Angina Monologue 23

There is always a certain meanness in the argument of pure evil, joined with a certain superiority in its fact.

— Darth Waldo Emerson

His Majesty prides himself on his realism and pragmatism. I think that’s why it so surprises me that he is doing something as quixotic as running for President against the likes of Cthulu, the Sweet Meteor of Death, and Hillary Clinton.

Speaking of which, he is preparing for his first press conference, which will begin at 6:30 Mountain Time this Thursday, September 17th, right here at the Junior Ganymede. A new post opening the conference will go up at that time. Just enter your questions in the comments thread, and His Majesty will be standing by to answer them.

I see that Doctors Without Borders is about to run out of multivalent snake bite antivenin.

What is curious is the remark by the manufacturer that they have “been priced out of the market.” Further reading of the article suggests that they are, in fact, the only manufacturer of this antivenin. That leaves me wondering what it even means to say that they have been priced out of the market. It can’t mean that someone else is making it for less — which would be a boon for Doctors Without Borders if it was true, in any case.

It can only mean that no one is willing to purchase the antivenin at a price that will cover the cost for Sanofi Pasteur to manufacture the vaccine. One wonders if there was any other customer than Doctors Without Borders.

I am tempted to monologue at length at what this tells us about the market for health care and the Affordable Care Act, but there really isn’t much of a market when you have one supplier and one customer.

That kind of thing has never really stopped you before.

Very true.

The problem here is not that Sanofi Pasteur cares about profits more than human lives. I doubt that’s the case, but even if it was, it wouldn’t actually be the problem. Nor is it that Doctors Without Borders feel entitled to a vaccine they can use to save lives, even if they don’t want to pay for it. I think they probably do, but that’s not actually the problem, either.

The problem is that envenomed snake bite is a fairly rare occurrence nowadays. This means that a relatively small number of doses of multivalent antivenin are actually used each year. But safe and effective antivenin is apparently fairly expensive to prepare. Batch preparation is, in fact, hideously expensive, as it is for almost all drugs or chemicals with multiple manufacturing steps. But setting up a production line is unlikely to effectively amortize costs, as it does for drugs used more frequently. So when the market says that multivalent antivenin costs more than anyone will pay (assuming that it is really what the market is saying, and the market has not in fact been clobbered over the head by a government dictat that has left it mumbling incoherently) what the market is saying is that the resources needed for the multivalent vaccine will save more lives if they are used on something else. Such as the rabies vaccine mentioned in the article.

That’s very bad news for snake bite victims, but remember one of our campaign planks: Reality is not optional.

Here’s another interesting item. A fellow has written an editorial on how drugs cost too much, particularly when they are cancer drugs that only extend life a few months but cost thousands of dollars for each of those months. He thinks our government should negotiate Medicaire prices for these drugs as aggressively as other governments negotiate prices for drugs.

Where to begin dismantling this foolishness? Let’s start with the idea that two or three more months of drug-hazed, pain-filled, crappy existence are worth thousands of dollars a month. The author actually seems to sense this, but talks around it, because it’s the kind of truth only an evil Sith Lord would actually utter out loud. — See here: I invented the death panel. It saved the Imperial government vast sums while hastening the merciful termination of the miserable existence of countless incurable dying patients. We authorized doctors to prescribe these patients whatever level of narcotic was needed to make their suffering bearable. It’s not like we were worried about them becoming addicts, for Sith’s sake. And if the narcotics depressed their central functions enough to hasten death … there can be a fine line between pain relief and euthanasia, but an honest doctor knows the difference. In any case, this is precisely what we are looking at if Obamacare stands. It is unavoidable.

Now let’s look at this business of Medicaire not negotiating aggressively enough for cheaper drugs. The dilemma here was completely ignored by the writer. It is that the cost of the drug consists both of its cost to manufacture on an established production line, and the cost of developing the drug and setting up the production line in the first place. If you want new drugs, you have to somehow amortize the development costs across the drug’s lifetime. Which, for the original developer, is the lifetime of the patent. When that runs out, the drug will be taken up by other firms, whose comparative advantage is in developing cheaper ways to produce and market existing drugs.

Patents are problematic. They are a suspension of the usual rules of the competitive market, imposed by government decree, for the sake of trying to convert a public good (knowledge of the efficacy, safety, and production methods of a drug, in this case) into a private good. This is done because it is believed that free markets undersupply public goods. This may in fact be true, and patents may in fact spur innovation. I am inclined to believe so. But the problem is that there is then no adequate pricing mechanism.

When it’s a monopoly supplier selling to a monopoly buyer, the market is going to be very distorted. And, for all intents and purposes, the public health service of Canada (for example) is a monopoly buyer in Canada. The drug company can either supply the drug at the price the buyer decrees, or not sell any drugs at all. The rational strategy for the drug company is to provide the drug at a bare profit — one that does not include any of the amortization of the development costs. People on the micro level might deal with this situation by taking the loss, in order to “punish” the buyer for his stinginess. But drug companies are large enough (since drug development is so risky) that they tend to behave rationally and provide the drug at the bare profit.

How then do they make up their development costs? On the backs of the American medical insurers, including Medicaid. The foreign markets are getting a subsidy from us.  Our allies relied on the American nuclear umbrella to spare them the need for paying for a serious national defense, and now they have got the habit.

There are alternatives, of course, but it’s not clear any are superior. The government could subsidize drug research, and restrict drug companies to competing for the manufacture of drugs that are already approved. Academia would conduct all the drug research, in the calm, reflective, and disinterested environment of the university campus, unhampered by any profit motive — Lord Vader, is there something wrong with your breath mask?

<wheeze> My apologies, my master.

The problems with that approach should be painfully obvious. Academia might in fact come up with some novel approaches that a drug company would not, because there would be less aversion to risk. But that same reduced aversion to risk pretty much guarantees that 90% of the money devoted to drug research would be going down a rat hole.

No one expects engineering departments to come up with the next Ipad, for very good reasons. It is amazing how this good sense fails to transfer to our expectations for other fields.

I think we shall adopt the repeal of Obamacare as a political plank. Obamacare is unpopular enough that this should not be unduly risky, from a political perspective. We shall, of course, offer our alternative vision of how medical care should be provided:

Routine medical care will be paid for by the patient. It is no different, really from paying for food, clothing, and housing. That is the very definition of routine. Such a good is best provided by a free market. Of course, the market is not entirely free so long as irrational restrictions on providers remain in place. You do not need a doctor to prescribe antibiotics for strep throat; if diabetics of all walks of life can be expected to test their own blood glucose level, mothers can be expected to test their children for strep antigens.

Actually, diabetics can’t be expected to test their glucose, or at least, not all diabetics. Noncompliance by patients is a huge issue that most doctor wrestle with.

This is primarily true among undereducated diabetics, and it is a reflection of the wider problem of our growing underclass. This should be addressed from that perspective, rather than as a medical issue.

In any case, it’s not that you need a doctor to prescribe antibiotics for step throat; it’s that you need a doctor to refuse to prescribe antibiotics when it isn‘t strep throat.

You may find it amusing to check the statistics on antibiotic prescriptions by doctors who have a good idea it’s not a bacterial infection, but prescribe the antibiotic anyway. It’s rather like global warming: It’s irrelevant whether we adopt carbon dioxide controls, because China and India are not going to adopt carbon dioxide controls. Not going to happen.

Likewise, in most third-world countries, antibiotics are handed out over the counter like candy. Those countries will breed resistant strains regardless of what we do here.

But it’s not our best, top-of-the-line antibiotics they’re handing out like candy. Those are still worth protecting.

<cackle cackle> Prices are truly a wonderful governing mechanism, aren’t they? The reason our top-of-the-line antibiotics aren’t sold over the counter in Third World hellholes is because they cost too much. They cost a lot here, too. So mothers have a strong price incentive to check that the kid really needs Gorillamycin before purchasing a two-hundred-dollar course of treatment for the precious snowflake.

<cackle cackle> I see from the look on your face that this is a new thought. <cackle> It’s positively delightful to see the astonishment when it’s pointed out how the market really does work.

Your Majesty, my face always has that blank stare. It’s just the way it was molded.

So routine care will be the responsibility of patients. Oh, insurance companies can keep subsidizing preventative care, if they think it will save them money; more power to them. Literally. But there will be no more tax subsidies for such insurance plans.

Catastrophic care is precisely the kind of thing insurance is meant to provide, so we’ll leave that part of the market largely unchanged. Except that we’ll eliminate the tax advantage of employer plans, so that catastrophic medical coverage becomes decoupled from employment. That tie needs to be broken. We can eliminate the tax advantage either by beginning to tax company-provided insurance, or by allowing premiums on non-company plans to be deducted by individual taxpayers. I rather favor the latter; it panders to the right crowds. I think we can absorb the costs, at least for now.

There is still the matter of insurance pools and adverse selection. Company-provided insurance has a small advantage here. I think this advantage is probably harmless, from our perspective — we certainly will make no move to prohibit company plans, we just won’t give them a tax advantage.

But I believe a new model is needed for the thorny issues of chronic conditions and end-of-life care — expensive situations that are not properly insurable, because the gamble represented by an actuarial risk has already been lost, or because the risk is effectively 100%. I think some form of annuity is the right idea. You take out a lifetime policy when the sprog is conceived, which covers birth defects; chronic conditions that develop later in life, such as diabetes; and end-of-life care.

Of course, we will emphasize the good sense behind this vision of health care, and (mostly) play down the fact that we have no intention for the government to pay for any of it — except perhaps for the most indigent patients, where the danger of communicable disease is involved. Public health is a legitimate government concern; we don’t want the ranks of the potential cannon fodder all riddled with preventable communicable diseases. But the scope of public health in this country has been expanded into meaninglessness, and I mean to fix that. We shall, of course, have to be careful how we present that. It’s bitter medicine, after all, but there is no other way to cure the patient.

His Majesty cackled again and headed into the television room. He has been alternating Doctor Zhivago with Soylent Green; I think he finds the contrast amusing.

I can’t say His Majesty is wrong. The thing he leaves out is the pain the rest of us feel when we see a child suffering from a medical condition that could easily be treated, if the parents only had the money.

Oh, I know what he would say to that, too. Our feelings of pity provide a powerful incentive to make voluntary donations to charity hospitals that take care of the poor. He would suggest that a society that is compelled to use the power of government to get its citizens to provide care for the indigent is a society that is on its last legs already, and turning these tasks over to government only hastens the collapse.

He’s not wrong. I think the charity of ordinary Americans is grossly underestimated by the Left. But that’s because the Left is projecting, and they seem to be calling the shots. A society run by those who have no understanding of real charity in their hearts is going to either collapse, or become an extraordinarily rigid and sterile society in order to prevent such collapse. And the latter strategy is still not guaranteed to prevent a collapse; becoming medieval China may simply not be an option any more.