Prescription Medicine Lacks Price Discovery

By Glen Wallace                                                                                 February 8, 2024

                                                                                               updated:   March 3, 2024

There seems to be a general lack of price discovery when it comes to prescription medicine, whether it be drugs, procedures or medical devices. By a lack of price discovery, I mean there is little to no way for the market to discover what a fair price for the product or service is. For instance, someone in a medically incapacitated state might be sent by ambulance to the nearest hospital. Once there, the patient wont be presented with a selection of all the available medications and providers, along with their price, from which the patient can choose, after comparing online reviews and ratings, combined with the price, and decide which medicine, device and provider provides the best combination of price and quality. No, that doesn't happen. Instead, the patient is given the medications and procedures the attending physician prescribes. And once discharged from the hospital, the patient is presented with a bill that either they have to pay out of pocket or their insurance carrier pays for. But, a competitive marketplace is supposed to work properly through the consumer being able to make a selection of a product or service based on a combination of price and quality after comparing a selection of the same or similar products or services offered by different vendors.

The prescription medicine consumer, at best, is only offered a selection of either a generic medicine, if the drug or device, is out of patent protection. But even there, there often is no selection offered. A prime example of that is with the epinephrine auto injector device. Even though such a device has long been out of patent protection, in the US there is no selection of manufacturing vendors that offer that product. Instead, there is only one manufacturer vendor of the epinephrine auto injector and thus the consumer has to pay whatever the vendor charges to purchase that type of product.

So, what is the solution to quandary of a lack of price discovery with prescription medicine? It would seem that there needs to be change in the treatment of field of prescription medicine itself. Instead of treating prescription medicine as being part of just another capitalist marketplace, it should be treated as a vital utility. With all the other vital utilities, such as gas and electric, water and sewer, it is understood that a monopoly necessarily exists, and thus a competitive marketplace cannot exist. Monopolies and competitive marketplaces are mutually exclusive entities.

Whenever any kind of socializing of medicine is suggested, inevitably, there is a reflexive reply from the free market capitalist, that doing so would dampen innovation in medicine. My retort to that is, in addition to the lack of a free market existing in prescription medicine, the innovators in medicine are not the capitalists, but the engineers and scientists. And it is those engineers and scientists who almost invariably have given up all intellectual property rights to their innovations, to their employer, in exchange for a regular paycheck. Thus, an engineer working for the government drug or medical device manufacturer would have the same incentive to innovate as when they're working for a capitalist manufacturer. People drawn to the field of medical research and development, often are drawn to the field not for riches, but to find innovations that ultimately help people; the patients that benefit from those innovations. Too often, the free market capitalist makes the unsafe, simplistic assumption that people are motivated only by money and will only do any kind of work for money. Human beings are much more nuanced and complex than that. Yes, there may need to be a paycheck and a boss to ensure that most innovators come into work every day on a set schedule. But, once they are there at work, there doesn't need to be the carrot of a huge, extra financial reward in addition to their usual paycheck, tied to the researcher that comes with some innovation, to motivate them to innovate in the first place. There is already plenty of motivation for the researcher, as the process of inventing, discovering and innovating is itself an inherently rewarding process psychologically.

Therefore, the next logical step would be for a public entity to be the employer of the real innovators, who are the researchers.  The public employer would also be the entity manufacturing and distributing the drugs and medical devices once the research and development process is complete.  I refer to this public entity as such purely out of an attempt to avoid the image problem that the term 'the government' has with many folk.  I do this even though there is no fundamental difference between a 'public entity' and a 'government entity' in the common language sense of the two terms.  Both terms refer to essentially the same thing.  I would also remind those for whom the term 'government entity' has a disharmonious ring to it, that the local police and fire departments along with all of the US Armed Forces are just as much 'government entities' as my proposed public medical products R&D and manufacturing entity would be.  If anyone claims that "the government can't do anything right" I would ask them if they think the same thing about police and fire and the armed forces.  And even if they don't think much of those branches of the government, I would ask them if they use any public roads or parks and ask them if they think those government services should be all be switched over to capitalist enterprises.  If the answer is no, they might then respond "well the government never actually makes anything."  I could then respond by pointing out that the United States Printing Office, now known as the US Government Publishing Office, has, for many decades, made, through printing and publishing, a vast number of books and other documents over the years.  The government printing office is perhaps best known for their 'Yearbook in Agriculture' series of books that cover a variety of topics involving agriculture such as trees, water and soils.  From what I've perused of those US Government agriculture books, they are very well written and well bound by the book binder.  So, yes the government does make stuff and, in the case of those books, they make that stuff well.  Therefore, there is no reason to believe that they, the government, couldn't also do a just as good a job manufacturing pharmaceuticals and medical devices as they do writing and printing and binding books.  As a matter of fact, I believe the NIH already has a long history of making new drugs, albeit drugs classified as experimental.  So, it wouldn't be that great of a step for the NIH to go from being limited to manufacture of just experimental drugs and medical devices, to doing the same with drugs and medical devices approved of by the FDA.  I would argue to those still resistant to the idea of government expansion into the manufacture and distribution of medications, that most of the problems related to crony capitalism and an untoward relationship between the government and Big Pharma has been the result of the profit motive and having that motive corrupt government personnel.  So, the problem hasn't been coming from the government and going towards and corrupting corporations and their executives.  Rather, it is the other way around where corporations are corrupting the government.  Get the corporations and the profit motive out of the loop and most of the corruption will be extinguished.  

It should be noted that where the US Congress has gotten themselves involved in the matter of exorbitant drug price increases, they only jawbone the matter, but do absolutely nothing.  Members of Congress do nothing because, typically, among their biggest campaign donors are the Big Pharma and Big MedTech companies that very much want their gravy train of monster profit margins to continue indefinitely.  There again is another example of it being the capitalist profit driven of the economy that is 'infecting' the government side.  Perhaps the most egregious example of Congress talking a lot about medical price gouging but doing absolutely nothing was the 'Pharma Bro' Martin Shkreli involving the drug Daraprim where the price was increased from $17.50 per tablet to $750 per tablet.  I question why the drug was priced so high at $17.50 per tablet in the first place; even that seems really high.  Did the raw ingredients cost anywhere close to that to begin with?  Regardless, Shkreli did appear before a Congress where some legislators did scold him about the price increases.  However, while listening to that hearing, I was left wondering why don't those legislators do some legislating in the matter to prevent this from happening again?  I mean, they are there to make laws to make the nation a better place for its citizens, not sit there and scold some smirking young pharmaceutical executive.  All that Congressional hearing left me cynically wondering if those members of Congress were doing that scolding just to improve their image with their constituents, while at the same time planning to do nothing legislatively to keep their Big Pharma donors happy at the same time?  What a masterful juggling act.