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I'm ranting against free market capitalism because the whole point of free market capitalism is to ensure the price of a product is as close to its "free market

by exelius 12y ago

I'm ranting against free market capitalism because the whole point of free market capitalism is to ensure the price of a product is as close to its "free market value" as possible. For health care products, the calculation of value is inherently inaccurate because an individual places a much higher value on his/her own life than the market would. I do agree that this is an example of misguided government regulation. The problem is that the government tried to use a capitalist solution to a societal value problem (i.e. the orphan drug laws). This created additional arbitrage opportunities. What I'm saying is that we need a serious discussion at a national level about the goals of our health care system, and the optimal means for achieving those goals. We don't need new government regulation of health care; we need an entirely new systemic approach to health care. We've recently had a national awakening that the approach we've taken to drug abuse doesn't work, and that we were maybe trying to solve the wrong problem in the first place. We need a similar awakening on health care, though I'm doubtful it will happen until health care is out of reach to all but the wealthiest in society.

drchaos 12y ago
> the whole point of free market capitalism is to ensure the price of a product is as close to its "free market value" as possible You forgot competition. In a healthy market, a big difference between manufacturing cost and final price is a strong incentive for competitors to enter the market and undercut prices. You can see this in practise in unregulated markets like electronics, leading to a flood of really cheap devices, for example you can get a Galaxy S4 clone on Alibaba for about $200, whereas an original S4 goes for $400 right now. You can bet the Chinese would also do cheap generics, if the FDA would let them.
- exelius 12y ago
  Right; but the pharmaceutical industry goes out of its way to avoid competition. They won't develop drugs if there is too much competition. I understand that someone needs to pay for R&D. Unfortunately, the US government already pays for most drug R&D, but the patents get assigned to the company doing the development in all but a few rare cases.
  - innguest 12y ago
    They go out of their way by lobbying, which is to say they go out of the free market scope in order to avoid competition. So you are wrong in blaming the free market for this. And when you say 'They won't develop drugs if there is too much competition' that only means that those existing companies won't do it - and as soon as they leave the market because they don't want to compete, several entrepreneurs will step in and fill the void because they're not afraid of competing.
  - refurb 12y ago
    The US gov't does not pay for most drug R&D. It pays for most of the basic science, that often leads to drug candidates, but the industry shoulder nearly 100% of the cost of getting a drug to market. The combined, private R&D budget for biotech is ~$70B (not including VC funding). Total NIH funding (much of which is not drug focused) is ~$30B.
crusso 12y ago
because an individual places a much higher value on his/her own life than the market would That doesn't make sense. I place a much higher value on sunflower seeds than the market does, so that means I buy a ton of sunflower seeds so that I always have a bag on hand. They are cheap to me because I love them. we need an entirely new systemic approach to health care We agree there, but probably not in how we would do that. Most of our healthcare industry problems would benefit from more free market, not less. Remove the government structures that create unnecessary middlemen in healthcare like employers and the current insurance companies. If there were any regulation around healthcare, it should be toward opening the market up. Force doctors and hospitals to expose their prices so that consumers can wisely use their healthcare dollars. Even within healthcare, there are segments that produce better outcomes at diminishing prices; like the cosmetic surgery and corrective vision surgery fields. As you look at those segments, they benefit from being mostly outside of the government-insurance-employer loop of spiraling costs. Then for all the cherry picking you're trying to do with the private sector, go back and cherry pick on the problems that governments have. Governments purposefully maximize obscurity of relationships between manufacturers, lobbyists, lawmakers, and bureaucrats so that corruption becomes rampant while serving the needs of the consumer falls way behind. If government were in charge of allocating dollars for which medicines were produced, you can bet that there would be massive overproduction of some drugs and massive shortages of others that would take election cycles to correct - with the end result being that people won't get the healthcare that they're needing.

by exelius 12y ago

drchaos 12y ago

> the whole point of free market capitalism is to ensure the price of a product is as close to its "free market value" as possible You forgot competition. In a healthy market, a big difference between manufacturing cost and final price is a strong incentive for competitors to enter the market and undercut prices. You can see this in practise in unregulated markets like electronics, leading to a flood of really cheap devices, for example you can get a Galaxy S4 clone on Alibaba for about $200, whereas an original S4 goes for $400 right now. You can bet the Chinese would also do cheap generics, if the FDA would let them.

exelius 12y ago
Right; but the pharmaceutical industry goes out of its way to avoid competition. They won't develop drugs if there is too much competition. I understand that someone needs to pay for R&D. Unfortunately, the US government already pays for most drug R&D, but the patents get assigned to the company doing the development in all but a few rare cases.
- innguest 12y ago
  They go out of their way by lobbying, which is to say they go out of the free market scope in order to avoid competition. So you are wrong in blaming the free market for this. And when you say 'They won't develop drugs if there is too much competition' that only means that those existing companies won't do it - and as soon as they leave the market because they don't want to compete, several entrepreneurs will step in and fill the void because they're not afraid of competing.
- refurb 12y ago
  The US gov't does not pay for most drug R&D. It pays for most of the basic science, that often leads to drug candidates, but the industry shoulder nearly 100% of the cost of getting a drug to market. The combined, private R&D budget for biotech is ~$70B (not including VC funding). Total NIH funding (much of which is not drug focused) is ~$30B.

crusso 12y ago

because an individual places a much higher value on his/her own life than the market would That doesn't make sense. I place a much higher value on sunflower seeds than the market does, so that means I buy a ton of sunflower seeds so that I always have a bag on hand. They are cheap to me because I love them. we need an entirely new systemic approach to health care We agree there, but probably not in how we would do that. Most of our healthcare industry problems would benefit from more free market, not less. Remove the government structures that create unnecessary middlemen in healthcare like employers and the current insurance companies. If there were any regulation around healthcare, it should be toward opening the market up. Force doctors and hospitals to expose their prices so that consumers can wisely use their healthcare dollars. Even within healthcare, there are segments that produce better outcomes at diminishing prices; like the cosmetic surgery and corrective vision surgery fields. As you look at those segments, they benefit from being mostly outside of the government-insurance-employer loop of spiraling costs. Then for all the cherry picking you're trying to do with the private sector, go back and cherry pick on the problems that governments have. Governments purposefully maximize obscurity of relationships between manufacturers, lobbyists, lawmakers, and bureaucrats so that corruption becomes rampant while serving the needs of the consumer falls way behind. If government were in charge of allocating dollars for which medicines were produced, you can bet that there would be massive overproduction of some drugs and massive shortages of others that would take election cycles to correct - with the end result being that people won't get the healthcare that they're needing.