Rising medical costs affect all of us. Health insurance prices are through the roof, drug prices are through the roof, the price of medical services is through the roof. My concern is that we have no easy remedy for any of it.
The Problem of Martin Shkreli
In 2015, Martin Shkreli acquired the rights to the drug Daraprim, and quickly increased the price from $13.50/pill to $750. The drug is used to treat a number of parasitic diseases, particularly toxoplasmosis, a rare infection in the developed countries, but common among AIDS patients.
The media and Congress went wild. Shkreli is currently on trial for other things, but I’m not sure what Congress could do about his price gouging. Shkreli may be unsavory, he might even be a sociopath, but we have no mechanisms, nor even paradigms, to deal with unethical business activities, even when they involve critical problems such as rising medical costs.
The Free Market
In our system of government, I can’t see how the law should be involved. We live under a governmental strategy which says that one can charge whatever the market will bear. Microsoft sells software packages for up to tens of thousands of dollars, when the product cost is essentially zero after the first one. Chewing gum and bottled water cost pennies to make, but the retail price is upwards of a dollar a unit. People in various financial sectors make billions of dollars in ways that most of us simply do not understand, for doing nothing but moving money – our money, at that – from one place to another.
Rising Medical Costs
That doesn’t mean that rising medical costs aren’t a severe problem which badly need remedy. And you may not be affected with AIDS, but price gouging is going on everywhere in medicine. There are drugs we use in the ER – drugs which are no longer under patent, mind you – that have recently gone through the roof.
Consider vasopressin, which cost $4 a dose four or five years ago. It now runs $110. Nitroprusside is another emergency drug, recently costing $8, now $800. There is hydrocortisone; the pills cost 15¢ apiece. The suppositories however, which any pharmacist can quickly compound from the pills, cost $38 apiece. Vitamin K tablets very recently cost $1 apiece, they are now $50; unfortunately it’s much worse than that, because pharmacies can only buy bottles of 100 pills, for $5K. Since many hospitals rarely use the pills, they tend to expire, further driving up consumer costs. Even worse is ketorolac, the generic for Toradol, a fancy Advil; in 2012 the pills cost $15 apiece. Now they cost $179 each, but only come in bottles of 100, giving a price tag of about $18K per bottle; those also tend to expire before being used. These two final examples bring us to how dates for drug expiration are set, which is another questionable aspect of drug pricing: every day the shelf-life is shortened generates an increase in profits for the industry.
Drug companies offer all sorts of reasonable-sounding explanations and defenses for their prices, of course.
So does Martin Shkreli.
Profits over Professionalism
The problem with these sorts of pricing cancers is that they quickly metastasize throughout the industry. There is a bedside test for hidden blood in the stool, that is considered a part of the physical exam. I put a sample on a card, add a reagent, and immediately know if there is something more that has to be done. In the old days, I would simply mark it as negative on the chart, or take further action if it were positive.
Then some sharp-elbowed accountant realized that hospitals were losing potential profits on the bedside test. So today, hospitals withhold the reagent from the doctors, so that the cards must be sent to the lab. What was once included in the cost of responsible medical care, is now billed at $30 or more. Here’s the sad thing: once the hospital pays for all the associated costs – it now must be securely bagged, labeled, transported to the lab, tracked, entered into the electronic system, billed for, and oh yes, everyone who handles the sample or the bag must wear gloves, handwash with expensive soaps, then apply sanitizers and moisturizers – what does the hospital actually make?
The Profit Motive
The most concerning thing about all of this is that there is absolutely no motivation for any of the responsible parties to lower costs. Everyone complains about rising medical costs, but remember, charges are typically a fixed percentage of cost. So as medical costs rise, everyone involved makes more money: hospitals, doctors, administrators, insurance companies, wholesalers, everyone.
Even patients are partly to blame. When a loved one is sick, nobody wants the Kia. Everybody wants the Cadillac, or even the Rolls.
I have mentioned before that money and economics fail to deal with important aspects of the human condition. That’s our problem: the bottom line isn’t the bottom line. A bit tongue-in-cheek, I even suggested a new, fairer tax strategy based on this conflict. Not too many people liked it, even though it is firmly designed upon simple economics concepts and the primacy of the free market.
It is said that you can’t legislate morality, which is true. Our dilemma is that morality is nevertheless critical. We need to be able to trust that the people we deal with are investing in a long-term relationship, and looking out for our mutual best interests. Without that trust, much of our way of life falls apart.
So what’s the solution?
I hinted at one possible response in a post about how Bernie Sanders could be more effective outside of government, than inside.
I’ll come back to that, but first there are other topics we will need to consider.
‘Drugs’ courtesy of Images Money via Flickr.