The Unbroken Window

It is becoming all too convenient to blame greedy, evil drug companies for the (seeming) escalation in the price of prescription drugs. While this is an interesting question, I want to focus on something a little different in this piece.

As I was sitting through a Human Resources annual benefit meeting this morning, a palatable tension was building up in the room. The tension was a result, I believe, of many folks’ feelings that they are entitled to large amounts of free health care – and that health care is something that is just too important to be left to the market. My suspicions were confirmed by the persistant frustration in the audience expressed via two questions. Both questions are related to what I thought was good news. The good news is that this year, and in the coming 36 months, we should expect a sizable increase in the number of drugs that will become available over-the-counter (so says our broker).

First, emotions started to run a bit hot as our health insurance broker explained that the allergy drug Claritin was being made available OTC while a simular drug Allegra was not yet going to share this fortunate outcome. Some in the audience were angered by the terrible injustice that ONLY Claritin was being made available, while those people that must take Allegra would not soon enjoy the same benefits. “Why are the greedy drug companies keeping Allegra in the hands of the physicians?” I should not have been astonished by this sentiment – after all, a good number of people blame the world’s problems on greedy corporations. How come it does not occur to anyone to ask a deeper question, “Could anything else be responsible for this outcome?” Of course, everyone likes to think that the government is always doing the right thing and looking out for us, but when it comes to medical care, I simply don’t have as much faith as the masses do. But, for some insight as to why Allegra might still be prescription only while Claritin is now OTC, you might look here or here. Would you rather make your own health care decisions or have the FDA make them for you? Is it really necessary to have physicians be the gatekeepers to all drugs? Perhaps, but I’d rather have the option to decide for myself.

Second, people seemed even more upset by the fact that not only is Allegra not yet available OTC, but that over the past few years, the drug seems to have moved from a category 1 drug (which was inexpensive in general and required a very small copay) to a category 3 drug (which is more expensive and requires something like a 20% copay) according to our insurance company. Clearly again the evil drug companies are trying to gouge customers that need Allegra. Never mind that the demand for the drug has skyrocketed over the past few years. Never mind that even if drug companies were to make “excessive profits“, this enables them to undertake risky research and finance efforts that might end up with excessive losses in the future (to see how awful profits are, read more here). Never mind that allowing the price of drugs to rise coordinates the wants of buyers and abilities of sellers – the right amount of drugs get produced and getting to the right people. Never mind all that – corporations are greedy, gouging mongers and we all are entitled to receive drugs! Drugs are simply too important to allow their price to rise to reflect their true scarcity value.

Inevitably, events such as my information session this morning will embolden those that wish for the government to step in and “do something” about the tragic state of our health care system. Before falling prey to these feelings, and for lamenting the fact that free-markets cannot work in health care, consider several points.

1. The U.S. healthcare system in no way resembles a free-market. It might look like a free market to a Marxist (because people are free to opt out of it if they like), but in no other way can this point be supported.

2. It is certainly NOT the “market’s” fault that we have chronic shortages of flu-vaccines and are woefully underprepared for a viral epidemic. See here and here for more on this.

3. If we are all so worried that the drug companies run America because of their influence on government, why do so many also want the government to become MORE powerful?

4. Consider this video before hoping that our health care system can be turned into something as “good” as Canada’s. Yes, the video may seem over the top, but Canadian pets seem to have better access to health care than Canadian people.