December 3rd 2008
A Tale Of Two Markets
T
wo markets - the automobile market in the U.S. and the healthcare market in England - make interesting blog fodder this morning for free marketeer and big government junkie alike.
First, to the automakers, with the NYT reporting of General Motors:
G.M., the world’s largest automaker for decades, said Tuesday that it was in such dire straits that it would deeply cut jobs, factories, brands and executive pay as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit. …
G.M.’s president, Frederick A. Henderson, said the company would be insolvent if it did not receive federal assistance, including an infusion of $4 billion in cash before the end of the year.
“Absent support, frankly the company simply can’t fund its operations,” Mr. Henderson said in a call with reporters.
To which I say, why did it take having to grovel before the US taxpayers before you would promise to do what you should have done years ago on your own, Mr. Henderson?
Had GM dealt with its bloated workforce, eliminated costs associated with keeping Buick, GMC, Saturn et. al. afloat, and stopped paying its leadership losership as if they were actually accomplishing something, insolvency wouldn’t be just around the corner and Henderson wouldn’t be begging for $14 billion.
This is both a troubling and a glorious moment for any free marketer.
It’s troubling because we’re seeing the desperate lust for government money accomplishing what the free market should have accomplished on its own. And it’s glorious because we are seeing an admission by one of the world’s largest corporations that it is NOT anywhere close to the free market, and it’s killing them. Or it should be killing them … they may yet get hooked up to financial life support.
And speaking of life support, that takes us to another NYT article, this one a much more troubling tale of government’s influence on the free market.
RUISLIP, England — When Bruce Hardy’s kidney cancer spread to his lung, his doctor recommended an expensive new pill from Pfizer. But Mr. Hardy is British, and the British health authorities refused to buy the medicine. His wife has been distraught.
“Everybody should be allowed to have as much life as they can,” Joy Hardy said in the couple’s modest home outside London.
If the Hardys lived in the United States or just about any European country other than Britain, Mr. Hardy would most likely get the drug, although he might have to pay part of the cost. A clinical trial showed that the pill, called Sutent, delays cancer progression for six months at an estimated treatment cost of $54,000.
But at that price, Mr. Hardy’s life is not worth prolonging, according to a British government agency, the National Institute for Health and Clinical Excellence. The institute, known as NICE, has decided that Britain, except in rare cases, can afford only £15,000, or about $22,750, to save six months of a citizen’s life.
This is a tragic but familiar type of real life story that girds our loins as we fight against the Dems’ drive to impose universal health care in the US. But wait, there’s more:
Drug and device makers, which once routinely denounced the British for questioning product prices, have begun quietly slashing prices in Britain to gain NICE’s coveted approval, especially because other nations are following the institute’s lead. Companies have said that they will consult with NICE to help determine which experimental compounds enter the final stage of clinical trials, so the British agency’s officials will soon influence which drugs enter the market in the United States.
The British government created NICE a decade ago to ensure that every pound spent buys as many years of good-quality life as possible, but the agency is increasingly rejecting expensive treatments. The denials have led to debate over what is to blame: company prices or the health institute’s math.
After seeing the auto execs fly to DC in their three private jets and looking at Wall Street execs rake in hundreds of millions as their companies fail beneath their incompetent feet, there’s no doubt in my mind that there’s more lurking behind the cost of pharmaceuticals than legitimate R&D expenses.
Government has no moral authority to use the lives and quality of life of citizens as bargaining chips in a price war; that’s verboten. While the cruel effectiveness of NICE can’t be ignored, we free marketeers must realize that whatever NICE is accomplishing, it is not doing it in a free market. Access to pharmaceuticals is highly regulated, and the companies are using that to their advantage.
If there were a free global market for these drugs (with only patents protected), then we could take our prescription to Canada or Mexico or Khartoum for filling, picking the market where Pfiser or Glaxco offers the best price. And if that were to happen, the global price would quickly fall to the best price. That price would support needed R&D and salaries at the level necessary to provide effective managers, but it would cut out excesses.
Meanwhile, Bruce Hardy will die a little earlier and his widow will be not just sad but rightfully very angry.
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Posted in Economic Policy, GM, Healthcare policy | 4 Comments » | 
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December 7th, 2008 at 2:43 am
So the British guy’s life is worth saving, but the lives of people who cannot afford health care in America are not? Why is it that when the government precludes life-saving medicines that is tragic, but when the free market does it, it is no longer tragic? How does showing the tragedy of a flawed British policy somehow connect logically to the tragedy of the flawed US policy. How about just giving equal time to both tragedies and agreeing that human life (according to your view) cannot be commoditized regardless of whether it is being done by a government actuary in the UK or the free market in the US? That would show a more fair and balanced application of your morality concerning inherent human worth…
December 7th, 2008 at 12:26 pm
Do you mind if I point out some of the moral, financial and legal issues that will arise with the embrace of nationalized health care, or do you want to giddily run into its open arms, like Pollyanna embracing Dr. Mann? I think that in the process, I am building evidence in support of exactly what you ask for: concern that human life cannot be commoditized.
Your poor person is a canard. We have Medicare, Social Security SDI and state programs like Medi-Cal to care for the indigent and poor. I don’t protest that at all; care for those who can’t care for themselves is a legitimate role for government. Caring for those who can is not.
December 8th, 2008 at 11:24 am
There are impoverished folks and homeless people here in Los Angeles that are taken by taxi out of emergency rooms and dumped back on the streets without having received adequate care. The conservatives in this country do not talk about these cases, but the minute someone receives adequate but not cutting-edge, outrageously expensive treatment, then the entire healthcare system is called into question. This does not seem balanced to me, nor is it a canard. And life is definitely commoditized by the United, Tenet and other hospital operators that must manage down the charity cases to hit their EBITDA margin targets, which is why they send for those cabs in the first place. My point is that those who claim that life should not be commoditized should be concerned regardless of whether the accountant-minded bean-counter is employed by Tenet Healthcare or by the U.S. Department of Health and Human Services. Both are real problems that should be addressed, not just the one that fits your ideological schema. And of the two, the denial of healthcare entirely to the poor is a bigger tragedy than the denial of the most expensive care to a person who is nonetheless receiving some form of it, in my opinion.
December 8th, 2008 at 5:27 pm
Both of the situations you address are in accord with my “ideological schema.” In other words, I agree with you, DG. I do talk about the drop-off cases, but not on my blog due to a client conflict. Let me just say that much is being done in the health care community to address this problem, and it should be relatively easy to solve because the people are poor and there’s little controversy about treating the truly poor and needed. Expanding existing systems to treat people farther and farther above the poverty line before the problems with the poor are addressed will not help solve the problem.