This essay is about drug companies and health care systems. As background for this presentation I will provide a brief summary of the conclusions of the first presentation in this “Invisible Hand” series which examined the physical object nature of our money and some of the unfortunate consequences of that nature. I will be concise so if you have already read one or more of the earlier essays don’t worry, this review won’t take long.
All money in history (and pre-history) has been considered to be or to represent physical objects such as a basket of grain, a cow, a coin, or a paper bill. Today most money is in computer accounts and though it zips around the world from account to account at almost the speed of light, it still is treated as if it were a physical object of some sort. Because we treat money as if it were a physical object, anything which is true of physical objects in general will also be true of money. This obvious point is ignored by economists and others who talk and write about money even though it is the most important truth about money. The importance of the physical object nature of money cannot be overstated. What follows are some of the consequences of that physical object nature.
First, money is like other physical objects in that it can be taken from its owner against that owner’s will; by force, fraud, or stealth and it can also be lost or destroyed. This means that you need to suspect almost everyone of trying to get your money by fair means or foul.
Second, money must be amoral because all inanimate physical objects are amoral. Even animals are amoral, in that they have neither an ethical sense nor morality, especially when they are used as commodity money. You can use your physical object money for anything, good or bad.
Third, the money supply is independent of the supply of goods and services for sale because the supply of one physical object is independent of the supply of other objects.
Fourth, money falsely simulates a zero-sum game in monetary transactions because the money gained by one party must be lost by some other party or parties. Money makes us think that other people can gain money at our expense and that we can only gain money at their expense. It makes us treat others as if they were competitors, rivals, opponents, or even enemies.
Fifth, money is almost impossible for a society or nation to control. In every nation that attempts to limit, regulate, or tax trade a black market comes to exist; and organized crime flourishes in all nations.
Sixth, money transactions are two-party interactions. Two-party interaction is inherently unstable because if one party gets an advantage in power such as having more money, the stronger party can use that power to gain still more advantages. This is particularly true of money. The old saying “them as has, gets” is true. Possession of money does make getting more money quite a lot easier. Naturally, the weaker party in such two-party interaction will eventually want to end the interaction. Thus the relationship is unstable.
Keeping that review in mind, let’s consider making money with drugs.
Let’s say you had a magic elixir which would cure some dread disease. The disease is terrible and kills thousands of people each year. There are several candidates for this disease that already exist such as pneumonia or the flu. You could make as much of this magical elixir as you liked and you were the only one who knew how to make it. Could you use this situation to get rich? I’ll bet you can easily see how one could get lots of money from that situation. You could say, “Give me $100 if you want a dose of the elixir.” The ill person or someone who loves that person would be happy to prevent that death for such a small price, relatively. Would they be willing to pay $1000 or $10,000? What about $1 million? $100 million? At some point the person won’t have enough money or will think of some excuse to not save that life after all. So you can’t just charge whatever you like. You want to charge the price that generates the most profits. Some prices will be so high that too few people can pay. With only a few customers one does not have to work so hard to produce and sell the elixir but if only a handful of people can buy at that price even though they are each willing to pay a million dollars that’s only six or ten millions. If you charge only $10,000 per dose you might sell 10,000 doses and get 100 million. But if you lower the price so that just anybody can buy at $100 then the 100,000 who buy get you only 10 million again and you have to work hard to produce 100,000 doses and sell to 100,000 people.
So if you want to maximize profits you find that sweet price point where you maximize profits. Of course, at that price point thousands of people die without the elixir but what’s that to you?
Then someone comes to you and says, “Look. How about having the government pay to get doses of your elixir for those folks who cannot afford to pay for it themselves? I’ll bet lots of people would vote for that.” Such a good idea! We can raise the price point quite a bit and the government can still come up with the money. After all, the government can just print the stuff, or raise taxes. We could even hire lobbyists to encourage officials to make laws that compel the government to pay. Of course the government might also want to set limits on what we can charge for the elixir, knowing that it’s cheap to make. We’ll have to see to it that our lobbyists oppose price limits. We may even want to hire a few Congressmen just to be sure. Of course, if they do set limits, we can always increase sales by advertising.
This government approach increases profits, and also, as a byproduct, saves some more lives: That’s a good thing, right? But all that success is eliminating customers by curing them. We need something better than that. We need a product that the public has to keep buying for the rest of their lives. We need a disease that lasts a lifetime and tortures the patient so that the patient will be willing to pay anything to ease the physical or psychological pain. So rather than curing the patient, let’s just reduce, to some degree, the symptoms without effecting a cure at all. Then we will have the customer hooked. They will be addicted to our elixir. They will pay anything to get more. And those who don’t pay will suffer and provide motivation to others who see their suffering.
Wait, I have an even better idea. How about if this elixir which reduces the symptoms also has side effects… side effects that are pretty bad in their own right? Then we could sell not only the elixir, but also other medications to reduce those side effects. Thus, it will be all right if the first elixir is pretty bad because it will merely lead to more sales of other products.
But how will we get people to take drugs that have side effects that are so bad? Perhaps if we give the doctors who prescribe drugs a cut of our profits, pay the doctors to prescribe our drugs… The money is all coming from the patients and the government anyway. So why should the doctors care if more people suffer? And we don’t even need to get all the doctors, just a small percentage will be enough to get the ball rolling.
Can you imagine all that? Is there any part of that plan which sounds like it would not work? Do you have any reason to think that a large corporation would be unwilling to increase income by doing things which are unethical, immoral, and dangerous to the public health? The tobacco industry alone kills over 400,000 U.S. citizens each year, and sickens millions. The dollar cost of that illness and death to the U.S. economy is huge, and that’s not even counting the misery and suffering of families and loved ones. Are the executives of drug companies so different from the executives of the tobacco companies? Both are paid to maximize profits. Both are paid to increase sales and cut costs. Both kinds of companies are owned by stockholders who purchase stock to increase their own income. I really think you will have difficulty in making a case that large drug companies would be unwilling to do any of the things mentioned above.
The drug companies are only a part of the health care system in any nation. But they illustrate quite nicely how the system does not work to maximize health nor to provide the best of care. In every case the system works to increase income for those who provide the products and the services. The system will do that which generates income because that is the basis on which people are rewarded. Those who go into medicine or nursing or medical research or even biology may, in most cases, be motivated by a desire to be a benefactor, a person who makes a major contribution to humanity. I think most people like the idea of doing good things for other people. I also think that almost every adult likes to gain money and fears a lack of money. We know that even the very wealthy feel that they are financially insecure and need about 20% more money and income than they have already. We can see the miserable lives of those in poverty, with hungry children and untreated medical problems. We know that the middle classes work very hard to avoid losing ground despite the odds against them. Those financial and psychological pressures make it very tempting to cut corners, to compromise, to cheat just a little, to give in when upper management asks them to do something unethical. I don’t think anyone is proof against such continual and unremitting temptations. We are, after all, only human. So it’s the system that produces all this suffering and needless death, not the evil nature of the people who work in it or even those who set the policies of the major drug companies. Those top executives were all in college at one time or another. I really don’t think that they aspired to kill thousands of people in order to get rich or wanted the suffering of millions on their heads. I can well imagine that they wanted to become wealthy and powerful, but I doubt that their preferred course in life included letting children die… Things just worked out that way. If you were to interview those top executives I would bet that none of them would say that they wanted people to suffer and die, or that they enjoyed knowing that their actions caused needless deaths and human suffering. I would bet that in every case, the executives would say that their hands were tied, that there was nothing they could do. And, they are correct in saying that. Any executive who attempted to have his company act to minimize death and suffering would soon find himself out of a job.
What is the first duty of any corporate executive according to business theory? To see that the company makes profits for the stockholders. That duty is the basis on which most executives are paid high salaries and bonuses. The basis on which stockholders invest is the expectation of gaining income. The prices of stocks on the market change based on the expected profits of the various corporations. The price of a stock does not go up because the company is benefiting the sick and injured. The price of a stock does not go down because the company is allowing people to suffer and die needlessly. So if you held stock in a corporation which adopted the policy of doing that which generated the most benefit to humanity would you expect the value of your shares to go up or down? If the corporation was a drug company you would expect the company to reduce prices to just costs of production and distribution plus a little more. Of course this would greatly reduce income and profits but it would benefit humanity. The dividends paid by your share of stock in that company would go down even as more people were helped by access to the life-saving or health-improving drugs manufactured by that company. As you can see, capitalism and any other system that involves a business making a profit would eliminate any such drug company via natural selection.
Therefore, every company, drug companies included, will have top executives whose job it is to increase profits. These companies will select executives from among those who have been successful in their efforts to increase profits. The companies will make bad choices in many cases because those doing the choosing of executives are only human, but they will be trying to increase profits. The whole system is set up in such a way that it will generate the behaviors which produce needless deaths and pointless suffering. Not because the human beings who fill those executive chairs and high offices are evil, but because the systems themselves are evil.
Yes, I do blame the nature of our money for this situation. Better yet, I explain the existence of this situation by pointing out the nature of our money. There is no benefit to be derived from blaming the persons who head drug companies. There is no benefit to be derived from blaming those corporations which are not even human beings at all. We have been blaming persons and companies for thousands of years now and it has done nothing to eliminate the problems. Blaming the high priests when the rains did not come in time to prevent famine did not solve the problems of drought. Blaming the Jews for the plague did not end those dread diseases. But understanding why things happen as they do allows us to perform certain actions to influence outcomes. If we can explain why bad things happen, then we have a chance to understand how to prevent those things from happening again. Therefore it’s very important to understand why situations such as the one which exists in the drug industry are brought about. If we don’t fully understand, how can we possibly succeed in fixing the problem? Just like: if we don’t understand how a drug works we cannot know whether the drug will kill or cure a particular patient.
To begin with, the first consequence mentioned above was that POM could be taken from you against your will. Extortion is the act of obtaining money by using force or threats. Telling someone that they cannot save their lives unless they give a drug company thousands of dollars is a form of extortion. It’s the old “Your money or your life” armed robbery situation in modern guise. The only difference is in what will do the killing. Certainly, few people want to (or are able to) pay the high prices for lifesaving drugs. But let’s say you have insurance. It’s the insurance company that pays or at least pays most of the cost and if you are as old as I am you probably have Medicare which pays some 80% and perhaps you also have supplemental insurance. So is an insured person not actually paying for those expensive drugs? Well, actually the insured person is still paying… one way or another. We have money withheld from our paychecks for Medicare. We pay for that supplemental insurance. Our employers could provide more money in wages and salaries if they did not have to spend all that money on insurance for their employees. In other words, the general public pays for those high cost drugs. Do you have any choice about paying taxes? Not much. Do you have any choice about paying for Medicare? Not much. Do you have any choice about paying for supplemental health insurance? Yes, but do you really want to take the risk of not paying for it? And let’s look at the position of the health insurance companies. Do they want to give money to the drug companies rather than keeping it for themselves? No, they prefer to keep that money so they do what they can to avoid paying. If they don’t pay the person who needs the drugs must pay. Once again, the general public is footing the bill. Also, look at all the people employed by Medicare, the tax collectors, the folks who send the money to the government and to the insurance companies for the employers, the folks at the insurance companies who collect money and send it on to the drug companies when they have to. In other words, there are lots of people working to take money from the general public and pass it along to the drug companies. The work those people are doing, the money they are earning by doing their jobs, that’s all wasted effort. Those people do not provide treatment or healing to the sick and injured. They are just bureaucratic paper shufflers using expensive electronic equipment and office equipment to transfer POM from one party to another. It costs the U.S. economy billions to transfer POM from the public to those drug companies. The public pays those billions in one way or another. The public pays out of fear of the consequences of not paying. Those consequences are death, suffering, and jail time. Doesn’t that sound like extortion to you?
But wait… isn’t extortion immoral and unethical? It sure sounds immoral and unethical to me; but then a second consequence of POM is that POM is amoral, and can be used for anything good or bad. Therefore the government, the hospitals, the doctors, the insurance companies, and those drug companies can hire people to threaten you with death, with serious pain, and with jail if you don’t give them money: even though such threats are immoral and unethical. POM doesn’t care.
Another consequence of POM is that it creates a false simulation of a zero-sum game in monetary transactions. At each step in the process from first diagnosis to your taking a dose of the drug, your relationship with the health care system involves a financial transaction. Money permeates the healthcare system. All of the relationships have that false zero-sum game component. The drug companies versus the insurance companies. You against the tax collector. The doctor being paid by the drug companies to prescribe their drugs. In every case the lie being told by POM is that those others are your rivals, your opponents and it’s all right to do whatever it takes to get their money. So the doctors cheat the government and the insurance companies and their patients. The drug companies bribe the doctors, lobby the government, and charge whatever the market will bear. The insurance companies pay as little as they can and sell deceptive policies. It’s a dog-eat-dog world, a rat race out there. It’s every man for himself. That is the false situation that POM creates and insists is necessary.
Next we have the consequence that POM is uncontrollable. Illegal or not, POM can be used to bribe doctors, bias scientists, influence the enforcement agencies, and buy Congressmen. Laws passed to protect the public do not affect the behavior they are designed to prevent. You can make it illegal but people are still able to do it.
Finally, the consequence that POM produces instability results in a few drug companies dominating the industry. That much power concentrated in the hands of a few results in further exploitation. Rather than participating in a free market, we get monopoly markets for the drug companies. Extortion is far easier for the powerful than for the weak or for equals.
The system we have now rewards and motivates exploitative behavior throughout the healthcare system. The current system is dominated by POM. All the failings of POM are made manifest in our healthcare system. It’s no wonder that we have poor health and needless deaths at such a high rate while paying for the most expensive healthcare system in the world.
But enough of looking at the dark side: Let’s see what could and would be done if we used a non-POM instead of a POM. Remember that POM produces those consequences by its very nature, it does not require that people be evil or bad, the evil and bad behavior is a consequence of the nature of POM. With a non-POM economy and money which has different characteristics and consequences, the behavior that it motivates and makes possible will have at least the following characteristics: A non-POM cannot be taken from its owner against that owner’s will, therefore fraud and force cannot be used to gain non-POM. That means there’s no profit in withholding useful drugs from those who need them. Denying someone a drug they need generates no income for anyone in a non-POM system. Giving needed medicine to a patient generates income to the degree that the medicine actually helps the patient get well. Of course, if there are adverse side effects, those bad consequences reduce the income of those who produce the drug. Therefore the producers of drugs would have a powerful monetary motive to provide healing drugs to everyone who would benefit from using such drugs. They would likewise have a powerful monetary motive to prevent and/or minimize any adverse side effects of the drugs they provide. And, unlike today, they would have a powerful money motive to avoid over-prescribing any drugs, as that would cause more harm than good. More is not necessarily better especially with drugs.
The second consequence of POM stems from its amoral nature. By contrast, a non-POM is moral and can be used only for moral actions. Therefore non-POM would not be available for motivating immoral actions. Non-POM does not motivate immoral behavior and does motivate the prevention of immoral acts and does motivate addressing and solving problems caused by immoral actions.
The false zero-sum game simulation which POM provides is strikingly reversed by non-POM. With a non-POM the mutual interdependence of human beings is emphasized. No one can gain non-POM from the suffering of others. If others lose we all lose with non-POM. If others gain we all gain with non-POM. Therefore everyone is viewed as a person who will help us, as a person who is on our side. With non-POM it’s humanity against any opposition – terrestrial or otherwise – with everyone cooperating to see that humanity wins despite the uncaring and unfeeling universe threatening us at every turn. So when it comes to fighting injury, disease, aging, and the autoimmune problems, everyone in a non-POM system is trying to help, not seeing those problems as an opportunity to exploit.
With non-POM the economic system is based on free markets. Each person is an independent though cooperating entrepreneur producing as much net benefit as they can when they choose to work. Therefore there are no monopolies, no so-called “powers that be” with vested interests in cheating, coercing, defrauding, and bullying to get still more POM and the power it brings.
With non-POM there are no insurance companies to refuse payment for medical care. There is no government spending and there are no taxes of any kind by any level of government as well as no fees for what are called government services. Patients don’t pay doctors or pharmacists or nurses or hospitals. Medical care is provided because of the net benefits it produces. With non-POM people earn money (non-Physical Object Money, of course) as a consequence of the net benefits to others they produce. So they, those who provide medical services, are rewarded for treating the ill and for preventing illness. The patient pays for nothing. No doctor gets rewarded for needless tests, for prescribing certain drugs which are unneeded or may not be the best treatment, for owning stock in a drug company or for owning a drug store. People in a non-POM system earn money only by producing net benefit.
Therefore all government activities having to do with medicine today would no longer be needed. Even licensing and certification of doctors or medical schools would not be needed. If a person gains money only by benefiting others, providing treatment which harms reduces income. So if you aren’t qualified to treat patients you provide treatment only at considerable risk to your future income. Those who are not qualified or, if qualified, have bad patient outcomes soon find that they are losing money, not gaining money. They are powerfully motivated to do only those things which they are confident will produce benefits and do no harm. Needless to say, this applies not only to what drugs they prescribe, but also to their efforts to gain knowledge of things like drug interactions and side effects. The practice of just “throwing antibiotics at every symptom” so to speak will stop. Contributing to so-called “superbugs” which are immune to our antibiotics can be very expensive to doctors.
Which brings us to the topic of the creation of new drugs. The current drug companies claim that creating and testing new drugs is very expensive, thus justifying their very high prices (and large profits). Clearly a part of the expense comes from keeping secret what they are doing. With non-POM no such secrecy is needed. In fact, all those who are doing research on new drugs will be strongly motivated to share their findings as soon as possible in order to both increase and hasten the production of net benefits. If what you discover helps someone else to produce beneficial results, then you will have earned non-POM proportionate to the net benefits. So you want to share as soon as you are confident of your findings. In this way, all those who are doing research, manufacture and testing of drugs are on the same team. They are not competitors but teammates. Also, people who collect information about these research efforts and bring information relevant to their efforts to the attention of researchers are rewarded. Today such people would be considered to be industrial spies or saboteurs stealing trade secrets. With non-POM they would be considered to be a source of help and ideas, finding connections that others might have missed. In other words even those who merely help the sharing of knowledge to move along share in the earnings.
You may have heard the old saying “imagine what we could accomplish if money were no object” which today means “think of what we could do if we had more money than we have available”. With non-POM that saying takes on an entirely new meaning. With non-POM, there’s always plenty of money available. If there are people and resources available, non-POM is never a limiting factor. We all recognize that the drug companies could produce far more of needed drugs if they were not concerned with expenses. With non-POM there is no concern with costs; there is concern only with consequences, outcomes, and results – all results. If producing more of drug A requires producing less of drug B then a decision will have to be made by the producers as to what course of action to follow. But that will very rarely be the case. As war time production has shown repeatedly, seeming miracles of production can be brought about just by eliminating the money bottleneck, the limits on what will be spent to increase production. With non-POM, those limits are removed.
Will creation of new drugs require considerable effort and resources? Of course. But the economy using non-POM has far greater productive resources, both human and material. Just by eliminating poverty and having full employment, a non-POM system greatly increases the human resources for production. Within the current healthcare system there are hundreds of thousands of people whose job it is to shuffle money around and deny services to those who cannot pay. Those workers could better serve the economy simply by doing other work. So the material and human resources available to discover new drugs, to test them, to produce them efficiently, and distribute them are far greater with non-POM.
All of the problems we have today with drugs and drug companies would either be eliminated altogether or greatly reduced by conversion to a non-POM system. POM is dangerous to your health and well-being.