Rationing Health Care Part II

My daughter texted me last week that she didn't quite get the last blog entry, so I wanted to expand a little on that topic. I also wanted to mention that I am not opposed to industry discovering and profiting on new health care modalities. Free market forces promote the development of new techniques and drugs and the profit that follows is the reward for taking the chance on such a development.

People in the pharma industry would defend the high cost of new drugs in the following way. They note that the cost to bring the drug to market is very expensive. Only one in a hundred molecules that go through expensive trials actually make it to market so they have to recoup the cost of not only the marketable drug but also the molecules that were developed and tested that never made it. They also would mention that by keeping people with chronic diseases healthy with newer technology, other costs such as long term hospitalization or institutionalization have abated. Lastly, they would stress the enormous impact that new drugs and technology have had both by lengthening people's lives and improving the quality of those lives. Is there any price to be placed on those factors?


Sometimes by looking at an extreme example you can clarify the problem and possible solutions. Lets say that an imaginary drug company named Eternity Therapeutics develops two drugs. Drug A can cure cancer but you must take it for the rest of your life. Drug B can stop you from aging but must also be taken daily or the aging process will resume.(Btw, these are not fantasies but research is now taking place to achieve both of these). The cost of each drug is one million dollars per year. Why is it so expensive? Maybe it has ingredients that are extremely rare and thus is in limited supply. Maybe Eternity Therapeutics knows they can get their price so they price it at whatever the market will bear.

So who should pay for drugs A and B? Private insurance companies will not include these drugs in their benefits. Their premiums would have to be too high to include these drugs. If government included these drugs in their benefit packages, the country would go broke (I should say, even more broke than they are currently). Ultimately , it is unaffordable and only the rich will be able to get them. At some point the cost of extending peoples lives will just cost too much for society. The only question is where is that point. Will we be able to have the discussion without the opposition declaring death squads or throwing granny under the bus.

My point in the previous blog was not to demonize private industry regarding the cost of new drugs/techniques. Hopefully, they can continue to develop drugs and profit without charging exorbitant fees. Their profit should be generated from all countries not just the USA which pays higher fees than other countries. The point was only to raise the notion that the costs of new technology have outpaced the ability of society to pay for them. What's the use of developing new drugs if society cannot afford them. Eventually, industry will conclude that if there is no profit to be had further innovation will cease. Everyone loses.