A quick excerpt from an interview with Dean about the new health care debates. If you didn’t know Deans main industry is the medical field and he has seen and influenced a lot, his medical inventions are paying for $1000 dollars of your kits next year.
Great article, I hope more people have open discussions about the costs of any controversial government programs.
Less politics more economics !
I read all of Dean’s parts in his voice, thats not good. haha. I have a feeling that this is what we’ll be hearing a lot of this season in FIRST, considering last year we heard Dean talk about the ressession.
Dean’s thoughts on this subject are unique, and they should be put even more into the limelight and given a real debate.
I challenge Dean’s point of view with a single piece of anecdotal fact of my own experience. Three weeks ago I paid a measly copay for a ridiculously expensive generic medicine that got rid of one thing related to a seasonal allergy uneffected by OTC stuff. That one medicine wiped out every single bit of what I’ve paid into medical insurance. In other words, the insurance companies are back to breaking even on me.
The contents of the medicine cost less than $10.00 raw. How could it have possibly come out to over $400 total cost even though it’s a generic and has been out for several years now? It simply astounds me and makes me believe that at least some sort of reform is necessary. If only they’d ‘innovate’ new methods for making it less expensive – every other industry does. From a strict business perspective, how does this situation make sense? One would obviously say that they weren’t charging me enough for insurance – which is one side of the debate. The other side says that the cost of the medicine was too high due to … whatever evidence they choose to present, who really knows why.
I found Dean’s thoughts rather interesting, even though I didn’t totally understand where he was going with them. I understand that he feels like more money into R&D is the right way to go, though I’m skeptical that such research would actually reduce costs for the consumers. Ideally competition between companies would keep the cost said drugs low, but judging from JesseK’s point this isn’t necessarily the case. I’m no expert on the industries associated with health care though. Would anybody be able to clarify why the drugs would cost so much? Greed alone wouldn’t explain why competition between producers wouldn’t at least lead to at least halfway reasonable prices. Or at least I wouldn’t think that they would.
No collusion needed. The monopoly power of a patent quashes competition. Not that that’s a bad thing, if it means that entrepreneureal folks keep inventing good things because they have the promise of a payback. I think that’s Dean’s main point. Without a reward, there is little incentive to work hard at creating something.
The “$10” of materials is only a small part, figure another $2 for automated mixing and stamping of pills. so that leaves $388 of profit? Nope there is probly $13 for profit and 375 to re invest into research. as we all know doing something for the first time can be costly.
Usually technology has a way of being excessively expensive for the consumer at first because the price is set at ‘what the market can bear’. This is so that R&D costs are recouped quickly, as the price tends to decrease over time due to newer technologies that decrease demand for the current technology, better production methods, and ‘innovations’ in how the consumer pays (such as lower up front cost and higher monthly payments for service that subsidize the product cost). Then, when a newer technology idea comes around, usually corporations use their Capital holdings (aka money from stock sales) to fund the R&D for that idea. Case and point: the iPhone. Another case and point: the current way loans are recouped … it’s not ‘technology’ but it uses the same model – your payments go more torwards interest than principal at the beginning of the loan so the bank recoups the overhead and risk costs of the loan quickly. …this is also why the banks have no problem taking away a house 20 years into a loan just because of temporary life changes that cause a family to miss 3 payments…but that’s another argument for another day…
Nothing like this model appears to exist in the healthcare industry, yet we all are aware that insurance and pharmaceutical companies utilize the stock market just like every other industry.