R&D SOS

New at Reason: Ron Bailey investigates how Medicare drug price controls would dry up money for pharmaceutical research and development.

Comments

[Justin]

Don't forget the side effect of making the taxpayer responsible for the consequences of unhealthy actions ultimately leads to the taxpayer making or influencing the decisions about the ?unacceptable? choices.

Now if the republicrats get their way and pass a health care plan with the universal qualifier attached to it that means you and I are responsible for the consequences of a lifetime of choices, and we will have the right (and obligation) to influence people?s lifetime worth of choices.

How do you and I influence choices? We vote and petition our representatives to get the government to pass laws that infringe upon the ability to choose to do things, like enjoy an Oreo cookie.

If it isn?t resolved by the legislative and executive branches then it?s on to the courts. We already have a precedent set. If the states (or feds) are responsible for the costs (that?s us) then anybody who chooses unacceptable products would be liable (higher taxes) or the provider of unacceptable choices will be made responsible (civil litigation and settlements).

[Anonymous]

OK, now say all that in plain English, please.

[JDM]

anon,

If the government is paying for your healthcare, it is only a matter of time before it starts cutting costs by passing laws that modify the way you live.

[Warren]

Public housing, public education, public transportation, public toilets. See the pattern? Let's do the same to health care.

[Anonymous]

There are public toilets ?

[Jim]

Ira's point about 65 year and over health insurance, while sounding sensible, ignores the experience of life insurance. Life insurance, if you keep it till you're old enough, has a 100% payout rate. The way it works is you get the policy when you're young and by the time you die you've paid enough in to cover the costs of the payout. Of course the alternative is to just save your money, but if you get hit by a truck at 30 then you'll leave your wife and kids more money than you've paid in. The same thing can also work with health insurance. Start paying in when you're young and the money will be there to cover your nursing home expenses later. Of course, current health insurance doesn't work this way but really there isn't a market need for it since the government created Medicare and because many seniors have health insurance through their employers. That might change as more employers begin to not offer traditional pension and health insurance to retirees due to high costs, and as many people no longer work for the same employer for most of their careers, and as the gov'mt cuts Medicare payments to the point that many doctors won't accept it.

Even 'high risk' patients with predispositions to cancer etc. don't have a certainty of dying from it, and in the case of life insurance (where death is pretty certain unless you've been born of a virgin), a market system allows for some type of insurance in the face of a fairly high degree of certainty in a negative outcome.

Again, early testing for genetic predispositions might help create the market for this type of insurance. If you know you have a certain risk of cancer from birth, you can buy a cancer policy in time to have paid enough in to cover you if you have a 50% chance of cancer at 45. If 50% by 45 is the standard likelyhood of someone in your situation, then your payments by age 45 will still be less than the full costs of cancer treatment and the insurance company will still have been able to make some money off of your policy. And you have the security of knowing that if you get cancer at age 20 or 70, the bills will be paid.

Granted, in this scenario the person in question will probably have higher insurance premiums than someone with a safer prognosis for future health, but in our current system of relative ignorance, we all pay higher premiums to insure those with a higher risk.

[Justin]

Hold on to your wallet, the evil and the stupid parties are working together.

Key Senate Panel Set to Pass Medicare Bill

By Joanne Kenen

WASHINGTON (Reuters) - A key U.S. Senate panel was set to pass a landmark bipartisan bill on Thursday to help senior citizens pay for prescription medicines, a crucial step in breaking the impasse on Medicare drug benefits.

[Ken]

In your synopsis on the Bailey article you claim that "Bailey investigates how Medicare drug price controls would dry upmoney for pharmaceutical research and development". The article does no such thing -- it is merely an opinion piece that offers no evidence for its conclusion. It is simply another example of inflammatory right wing rhetoric and fear mongering.

[Communist Canuckistan]

The above comment hits the nail right on the head.It is not a 'reasoned' piece.

[Kevin Carson]

Madog:
"Of course, they'd have to work something out with the Indian goverment to stop their products from being copied and sold as generics..."

They've already worked that one out. It's the intellectual property provisions of the Uruguay Round of GATT, enforced by the WTO.

Jim:
"Much of the American medical disaster is the logical result of private enterprises managing human necessities, and it will get worse."

Actually, it's caused by the state intervening in the free market on behalf of such enterprises. If the state didn't 1) enforce Big Pharma's right to charge monopoly prices with its patents; 2) enforce the white coats' monopoly of medicine with its licensing; and 3) ban a great deal of alternative medicine through the FDA mafia, you'd have a lot more choices and they'd all be a lot cheaper.

Socialized medicine is just another form of corporate welfare. As is, it tends to be the largest corporations that offer health insurance to their employees. By acting through their servant, the State, these coporations can jointly provide the same service for themselves. But by doing it through the State, they effectively cartelize the function and remove it as an issue of cost competition between themselves. It's what James O'Connor referred to in *Fiscal Crisis of the State*, as the State undertaking functions formerly carried out by the monopoly capital sector, and thus removing it as part of a corporation's private costs. Why do you think the issue of the Canadian National Health keeps coming up in U.S. corporate circles, and they keep trying to fight it in the WTO? They argue it is giving a competitive advantage to Canadian corporations that don't have to pay for their own employees' insurance.

The "prescription drug benefit," likewise, is just corporate welfare for the drug industry. It will mean another highly regressive payroll tax to buy drugs at monopoly prices from--guess who?

[Madog]

If they have less money for R&D they'll eventually realize they can just outsource all their research to places like India. Already alot of programming gets done there, and I wouldn't be surprised if biotech and pharmaceutical research moves there too. Of course, they'd have to work something out with the Indian goverment to stop their products from being copied and sold as generics...

[Jim]

Public armies, public police forces, public secret service, public courts, public libraries, public parks, public roads, public universities, see the pattern?

Much of the American medical disaster is the logical result of private enterprises managing human necessities, and it will get worse.

Let's assume genetic testing for predisposition to disease becomes reliable and commonplace. No sane parent would allow his or her children to suffer from a future disease which (for the sake of argument) could be prevented by some invasive and expensive treatement. Refusing to give your child the test would amount to real negligence. So you submit your child to the test, and the test predicts that he will die in five years without treatment that costs two million dollars.

What market mechanism will force an insurance company to insure the unfortunate child at an rate the parents could possibly afford? What market mechanism will force a hospital to donate care, and how do they choose which child to treat among many equally deserving children? What sort of libertarian society will allow the child to die in order to save money? Please don't blather on about the threat of public funding.

[s.m. koppelman]

What I'm not quite sure of is why the US has to be the one wealthy country in the world that doesn't have guaranteed, cost-controlled baseline healthcare for all of its people. If I understand correctly, the fact that a quarter of all Americans at any given time are one health catastrophe away from financial ruin is a patriotic duty we should carry with pride because, gosh, our usurous private healthcare arrangement gives companies based in countries with socialized medicine, like Bayer, their sole reason for continuing to do any R+D at all.

I'm also not quite sure how research is benefitted by the private medical insurance system, which effectively marks up the cost of healthcare so much that it wipes out any actual "savings" realized by the limits it places on access.

[Another Jim]

"Much of the American medical disaster is the logical result of private enterprises managing human necessities, and it will get worse." -

I suppose that's why we have the goverment provide food, water, housing, transportation, and electricity too - because the market cannot provide human necessities. What a bunch of BS. Pretty much any area of these things the government gets involved in, there are problems. Communist countries have had huge shortages of food, and we all know what public housing is like. California's energy crisis was largely due to faulty government regulation, not deregulation as everyone said. Even our existing health care system is messed up a lot by government action.

I'd like to know what this hypothetical disease is that will kill a child in five years unless 2 million dollars is spent to cure it. I don't think such a thing really exists in reality. Sure some treatments are expensive but a lot of that is related to existing regulations (high costs of getting FDA approval) and/or ligitation that affects health care.

"the fact that a quarter of all Americans at any given time are one health catastrophe away from financial ruin" - an equal number (if not more) are one or two paychecks away from this if they lose their jobs. We don't provide guaranteed employment either, again, based on how well it's worked out in places that have tried it. Working to remove regulatory burdens that add costs to medical care will help with this problem too.

I don't think we don't have single payer price controlled medical care because we're sacrificing ourselves to help the rest of the world out by paying for drug research, it's because socialized medicine just doesn't work that well. For all it's problems (many caused by regulation), we've got the best health care in the world. Does anyone think it's a coincidence that none of the SARS victims in the US have died, compared to all the deaths around the world? (I know we don't have many cases here but I think we've seen enough that someone should have died by now!)

Ron Bailey's piece is opinion, but it's based on some good reasoning. People have to have a motivation to provide a good or service. That motivation is profit (at least that has proven the most effective). If you price things below cost so no one makes a profit, then they stop doing these things. One area that drug companies can cut is R&D, and probably it will suffer if price controls are instituted.

[Justin]

With genetic testing the market will respond by placing genetically predisposed people in similar risk groups, we do the same with smokers and bad drivers and age groups. What is wrong with that?

More information makes the market work better not worse. The market is made up of producer and consumer. A more efficient health care market with better information for consumer and producer would allow tailoring health insurance plans for more precice risk groups. A person predisposed to diabetes would insure themselves for the possibility of developing diabetes not the diseases they are not predisposed to develope. Furthermore, the knowledge of a pre-disposition for something would promote longer range planning and lifestyle modification to minimize the risks, with the possibiliity to build that into the insurance premiums. You know like we do with younger drivers, bring in a report card with good grades and get a lower premium. Bring in a good bill of health - proof of preventative care - and the premium could reflect and encourage it.

And on to that canard "why is this country, among the wealthiest in the world, the one that doesn't provide government run health insurance?" Because we are among the wealthiest there is no NEED for someone else to pay your bills. We have the capacity to do it ourselves without running the money through the dolts in DC. The money launderers who skim some off the top to line their own pockets, then skim some more to fund totally irrelevant programs, then skim some more off the top to build the collection bureaucracy, then skim some more to create the payment bureaucracy, then skim some more to create the audit bureaucracy (bet it isn't off the top now, must be down somewhere near the middle) then skim some more off to create a study to find out why money is wasted, then skim some more ti fund a study to find out why what was promised isn't being delivered, then skim some more to fund a study to figure out how to redesign the process because it is going broke far faster than anyone expected ...

All that skimming and financial chicanery to decide that they aren't taxing us enough to provide too little, too poor a service. (evidence? see current medicare program)

Don't like the government program? Tough you still have to pay for it.

One more thing, costs are not equal to price. Regulating something out of existance is a cost without an apparent price. Putting a price cap on drugs regulates some research out of existance, can you put a price tag on that cost? I guess they can always create the Byrd/Thurmond pharmacutical research department specializing in drugs to maintain old bastards in the senate.

[twistedmerkin]

First Jim,
I'm not sure you're characterizing the point of insurance properly. You shouldn't wait until you have a traffic accident to buy auto insurance. The point of insurance is to protect against the unknown, not to make known costs less costly. As far as your hypothetical sick kid scenario goes, privacy, including medical privacy, is an important libertarian ideal. The results of the testing should be the property of the child and the parents. Neither the government nor any corporation should be given that info without the consent of the parents. Protection of such privacy from both government and corporate interests is an issue that traditional democrats and republicans don't seem to care about.

[Ira Weatheral]

"With genetic testing the market will respond by placing genetically predisposed people in similar risk groups, we do the same with smokers and bad drivers and age groups. What is wrong with that?"

1)Your examples, except age, are chosen behaviors. No one chooses their genetic predispostions.

2)Just because your genotype 'predisposes you' towards cancer or 20/20 vision, envorimental factors affect your phenotype. if tyou are not expose to carcinogens then a predispostion to cancer will not result in a cancer, and even soemone with 20/20 vision can be blinded in an accident.

3)Insurance doesn't work (or becomes prohibitively expensive) when there aren't enough healthy folks in the risk pool. What company in their right mind would insur individuals over 65, even if they are in good health? You know within 15 years there will be a big payout on their premiums. This is twhy the for profit insurance comapnies are getting out of the medicare market, leaving it to the non profits to pick up the slack, increasing their premiums.

Sure, everyone would like to insure 20 year old women (healthy, very low risk) cause they'd make a ton of money. Is it then fair to take the premiums and then deny service when the person gets sick. Sounds like a breach of contract to me.

[Justin]

I included age because it is not a chosen circumstance. The market responds to it by appropriate pricing structures.

Predisposition is related to risk or probability. If you have a predisposition to something you are more likely to develope it. Insurance ranks risks, accidents are a predictable occurance and your premiums reflect that.

Insurance doesn't work when the premiums collected do not cover the costs, better knowledge allows for better risk predictability and appropriate (cost covering) premiums. Healthcare providers and insurance companies are getting out of the medicare market because the governemtn is crowding them out, or regulating them out, or price controlling them out. Want to discuss ability to pay? Look at the census, the wealthiest age groups in this country are the elderly.

http://www.census.gov/hhes/www/wealth/1998_2000/wlth98-1.html

http://www.census.gov/hhes/www/wealth/1998_2000/wlth00-1.html

Glad you mentioned healthy 20 year old women, how many of the self insured fall into such a healthy grouping? There are a few logical reasons for this healthy person to buy insurance, provided they don't have other more pressing needs and wants.

insuring insurability
high risk life style
high risk job
high predisposition to costly diseases

[B.Ross]

Certain idiots in Congress usually create more problems, by trying to solve the problems they created in the first place. The best course of action for them is simply to admit that they cannot solve these problems (never have, never wil) and leave it to the marketplace. The markeplace being private individuals transacting with one another, value for value, without some overlord gumming up the transaction.

If you don't believe this will work, look at history and you'll see that it has. Also look at history and name us one (any) market problem that some idiots in Congress have been able to solve, without creating an even greater problem.

[K.Marx, Jr.]

Public armies, public police forces, government secret service, public courts, government libraries, public parks, government roads, public universities, government grocery stores, public transportation, government entertainment, public television, government computers, public malls, government clothing stores, public parenting, government churches, public schooling, government-provided mates, public baths, government cars, public refineries, government theatres, public internet service providers, government pizza parlors, public shoe outlets, government hair dressers -- see the pattern?

Much of the American disasters are the logical result of private enterprises trying to provide human necessities, and if private enterprise doesn't butt out, it will get worse.

You Libertarians and Republicans should take an example from the USSR, North Korea, certain African countries, Cuba (an excellent example) if you wish to see why private enterprise and the marketplace doesn't work. You have a lot to learn from those countries. They do it right, for a change.

[Justin]

Thanks K. Marx! I needed a good laugh this morning.

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