‘Empathic Pricing in Healthcare’
‘Your Money or Your Life’
An Economic Philosophy for Private Sector HealthCare and Enablement Thereof
Phi-los-o-phy: a system of principles for guidance in practical affairs (Random House )
Health Care: the maintaining and restoration of health by prevention and treatment of disease.
Empathic Capitalism: the principle of pricing ‘necessities to health and life” — specifically medicines and healthcare products and technical services — at manufacturing cost, (or cost of acquisition), plus a mandated reasonable profit margin range, not exceeding a specified maximum percent- e.g. 25% mark-up over costs.
This article was inspired by the philosophy and writings of Adam Smith who is accredited as being the father’ of capitalism.
In modern banker’s terminology, it’s time for a new economic model as pertains to the Healthcare Industry.
In old fashioned terms, its time the population of this country, its politicians of all parties and ideologies, recognize that medicines and healthcare service and medical products should serve the primary purpose of caring for and caring about, the patient/consumer as well as the taxpayer supported programs, such as Medicare/Medicaid.
With the exception of most individual dedicated doctors, nurses and personal caregivers, the healthcare industry today operates no differently than any other private sector industry — the main goal of which is to make money, and the greater the profit the greater the acclaim by investors, This economic philosophy may be acceptable “raw” capitalism, but: Should making money alone be the goal and primary aim and achievement of healthcare? Perhaps the reader and later the nation might agree that empathic pricingas suggested (connoted) by Adam Smith, is a better model for our healthcare industry –-private sector operated, patient-priority-oriented, yet ‘profitable’ to the provider of product or services to he extent of reasonableness, not greed.
It’s a choice of Empathic Pricing versus Your Money or Your Life –or your Health; or your Heart, or your Eye-sight, Brain, Liver, or some other medically treatable ailment. In healthcare, pricing based on what the market will bear can arguably be equated to a demand for ransom or outright blackmail for the privilege of keeping healthy, useful and alive. Yet, this is our current and underlying guiding philosophy and economic model of drug manufacturers distributors, and retailers, insurance companies, and of many if not most suppliers of medical products and services –- keeping in mind that available and affordable medicines and medical treatments and products are biologically essential to good health and life itself — second only in priority to the availability of food and basic shelter.
Essentials to healing, health and life itself should not be the legalized target of “Your Money or Your Life” pricing.
Implementation of a healthcare system of empathic pricing in healtcare would be based on the simplest of economic concepts — as phrased in a single sentence, perhaps remindful of baseball’s Yogi Berra and Casey “Stengelese”:
“….The way you lower the cost of something, is to lower the price…”
Both a truism and a tautology — and, come to think of it, common sense. Thus, what has been and will be most often referred to herein as ‘empathic’ capitalism, can just as well be thought of as plain old ‘common sense’ capitalism when it comes to pricing essentials of health and life itself. Not only common sense but a more accurate interpretation of the kind of capitalism Adam Smith visualized. More will said about Adams’ philosophicl moral and teachings — -keeping in mind that Adam lived and wrote some 250 years ago as a philosopher, and not as an economist.”
Just how to drastically lower consumer prices of medicines, medical products, and technical services as suggested herein is not arbitrarily determined, but rather pricing is based on simple, algorithms related to original cost of manufacture’/cost of acquisition, plus “reasonable” profit markups — the term “reasonable” excludes the practices of “price gouging” or “charging whatever the market will bear” as will be later discussed in particular context of the pharmaceutical and healthcare market.
The role of government would be not as an intervener, but as an enabler of a system embracing the concept.
Importantly: Both the concept as well as the implementation of an empathic private sector operations approach to healthcare, and particularly in reference to pharmaceuticals and medical products, is compatible with the major provisions of Obama-Care, insofar as directly and drastically lowering patient/ consumer/ taxpayer costs of healthcare services and products per se with resultant lessening of the need for, and cost of, insurance where it may still be needed, as in catastrophic insurance.
As noted, this article was inspired by the writings of Adam Smith who is accredited as being the “father’ of capitalism. His voluminous writings were authored more than 200 years ago, actually before the United States was born, and long before there was anything remotely resembling our economic systems of today’s world, much less any ‘healthcare system”. No doubt he would heartily approve of the philosophical and economic concepts of “universal and affordable” healthcare, but would deplore government management roll, as in Obama-Care, and also would be highly critical of many aspects of our system of medical care as much of it has greedily and un sympathetically evolved since the mid-twentieth century.
Adam was a philosopher, concerned with individual human and societal morality (without reference to God or religion being a source). A great part of his thesis dealt with an individual’s capacity to feel and manifest ‘sympathy; (i.e., empathy) for others, and which Adam later tried to carry over to his proposed “capitalistic” economic system put forward in a separate and later work. In this latter dissertation, Smith favored a private sector economy where those engaged in commerce would be free to choose for themselves what kind of work or business to engage in, and having chosen, were entitled and expected to make a reasonable profit from theirs labor or business.
Most often cited by politicians are Adam’s comments about the butcher who provides you meat, not out of benevolence, but for profit — which, if saved, becomes capital for future investment or spending in any way the butcher should decide. It seems clear, in the case of the butcher, Smith has in mind “reasonable” profit, based on reasonable value in commerce involving competition with others. It can be safely assumed that Adams philosophy regarding human morality (empathy) within or outside of commercial transactions, would contemplate that even if the butcher was the only one in town, he would still price food (meat) according to the reasonable value of the goods — certainly not on the basis of how much the customer would pay to avoid cruel hunger or starvation. Yet, this latter method of pricing — i.e., “according to what the market will bare”, is precisely the formula universally used by drug companies, and, regrettably, by many of our medical product suppliers, and certain service providers, certainly including medical insurance companies which, like the drug companies, operate without serious competition as monopolies (or oligarchies} in their statewide or larger marketing areas –essentially worldwide.
Charging obscenely high, and economically unjustified prices for life saving drugs or medical insurance translates in any language to Your Money or Your Life.
In passing, it should be noted that Smith also admonished that government should have a limited role in commerce, yet should serve the purpose of protecting the rights and property of its citizens, as well as serve the public in general through public roads and works… thereby rather anticipating by two centuries the current Tea Party’s theme song of lesser government intervention. So, Mr. and Mrs. Tea Partier, its nice to have the ‘father of capitalism’ on your side in keeping with your proclaimed values of “do-what’s-right’ patriotism.
And, those of you who have in good faith demonstrated as a “99% Occupier” might take comfort in at least understanding that capitalism as contemplated by its “inventor” and earliest advocate, Adam Smith, can and should be empathically practiced — and surely most importantly in that segment of our private sector which provides our healthcare products as well services to patients’.
It appears from polls taken, that a majority of Americans have registered individual and personal uncertainty about, and discomfort with, Obama-Care.
It further appears that an equal number of Americans feel just as queasy about ‘returning” to the ‘out-of-control’ system that that we would be left to live with if Obama-Care is not amended or replaced with a more intelligent and “patient/priority” system of genuinely affordable healthcare, one that dramatically lowers the cost to consumers of pharmaceuticals, the majority of medical consumer products, and catastrophic Healthcare insurance.
THE 1950’s — Let’s Reflect Back to Look Forward:
1952, just 60 years ago (7 years after the end of WWII), Alice a 29 year old married woman in the maternity ward of a first class hospital in Berkeley, CA gave birth to a 6th month term premature daughter, weighing in at just 1.9 pounds. At time of birth, Alice was attended to by a top pediatrician and especially trained staff of registered nurses. The infant named ‘Bobbie’, was placed in an oxygen enhanced incubator where she was watched and attended to 24/7 by staff for 3 solid months, at which time the she had reached close to 5 pounds and was released to home care by her parents — one of whom was me, the father. (Today, the ‘premie’ daughter Bobbie is the mother of two grown and married daughters, and the grandmother of four.)
The Hospital charges were $15 per day.
Thus, in l952, the TOTAL hospital care for 90 days = $1.350 which, in this true story, the parents were able to pay from their modest current earnings on a weekly basis of $105, as billed at the time by the hospital without insurance.
Compare with 2013: Suppose Bobbie’s 30 year old married granddaughter (also 30} would be admitted to the very same hospital and give birth to a premie requiring she be placed in special care until released 3 months later. Hospital charges for basically the same services would be around $8,000 — $10,000 (per each and every day of care.
Thus, in 2013,the TOTAL estimated hospital and nursing care for 90 days = $720,000 minimum, and likely closer to $1,000,000 — Who of us can pay this price from current earnings? As a matter of fact, how many of us could afford the insurance premium for full coverage of such a medical charge with required co-payment.
Inflation of the U.S dollar over sixty years has dwindled down the value of a 1953 one-dollar bill to about a dime. So why shouldn’t today’s hypothetical 90 day hospital care calculate closer to $13,350 than $1,000,000? How does one account for a price differential of hundreds of thousands of dollars for the same hospital services even after cost of inflation has been factored in?
One thing seems clear — -voluntary or involuntary insurance is not the first-choice approach to lowering costs of medical care. To the contrary, medical insurance increases, rather than lowers medical costs in totality. Insurance may insure and compensate the patient for treatment received, and that’s good — but that same policy whose unreimbursed premiums/co-payments paid for by the patient, insures and guarantees payment in full, to the seller of the product, services or pharmaceutical.
A Supreme Court Justice once began an opinion: “Danger invites rescue”. This masterpiece of brevity inspires me to suggest that: “Insurance invites greed” in pricing by purveyors of medicines and health products and services. In terms of economically unjustified price raises in all categories of pharmaceuticals, especially since the first mention of mandatory insurance in Obama-care in 2010, the drug companies have more than proved the point that insurance invites greed! Over the counter maintenance drugs that we buy monthly have risen drastically and continue to do so, and without any real or imaginable justification underlying the reason for the rises. Notwithstanding, Catastrophic insurance, if affordable, is a wise investment.
In a 2004(when the economy was booming) TIME magazine published an article Why We Pay so Much For Drugs. The main thrust of the article was to detail the then long standing controversy involving congress, the FDA, and the drug companies in regards to the proposal that drug costs could be reduced as much as 40% if Medicare, government institutions and the population of America in general could and should legally buy their pharmaceuticals from neighboring Canada — it being well known then, as now, that all other countries in the world pay a fraction for their prescription drugs than we Americans –a sad fact largely due to pressure of the drug lobbyists with their political favors and threats versus our historically weakling or corrupt congress acting as a majority in either party. Not unexpectedly, the drug companies then, as now, won the battle, and Americans, sadly, still pay 50–70% more for Rx drugs than any of the 30 western nations — New Zealand apparently being the lowest on the consumer drug price scale. (It should be noted that it is technically illegal to import drugs from Canada or foreign countries, yet several licensed companies in Canada fill U.S. prescription drug orders and mail them to consumers in the US, usually without interference by USA customs.
The same TIME article begins with the anecdote concerning an elderly lady named Helen who suffered from multiple ailments, and struggled to try and find “bargains” for various prescription dugs by shopping in Canada. She boasted that her “biggest savings” was being able to buy (in Canada) a six month supply of Lipitor for $500 compared to $1,900 if she made the same purchase in the USA.
So Helen might have felt good about her “biggest savings” at $500, but what if she knew that even at Canada’s lower price, she was still paying around $475 more than what would have amounted to a reasonable profit for each the manufacturer, wholesaler and retailer for a six month supply (200 tabs) of Lipitor.
The concept of buying drugs from Canada, New Zealand or other lower drug price countries resulting in substantial savings, would be an advisable and desirable short term partial solution, but, it is not the final answer to drastically lowering either drug costs in particular, or overall healthcare costs in general, as compared to centralizing all drug making and selling within our own borders with pricing reasonably related to manufacturing/acquisition costs, yet providing a reasonable profit to the maker, seller, or service provider.
Over-the-counter (OTC) non-prescription Drugs
Marcia, a 47 year old legal secretary, 8 months jobless, and widowed mother of a three year old, was faced with a cruel dilemma — she suffered from an eye ailment commonly referred to as “dry eyes” (lack of natural tear production) for which there no sure-cure. However, a variety of sympton relievers including non-prescription(OTC — over-the counter) artificial tears and lubricants absolutely necessary to keep the eye lids lubricated and the eye constantly moist, are readily available on the shelves of any drug store.
The problem facing Marcia is that both the ½ oz. of artificial tears and the ¼ oz of lubricant are each obscenely priced around $20 each — amounting to over $30–60 weekly (depending on frequency of use), notwithstanding that the active ingredient of the artificial tears is over 99.7% water plus a grain of salt, and costing virtually nothing to the drug manufacturer. The tiny tube of eye lubricant is nothing more than a mixture of mineral oil and Vaseline, sold to the manufacturer in 55 gallon drums, yet selling to the consumer/patient ‘…at what the market will bear, i.e., for many thousands of times its total costs of packaging and shipping.
Marcia’s dilemma? Whether to buy food for herself or medicine (eye-drops/lubricant) for protection for her eyes — ‘your money, Marcia, or your eyesight!’ If the eye medications were reasonably priced, say 1/10th or less, she could have afforded both the essential of eating, and the necessity of medication. Our account of this incident, and a library of similar cases, do not reveal what choice Marcia, or the myriad of others, made at any given moment in time. Just the fact that any person, especially in this country, should be faced with such a choice — food or medicine — is inexcusable and disgraceful –and even more outrageous when one takes into account that both eye products, the drops and the tube of lubricant, are generic, unpatentable, off-the-shelf, non-prescription, and non-insurable necessary medicines. The profit markup of manufactures and retailers over aquisition costs of the $20 eye-drops is as close to infinity as one can imagine.
The reader might think that if Obama-Care had been in place Marcia would not have to make a choice between medicine or eating. Think again. Non-prescription drugs are not insured under any insurance plan, including Obama-Care which ‘limits, rather than expands’, individual health benefits as noted by Supreme Court Chief Justice Roberts writing for the majority.
Empathic Capitalism, would result in reduced pricing of non prescription as well as most prescription drugs to a degree that Marcia could afford her eye-drops and other medicines along with a steak dinner.
“Empathic Capitalism Requires Pricing Be Directly Related to Manufacturing/ Acquisition Costs.”
In run-of-the mill consumer products where there is genuine competition, a reasonable markup over manufacturing costs might be in the range of 25%. Also, it is a general rule-of-thumb that the final retail price of such a product would likely be in the neighborhood of 5 times the manufacturers selling price. Thus, if manufacturing costs amount to $1.00 and the mark-up is 25%, the manufacturers price to the distributor/wholesaler is $1.25, and the expected retail price (times 5) = $6.25.
How better off this world would be if medicinal drugs were manufactured, distributed and retailed as simply another run-of-the-mill consumer product, which in fact, most medicines are, with rare exception. The great majority of medicines are mass produced and packaged by automated or computerized equipment in the form of lightweight pills, capsules, plastic containers. Because of their inherent lightweight, even shipping costs favor minimizing overall pricing to the consumer. (What about R&D costs? We’ll get to that.)
Costco recently released a study it sponsored listing the basic costs of the already synthesized active ingredients of more than a dozen different popular prescription drugs. Understand that it is only the active ingredients in any pill, capsule, bottled product, or injection that has medicinal value. Most medicines we obtain from the pharmacist or off the shelf, are highly diluted with larger quantities of some binding matrix in it pill or capsule form, or in the case of bottled medicine, the dilutant is often water or some common liquid that is of inconsequential cost to the manufacturer.
Let us take another example of a prescription drug, Prozac, used to treat persons who suffer from serious depression, obsessive compulsiveness, panic disorder or other health and life threatening mental disorder. According to the aforementioned Costco report the cost of the synthesized active ingredients is a trifling $0.11, sufficient to package and sell 100 tablets that retail for about $250 -–a markup of just about 225,000% over the cost of acquisition of the actual drug(Prozac ) itself. Of course; this computation does not detail the total cost of packaging, labeling and shipping the product, nor does it include the respective costs and mark-ups of the wholesaler and retail pharmacy.
However, before we discard as useless this information as to raw product costs, lets calculate what the retail price of Prozac could and should be to the consumer/patient if Prozac were priced like other mass-produced consumer products in the regular flow of commerce:
Starting with the knowledge of 11 cents for the cost of product itself, it is an overly-generous assumption that the total additional manufacturing costs (i.e. — final processing, packaging, labeling and shipping costs) might approach 20 + 11 cents = $0.31 per packaged 100 tabs. We will double to 50% the mark-up (16 cents), thereby establishing a manufacturer’s price of $0.47, which multiplied by 5 = $$2.35 retail for 100 tabs of Prozac . At least that’s the maximum of what you, the patient and consumer, should be charged if the product were produced and sold generally in accordance with pricing practices of most mass produced consumer products. And $2.25 is the maximum price you, the taxpayer, should be liable for — you know, your proportionate share of Medicaid, Medicare, Veteran’s Administration, Politicians healthcare, etc,
De-bunking Some Myths and Legends:
The oldest, most touted, and exaggerated claim put forward by the drug oligarchy is: “…The reason our prices are so high is because of the astronomical amounts we spend on research and development of new drugs…”. Yeah, sure. Then why doesn’t your financial reports to your shareholders over the years show more than 5–7% expensed out to R&D? Statistics reflect Big Pharma pays at least twice the amount of money on advertising than it does on research and development. And add to the above that the criticism levied by a former head of the FDA that most of the drugs licensed in recent years are referred to disparagingly in the trade as “me-too” drugs…i.e., they are too often no more effective, safer, nor in any way better than what may have been on the market for years… keeping in mind that it is not the task or responsibility of the FDA to determine whether or not a “new’ drug offers any advantage over its predecessors. The public, in their innocence and ignorance of what may be the true facts, are suckers for something that’s packaged and labeled “advanced”, “new & improved” or the like. Many articles have recently appeared from trustworthy medical information sources recommending that doctors and patients alike wait for three years before trying out any new drug, and until it shows a favorable medical track record in the marketplace particularly in reference to discovery and public disclosure of unforeseen side effects.
What may be loosely referred to by the largest and richest pharmaceutical companies as ‘researching’ for new miracle drugs (supposedly for the benefit of mankind), could be more accurately described as near reckless gambling in hopes of hitting the ‘jackpot’ of medicinal products called a “blockbuster” which is defined in the trade as a product that nets the jackpot winner at least a $billion dollars in sales per year. The biggest block buster of all time is Lipitor that’s been on the market for about 30 years and has earned Physer an estimated 200 $billion dollars during that period. According to the 2011 Costco report, the active ingredients in Lipitor cost $5.80 per 100 tablets which sell for $272.37, indicating a tidy percent mark-up of 4,696%.
The USA is the single biggest and by far most profitable market for drugs, and healthcare in general, in all categories — yet we are charged and pay an average of more than double the average price for drugs and medical products than any other country in the world –this, notwithstanding that probably most drugs and medical products are either foreign imports or are produced in whole or in part through foreign outsourcing, ‘to make them less expensive, so we are told.. This extraordinary situation seems to defy common sense — unless, of course, you factor in greed and political shenanigans — to put it mildly. What evolves from this sad commentary is an obvious fact that the drug companies, (and medical device makers} can profitably sell their goods for much less to every other country in the world than to their largest volume customer — we Americans.
As noted, the drug companies spend twice the amount of R&D monies on advertising — mostly for aphrodisiacs with the alluring ‘threat’ of an overtime erection, and medicines for frequent urination and high cholesterol. The 5 or 6 billion ad dollars spent on these specialties are of course expensed out to the all us consumers/patients/taxpayers without discrimination as to our age, sex, or affliction. The USA and New Zealand are apparently the only two countries of the 30 nation ‘western bloc’ that permit advertising — and to add insult to injury, isn’t it ironic that you can apparently buy your Rx drugs in New Zealand for about 27% of what we suckers pay in this country, again evidencing that selling at fractionally lower drug prices must still be profitable in developed countries — even where commercial advertising, adding extra cost to consumer pricing, is permitted.
National Institute of Health
What is frequently overlooked is the enormous and leading role that the National Institute of Health (NIH) plays in domestic and global healthcare, and especially in funding research at universities and institutions throughout all 50 states, as well as ‘partnering’ with both public and private entities located in 90 countries. NIH awards an average of about 50,000 R&D grants a year to over 300,000 researchers per annum world-wide and makes available the results of basic research to drug companies or other entities who appear to be in a position to develop it for marketing. What seems ironic, is that the USA taxpayer supplies the funding for NIH to implement its important contributions to healthcare, only to be price-gouged as a patient by the marketers of the NIH contribution as fully developed and marketed.
R&D ***PATENTS ***LICENSING
A complete healthcare system must provide for incentives to independent, non-governmental, researchers and labs to continue to innovate in all areas of healthcare science.
As noted, NIH is the singularly most important cog in the world of basic medical science inquiry and the catalyst in terms of finding sources for developing and marketing seemingly worth-while-discoveries in the private sector.
If consumer pricing according to empathic capitalism is limited to a multiple of manufacturing costs as herein proposed, it is suggested that all manufacturer’s be required to pay to NIH an R&D fee or tax of, say, 2% of manufacturing costs before markup. NIH shall use its own discretion as to how such monies shall be allocated in according to its own established regulations and practice.
Licensing, including compulsory licensing, of patents and know-how by manufacturers should be available for negotiation and or demand to insure competitions and multiple sources of uninterrupted supply in all areas of healthcare. Reasonable licensing royalty fees for product manufacturers should be paid as a percent of manufacturing costs, not exceeding 2%, and for a period not exceeding the life of the patent. ‘Phoney’ licensing or other types of contracts with, or ‘gifts and favors to’ third parties (including politicians) without genuine quid pro quo exchange to justify a price hike, deserves to be made at least a federal misdemeanor offense.
Putting Empathic Capitalism to Work in the Healthcare Industry
The philosophy of an empathic approach to healthcare, ideally and ultimately, boils down to creating a system will make it possible for the vast majority of Americans to individually support themselves in matters of non-catastrophic healthcare needs to the same extent, that in normal times, Americans can afford to pay for their own basic necessities and reasonable needs for food and shelter. This is not to discourage individuals from purchasing catastrophic insurance reasonably priced.
In concept and in practice, common sense suggests and dictates the way to reduce and maintain affordable prices is:
1) in the case of manufactured products, relate the maximum price to the cost of production plus a reasonable profit mark-up, as has been suggested;
2) in the case of purely technical services performed outside the immediate supervision of a doctor, e.g. x-rays, lab tests. and the like, relate the ultimate charges to actual pro-rata costs (plus reasonable profit mark-up) of performing the particular service, and limit the charges to the uninsured to not more than is or would be paid by the average insurance company for the same particular service; and
3) in the case of doctors, nurses patient care givers, clinics, hospitals, and or rest-homes (who provide total or limited healthcare), limit the charges to the uninsured to prorated actual costs of doing business plus reasonable profit compensation , and not more than is or would be reimbursed by the average insurance company for the same service.
Need for Enabling Legislation
Pending passage by congress of enabling legislation the President of the United States could and should right now, in the year 2014 within a matter of weeks or months, enter into an international agreement, such as a treaty with Canada or some other country (U.K, Netherlands, Australia, etc.) agreeing that consumer prices for prescription drugs sold in the USA shall not exceed the average price of the same or equivalent drugs sold in the 30 or so developed countries as recognized in the industry.
Implementation of any long term system of uniform and affordable healthcare must have popular citizen support and majority acceptance of political parities. Surely, the moderate and left-of-center groups have, over years past, been both vocal and active in support of this ultimate goal. The political and economic objections to prior proposals voiced by right of center have not been against the ultimate goal per se of uniform affordable healthcare, but rather as to its implementation by government vs. private sector, and, whether any such proposed system would be more likely to lessen or increase the costs to the consumer.
With all the above in mind what would be required of Congress and the President is enabling legislation that seemingly would minimally include provisions, such as:
1) Require within a specified time that all medical products sold in the USA, including pharmaceuticals, be priced to the patient/consumer buyer at cost of manufacturing (or cost of acquisition) plus a specified reasonable profit markup.
2) Wholesale and retail pricing and markups combined must be adjusted to stay within the patient/consumer price determined according to a specified multiple (e.g. 5–7) of manufacturing costs of the product as required in above paragraph 1. (see example above)
3) In the interests of long term reliable sourcing, safety, anti-corruptive practices and transparency and within a specified time limit, all medical products, particularly pharmaceuticals, will be required to be made in totality within the continental USA using USA labor exclusively. (NOTE: here lies our chance to ‘Get Back” our potentially largest industry for not only the valid medical reasons of affordability,, safety, reliability, and morality, but at the same time open wide the expanding job market for skilled and unskilled labor, all for the benefit of our people and our nation’s welfare. The FDA should stop issuing manufacturing licenses to foreign countries, like 53 or more to India, for importation back to the USA.
4) All manufacturer’s shall be required to pay an R&D fee or tax of 1or2% of manufacturing costs before profit markup, to NIH. NIH shall use its own discretion as to how such monies shall be spent in R&D and development.
4a) Optional: Payment of an R&D fee or tax of 1 or 2% to NIH computed after profit mark-ups, would be in lieu of any other Federal or State income, sales, or other taxes by any governmental agency — once again, bearing in mind the goal is to ease the burden on the patient/consumer, as well as to reduce operating costs of taxpayer supported healthcare programs and non-profit institutions providing health care services.
5) Licensing by manufacturers of patents and tradmarks may be negotiated by manufacturers, and the royalty fees paid as a percent of the manufacturing costs, not exceeding 2%. Compulsory patent and technology licensing, to insure competition and multiple domestic supply sources should be provided for.
6) Tort Reform (or some alternative to minimize “defensive” medical practices, medical malpractice insurance premiums, and medical product tort claims liability) is a ‘must’ in any genuine system of lower cost medical care or supplly.
7) State and Federal Reforms to limit excessive administration functions and costs, waste and abuses of Medicaid, Medicare, and like taxpayer supported systems.
8) Importantly, the product manufacturing operations of medicines and medical devices and pricing thereof must be completely financially separated from any R&D, Development, or other costs of doing business not directly related to the cost of product manufacture per se.
Big Pharma — Will the Oligarchy Cooperate?
We are a nation that can no longer afford to pay extortion, disguised as “prices”, for medicines or products that could and should be available to us for one-tenth the price, or less.
(If the private “for (reasonable) profit” sector fails to meet our needs, then let’s encourage the great non-profit foundations to at least fill the pharmaceutical manufacturing, distribution, and sales needs of the USA for their benefit and ours.
In particular, we should not hesitate to follow the lead of our arch rivals in many trade areas, China and India, along with some other Asian countries, which have, in their own self-interests, established their own domestic pharmaceutical facilities to make their own medicines at a fraction of the cost they would have to pay Big Pharma. India appears to have successfully negotiated patent licenses from specific drug patent holders to ‘honor’ intellectual property rights according to treaties and trade agreement. Less is known about China’s licensing practices.
As above noted, enabling federal legislation, according to ‘justice under law,’ would need include provisions for any FDA licensed drug maker to acquire by “compulsory licensing” the right to produce patented drugs of others upon payment of reasonable royalties related to manufacturing costs. This would help assure competition, the establishment of multiple sources of safe and adequate supplies, and reward new discoveries by independent researchers and developers of worthwhile medical contributions
So, if you are an entrepreneur, start a new drug or medical device company with a guaranteed market, a guaranteed reasonable profit, and a long lasting future.
End Results of an Empathic Approach in Healthcare
The end result of reducing the consumer price to 1/10th (or less) of just medicinal drugs (Rx and OTH) would revolutionize an enormous economic segment of the world we foolishly tolerate today by letting a de facto drug cartel (oligarchy) dictate both price and public policy.
The concept of common sense, or “empathic”, capitalism also addresses and contributes to narrowing the much publicized ‘gap’ of perceived unfairness in individual wealth/income distribution. I suggest the real gap resides not in how comparatively rich some people are in reference to others, but rather, it is the comparative purchasing power between rich and poor that is the real unfairness, particularly when comes to the ability or inability to buy all the food, all the medicines and all the essentials of life. If virtually all mankind could afford to readily buy essentials to life and health, who cares whether only a relatively few of mankind can also afford to buy mansions, yachts, and diamond studded tiaras.
We all yearn to solve the problem of certain bankruptcy of Medicare. The most significant and beneficial single cost-saving reform to Medicare, Medicaid, and all taxpayer supported health systems would be to adopt the philosophy of ‘empathic capitalism’ as applicable to all medical aspects, but first and particularly with the lowering of drug costs from ‘obscene’ to ‘cost-plus’.
Last, but not least, JOBS — that is jobs that could and should be “reclaimed” by our private sector with the legislative backing of congress and our President, whoever he or she may be, and regardless of party or politics. Here we dealing with the largest economic segment of the largest of all industries outside the food supply ‘industry’. How many new jobs that could be created with the centralization of drug manufacture within our 50 states would be speculation, but it is probably realistic to suppose it could and would be in the many tens of thousands.
We are, and should be, grateful to the backbone of the medical profession –the Family Doctor. Bless him, and those dedicated to the Hippocratic oath that the patient comes first in the world of healing.
(About the author: Charles E Townsend, Jr. is a retired business lawyer, having specialized in patent and antitrust law over a 55 year practice during which he was co-founder of what grew to be an international I.P. law firm. He, empathically, seldom declined his advice or full services to a client in need of legal justice because of inability to pay.)