Capitalist Rap

Yesterday I was out having fun with some capitalists that I know. As things went on, it became clear that they and I had some different perspectives on a number of matters. Klaus and I ended up having a very lengthily conversation which ended with neither of us changing our point of view. But, I thought some of the ideas bantered about would be interesting material for you, the reader.

Klaus, mind you, is someone I like and respect. I probably thinks I'm naive and I think his realism is based on the delusion that his success is self-made. Who knows who is right.

We began with the topic of health-care. My POV is that our health-care system is corrupt in many ways and that the pharmaceuticals industry, in particular, serves us poorly. Klaus felt that pharma industry was a bad place to invest, but that it did a great job of investing and taking risks in trying fight disease.

At this point, there were several other participants in the conversation, all of whom felt I was ill-informed. Especially when I pointed out that drug costs were out of control in this country and many of us find it necessary to purchase out of country to afford the drugs we need. Their POV is that in order to gain incremental sales, pharmas price their drugs too low outside of the US. That they recapture costs including R&D in the US, then capture only production, marketing, and distribution costs over seas.

This seems like a great repositioning of the facts. Rather than US prices being too high, foreign prices are too low. And, it appears that the US pharma's will begin to raise overseas pricing to maintain US pricing. Interestingly enough, they don't propose and arbitrage where US pricing also goes down somewhat.

So I pulled out the laser cannon on consumers. How come the US pays significantly more per capita for health-care than other nations but doesn't come close to leading the world in health? It was interesting to watch responses here. First, came Jimmy who tried pseudo-science. He pointed to the diet of American's, the ethnic diversity of American's, their travel around the world, and so forth, and posited that these provide risk factors that don't exist in other countries.

What Jimmy left out is that for many years we did lead the world in health, and the factors he pointed to were symptomatic of our population at that time. A much simpler explanation is that our health-care industry has replaced health with profitability as it's primary goal. We know that this has happened. We know that executives in the health-care industry are making money hand over fist and we know that the quality of health in this country has turned downward. It's hard to ignore capitalism as the primary driver in marginalizing our health-care.

So Klaus and I continued from this conversational base. He shifted the discussion to peoples behavior in response to different health-care systems. Klaus noted that Canadians come to the US for health-care treatment. His implication was that they can't get good treatment in Canada. He continued this theme pulling examples from several other countries.

Now, it must be acknowledge that some small percentage of patients cross borders in search of treatment. That flow isn't always directed to received treatment in the US. And where it is, it isn't directed to the general US health-care system. Finally, it is done in the context of self-funded access to health-care.

Within the US, patients seek treatment from: a) distant care-givers; b) care-givers outside of their payor's designated care-givers. No one uses these facts to establish that parts of the US health-care system are no good, so how can any use similar facts to argue that the Canadian health-care system is no good. Some folks go to the Mayo or Cleveland clinics, but most would never consider doing so, either in Canada or the US. Moreover, the patients seeking out the best treatment regardless of location of cost are the patients with the means to not care about the overall quality of their countries health-care system. When netted out, this argument in favor of the US health-care system is specious, if not jingoistic.

We also spoke further about the woe-is pharma industries problems of risk and profitability. I contended that it is the most profitable industry in the US, but was told I was emphatically wrong, that it was losing money hand over fist. So I inquired whether stock prices had gone to zero, knowing full well that they hadn't. Klaus acknowledged this is a left-handed manner, noting that they were currently down and still too high for the inherent value of their firms.

So I pointed out the standard free-market saw about the stock market representing all available knowledge. Which being the case, meant that the stocks must be more valuable than any current accounting based statement of profitability. Klaus had trouble accepting this point of view, noting that it takes time for the market to recognize changing value and apply it to stock prices. So, I asked him how long pharma pricing had been going down. Klaus' estimate was 5 years. Hmmm, I said, sounds to me like plenty of time to for the market to digest information and reflect pharma's negative value with a stock price of zero. This one left him a little flat-footed.

So then I went into how the pharma and larger health-care industries were not subject to market discipline (underlying thought of mine in response to free-marketeers: the free market doesn't really exist). I pointed out how typically, with medical insurance, comes a prescription drug card. This card essentially makes the price of all prescriptions equal. So, there is no need to consider efficiency, only efficacy. That pharmacies typically don't post pricing and are reluctant to release it except on one's bill. And that patients and doctors don't have access to good information on drug's cost effectiveness or even on the relative efficacy of different drugs.

Well, Klaus denies that doctor's have anything less than all the information they'd like. So, why is it that doctor's persist in prescribing drugs that are less effective and more expensive? It must be a problem with doctor's. As to pharma pricing, the issue is with "single payer systems", that is insurers. Well, I don't know who came up with the prescription drug card - it doesn't matter. This card isn't why there is no pricing discipline, it is an outcome of that fact. Insurers and pharma companies are the only place in the process where market forces can play out. The drug card provides a way for the insurance to push some costs onto the consumer and get some price relief from the pharmas. One of the interesting phenomena in all this, and one which comes up in the delivery of all types of health-care, is the need for insurers to see discounts. This is achieved by further raising retail list prices rather than reducing the price paid by insurers. Leaving the uninsured in a more vulnerable position than they already were and the pharmas with even fatter profits.

Capitalism is the conscious attempt to evade the price discipline associated with free markets. Free markets are the enemy of any large business, corporate leadership, and the leadership of the Republican party. That they embrace free-markets in words, is one more example of their euthenising language to advance their goal. And that goal is simple: to further concentrate profits and assets into the hands of a small elite at the expense of the lifestyle of everyone else.

More on this later.