally funded research. They can, but do they? In other words, is the amount of research done per capita in Europe more than the amount done in the US, counting both government and private sector in both cases? > Pure commercial health research is problematically burdened by interest in profitability of potential treatments. In principle this is just a measure of how important something is to people. A cure for cancer when you have cancer is worth a lot more than a cure for restless leg syndrome or whatever. Then that gets multiplied by the number of people who have that condition and it actually is a pretty good measure of how much we should be spending to cure something. Sometimes you get seemingly silly results like a lot of money going into things like baldness cures, but it's because there are a very large number of people with that condition, and small importance times large volume actually justifies a significant amount of research investment. It doesn't work that well for things that generally only poor people get, but that doesn't mean it can't work for the major killers like heart disease and cancer that get everybody. And charities are actually doing a pretty good job with the exceptions like malaria. You don't have to solve every problem the same way. > 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. It's not really a matter of cooperation. It's not as if the US develops a cure for a given condition and then keeps it to themselves and doesn't let Europe have it. The issue is that if there are 100,000 patients world-wide and it takes a billion dollars in revenue to justify the development, the average patient has to pay ten thousand dollars. If a country declares they'll only pay $8000, taking that much is still better than having to amortize the same costs over fewer patients, but then they have to charge more than $10,000 to patients somewhere else. Naturally every country has the incentive to do that, but the more of them that do the more drugs never get developed to begin with because the remaining countries couldn't make up the difference. > The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally. It's not just a matter of not having the treatment option available. Consider that math again from the perspective of the drug company. They need a billion dollars in revenue which is $10,000/patient on average. Now they go to the NHS in the UK which offers to pay no more than $8000. The actual manufacturing cost is only $100 and the rest of it is going toward fixed costs like R&D and interest on the money borrowed to do R&D. Getting $7900 to put toward those costs isn't sufficient on average, but it's more than zero. Meanwhile if the company refuses that price, they get nothing from the UK, because NHS does cover the existing alternative. Which means that if the company refuses the government's terms, a patient's price in that country is $10,000 more than the alternative, because the NHS is paying $6500 for the existing drug but nothing for yours. Then even though yours is $5000 better and only costs $3500 more, from the patient's perspective it costs $10,000 more because the alternative is "free" but yours is full price. So if you don't accept the governments terms you get approximately zero customers in that country. So the company takes the government's $8000 because it's better than the nothing they get in the alternative, and then the drug is "available" there. But that's not enough to sustain the research when everybody does it. The more countries do that the less research we get.

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
  > Others can do R&D in their own ways, including very significantly University research besides Nationally funded research. They can, but do they? In other words, is the amount of research done per capita in Europe more than the amount done in the US, counting both government and private sector in both cases? > Pure commercial health research is problematically burdened by interest in profitability of potential treatments. In principle this is just a measure of how important something is to people. A cure for cancer when you have cancer is worth a lot more than a cure for restless leg syndrome or whatever. Then that gets multiplied by the number of people who have that condition and it actually is a pretty good measure of how much we should be spending to cure something. Sometimes you get seemingly silly results like a lot of money going into things like baldness cures, but it's because there are a very large number of people with that condition, and small importance times large volume actually justifies a significant amount of research investment. It doesn't work that well for things that generally only poor people get, but that doesn't mean it can't work for the major killers like heart disease and cancer that get everybody. And charities are actually doing a pretty good job with the exceptions like malaria. You don't have to solve every problem the same way. > 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. It's not really a matter of cooperation. It's not as if the US develops a cure for a given condition and then keeps it to themselves and doesn't let Europe have it. The issue is that if there are 100,000 patients world-wide and it takes a billion dollars in revenue to justify the development, the average patient has to pay ten thousand dollars. If a country declares they'll only pay $8000, taking that much is still better than having to amortize the same costs over fewer patients, but then they have to charge more than $10,000 to patients somewhere else. Naturally every country has the incentive to do that, but the more of them that do the more drugs never get developed to begin with because the remaining countries couldn't make up the difference. > The doctors quite rarely don't have most expensive treatment option available and can advise that one is available for private purchase occasionally. It's not just a matter of not having the treatment option available. Consider that math again from the perspective of the drug company. They need a billion dollars in revenue which is $10,000/patient on average. Now they go to the NHS in the UK which offers to pay no more than $8000. The actual manufacturing cost is only $100 and the rest of it is going toward fixed costs like R&D and interest on the money borrowed to do R&D. Getting $7900 to put toward those costs isn't sufficient on average, but it's more than zero. Meanwhile if the company refuses that price, they get nothing from the UK, because NHS does cover the existing alternative. Which means that if the company refuses the government's terms, a patient's price in that country is $10,000 more than the alternative, because the NHS is paying $6500 for the existing drug but nothing for yours. Then even though yours is $5000 better and only costs $3500 more, from the patient's perspective it costs $10,000 more because the alternative is "free" but yours is full price. So if you don't accept the governments terms you get approximately zero customers in that country. So the company takes the government's $8000 because it's better than the nothing they get in the alternative, and then the drug is "available" there. But that's not enough to sustain the research when everybody does it. The more countries do that the less research we get.