News Is Universal Healthcare the Solution to Inefficient Capitalism?

[Economist]

medecines' cost is fixed by the government through negociations with laboratories. It's a deal, we buy hundred of thousands of your medicaments but you make us a good price. It's a fair deal since laboratories still make huge benefits from the social wealthare yet they would make more if they didn't have such constrait, the return being mostly (it's not totaly) free healthcare.

Well, it may be more complicated than this. If the government gets a better price, this maybe due to the fact that the government would be a monopsony (a single buyer) in this case. Just to let you know, a monopsony acts much like a monopoly because they have a large degree of market power. In other words, the government may "underpay" for such medication. Now, I'm not asking you guys to feel sorry for pharmaceutical companies for being underpaid. But I am asking you to think about the unintended consequences of such policy, as it would likely decrease innovation in the medical field. My understanding is that the US produces a very disproportionate percentage of new medication in the world. This may be due to other countries restrictive policies in the medical field (such as intellectual property laws). Luckily for many other countries, they are allowed to "piggyback" of the US discoveries because they can then purchase medication from US pharmaceutical companies. Sometimes I wonder how good medical care would be if all developed countries innovated as much as the US?

 

[ShawnD]

Economist, you've clearly never worked for a private company if you believe selling to a single customer is bad. Companies willingly sell bulk product at huge discounts because it assures that the product will move faster. Right now I work for a pharmaceutical company that produces a cream for soaking drugs into skin, and our biggest customers are warehousing companies like McKesson, Kohl and Frisch, and http://www.amerisourcebergen.com/cp/1/. Those 3 warehouse companies make up at least 95% of our sales. One product we sell to those warehouse companies is a cream that comes in 6-packs, which we sell to them for $48, which is $8/tube. We sell that exact same product on the internet for $20/tube. Even at less than half the price, the $8 tubes we sell to the warehouse companies make a hell of a lot more money than the $20 tubes since it's a different order of magnitude in terms of how many we sell.

That same thing applies to drug companies. Instead of selling to 10000 places in the US, they sell it to just 1 place in France - the government. Just put a different shipping label for different areas of France you're sending to, and all of the bills go to to the government of France. It's exactly the same as selling bulk cream to McKesson Logistics and letting them deal with each individual London Drugs, Shoppers Drug Mart, Walmart, etc.

 

[Economist]

Economist, you've clearly never worked for a private company if you believe selling to a single customer is bad. Companies willingly sell bulk product at huge discounts because it assures that the product will move faster. Right now I work for a pharmaceutical company that produces a cream for soaking drugs into skin, and our biggest customers are warehousing companies like McKesson, Kohl and Frisch, and http://www.amerisourcebergen.com/cp/1/. Those 3 warehouse companies make up at least 95% of our sales. One product we sell to those warehouse companies is a cream that comes in 6-packs, which we sell to them for $48, which is $8/tube. We sell that exact same product on the internet for $20/tube. Even at less than half the price, the $8 tubes we sell to the warehouse companies make a hell of a lot more money than the $20 tubes since it's a different order of magnitude in terms of how many we sell.

That same thing applies to drug companies. Instead of selling to 10000 places in the US, they sell it to just 1 place in France - the government. Just put a different shipping label for different areas of France you're sending to, and all of the bills go to to the government of France. It's exactly the same as selling bulk cream to McKesson Logistics and letting them deal with each individual London Drugs, Shoppers Drug Mart, Walmart, etc.

Check out on the research and literature on monopsonies then.

 

[denverdoc]

What I found amusing and pathetic is that under the new Medicare Part D plan states have been relieved of any kind of monopsizing, which in the past has saved bucket loads of money--both to the state gov'ts and the consumers. More corporate welfare under Med D and bunches of Economists to defend the decision. That benefits took an overall hit, unnoticed except by those affected and those that service them.

 

[Matthieu]

But I am asking you to think about the unintended consequences of such policy, as it would likely decrease innovation in the medical field. My understanding is that the US produces a very disproportionate percentage of new medication in the world. This may be due to other countries restrictive policies in the medical field (such as intellectual property laws). Luckily for many other countries, they are allowed to "piggyback" of the US discoveries because they can then purchase medication from US pharmaceutical companies. Sometimes I wonder how good medical care would be if all developed countries innovated as much as the US?

Not really. It's medications made everywhere in the world that gets this discount. In other word the market is the same for French or American or British medications. French medications are exported and French laboratories get important incomes from the US too so our pharmacetical industry, one of the world's largest, does not suffer from this.

 

[ShawnD]

Check out on the research and literature on monopsonies then.

Easy. UHC in Canada and other countries. Doctors are all private but their only customer is the government. It's not perfect, but it would be a lie to say it's a disaster. How about all city work? The roads in my city are all built by private companies, paid with government funds. The US military is all private created stuff, paid for by government. Is the US military a piece of garbage? Is healthcare in France garbage? Are the roads in my city garbage? IMO, the answer to all three of those is no. The US military has excellent equipment, France has excellent healthcare, and my city has excellent roads.

Government contracts are significant, so companies compete like crazy to get them. Competition is the one thing that makes capitalism work.
Having things too spread out leads to gross inefficiencies and collusion. An HMO is arguably a form of collusion, and we all know how bad those are. Insurance, hospitals, doctors, and drug companies all banding together to be your one and only provider. If you're sick, you are only covered by an HMO hospital. That total lack of choice eliminates competition and it ends up hurting capitalism whereas people under UHC with cheap drugs have the freedom to go to whichever hospital is closest, whichever clinic is closest, get whichever prescription drug is cheapest.

Having the government fight on your side also helps the people who are unable to fight. Somebody with cancer or HIV is not in a position to say "oh well the price is unreasonable, so I won't buy this". We aren't talking about a computer or a TV where you can simply not buy it. We're talking about something you need to live. Prescription drugs are almost like a kind of extortion where the company says "pay up or die" and you're not strong enough to stand up and say no, because you will die if you do. It would be ridiculous to ask for free drugs, but it's not ridiculous to stand up and tell the companies they need to compete if they want your business. They can't just win by default because they're the only game in town and they have a complete monopoly on drugs (that's what a drug patent is), we need some way to keep them in check.