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Tilting at Windmills

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February 3, 2006
By: Kevin Drum

COMPETITION....Speaking of Medicare prescription drugs, here's a little tidbit that somehow didn't make its way into the administration's progress report:

The new Medicare drug benefit will give drug companies up to $2 billion in extra profits this year because they're no longer required to pay rebates on drugs bought by the government for the elderly poor.

....The boost in profits comes from a shift in the drug coverage of 6.4 million poor and elderly people from Medicaid to the new Medicare drug benefit. Unlike Medicaid, which requires drug companies to charge their lowest or "best price" for medications, the Medicare program relies on competition among private drug plans to keep prices low. By eliminating the need to discount drugs for the government, the industry can now pocket the savings.

"The net effect over 10 years is probably closer to $40 billion in extra profit," said Stephen Schondelmeyer, a pharmaceutical economics professor at the University of Minnesota.

This is no surprise, of course. After all, you don't think the pharmaceutical industry would have supported the bill if they really thought "competition" would drive down prices, do you?

Kevin Drum 12:12 AM Permalink | Trackbacks | Comments (148)

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Comments

Once again, I have outrage fatigue.

Posted by: craigie on February 3, 2006 at 12:13 AM | PERMALINK

The new Medicare drug benefit will give drug companies up to $2 billion in extra profits this year because they're no longer required to pay rebates on drugs bought by the government for the elderly poor.

Good plan. This means drug companies can use their extra profit and put it into more research and development so that even better drugs can be made for people. So the new Medicare drug benefit plan helps people live longer and healthier from the new drugs.

Posted by: Al on February 3, 2006 at 12:22 AM | PERMALINK

Thanks

Posted by: Hostile on February 3, 2006 at 12:29 AM | PERMALINK

No, Al, this means that the drug comaponies can waste more money on lobbying Congress, on stock dividends, and on expensive give aways that do nothing for health. Make no mistake, these drug companies are in it for the money, not for health improvement. Dont' believe me? check out how many drugs get pulled after 5 or ten years for being harmful. Fascism: the bundling of nationalism, business and governmental interests. we've got it, baby, we've got it.

Posted by: Chris on February 3, 2006 at 12:49 AM | PERMALINK

Be interesting to trace the lobbying effort that went into this little medicare line item.

Be interesting to see how many trips to Scottland, or Lear jet rides it costs to get a 3 billion dollar kickback.

Just curious.

Posted by: the fake fake al on February 3, 2006 at 12:49 AM | PERMALINK

With PR like this, who can argue against a coupla billion in kcikbacks....

"If a medicine can restore a person's health or improve her life, then a person who needs it should have it.

Thats why the pharmaceutical industry wholeheartedly supports a prescription drug benefit for Americas seniors and disabled persons. We urge Congress to enact a Medicare drug benefit this year that offers good coverage through a choice of competing private health plans."

http://www.phrma.org/issues/medicare/benefit/

After all big pharma is only here to help...

Right Al.

Posted by: Fake fake all on February 3, 2006 at 12:54 AM | PERMALINK

Come on now Kev
Say it with me.

"Class War"

Good! Good! Let's try another one.

"Opression of the poor and helpless"

See now? That wasn't so hard, was it?
The truth will set you free.

Posted by: joe on February 3, 2006 at 12:57 AM | PERMALINK

Al, here is a link you might be interested in:

http://www.alldc.org

Its about how to have a career as a lobbyst.

You be good, I think.

Posted by: the fake fake al on February 3, 2006 at 1:00 AM | PERMALINK

joe: another one: molotov cocktails light the darkest roads

Posted by: murmeister on February 3, 2006 at 1:10 AM | PERMALINK

If the Democrats can't use this to get a positive net gain in Congressional seats this Nov., I am so outta here.

Posted by: Keith G on February 3, 2006 at 1:55 AM | PERMALINK

Ah, the dreaded "experts say" gag again.

A Prudential study "estimates" a "likely" outcome.

Medicare administrators draw conclusions from actual cost numbers so far, showing costs are actually going down.

The rest of the article is one side saying one thing, another side saying another.

Which side gets labeled "the experts?"

And of course, the commenters here, not to mention the headline of the article, act as though it's already a couple of years down the road, and the windfall profits are a matter of record, and not some guess in a report.

I understand that the Democrats have a lot invested in this not working, but can we at least wait for the actual data?

Posted by: tbrosz on February 3, 2006 at 2:35 AM | PERMALINK

maybe the American drug companies should do like their Canadian counterparts and focus attention entirely on generics. that would bring prices down a lot. It would make the system a lot more equitable, since a third or so of consumers can't afford the on-patent drugs anyway. It would also cut down on the millions of mice and rats that have to be sacrificed every year. The scientists could work for the NIH making all sorts of chemicals other than effective drugs, and the people in marketing could take up honest work writing expose's of drug company dishonesty.

With the same access to the results of federally funded research that American companies have, 80% of the world's economy (outside the US) make just 30% of all new drugs. We need policies that will drive that 30% figure up closer to 100%; price controls on drug company sales in the US will help to achieve that goal. There is simply no good reason why US pharmaceutical companies should continue to be so much more successful than US auto companies, steel companies, or airline companies.

Posted by: contentious on February 3, 2006 at 2:38 AM | PERMALINK

maybe the American drug companies should do like their Canadian counterparts and focus attention entirely on generics.

Posted by: contentious on February 3, 2006 at 2:38 AM | PERMALINK

Sure but you'd have to give Insurance Policies, HMO's and Medicare/Medicaid the power to pressure people to take generics or pressure doctor to give generics without lawsuit.

If you are a doctor, and you see something that is 10 times the cost but has a small chance of keeping you out of a malpractice suit, you'd prescribe the more expensive product. The insurance company or some state program is paying for it - not your patient.

Posted by: McA on February 3, 2006 at 2:44 AM | PERMALINK

McA: In Canada, for all Provincial and Federal sponsored Drug Plans, Pharmacies must substitute generics where available or they will not be paid. Doctors must justify ordering name brands only even in private plans. Works like a charm despite heavy bullshit advertising by the drug companies claiming lack of quality controls.

Posted by: murmeister on February 3, 2006 at 3:29 AM | PERMALINK

McA: In Canada, for all Provincial and Federal sponsored Drug Plans, Pharmacies must substitute generics where available

Posted by: murmeister on February 3, 2006 at 3:29 AM | PERMALINK

Would the trial lawyers support something like that in the US? No.

Would a doctor get sued if the generic, he prescriped had a quality issue? Yes.

Posted by: McA on February 3, 2006 at 4:04 AM | PERMALINK

More proof that, despite the constant lip service, conservatives don't believe in free markets - they believe in rigged markets.

Posted by: Stephen Kriz on February 3, 2006 at 6:33 AM | PERMALINK

Stephen Kris,

Good point. Don't ever let it be said the K-Street Project didn't work just as planned. Medicare Part D --the best legislation lobby money could buy.

Posted by: Ron Byers on February 3, 2006 at 7:07 AM | PERMALINK

"the industry can now pocket the savings."

Pocket it or apply it towards research.

Posted by: Lurker42 on February 3, 2006 at 7:40 AM | PERMALINK

In the UK, seniors get all their drugs paid for, to the best of my knowledge, with no copays. In the US, they get a modest discount off a criminally inflated list price, and have to pay several $1000 before they get real help.

Posted by: bob h on February 3, 2006 at 7:54 AM | PERMALINK

Of course this revelation should not surprise anyone. The Republicans in Congress and the adminstration have, for a long time, promised to change government as we know it...and they have. Government has been transformed from an instrument to help the citizens of the nation to a tool to help the rich and powerful put more dollars in their already overflowing pockets. Every aspect of the government - from the war in Iraq, to the Department of Homeland Security, to Medicare system - has been sub-contracted out to the private sector. And look what it has done for us. Non-performance everywhere. When will the "private sector" go back to doing its own business and let the government take care of the people?

Posted by: Lamonte on February 3, 2006 at 8:10 AM | PERMALINK

McA: The problem with generics is seldom a true quality issue but a truly litigious society that looks to blame someone for every natural event in the hope that a collection of idiots on a jury can be bamboozled or made to feel irrationally sympathetic. One always thinks of Charlie Chaplin when it was proved beyond a doubt that a paternity suit was false and that the child was not his but the jury felt sorry for the woman and ordered him to pay child support anyway. In Canada, the philosophy of generics succeeds because these sorts of suits are prevented by not allowing lawyers to base a fee on winning or losing. The loser must pay their own fee as generally the fees of the winner are paid by themselves unless the suit was obviously a nuisance suit such as are common in the US.

Posted by: murmeister on February 3, 2006 at 8:32 AM | PERMALINK

Good plan. This means drug companies can use their extra profit and put it into more research and development so that even better drugs can be made for people. So the new Medicare drug benefit plan helps people live longer and healthier from the new drugs.

Or buy more televison ad's

Posted by: Stephen on February 3, 2006 at 8:47 AM | PERMALINK

Gee, McA, shouldn't you be out with other MALAYSIANS rioting about some freaking cartoon in a Dutch newspaper or something? But thanks so much for coming here to tell us how people in your country see it. Are medicines to ease the pain of caning in the formulary under the MALAYSIAN prescription drug program?

Posted by: Pat on February 3, 2006 at 8:55 AM | PERMALINK

And, Al, thanks for the heads up. Good to know the drug companies will plow all these profits back into research. Just like the other GOP promises:

The health insurance companies will ereduce rates if we enact liability caps and solve the "malpractice crisis."

The property insurance and reinsurers will reduce costs for the public if the government creates a taxpayer-funded "backstop" in the event of more disasters like Katrina or 9/11. After all, insurance companies can't do it alone! (They can, however, collect premiums alone. It's just the "paying out" part they want the taxpayer to help with.)

Credit card companies will reduce consumer fees if we pass the bankruptcy bill and elminate the "crisis of easy consumer bankruptcy."

If anyone needs me, I'll be out by the mailbox waiting for my check. Anyone wanna come with?

Posted by: Pat on February 3, 2006 at 9:03 AM | PERMALINK

What I fail to understand is why no one brings up the fact that the Bush family owns a great deal of stock and interest in drugs companies, particularly Eli Lilly, which has been one of the largest beneficiaries of the new drug program. Why does no one remember that George H.W. Bush put his stock in one of those "blind trusts" when he became VP? It seems to me that this is just one more example of this president making money from his policies. The Bush family has many more financial intersests than oil. These things really need to be brought to the public's attention.

Posted by: Sharon on February 3, 2006 at 9:24 AM | PERMALINK

By the way, profit is what a company makes AFTER it puts money into new research.

Posted by: Sharon on February 3, 2006 at 9:25 AM | PERMALINK

Considering that at this time the drug companies spend more on advertising than they do on research, the righties' position that they will increase research spending would be laughable, if it weren't intentionally dishonest.

Posted by: CN on February 3, 2006 at 9:26 AM | PERMALINK

tbrosz: I understand that the Democrats have a lot invested in this not working . . .

Apparently the GOP has a lot invested in this not working.

On the other hand, your statement about the Democrats is yet another defamation typical of conservative SOP.

And funny how conservatives criticized every Clinton initiative without giving them a chance, but now say its wrong for liberals to do the same with regard to Bush.

Yet more SOP hypocrisy from tbrosz.

Posted by: Advocate for God on February 3, 2006 at 9:30 AM | PERMALINK

Lurker42: Pocket it or apply it towards research.

Yeah, I bet that's what the oil industries CEOs are doing with record profits, applying it towards research, because we all know from our history that corporate CEOs care more about the public interest than their own pocket books.

[Cue uproarious laughter.]

Posted by: Advocate for God on February 3, 2006 at 9:32 AM | PERMALINK

BTW, smoking SOTU.

Rasmussen has Bush's approval now down 2 points after a full day of post-SOTU polling.

Bush speaks; the public doesn't listen.

Liberals would recommend that conservatives get a new spokesman, but we really don't want to help the opposition by giving them good advice, unlike the conservatives who are always posting good faith advice here telling liberals how they can win back the country if they would only change this anti-Bush strategy that according to them isn't working.

Apparently they have a deep abiding love for liberals to want to help them so much, but of course only if liberals show an intention to become conservatives.

Posted by: Advocate for God on February 3, 2006 at 9:37 AM | PERMALINK

Medical services are simply not subject to market forces the way socks are. You can defer the purchase of socks and seek out cheaper socks from, oh, China, if you wish, without serious long range consequences. Unless of course you happen to have the misfortune to work in a textile mill...but it isn't quite on a par to being unable to buy insulin.

As we provide subsidies to one demographic fragment or other, then it naturally follows that that favored fragment will use its insulation from the costs of services to disproportionately comsume those services and the costs to everyone else will rise and their access decline.

We're just shifting deck chairs around on a sinking ship.

One payer, universal coverage is the only sane alternative.

Trying to shoehorn access to medical care into a laissez faire 'market forces' model does not work, cannot work, and never will work until such time as illness, accident, or disabilty is a 'free choice'.


Medicine is, essentially, a state enforced monopoly based in the power to prescribe.

The sooner we deal with this simple fact the better.

Posted by: CFShep on February 3, 2006 at 9:49 AM | PERMALINK

What keeps Canadian drug costs down is that the government negotiates costs with drug companies -- because the government buys in bulk they get a better price (because the drug companies know that they can move a guaranteed amount of merchandise). As I understand it, US law actually forbids any such negotiations with drug companies.

Posted by: LisainVan on February 3, 2006 at 9:56 AM | PERMALINK

Infidel! Negotiation is Un-Islamic. It should be banned.

Posted by: Mo on February 3, 2006 at 9:59 AM | PERMALINK

Would a doctor get sued if the generic, he prescriped had a quality issue? Yes. Posted by: McA on February 3, 2006 at 4:04 AM

McAss, obviously ignorant of Canadian law, but wants us to believe he know jack about US law.

It is to laugh.

Posted by: Dr. Morpheus on February 3, 2006 at 10:13 AM | PERMALINK

I am offended by your post. Laughing is un-Islamic and against the Koran.

Posted by: Mo on February 3, 2006 at 10:15 AM | PERMALINK

One item has drawn heavy criticism from the White House and others. It changes an accounting practice used by oil companies and hits them with $4.3 billion in increased taxes.

In a year in which oil companies made unprecedented profits at the expense of consumers through price gouging, Bush criticizes getting rid of an oil company tax loophole.

Yet more proof that whether it be prescription drugs or energy, the Bush White House hates ordinary Americans.

He will steal from them, he will send their sons and daughters to die for lies, and he will render their votes for president meaningless with GOP election fraud and voter intimidation.

Posted by: Advocate for God on February 3, 2006 at 10:15 AM | PERMALINK

"Yeah, I bet that's what the oil industries CEOs are doing with record profits, applying it towards research, because we all know from our history that corporate CEOs care more about the public interest than their own pocket books."

Um..No, Researching new products yields new products that can be sold to consumers...etc. c'mon, basic economics. They bennifit, we bennifit, it's cool.

Posted by: Lurker42 on February 3, 2006 at 10:18 AM | PERMALINK

Pocket it or apply it towards research.

They already spend more on marketing than research. If bribing congressmen returns more money, which would you do?

Posted by: Jeffrey Davis on February 3, 2006 at 10:19 AM | PERMALINK

"I have outrage fatigue."

There is a pill for that.


Fun Pun :)

Posted by: Lurker42 on February 3, 2006 at 10:21 AM | PERMALINK

Um..No, Researching new products yields new products that can be sold to consumers...etc. c'mon, basic economics. They bennifit, we bennifit, it's cool. Posted by: Lurker42 on February 3, 2006 at 10:18 AM

Umm, $1,000,000,000 in the bank now is worth more than maybe getting more later.

That's basic economics too, and the stock market responds to profits now a lot better than the promise of profits further down the road.

Duh.

Posted by: Dr. Morpheus on February 3, 2006 at 10:28 AM | PERMALINK

Lurker42: Um..No, Researching new products yields new products that can be sold to consumers...etc. c'mon, basic economics. They bennifit, we bennifit, it's cool.

You are welcome to your delusions.

Corporate research gave us unnecessary, environmentally unsound lead-infused gasoline, dangerouse drugs whose adverse health effects were hidden by drug companies to encourage higher sales to unsuspecting susceptible individuals, and many other products that have boosted CEO compensation at the expense of the lives of consumers.

Corporations spend most of their money on finding better ways to hide adverse consequences of using their products, bribing regulatory officials and politicians, and conning consumers into buying under-performing and dangerous products than they do in perfecting products and making thems safe and useful.

But then again, it is always the way of the conservative to be an apologist for corporate immorality and failure of personal responsibility, while refusing to recognize any justification for the plight of the poor in America other than lack of morality or personal responsibility.

Thanks for once again confirming this principle.

Posted by: Advocate for God on February 3, 2006 at 10:29 AM | PERMALINK

"Umm, $1,000,000,000 in the bank now is worth more than maybe getting more later.

That's basic economics too, and the stock market responds to profits now a lot better than the promise of profits further down the road."

Agreed, this IS after all a capitolist society.

Posted by: Lurker42 on February 3, 2006 at 10:34 AM | PERMALINK

My point is that to assume, automatically, that any additional profits will be plowed back into research is just that, a presumption.

In all likelihood additional profits will be distributed to executive officiers and stockholders and perhaps a portion might be invested into new research. But only if that research shows very strong possibilities of paying off.

To wit, it's more likely to be invested into new baldness treatments than cures for cancer. There are too few cancer patients to really make money hand-over-fist. But, on the other hand, the vanity of bald headed men (and their numbers), pretty much guarentees a healthy return.

So, does society really benefit from this? Only in a petty, venal manner, but otherwise, no.

Posted by: Dr. Morpheus on February 3, 2006 at 10:41 AM | PERMALINK

Pharmaceutical companies spend more of their own money on research than the entire NIH budget. Most of the other "everybody knows" things are wrong, too. I've posted the numbers before--several times--but they obviously aren't as appealing as comforting leftist delusions about industry and capitalism.

Posted by: tbrosz on February 3, 2006 at 10:42 AM | PERMALINK

Um..No, Researching new products yields new products that can be sold to consumers...etc. c'mon, basic economics. They bennifit, we bennifit, it's cool.

Alright, I can lurk no longer.

The industry average for percentage of operating capital spent on research and development is around 7%.

The industry average for percentage of operating capital spent on sales and marketing is 46%.

Ever been to a pharmaceutical or medical trade show? The anecdotes alone bear this out, as well as the investigations against major medical companies (I'm looking at you, Medtronic and YOU Boston) for paying graft to docs to use their stuff.

The bottome line is simple: roughly half of every dollar you spend on medicine pays for the company to sell that pill to you. This bullshit that "Oh, research is expensive and risky and we need to help drug companies..." is nonsense. The vast majority of base research into the pharmacokinetics of drugs that provide a roadmap toward which drugs should move into development are provided by the NIH in the form of T-1 and SBIR grants to universities and smaller offshoots of the same.

And don't even get me started on the delivery mechanisms required to make sure that those drugs make it to where they've got to go. Almost all of that research is funded through the government or private foundation grants.

Some of this is the way it's supposed to be. Public research is a GREAT thing, and the medical world does the best job of research, peer-review and publishing despite some high-profile snafus. But to suggest that big pharma or big medical (pharma + devices) is going to do anything with their profits other than increase their marketing efficacy and shareholder value is willful stupidity.

Posted by: Bedouin on February 3, 2006 at 10:44 AM | PERMALINK

Hey, Paul Harvey had a tidbit yesterday about how costs were $4B lower than expected, directly because competition lowered prices. He gave no mention of the source of his data, the time-frame, etc. I'm sure he is pimping some party line, but I sure would like to know the 'rest of the story'!

Posted by: fred rat on February 3, 2006 at 10:46 AM | PERMALINK

Pharmaceutical companies spend more of their own money on research than the entire NIH budget.

Entirely misleading quote.

R&D bugdets also include manufacturing and regulatory as well as support services for the same. So while NIH money goes to actual researchers doing actual work, corporate money goes to researchers, engineers, operations people, plant management, secretaries, paperwork and document control systems, ERP software, regulatory liasons and so on.

Besides, it's not like NIH is the only game in town. Taking into account private research foundations, grants fronted by the DoD, the Dept of Energy (yes, you read that right) as well as foreign investment in base research and the pharma companies have lots to pick from, since the vast majority of this is published.

Posted by: Bedouin on February 3, 2006 at 10:48 AM | PERMALINK

Tbrosz, pay attention to what bedouin is saying.

Posted by: Dr. Morpheus on February 3, 2006 at 10:49 AM | PERMALINK

Many thanks, once again, to Mr TBrosz for your wonderful work. You are definitely in the lead of our "Shill of the year" award. The check is in the mail.

Posted by: PHARMA on February 3, 2006 at 10:57 AM | PERMALINK

Pharmaceutical companies spend more of their own money on research than the entire NIH budget.

King Strawman strikes again.

Posted by: lib on February 3, 2006 at 10:58 AM | PERMALINK

tbrosz: Pharmaceutical companies spend more of their own money on research than the entire NIH budget.

Which says nothing about how much they spend on marketing, but here's one for you . . .

"Pharmaceutical companies spend more of their own money on marketing products than the NIH does marketing products."

See, a statement as meaningless as yours and which provides as little insight into the issues raised by Kevin.

Posted by: Advocate for God on February 3, 2006 at 11:01 AM | PERMALINK

Actually it will be much better if the Republicans publicly use the same rationale for justifying their support for pharmas as the wingnuts do here.

I never heard GWB or any Republican say out loud that one of the objectives of the new Medicare prescription drug program is to increase the profits for the manufactureres so that they can spend more money on research that leads to better drugs. Why this subterfuge about something you so fervently believe in?

Posted by: lib on February 3, 2006 at 11:10 AM | PERMALINK

Competition does drive down prices. I have to think that even Kevin Drum understands this basic truth. (Was it covered in Freakonomics?)

The cause of the inflated price in this case is that third-party payor programs (i.e., government subsidies to the buyers) drive prices up.

In a market like pharmeceuticals where the natural barriers to entry are relatively high (not to mention all the other ill-conceived artificial barriers to entry that the pharmaceutical industry already enjoys), the price-increasing subsidies to the buyers will far outweigh the price-decreasing competition from other companies.

Primary result: ever-escalating prices.

Secondary result: calls for STILL MORE market-interfering regulations to cap the prices that were raised by the earlier market-interfering program.

Tertiary result of price caps: pharmaceutical shortages (shortages always result from price caps).

Smarter solution: repeal the underlying market-interfering program that is causing the price-escalation in the first place.

Posted by: The Marketeer on February 3, 2006 at 11:20 AM | PERMALINK

For the Lurker:Exxon last year used some $18 billion for stock buy-backs recognizing that investing in their own stock was a better return than exploration. About $7 billion was in dividends. The states and the feds got $23 bllion in excise taxes so you won't hear states complain until high prices force down demand. They only collect on sales at the pump.
Cool is another subjective assessment.

Posted by: TJM on February 3, 2006 at 11:25 AM | PERMALINK

The Marketeer: Competition does drive down prices. ... not to mention all the other ill-conceived artificial barriers to entry that the pharmaceutical industry already enjoys

You're right. And of course the worst market distortion in pharmaceuticals are government granted 20 year monopolies (the code word for these is "patents"). If we get rid of these I'm sure prices will come down dramatically.

Please remind me which Senators, Representatives, industry trade groups and conservative think tanks support abolishing these market distorting "patents". I want to thank them for their efforts.

Posted by: alex on February 3, 2006 at 11:28 AM | PERMALINK

Bedouin (To much post to quote)

I agree that drug co's make obscene profits and charge WAY to much for their profits.

Assuming that the Liberal agenda is not going to get passed through congress in total and a mutual agreement must be met if ANYTHING is to be done, how would you propose limiting their profits in a free market economy?

Posted by: Lurker42 on February 3, 2006 at 11:29 AM | PERMALINK

contentious: With the same access to the results of federally funded research that American companies have, 80% of the world's economy (outside the US) make just 30% of all new drugs.

Wow, the pharmaceutical industry is a real asset to the American economy. So please explain how we run a $15B/yr trade deficit in pharmaceuticals.

Posted by: alex on February 3, 2006 at 11:32 AM | PERMALINK

Please remind me which Senators, Representatives, industry trade groups and conservative think tanks support abolishing these market distorting "patents". I want to thank them for their efforts.

"Think tank" is the best I can do.

The rest of the whole rotten economic-collectivism-system we call "the federal government" is, as far as I can tell, devoted to using its power to funnel benefits to its supporters in exchange for votes.

"Government is the great fiction through which everybody endeavors to live at the expense of everybody else."

-- Frederic Bastiat

Posted by: The Marketeer on February 3, 2006 at 11:33 AM | PERMALINK

"government subsidies to the buyers drive prices up." ~Marketeer

My nomination for most idiotic statement of 2006.

Posted by: Ace Franze on February 3, 2006 at 11:40 AM | PERMALINK

" WAY to much for their profits."

OOPS!! I meant WAY to much for their products.

Posted by: Lurker42 on February 3, 2006 at 11:40 AM | PERMALINK

Competition does drive down prices.

Thats why the administration (and the pharma industry) is opposed to letting people go to Canada to get their drugs.

Pull out your Econ 101 textbook and and read about the inelasticity of supply and demand.

Smarter solution: repeal the underlying market-interfering program that is causing the price-escalation in the first place.

And let people who can't afford their meds die in the streets.

Posted by: Stephen on February 3, 2006 at 11:45 AM | PERMALINK

Tbrosz, pay attention to what bedouin is saying.

I would, but he has no idea what he's talking about. Confusing operating capital and sales is the least of his problems, or are we really expected to believe that half of what you spend on drugs--part of over 200 billion in revenues--goes to advertising?

Some advertising numbers here. Note that most people include the cost of free samples in this number.

Those who are carping about the current system are welcome to come up with their own ideas on how they would transmit information to doctors and patients on which drugs are available, and which ones to use. Current drug company advertising is already heavily regulated.

Posted by: tbrosz on February 3, 2006 at 11:46 AM | PERMALINK

"government subsidies to the buyers drive prices up." ~Marketeer

My nomination for most idiotic statement of 2006.

The "Marketeer" is right, of course, but then why make a real counterargument when you can sit in a tree and throw crap?

Posted by: tbrosz on February 3, 2006 at 11:48 AM | PERMALINK

Competition does drive down prices.

Ah yes, the magic of the free market. I've heard of this.

Competition drives down prices in many markets, but we're not talking about many markets, we're talking about the pharmaceutical (and I would argue the broader medical products) market.

The thing about drugs and the never ending supply of patent extensions is that you almost never see a truly competing drug. The PK and modes of action and delivery of a drug can be protected almost ad infinitum on most drugs coming to market these days and so if a competitor wanted to move into a specific niche it's nearly impossible. So the competitor has to develop a drug with similar PK and so on, but via a different route. This is why there are some hundreds of heart medications on the market, and most of them endeavor to do the same thing.

The problem is that none of the drugs actually competes with one another on quality of action. The contraindications of each drug are specific and often unique and therefore each patient's specific profile will lock them into only a sort of drug or family of drugs. Most of the time (I'd wager ALL of the time...) a family of drugs is owned by a single supplier, so there's no reason to reduce prices since they have a patient population cornered. If they want to increase their market, they have to come up with another family of drugs that doesn't infringe.

Now, what about generics? Generics are more loosely regulated, which is also a boon for the pharmaceutical companies, as well as a boon for us. While it's true that the Walgreen's brand of Tylenol is cheaper than the Tylenol itself, it's because Walgreen's can actually put up to 20% less active ingredient in the pill and still claim the same mass of active. Name brands, since they had three phases of clinicals to get the dosage right, couldn't do this. Now, the drugs are still safe, because they've been conducting post-market suveillance for some 20 years by the time the generic is out, but name-brands can charge more for their product because of the mass of active included.

And as well they should. But it also means that generics don't drive down overall cost substantially unless they can replace the name brand drug en mass. And in some cases (again, patient-specific) they can't.

The subsidies to patients do not address the business model of the medical industry and so if there's more money in the pool, big pharma has NO incentive to reduce prices. It's like the Bush administration handed Big Pharma a check and asked, pretty please if they'd make buying drugs easier.

And as for price caps. The price caps usually stem from an insurer or government body having negotiated with the supplier on a price based on bulk sales. So what's the difference between that and say, Toro negotiating with Dupont on bulk sales of red paint? The more you buy, the bigger the discount. When you're an OEM or a government or whatever, sometimes you have to pay more because of availability, and sometimes you pay less because you can negotiate less. It's good business all around. Guaranteed sales for discounted prices.

This is some complicated juju, people. Let's not suggest otherwise.

And Marketeer; I'd be interested in hearing what other "ill-concieved" barriers to entry there are. Rediculous patent protection is one, but else are you thnking of? For about $50M you can set yourself up with a pretty decent drug company with a five-year buyout plan.

Posted by: Bedouin on February 3, 2006 at 11:48 AM | PERMALINK

Advocate:

See, a statement as meaningless as yours and which provides as little insight into the issues raised by Kevin.

I already addressed that issue by pointing out that the "windfall profits" that are being treated as a fact in this thread are based on a set of estimates in a report. Other estimates from other people come up with different conclusions, and while the latter estimates are, admittedly, based on a very short period of data, at least there's data.

My later statements are addressing ridiculous assumptions about costs and other issues.

Posted by: tbrosz on February 3, 2006 at 11:54 AM | PERMALINK

Confusing operating capital and sales is the least of his problems, or are we really expected to believe that half of what you spend on drugs--part of over 200 billion in revenues--goes to advertising?

Nope, it's the cost of sales bonuses, marketing staff, ad campaigns, free drugs, booths at conventions, flying docs to Rio for Carnival, and so on. Your sales figures, are again, misleading at best.

Here's the quote:

DTC promotion represents the expenditures for direct-to-consumer pharmaceutical advertising for prescription products on television, magazines and newspapers, on radio and outdoors. Office promotion includes costs associated with the sales activities of pharmaceutical representatives that are directed to office-based physicians. Hospital promotion captures the costs associated with sales activities of pharmaceutical representatives that are directed to hospital-based physicians and directors of pharmacies. Journal advertising reflects advertising expenditures for prescription products appearing in medical journals.

These are declared out-of-pockets expenses. Cash out for specific activities. This does not cover salaries, bonuses, support, and so on. Nor does it cover "clinical consulting fees" and the rest of the graft that's paid out and accounted for in most marketing budgets.

My point, dear boy, is that for the cost of one marketer on staff, you could buy 2 or 3 staff researchers. For the annual cost of keeping Dr. So-and-so's wife in Gucci, you could build another class 1,000 clean room to reduce manufacturing costs.

No one's tracking these costs, because thet wash out as the cost of doing business. Well, business should change.

Posted by: Bedouin on February 3, 2006 at 11:57 AM | PERMALINK

The Marketeer: "Think tank" is the best I can do.

I'll certainly accept mises.org as a think tank. Unfortunately, absent congress critters, industry trade groups, etc., one way out of the mainstream think tank will change nothing.

Argue for a pure libertarian approach if you want, but it's far more likely that hell will freeze over than that we'll adopt true von Mises style economics.

Posted by: alex on February 3, 2006 at 12:00 PM | PERMALINK

you don't think the pharmaceutical industry would have supported the bill if they really thought "competition" would drive down prices, do you?

Like all good Stalinists, they recognized that competition is inefficient.
.

Posted by: Grand Moff Texan on February 3, 2006 at 12:02 PM | PERMALINK

I'll Do a Tbroz: Iv'e posted the numbers before but i will do it again Big Pharma spends more money buying politacal favors than it does on research,Most reasearch is done on the feds tit which is then sold to the Pharma ind. for pennies.Allowing the big kick backs to the righties.

Posted by: GOP liar on February 3, 2006 at 12:04 PM | PERMALINK

tbrosz,

The Marketeer agrees that government granted and enforced 20 year monopolies ("patents") are anathema to a free market. As another libertarian, what's your take?

Posted by: alex on February 3, 2006 at 12:04 PM | PERMALINK

And Tbrosz, the whole point of my interjection was to point out that suggesting that pharma's big profits were a good thing because now they'd plow them back into research on new drugs is absurd.

They do not take R&D as seriously as we're led to believe. They take marketing, sales and distribution seriously and this is mostly what we're buying when we give them money.

Posted by: Bedouin on February 3, 2006 at 12:04 PM | PERMALINK

Hmm, in the first month costs for prescriptions are less than budgeted. And in the same first month, thousands of people have had coverage for prescriptions denied due to "startup glitches". Any chance these are related?

Posted by: skeptic on February 3, 2006 at 12:08 PM | PERMALINK

Listen to Bedouin? The man is just sitting there making stuff up.

While it's true that the Walgreen's brand of Tylenol is cheaper than the Tylenol itself, it's because Walgreen's can actually put up to 20% less active ingredient in the pill and still claim the same mass of active.

Requirements for generics from the FDA

Posted by: tbrosz on February 3, 2006 at 12:08 PM | PERMALINK

Hmm, in the first month costs for prescriptions are less than budgeted. And in the same first month, thousands of people have had coverage for prescriptions denied due to "startup glitches". Any chance these are related?

One of the few valid questions so far. As Kevin pointed out in another thread, the first month of this program would be hard to qualify as "typical." We'll know more down the road. Still, the negative estimates aren't based on any harder data.

You know, I will admit that if this program does come in under estimated costs, nobody will be more shocked than I would. I think it would be a first for a government entitlement.

Posted by: tbrosz on February 3, 2006 at 12:19 PM | PERMALINK

Hey, Paul Harvey had a tidbit yesterday about how costs were $4B lower than expected, directly because competition lowered prices. He gave no mention of the source of his data, the time-frame, etc. I'm sure he is pimping some party line, but I sure would like to know the 'rest of the story'!

Remember all those stories about the many seniors who were unable to get their prescriptions filled because the program was such a clusterf**k? Think that might have reduced costs a bit? I suspect that's a good bit of the "rest of the story."

Leaving aside the foolishness of projecting the long term cost of any program - even a well run one - on the basis of the first month.

Posted by: VAMark on February 3, 2006 at 12:21 PM | PERMALINK

Ouch, nothing like three new comments saying exactly what you were going to say popping up while you're composing your own ...

Posted by: VAMark on February 3, 2006 at 12:23 PM | PERMALINK

Listen to Bedouin? The man is just sitting there making stuff up.

Now you're just throwing stones.

So here's what you're quoting:

# Generic drug manufacturers must show that a generic drug is bioequivalent to the brand-name drug, which means the generic version delivers the same amount of active ingredients into a patient's bloodstream in the same amount of time as the brand-name drug.

These are lay terms. In an actual generic submission to the FDA, the active available for uptake can be as much as 20% less than the name brand drug. FDA reviewers allow this all the time so long as the limited clincal trials and/or paper case shows this to be alright. It doesn't always make the drug less effective, but it does always make the drug less of the drug you're after.

Ever spend time in a regulatory environment? In a drug company? Anywhere near industry? Ever seen an submission or conduct a clinical trial? You're quoting from sources that are nowhere near the actual processes inside the industry.

Posted by: Bedouin on February 3, 2006 at 12:23 PM | PERMALINK

And so I can't let you off the hook, again, you're skirting my point. That generics in the marketplace cannot reduce the overall cost of name-brands because they would have to be adopted in volumes equivalent to the name-brand. Not happening, because many people do not have a good an outcome with generics.

And, of course, 20 years of marketing Tylenol as a brand helps.

Posted by: Bedouin on February 3, 2006 at 12:27 PM | PERMALINK

You know, I will admit that if this program does come in under estimated costs, nobody will be more shocked than I would. I think it would be a first for a government entitlement.

Considering that the "estimated costs" from the Administration have fluctuated from $400B-$750B over time, it will be hard to determine whether or not the program is "saving" money.

Posted by: Nemo on February 3, 2006 at 12:34 PM | PERMALINK

Ever spend time in a regulatory environment? In a drug company? Anywhere near industry? Ever seen an submission or conduct a clinical trial? You're quoting from sources that are nowhere near the actual processes inside the industry.

he's a supposed libertarian who sits at home all day posting comments here, defending everything that George W. Bush says and does (odd, that). He likes to think that he's smarter than everyone else, but then he regularly gets schooled by far more intelligent and experienced people such as yourself.
You've just discovered what most of us here already know--tbrosz is a dishonest hack, and not nearly as bright as he likes to think he is.

most of his arguments boil down to this--"Stop saying bad stuff about Bush!"

Posted by: haha on February 3, 2006 at 12:36 PM | PERMALINK

The Marketeer agrees that government granted and enforced 20 year monopolies ("patents") are anathema to a free market. As another libertarian, what's your take?

A libertarian believes, or ought to, that a person has the right to profit from his efforts. Patents, like copyrights, are a recognition of this. The actual legal details can be a point of contention. While the principle of intellectual property is valid enough, where do you draw the lines? 20 years is, of course, an arbitrary number, like the age of 18 for adulthood. Maybe that length of time can be reduced, but given the huge hundred-million-dollar investments made in drugs, most of it going to satisfy the FDA, the bar to unfair competition should probably be higher for pharmaceuticals than it would be for, say, Slinkies or a design for a new bicycle.

One of the problems with the drug industry is that the clock on a patent starts ticking around the time when it's invented, not when it's approved and marketable, and approval can take many years.

The Hatch-Waxman Act is just one "adjustment" made to the regulatory process in past years, but it was a big one, and also had a lot to do with the growth of the generic industry. Note the chart on page 193.

There's a lot of noise on the same subject in the field of publishing right now.

Posted by: tbrosz on February 3, 2006 at 12:41 PM | PERMALINK

the bush administration reminds me of a cartoon of many years past.
these two boy scouts were helping this old lady across the street and when they got to the other side , she started frailing the hell out of them with her trusty umbrella and screaming --- you idiots i did not want to cross the dam street . BRASS MONKEY

Posted by: BRASS MONKEY on February 3, 2006 at 12:44 PM | PERMALINK

""government subsidies to the buyers drive prices up." ~Marketeer

My nomination for most idiotic statement of 2006.

The "Marketeer" is right, of course, but then why make a real counterargument when you can sit in a tree and throw crap?
Posted by: tbrosz"


Very astute, non-crap throwing response. Do either of you really think that the amount spent by government for anti-psychotic medication (for instance) really has a significant effect on the cost of drugs or on pharma profits? If so, neither of you can see past your selfish ideologies.

Posted by: Ace Franze on February 3, 2006 at 12:47 PM | PERMALINK

Bedouin:

These are lay terms. In an actual generic submission to the FDA, the active available for uptake can be as much as 20% less than the name brand drug. FDA reviewers allow this all the time so long as the limited clinical trials and/or paper case shows this to be alright. It doesn't always make the drug less effective, but it does always make the drug less of the drug you're after.

Ever spend time in a regulatory environment? In a drug company? Anywhere near industry? Ever seen an submission or conduct a clinical trial? You're quoting from sources that are nowhere near the actual processes inside the industry.

I can see where the actual amount of drug might not be related to the effectiveness in some cases. I do know that certain time-release formulations have less active ingredient but deliver the same amount of dosage over a given time (my wife is a pharmacist, so she knows a lot about the delivery end. Not so much about production). In some cases, as with drugs that have toxic problems in high doses, this is a good thing. I don't think Tylenol was an example of this.

BTW, as far as sources go, you're welcome to actually supply references on your numbers. I'm open to correction.

Posted by: tbrosz on February 3, 2006 at 12:48 PM | PERMALINK

As tbrosz actually responds to posts, its hard to call him names. By comparison, Al must be Kevin.

Posted by: hank on February 3, 2006 at 12:55 PM | PERMALINK

"A libertarian believes, or ought to, that a person has the right to profit from his efforts. Patents, like copyrights, are a recognition of this."

So are minimum wages, social security, regulations demanding profit sharing, and even unemployment.

If that's libertarianism libertarianism is meaningless.

Posted by: jefff on February 3, 2006 at 1:33 PM | PERMALINK

If marketing serves no purpose, then why do drug companies spend money on it. Why not keep it as profit?

Posted by: Yancey Ward on February 3, 2006 at 1:34 PM | PERMALINK

Maybe that length of time can be reduced, but given the huge hundred-million-dollar investments made in drugs, most of it going to satisfy the FDA, the bar to unfair competition should probably be higher for pharmaceuticals than it would be for, say, Slinkies or a design for a new bicycle.

How much is going to televison ad's ?

See:http://www.cptech.org/ip/health/econ/allocation.html

Does the FDA require pharmaceutical companies to buy time during the Super Bowl ?

most of it going to satisfy the FDA,
Source?

Posted by: Stephen on February 3, 2006 at 1:36 PM | PERMALINK

Stephen:

It costs almost $900 million to get a drug through to final FDA approval. This comes out of the industry, not government, and they don't get it back if the drug fails.

As for that chart, which I have seen quite a few times, it also includes administrative costs.

I've already posted a link on advertising costs, which also include the costs of samples to doctors that get distributed to patients for free.

Posted by: tbrosz on February 3, 2006 at 1:43 PM | PERMALINK

And let people who can't afford their meds die in the streets.

Since when is the prescription drug plan need-based? Or Medicare for that matter?

Got any other straw men you'd like to argue with?


And as for price caps. The price caps usually stem from an insurer or government body having negotiated with the supplier on a price based on bulk sales. So what's the difference between that and say, Toro negotiating with Dupont on bulk sales of red paint? The more you buy, the bigger the discount. When you're an OEM or a government or whatever, sometimes you have to pay more because of availability, and sometimes you pay less because you can negotiate less. It's good business all around. Guaranteed sales for discounted prices.

The difference is that Toro has to compete with every other red paint purchaser out there. The difference is that Toro is actually engaged in productive economic activity, has to sell its product, and must therefore carefully calculate the value of the paint (and that of every other cost), compared to the value of that item to the final product, and thus the value of that final product to its customers.

In contrast, the government that buys prescription drugs, or flu shots, does not earn its money in the market. It has no customers. It obtains its income via taxation. It therefore cannot engage in economic calculation -- the simple process of comparing expenses to revenue, and analyzing the question of whether to engage in a particular transaction in terms of its costs and benefits. Governments basically have no real concept of price, at least not the same way that private buyers do, since they must control their costs to survive.

That is why, when a government buys, for example, the majority units of a given product at a below-market price (displacing many private purchasers), it has the same effect as a price cap -- it depresses the market price, driving the marginal producers out of business. This is exactly what happened with the Clinton-era flu vaccine buying program, and exactly the reason there were so few producers left in the market. When one batch was contaminated, there was an instant shortage.

Incidentally, the discount on bulk purchases is caused by the fact that a buyer has a decreased need to buy a product as the number of units bought increases. If you buy a pair of jeans, and are willing to pay $30 for them, once you buy the first pair, you are to some degree less likely to buy a second pair. Why? Because your purchase of the first pair satisfied at least part of your need for pants. If you are going to buy more, you are only willing to do so at a lower price, or you will not buy at all. That is why prices always fall to market-clearing prices. Sellers know this, even sellers of red paint.

Posted by: The Marketeer on February 3, 2006 at 1:46 PM | PERMALINK

Ah, there goes tbrosz again, trying to split the difference between his knee-jerk Bush apologism and his ostensible gov't-is-bad ideology - this time by not addressing the issue, just complaining about anyone discussing it. I give him credit, he's at least somewhat subtle about it.

Ah, the dreaded "experts say" gag again.

Ah, the dreaded "disparage the sources" denial again.

A Prudential study "estimates" a "likely" outcome.

*snort* Because we demand absolute certainty from his forecasts! That's why we also reject global warming, population growth, and weather forecasts.

Medicare administrators draw conclusions from actual cost numbers so far, showing costs are actually going down.

Oh, and they're not politically motivated. No, government agencies under this adminstration have proven so adherent to the truth over political lying.

Whereas Prudential has no axe to grind either way, and there's no evidence that Schondelmeyer does either.

The rest of the article is one side saying one thing, another side saying another.

Which side gets labeled "the experts?"

Neither. "Experts" doesn't equate to "the experts". But one side consists largely of impartial experts and the other consists solely of political appointees.

And of course, the commenters here, not to mention the headline of the article, act as though it's already a couple of years down the road, and the windfall profits are a matter of record, and not some guess in a report.

Yeah, because things are only worth talking about - heck, only worth taking action over - if they've already happened.

I understand that the Democrats have a lot invested in this not working, but can we at least wait for the actual data?

Hey, there's a great damn idea - particularly coming from an engineer. Who needs models and projections anyway? Throw it against the wall and see what sticks! One idea is as good as another! Hell, we didn't know what was gonna happen in Iraq until we invaded it, did we?

A) Planning and forecasting is useful.
B) Planning and forecasting can be done with a fair degree of accuracy.

It's posts like this that really pull the blanket of "independent thought" off of the underlying right-wing-meme-of-the-day adherent.

I'm not going to address the Marketeer's comments, but they are straight from his usual high-school level grasp of economics, and largely wrong.

Posted by: S Ra on February 3, 2006 at 1:46 PM | PERMALINK

It costs almost $900 million to get a drug through to final FDA approval. This comes out of the industry, not government, and they don't get it back if the drug fails.

The amount doesn't matter, the marginns do.

They spend millions advertising drugs on the least targeted and most expensive mediums available.

which also include the costs of samples to doctors that get distributed to patients for free.

Is that the retail price or cost of goods ?

Posted by: Stephen on February 3, 2006 at 1:53 PM | PERMALINK

Tbrosz:

As far as my references go, you're complaint is fair. I'm drawing from my experience, and as such I'm citing chapter and verse from inside the beast. That's no excuse, though. I wanted to post quickly to acknowledge your complaint but it will take me some time to find sources on the internet that are public friendly (don't require hundreds of dollars to download statutes and standards.) I'll look.


One of the problems with the drug industry is that the clock on a patent starts ticking around the time when it's invented, not when it's approved and marketable, and approval can take many years.

Agreed. In fact, the entire system we use for protecting intellectual property breaks down when it comes to drugs.

In response to this and to Lurker's question above this is a thorny issue. If the public's health is going to be entirely a for-profit enterprise then how do you make sure there's enough profit to entice companies to work to maintain the public's health? Or some phrase that's more artful.

But at the same time, the libertarian side--similar to where we are now--means that more money equals more health and of course, no money equals no health. And heaven forbid you have a disease that isn't profitable--one of the dreaded "orphan diseases" that doesn't kill ENOUGH people a year to entice drug companies to develop a treatment.

If we maintain the same system of for-profit health and no single payer system, I'm open to it just so long as we make the rules more fair.

We open up competition by reducing the ability of companies to extend their patents using bogus "method patents" or "delivery patents."

We increase the ability of cross-licensing and mandate it if the product is life saving or significantly improves life expectancy.

We boost government spending on base research and restrict the ability to profit from work paid for by taxpayers.

We allow states, business consortiums, communities and so on to form larger insuring agencies to bargain with drug companies for lower-cost drugs bought in bulk. We're sort of half-assed doing that now, but we still restrict consumers too much. If you're a libertarian, I can't expect that you'd be okay with ceeding so much power to drug companies to set prices absent a truly free market.

I don't know. There are myriad of other ways to make health care available to everyone. This is just off the top of my head, while stil preserving publically traded companies that deal life and death. Maybe there's a problem in there, somewhere.

Posted by: Bedouin on February 3, 2006 at 1:56 PM | PERMALINK

Marketeer, your whole argument hinges on the wildly inaccurate assumption that health care purchases are done in exactly the same manner as red paint.

Let me put it this way, what price do you put on your life?

Posted by: Dr. Morpheus on February 3, 2006 at 1:59 PM | PERMALINK

Argue for a pure libertarian approach if you want, but it's far more likely that hell will freeze over than that we'll adopt true von Mises style economics.

This government (and perhaps this society) can choose to commit suicide if it wants to. That's the way that most fail, actually. Not by invasion. They destroy themselves by choosing to ignore immutable economic truths.


Do either of you really think that the amount spent by government for anti-psychotic medication (for instance) really has a significant effect on the cost of drugs or on pharma profits? If so, neither of you can see past your selfish ideologies.

Huh, it's been at least 6 or 7 minutes since some Leftist called me "selfish"!

But, Mr. Franze, if you care to take a moment to think carefully and clearly, you will see that my original comment said that subsidies to buyers cause prices to increase.

In the case of your anti-psychotic medication example, let's say that psychotic people are, as a group, not very likely to purchase medications. If they are, they tend to have limited incomes and thus only willing to pay very low prices for medications. (We will ignore the possibility of others voluntarily buying such medications for them, for now.) It is therefore likely that the true market price for anti-psychotic medications, in the absence of a subsidy to the buyers, will fall below the cost of producing that drug. Thus, little or none of it will be produced.

Now, when you provide a subsidy to the buyers, the buyers are then able to "pay" more for the drug. At this increased price, producers will enter the market and make it. Which is exactly what I said -- the subsidy has effectively increased the market price. In this scenario, the government increases the price ON PURPOSE in order to make the production of the drug economically feasible.

If you can see how subsidies increase prices with regard to the price-increases you want, how can you not see it with regard to the price-increases you DON'T want? The economic mechanism is exactly the same in both cases. The only difference with drugs (other than anti-psychotics), you apparently feel that the price is too high and want it to be lowered.

Well, the subsidy you support is the cause of the increased price. For better or worse, that is the reality.

Posted by: The Marketeer on February 3, 2006 at 2:05 PM | PERMALINK

Let me put it this way, what price do you put on your life?

Bingo.

Marketeer:

That is why, when a government buys, for example, the majority units of a given product at a below-market price (displacing many private purchasers), it has the same effect as a price cap -- it depresses the market price, driving the marginal producers out of business.

You've just argued Wal-Mart out of existence.

There is no reason why government can't set up a single-payer system in tiers, taking in more money from people who want various levels of care. Health care is already nasty brew of non-profit and for-profit and government enterprises, but the system we have in the Czech Republic ain't all that bad. You opt in, pay what you want and get out some level commensurate with that.

But what I'm hearing is essentially an argument that the government screws up everything it touches, so we shouldn't trust it to neogtiate prices because then prices will be too low. You've seen the way we negotiate defense contracts, yes?

I hardly think that the argument that the government might be TOO efficient in negotiating on behalf of its clients is reason to not explore the idea. Hell, it can't be worse than what we have now.

Posted by: Bedouin on February 3, 2006 at 2:16 PM | PERMALINK

Let me put it this way, what price do you put on your life?

Let me put it this way: unique, life-saving products are valuable.

How do you plan to produce unique, life-saving products?

How do you plan to invent new ones?

What is the magic price for these unique, life-saving products, the price that will ensure their continued invention and production, but not be too high for your sensibilities?

What kind of arrogant, God-complex megolomaniac do you have to be to think that you alone know what that price is?

Posted by: The Marketeer on February 3, 2006 at 2:18 PM | PERMALINK

Bedouin:

As far as my references go, you're complaint is fair. I'm drawing from my experience, and as such I'm citing chapter and verse from inside the beast. That's no excuse, though. I wanted to post quickly to acknowledge your complaint but it will take me some time to find sources on the internet that are public friendly (don't require hundreds of dollars to download statutes and standards.) I'll look.

For the record, if you have personal experience in a field, that is not something I would automatically discard when you're talking about a subject. Can you be more specific?

If the public's health is going to be entirely a for-profit enterprise then how do you make sure there's enough profit to entice companies to work to maintain the public's health? Or some phrase that's more artful.

The drug industry is already regulated up to its eyeballs. Whether or not some regulations are too much, and others not enough, is a whole thread in itself. I don't know that adding price and profit controls will improve anything. I do know that price controls usually have more negative results than otherwise.

Posted by: tbrosz on February 3, 2006 at 2:18 PM | PERMALINK

Let me repeat:

Do either of you really think that the amount spent by government for anti-psychotic medication (for instance) really has a significant effect on the cost of drugs or on pharma profits? If so, neither of you can see past your selfish ideologies.

Posted by: Ace Franze on February 3, 2006 at 2:22 PM | PERMALINK

You've just argued Wal-Mart out of existence.

No, I've just explained why various marginal producers who are now out of business complain about Wal-Mart's prices. Their business is now going to the more efficient producers who make the things that Wal-Mart's customers want to buy, at the price they prefer to pay.


the system we have in the Czech Republic ain't all that bad.

Gee, your confidence is overwhelming. Sign me up.


But what I'm hearing is essentially an argument that the government screws up everything it touches, so we shouldn't trust it to neogtiate prices because then prices will be too low.

Then you are, in fact, listening.


You've seen the way we negotiate defense contracts, yes?

Yes.

Posted by: The Marketeer on February 3, 2006 at 2:23 PM | PERMALINK

Marketeer, your whole argument hinges on the wildly inaccurate assumption that health care purchases are done in exactly the same manner as red paint.

I hear this one a lot. The problem is, we're not talking about price-shopping for the emergency itself, we're talking about price-shopping for the preparation for the emergency. Insurance, health care plans, health care savings accounts, and the rest.

I don't start going out to tire stores looking for a new tire when I get a flat on the side of the road in the rain. Under those cirumstances, you can imagine that I'd be willing to pay something considerably over market price, or would tend to grab a tire at the first store that had one, regardless of price or quality.

No, I buy a spare tire when my car is running just fine, and stick it in the trunk. I have the time to shop around, then.

Same for insurance. Nobody should be going out with a broken leg and start looking for the best health plan. This gets done earlier, and the price and service comparisons get done then.

Posted by: tbrosz on February 3, 2006 at 2:26 PM | PERMALINK
"Government is the great fiction through which everybody endeavors to live at the expense of everybody else."

Marketeer -- there are plenty of places in the world that effectiely lack government. While most people wouldn't live in them by choice, you could satisfy your pretended preference by moving to one of them.

Posted by: cmdicely on February 3, 2006 at 2:26 PM | PERMALINK

Let me repeat ...

You overlooked my response here.

Posted by: The Marketeer on February 3, 2006 at 2:28 PM | PERMALINK

cmdicely:

Marketeer -- there are plenty of places in the world that effectiely lack government. While most people wouldn't live in them by choice, you could satisfy your pretended preference by moving to one of them.

The proper function of government is, primarily, maintaining order, creating a legal framework for human interaction, and providing military, police, and courts.

This should not be confused with the function of government in redistributing wealth, which seems to be the primary function of our current government, if you go by budget amounts.

The lack of a welfare state does not automatically imply anarchy.

Posted by: tbrosz on February 3, 2006 at 2:30 PM | PERMALINK
The problem is, we're not talking about price-shopping for the emergency itself, we're talking about price-shopping for the preparation for the emergency. Insurance, health care plans, health care savings accounts, and the rest.

I don't start going out to tire stores looking for a new tire when I get a flat on the side of the road in the rain.

I hear this one a lot. The problem is, the factors which go into making a good spare tire, and the universe of conditions which could necessitate needing to use a spare tire and the effects those have on the choice of an appropriate spare are considerably more transparent to the average consumer of spare tire than the analogous factors relevant to selecting a health plan are to the purchasers of a health plan.

Since the efficiency of the "free market" relies entirely on behavior approximating the perfect-knowledge (of utilities or disutilities resulting from choosing among options) rational choice theory, the rather substantial lack of accurate predictive ability here, and the rather substantial utilities and disutilities involved in good vs. bad healthcare, mean that the market doesn't work efficiently in allocating healthcare services -- whether precautionary insurance purchases or buying healthcare services directly.

Posted by: cmdicely on February 3, 2006 at 2:32 PM | PERMALINK

Bedouin,

Mandating cross-licensing for truly life-saving drugs will only decrease the potential reward for doing the research and development work, and thus decrease the research and development work done to produce new ones. In other words, you may save some people today, but you will certainly kill others in the future.

An earlier commenter wanted to know what a libertarian thinks of patents (alex, I think, was the one who asked). A pure libertarian thinks they are a government intrusion on the free-market and are anathema. The same applies to copyright. If you wanted to do away with patents for drugs, then, to continue to develop new treatments, one of two things will have to happen: either (1) the government will have to conduct all of the research and bear all of the costs, or (2) the regulatory environment will have to be scrapped to make the development of new drugs much, much cheaper. I think option (1) will be far less efficient than even what we have today, and I can foresee no way for option (2) to ever take place.

Without some term of monopoly protection, no one in their right mind would invest a single dollar in pharmaceutical research expecting a return on their money since the final product itself can be easily identified and copied. Really, since almost every patented drug of today will be a generic 10 years from now, is the present system so bad?

Posted by: Yancey Ward on February 3, 2006 at 2:32 PM | PERMALINK
The proper function of government is, primarily, maintaining order, creating a legal framework for human interaction, and providing military, police, and courts.

That isn't what Marketeer quoted.

Were I responding to that claim, I would respond differently.

Please learn to be relevant.

Posted by: cmdicely on February 3, 2006 at 2:33 PM | PERMALINK

Tbrosz:

A resume'? Ok, no dates, no company names:

Bachelor's and Master's: ChemE/BiomedE
2 years: Mega-huge Medical Device Company (back when we still injected Cobalt 14! Mmmm-mm good!)
1.5 years: FDA's Center for Devices and Radiological Health
1 Year: Teeny-tiny medical start up
2 Years: Foundation Researcher/half-assed PhD student
4 Years: Project Manager, mid-size medical division inside Ginormous Pharma
2.5 years: Project Director, advanced drug delivery systems, Ginormous Pharma; sucked up some smaller pharmas
1 year: Research sabbatical
Current: Director of R&D, smallish medical in Europe

And I don't know about price controls. They usually don't work because who wants to be in business when you're profits end up capped?

But at some point, we need to have a discussion in the US about what value does the public health actually have. If there is no value other than how much people are willing to spend, then we're doing fine. But business--especially the health care business--is about values, and what are ours as a society. So I recommend starting there, 'cause until we sort that out, the rest is noise.

Posted by: Bedouin on February 3, 2006 at 2:37 PM | PERMALINK

cmdicely:

Your argument, shortened up a bit, seems to be that the average person is too stupid to deal with selecting their own health care options. I don't agree.

When something is inherently complex, and I would be the first to agree that the private/public chimera of American health care is complex, the market will generate services to assist people with this complexity.

Dealing with tax forms and the IRS would be one good example.

Posted by: tbrosz on February 3, 2006 at 2:39 PM | PERMALINK

"...your profits end up capped?" I suppose I could blame that on the stupid Czech keyboard, but basically I'm dumb.

Posted by: Bedouin on February 3, 2006 at 2:39 PM | PERMALINK

cmdicely, you apparently have not read Bastiat.

One of his basic premises is that government acts within its proper role when it does things that would be appropriate, if we as private citizens were to do them.

Take self defense, for example. We have the moral right to use force to protect ourselves against acts of aggression. We can delegate that task to others, as one might do with a police force.

Unless you slept through the lectures on agency, you know that one cannot delegate authority to another what the principal could not do himself.

In other words, government can be an instrument by which a free people volutarily agrees to aggregate its resources and authority. But banding together does not, by the mere gathering together in a group, confer some mystical legitimacy on those who act as agents for that group.

I'd say that since kindergarten, we know in our personal lives what the bounds of basic decency are, when force is justified, when it is not. There are some gray areas, of course, but in your personal life, I'd say that you know what is an act of aggression, what is malum in se.

Just because some large number of people get together (let's call them "Democrats" or "Republicans") and decide to tell someone else what price he can charge for his product doesn't make it right. You may get your way, for a while. But government price-fixing is no more legitimate than the dictates of any other brute.

Posted by: The Marketeer on February 3, 2006 at 2:40 PM | PERMALINK

Okay, I took the day off of work 'cause I'm sick, and now I'm crashing. You all, I hate to leave a conversation unfinished, but my state-priced-controlled flu drug is kicking in and I better lie down.

G'night.

Tbrosz, I've not forgotten about you. Another time, then for well-sourced material?

Posted by: Bedouin on February 3, 2006 at 2:42 PM | PERMALINK
Your argument, shortened up a bit, seems to be that the average person is too stupid to deal with selecting their own health care options.

Er, no. Which is why polls show strong support for government involvement in healthcare. Most people, even without much theoretical background in economics, are smart enough to realize, intuitively, that the market does not efficiently allocate healthcare services.

When something is inherently complex, and I would be the first to agree that the private/public chimera of American health care is complex, the market will generate services to assist people with this complexity.

Really? Where are the services that have emerged that make perfect-knowledge rational choice with costs and benefits privatized in the participants even a remotely reasonable approximation of the interactions going on in the healthcare in the absence of government action?

Posted by: cmdicely on February 3, 2006 at 2:52 PM | PERMALINK

Bedouin:

Your resume gives you a lot of credibility on dealing with health care regulations. Heck, given what I know from people in the industry around here, the medical startup alone would probably have done it.

Doesn't explain why you thought half of what we pay for drugs goes into advertising, though. ;)

We screwed up in the U.S. a long time ago by making health insurance a "benefit," instead of something you go out and buy, like fire insurance, car insurance, or life insurance. Not only did this tie people to employers (not as big an issue back when the "college-to-gold-watch" career was a lot more common than today), but already the consumer was disconnected from the true costs of the service, and the market system started breaking down. Adding government health care into the mix only made that worse.

It isn't just the government that crippled market forces. The idea that private insurance should pay for everything, not just emergencies, hasn't helped.

I don't know if there is a workable way any more to bring the market back into the system to the level required to make things more affordable. What policies could make personally-purchased health insurance more attractive than an employer-provided plan? You would have to get the employer to pay you the difference, and have what you pay for the insurance fully tax deductible. And that's just for starters. Health savings accounts will have a very small effect on the big picture.

I am very worried that a single-payer system, with its inevitable price controls and/or rationing, will tend to cut off much of the advanced medical technology we see now. What we'd end up with is what Social Security provides: sustainment. Just enough medical care for everybody to get by.

Posted by: tbrosz on February 3, 2006 at 2:53 PM | PERMALINK

Which is why polls show strong support for government involvement in healthcare. Most people, even without much theoretical background in economics, are smart enough to realize, intuitively, that the market does not efficiently allocate healthcare services.

Amazing. An Appeal-to-Popularity fallacy, combined with a Begging-the-Question fallacy. At the same time!

Posted by: The Marketeer on February 3, 2006 at 2:55 PM | PERMALINK

Tbrosz, I've not forgotten about you. Another time, then for well-sourced material?

Don't sweat it. Coming up with sources is a pain in the ass (believe me, I know), and what you've posted about your experience carries a lot of weight. Get better.

Posted by: tbrosz on February 3, 2006 at 2:56 PM | PERMALINK
cmdicely, you apparently have not read Bastiat.

Well, yes, I have, though not recently. Not that that fact is relevant to my response to your particular quote, or anything else here.

One of his basic premises is that government acts within its proper role when it does things that would be appropriate, if we as private citizens were to do them.

Yes, well, that's nice. I don't agree with that premise (or, while I'd agree with the words that you use to refer to them, I don't agree with his idea that you refer to with them, or with what you presumably believe in citing his premise.)

Take self defense, for example. We have the moral right to use force to protect ourselves against acts of aggression. We can delegate that task to others, as one might do with a police force.

Taken logically, this implies that the police right to use force extends and is limited to only those circumstances where they stand in someone else's shoes in self-defense.

Posted by: cmdicely on February 3, 2006 at 3:00 PM | PERMALINK

We screwed up in the U.S. a long time ago by making health insurance a "benefit," instead of something you go out and buy, like fire insurance, car insurance, or life insurance.

Health insurance as compensation got its start with war-time government-mandated wage (price) fixing. When employers were not allowed to actually pay more, they offered non-cash insurance instead.

Typical. A government program is at the root of the problem. Of course, the government-program nuts want ... more government control over prices!

Posted by: The Marketeer on February 3, 2006 at 3:00 PM | PERMALINK

One of his basic premises is that government acts within its proper role when it does things that would be appropriate, if we as private citizens were to do them.

Like take care of sick people ?
Help those less fortunate than ourselves ?
Provide care for the elderly ?
Charity ?

Unilaterally invade sovreign nations that may or may not become a threat at some time in the distant future ?

Posted by: Stephen on February 3, 2006 at 3:04 PM | PERMALINK
Amazing. An Appeal-to-Popularity fallacy, combined with a Begging-the-Question fallacy. At the same time!

You need to track what the point being argued for is -- those were argued in rebuttal to "your earlier argument is that people are too stupid" (i.e., an argument about the content of the previous argument), not in support of the truth of the previous argument.

As such, they are neither appeal to popularity nor begging the question.

Learning the names of logical fallacies is not a substitute for reading comprehension.

Posted by: cmdicely on February 3, 2006 at 3:04 PM | PERMALINK

Taken logically, this implies that the police right to use force extends and is limited to only those circumstances where they stand in someone else's shoes in self-defense.

Yes, it does. See, logical reasoning is a good thing. (Or, at least I call the words you have used refer to something that approaches "logic," when, in fact, they may not actually be the product of logic per se, but rather a really smart monkey that has taken over your computer.)

Posted by: The Marketeer on February 3, 2006 at 3:06 PM | PERMALINK

So, tell me how your citation of "polls" remotely supports the proposition.

Or how the results of a poll on whether people support a government program proves ANYTHING about how "smart" the poll participants are.

Or are the "most people" you referred to in one sentence not the same as the large numbers of people who apparently respond favorably to your (unidentified) polls? Or was that a complete non-sequitur?

Please, dazzle us with your logic.

Posted by: The Marketeer on February 3, 2006 at 3:12 PM | PERMALINK

Al enjoys being a douche-bag idiot. It's like his BDSM.

Posted by: The Tim on February 3, 2006 at 3:19 PM | PERMALINK

Stephen,

Is it acceptable for private citizens to enslave others to accomplish the tasks you outlined?

Posted by: Yancey Ward on February 3, 2006 at 3:45 PM | PERMALINK

Yancey Ward: Without some term of monopoly protection, no one in their right mind would invest a single dollar in pharmaceutical research expecting a return on their money

Agreed. In other words, "free" markets are not the answer to all economic problems.

Posted by: alex on February 3, 2006 at 3:56 PM | PERMALINK
the average person is too stupid to deal with selecting their own health care options.Dealing with tax formswould be oneexample.Posted by: tbrosz
The basic assumption that an individual purchase personal coverage or insurance is that medical service providers make all their charges publicly available and secondly, they also make their doctors' success rates publicly available. Until that information is broadly disseminated, no informed choice can be made and no legitimate "free-market" solutions will be possible.

Computing the tax rate and tax is easy. It's in the back of the book. It is computing the net income that is unduly complex because of all the various loopholes for income that Republican congresses are fond of creating.

Posted by: Mike on February 3, 2006 at 4:03 PM | PERMALINK

Is it acceptable for private citizens to enslave others to accomplish the tasks you outlined?

Enslave others?


Posted by: Stephen on February 3, 2006 at 4:03 PM | PERMALINK

Stephen,

Yes. You might wish to tax me to give income support to others, such as the poor, the elderly, Exxon, and the handicapped. If I don't wish this done, then you have enslaved me.

Posted by: Yancey Ward on February 3, 2006 at 4:23 PM | PERMALINK

alex,

I should have been clearer. The patent system serves the purpose of ameliorating the damage that other state intervention has already caused. A truly free market in pharmaceuticals is quite viable if you removed all of the regulatory hurdles put up to drug development. It is these hurdles that drive up the cost and the time to develop a drug and make the patent system necessary.

Posted by: Yancey Ward on February 3, 2006 at 4:34 PM | PERMALINK

Yancey, I believe a patent system is used so other companies don't steal each other's intellectual property. Not to protect them from, "other state intervention."

Posted by: D. on February 3, 2006 at 4:47 PM | PERMALINK

I believe a patent system is used so other companies don't steal each other's intellectual property

The term "intellectual property" is an invention of the State, not a form of property as it exists in a free market. The term "intellectual property" is simply a way of drawing an analogy to (genuine) property.

The reality is that a patent is a temporary, state-granted special privilege of monopoly on the sale of a certain class of goods.

Posted by: The Marketeer on February 3, 2006 at 5:07 PM | PERMALINK

I can't resist pointing out to Yancy that if he absolutely cannot stand how the United States federal government spends his tax dollars, he can (i) vote for someone else, or (ii) leave the country, as no one is keeping him here against his will.

Depending upon the tax treaty, its even possible to leave the country and not pay any U.S. tax and retain citizenship.

Hardly "slavery." Rather, depending upon how seriously one takes the daily crapola posted here, pretty much of an insult to those in actual slavery and descendents of people actually enslaved in the past.

Posted by: hank on February 3, 2006 at 5:12 PM | PERMALINK

D.

It may be that patents were not developed to ameliorate this damage, but it is the state intervention that makes the theft so damaging. If I invest $900 million dollars to develop a drug that can be copied within a few months of my disclosing it, I will never recover the cost of my investment. It is the drug regulatory apparatus that makes these up-front costs so high. Without the high costs of discovery and development, the patents may not be necessary at all, or could be greatly shortened in term. Without patents and the FDA, the pharmaceutical business would be very different than it is today, and I think it would likely benefit far more people than it does today.

Posted by: Yancey Ward on February 3, 2006 at 5:12 PM | PERMALINK

The Marketeer,

I think I will dig up some of Kinsalla's articles and post them here.

Posted by: Yancey Ward on February 3, 2006 at 5:14 PM | PERMALINK

hank,

You may want to read the comments that Stephen was replying to before you attack me. We were discussing Bastiat's assertion that the proper function of the state are only those activities that would be acceptable for a private citizen to perform. Stephen chose to completely misunderstand this and implied that this means the state can care for the poor, elderly, etc. Of course, what the state does in performing these activities is to coerce some of the citizenry to part with their property to give to others, an activity that would be improper for a private citizen to perform.

However, on the broader point, if I am laboring to support someone I would not want to support if given a free choice, then that is slavery. You are correct, I could leave the country if I like. Indeed, all you could leave if you don't like corporate welfare, but it doesn't change the fact that forcing you to pay for such welfare or the war in Iraq is still slavery. We can dress up government however we like, but we still go to jail if we don't pay taxes to fund activities we disagree with. I prefer to call it what it is, rather than delude myself.

Posted by: Yancey Ward on February 3, 2006 at 5:26 PM | PERMALINK
The term "intellectual property" is an invention of the State, not a form of property as it exists in a free market.

You are clearly using "free market" in an interesting and somewhat peculiar way.

You also seem to be confusing property (which are a set of social prerogatives that are always an invention of organized society) with goods (which are one class of things in which property may be assigned.)

The term "intellectual property" is simply a way of drawing an analogy to (genuine) property.

No, intellectual property is property in the exact same sense as real property, or tangible personal property, or intangible personal property other than intellectual property.

The subject matter in which the interests vests, and the exact set of interests in which particular societies recognize a proprietary interest may vary, of course, within and between those classes of property.


The reality is that a patent is a temporary, state-granted special privilege of monopoly on the sale of a certain class of goods.

All property rights are state granted monopolies on some set of prerogatives. Some are temporary, some are permanent.

Posted by: cmdicely on February 3, 2006 at 5:33 PM | PERMALINK

Its not an attack, but come on, its certainly not slavery, last time I checked one of the key incidents of slavery was the inability to opt out.

Its kind of beneath your usual high level of discourse to stoop to that.

I prefer to view myself as a member of one of the greatest private clubs in the world. Of course I don't agree with every club expenditure. But once you agree to join the club in the first place you have to realize that it comes with the territory.

In your case, you really don't believe the government should be in the insurance business. Fine, but slavery? Come on.

Posted by: hank on February 3, 2006 at 5:35 PM | PERMALINK

So, tell me how your citation of "polls" remotely supports the proposition.

Well, since you are stupid, here:

I argue that the free market doesn't efficiently distribute medical services.

Tbrosz responds that I am arguing that people are too stupid to make decisions about medical services.

I respond by pointing out that, no, as I am arguing that the free market doesn't efficiently distribute medical services, and as, in fact, polls show that most people prefer the system that I am arguing is more efficient, I am not arguing that most people are stupid, since most people are intuitively inclined to make the right decision on the matter.

Now, the poll results don't support (nor do I claim they do) the argument that in fact the free market is less efficient than a public system, but that's not what I am using it to argue.

Posted by: cmdicely on February 3, 2006 at 5:37 PM | PERMALINK

I have been reading the libertarian posts. I get really tried of the libertarian arguments in favor of contracts of adhesion. A free market exists only where you have a willing buyer and a willing seller neither of whom are under any compunction to buy or sell and neither of whom has any significant monopoly or size advantage. Everything else is less than a free market. In our modern world truly free markets establishing the real value of goods and services are very rare indeed.

I wonder why the liberarians are supporting a rigged market. In a free market, the Government would, on behalf of all of us, be able to negotiate price with the pharmaceutical companies. If the drug company didn't want to accept the amount offered by the agency, it wouldn't have to sell. Of course, since Medicare D would probably be the biggest player in the market, it would probably be willing to cut its prices. Giving Medicare the opportunity to negotiate prices is nothing less than a blow for free markets. How am I wrong?

Posted by: Ron Byers on February 3, 2006 at 5:38 PM | PERMALINK

Patents are not "monopoly protection" any more than laws to keep some stranger from driving off with your car are "monopoly protection." Let's not beat up the terminology any more than we have to.

cmdicely is right on her definitions of property, although I wouldn't call property rights state "granted" as much as I would "state recognized and protected." Property rights are as much natural rights as the others are.

Ron:

In a free market, the Government would, on behalf of all of us, be able to negotiate price with the pharmaceutical companies. If the drug company didn't want to accept the amount offered by the agency, it wouldn't have to sell. Of course, since Medicare D would probably be the biggest player in the market, it would probably be willing to cut its prices. Giving Medicare the opportunity to negotiate prices is nothing less than a blow for free markets. How am I wrong?

Depending on the level of participation by the government, ranging all the way up to single-payer, at some point the government stops being a customer and starts being an owner. Add to that the power that the government has, and you end up with a situation like a referee who has decided he's playing for one team. When the government is the only major customer, we stopped talking "free market" a long time ago.

It's interesting that people are perfectly happy with the government weighing in on a sector of the economy at a level that would have everyone screaming for the trustbusters if a private company was doing it.

Posted by: tbrosz on February 3, 2006 at 6:26 PM | PERMALINK
cmdicely is right on her definitions of property,

Just because I can read doesn't mean I'm female. ;)

It's interesting that people are perfectly happy with the government weighing in on a sector of the economy at a level that would have everyone screaming for the trustbusters if a private company was doing it.

I don't know why it should be "interesting" that people view a democratic government based on popular consent and universal suffrage as different than a private organization chartered to advance the private interests of a select group.

I think its "interesting" that you don't seem to be capable of seeing the difference.

Posted by: cmdicely on February 3, 2006 at 6:36 PM | PERMALINK

Oops...sorry. Don't know where I picked up the idea you were female. "Shortstop" has the opposite problem.

I don't know why it should be "interesting" that people view a democratic government based on popular consent and universal suffrage as different than a private organization chartered to advance the private interests of a select group.

Take off the rose-colored glasses, and take a look at our government as it has been for quite a few years. Does it fit the former definition better than the latter?

One of the reasons I am concerned about turning over our medical system to the State is that we won't be giving it to some idealized Jeffersonian government, but a mixed-economy government that's a circle-jerk between power-obsessed politicians and private interests who see a way to use the government to advance themselves where purely market forces won't.

I suspect that the only difference between pharmaceutical companies now and under nationalized health care is that the advertising budget will become a lobbying budget.

We have to start peeling our lives away from the government, not getting further in.

Posted by: tbrosz on February 3, 2006 at 6:56 PM | PERMALINK

tbrosz: Patents are not "monopoly protection" any more than laws to keep some stranger from driving off with your car are "monopoly protection."

Yes they are. A key difference between physical property and "intellectual property" is that, by taking your car, I'm depriving you of its use. By contrast if I use your idea I am not preventing you from using it.

Additionally, if I like your new Belchfire V13 Coupe, I can go out and buy one for myself. By contrast, once you patent an invention, you have exclusive control over it - even if I independently make the same invention. This happens all the time.

I'm certainly no fanatic, and accept that patents serve a purpose. Nevertheless they are a government granted monopoly, and hence a serious market distortion. That's why devout libertarians and free traders reject them. To accept that patents do more good than harm is to accept that "free" markets are not the answer to every economic problem.

Posted by: alex on February 3, 2006 at 7:08 PM | PERMALINK

alex:

Look up Ayn Rand's article "Patents and Copyrights" for a discussion of the principle.

I am aware that some libertarians don't believe in intellectual property. Some also believe that armies and police forces ought to be private and competitive. I don't agree with either of these positions.

Posted by: tbrosz on February 3, 2006 at 7:24 PM | PERMALINK

All corporations, be they drug companies, energy companies, or whatever are chartered and their very existence defined by civilized government. Without a set of rules to follow and laws to follow the corporate world cannot exist. It's very ability to perform is developed by a lawful society. They must co-exist. Without government large business and corporate sustainability is compromised. Corporate charters are provided for and legalized by governments. All charters indicate the type of "legal" activity that the corporation can produce with respect to business. Government has the responsibility to monitor and determine the scope and legality of it's creation: the corporation.

Currently health care represents 16% of GDP and is growing. The only strong stock sector for the last 20 years is the health care area. Proof of this can be found in the annual value increase over 20 years in Vanguard Health Care Fund-my personal favorite. As health care consumes more and more of our productivity a point will be reached where the government must begin to control it's device, the corporation, or citizens will start to die from lack of health care do to affordability issues. The government will have to decide which is more important: death and disease or corporate profit/lobby money. GM and Ford are all ready interested in the answer.

Posted by: MRB on February 4, 2006 at 1:28 AM | PERMALINK

Government influences the corporation. It can influence it negatively or positively. Since government and corporation both exist they influence each other. Total lack of influence can only exist in the mind of the irrational unrealistic libertarian. Government legalizes the corporation and therefore the corporation owes it's existence to the government. Land ownership can be thought of in the same way. Ask yourself: if the government fell apart and civilization became total chaos-how long would the corporation last? Just about 2 seconds. The 2 are linked together. Corporations exist to make money. Governments exist, partially, to make sure that corporations serve citizens fairly, safely, and legally. Anything other than this will result in eventual failure of the corporate business structure. Therefore government must constantly influence corporations to act legally and to the benefit of the citizens-the corporate profit motive will not always provide this incentive. Remember corporations will do whatever necessary to make a profit-this may not coincide with legal, moral, ethical business practices. This is why government must exert a force upon the corporation.

Health care has been studied and studied as a commodity. Factually it does not exist as a typical market force. The elements of professional competion, market share, and competive pricing don't seem to influence the overall nature of the business to keep the costs down. Failure to recognize this given the time that we've had to consider it just becomes insane over time. The money revolves around this structure now and a republican congress dependent on the lobby dollar has noticed. Now it is becoming more important monetarily to them than the energy sector. American citizens are dependent on it, cannot refuse it, and have virtually no control over it and now a conservative congress knows this and is dependent on the lobby dollar from it. Their hands are deep within our pockets now and they know we cannot stop them. Maybe when health care reaches 25% of GDP they will start to wake up. Maybe 35%? Right now, as a betting person, I'll just keep a huge investment in health care stocks, I know that they have America bent over and there's little risk that this government will make them stop. It's a sure thing.

Posted by: MRB on February 4, 2006 at 2:09 AM | PERMALINK

Game, set and match to Bedouin.

Posted by: CFShep on February 4, 2006 at 6:38 AM | PERMALINK




 

 

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