Dying because you can't afford a device you need is also not something to take lightly. It may not be a good idea, but blame should lie with the manufacturer for raising the price to such ridiculous levels.
Yes; this is why using the free market to set prices in health care is always such a troubling thing. People don't like the idea of putting a price on their health.
Please don't blame the free market for these high prices. This is a highly regulated medical device market with patent protections and insurance market complications.
The price hikes would immediately attract lower-cost competitors if this were truly a free market.
> The price hikes would immediately attract lower-cost competitors if this were truly a free market.
Any participants in a free market for a product with inelastic demand (e.g. something you need to stay alive) and non-trivial entry costs immediately implements price fixing in the absence of regulation.
When life-saving devices that require a significant supply chain to manufacture capture the bulk of consumer surplus from the majority of potential customers (and the poorest are left to die), the free market is working as intended, efficiently allocating resources to maximize profits.
The non-trivial entry costs are there because of regulations and the legal environment regarding liability.
You can view the high price as the free-market finding the intersection of supply and demand given the regulatory and legal constraints but that seems like a less than useful way of understanding 'free-market'.
> You can view the high price as the free-market finding the intersection of supply and demand given the regulatory and legal constraints but that seems like a less than useful way of understanding 'free-market'.
Stop using regulation as a stalking horse for your argument. Everything you need to know about the price of epi pens you can derive from inelastic demand (people don't want to die), and barriers to entry (copyrighted brand, network of doctors writing prescriptions, and yes, FDA approval so these things don't kill people).
The price is high because people will pay almost anything to not die. This drives the price point up to capture consumer surplus. It's easy to understand.
The Free Market isn't a magic bullet that will drive down these prices. For one simple reason. Rational actors don't compete on price. I'm going to repeat this, because so many people don't get it.
Rational actors don't compete on price. Rational actors will spend up to their expected monopoly profits to create a Nash Equilibrium where new entrants into a market will be unprofitable. The simplest way to do this is through dumping. (see "competition" in the generic drug market for example) Why doesn't this happen in every market? Regulation.
Maybe you don't like that in unregulated markets, people starve, are poisoned, are denied treatment, and worked like slaves. Because that's how you maximize profit, by minimizing your own costs by maximizing externalized costs. So you'll think anything to avoid that realization. Like blame 'regulation' for what's obviously rationally maximizing profits.
And if you want to know how exactly the 'free-market' for medical supplies would work without regulation, just look at the 1800s. Demand was still inelastic, so prices were high, quality was low (for obvious reasons), and competition was still stupid, because price fixing and dumping were still more profitable than competing on price.
> The non-trivial entry costs are there because of regulations and the legal environment regarding liability
I think that misplaces the cause. The requirement for safety and the high cost of failure is what creates those regulations and liabilities.
Theoretically, we could eliminate the regulations and liabilities and just let people die, but 1) that's a really bad idea, and 2) it would be excluding from the market mechanism (i.e., externalizing) the most important aspect of the product, its safety.
Suppose there were no regulations and no liability for manufacturers. Would you really trust your life or your kid's life to some unregulated clone of the EpiPen that may or may not actually work properly when needed, knowing that if it went wrong the manufacturer wouldn't even have to pay one cent of your medical bills and didn't have to worry about liability for screwing up? I suspect not.
I can think of many products which are life-saving which are readily available from countless producers for relatively cheap. The difference here is just as gwright has pointed out and you have a corpus of regulation which makes this particular product more expensive and/or chokes out competition.
The only sectors of the economy where significant, lasting shortages occur are the ones most heavily regulated.
> The only sectors of the economy where significant, lasting shortages occur are the ones most heavily regulated.
So you're saying that Petroleum Exporting Countries would never say... create an Organization intended to increase the price of oil?
Or the DeBeers wouldn't collude with diamond producers to limit the availability of diamonds to increase the price?
Or that manufacturers and distributors of light bulbs, lysine, copper, cleaning powder, vitamins, glass, milk and machinery would never, ever engage in price fixing?
I want to live on your planet, where capitalism is so nice and perfect that companies rush to give away all their profit by competing the marginal cost down to zero without any of those pesky regulations.
> The only sectors of the economy where significant, lasting shortages occur are the ones most heavily regulated
That's not what economic theory (and practice) say, I'm pretty sure. For example, unregulated electrical, communication (including Internet service) and transportation markets have resulted in shortages in rural areas. Unregulated food and housing markets (and many other markets, including Internet service) result in shortages for poor people. Unregulated fishing creates shortages of fish - a 'tragedy of the commons'. Monopolies and oligopolies eliminate whole categories of products.
The free market is very good for some purposes, but it's not a benevolent God that finds solutions to all our problems. It's just a very useful tool in the toolkit.
Yes, but in other countries everyone gets the same access to health care and people don't die on the street because they can't afford a commodity like an epipen! Though you might die in a hospital bed because the government wont spend a million euros a week on medication that may or may not give you a year more to live.
Of course. This case is particularly interesting because the device/drug combo is so commonly needed. But you'll find many other stories of manufacturers hiking the price of drugs people need to live, and the resulting backlash. Look up Martin Shkreli for a couple of recent examples that got attention.
We also see drug shortages because the lone manufacturer temporarily or permanently stops manufacturing. For example, there's an ongoing injectable estrogen shortage because the manufacturer has an issue sourcing a key ingredient [0] [1]. (Thankfully, other forms and dosages are not impacted.)
Then why are they making hundreds of thousands of epipens? Sounds like they should make like 100 a year and auction those suckers off. Less material and capital to manufacture, same profits.
doubtful that an auction that would demand those profits would be 1) easy to facilitate 2) stable and predictable.
Also, the individual price per unit would rise to the point that there would be another competitor to the market.
My point is that you can't cry about government controlled health care, and high prices of "free-market" items at the same time.
So either we have a gene pool cleansing and accept that people die, or a controlling entity uses force to coerce the manufacturers to adopt practices that will make it available at "reasonable" prices to the populous.
The manufacturer is obligated to (1) obey the law, and (2) maximize profits for shareholders. If you have a problem with the current situation, blame the government/laws[1], not the company.
[1] Blame is justifiably attributed to the government whether you believe the fix is a freer market (to reduce the costs associated with bringing suitable competitors to market) or you believe regulation should prevent this from happening. Apart from the requirements codified into law, we should have no expectation of altruism by companies, especially when their existence is intrinsically related to profit-seeking motives.
(1) seems like a total cop-out to me. By that logic, you can blame everything on the government. Some guy murders his family in a fit of rage? Government should have done a better job preventing it.
Also, part of the point of this kind of outrage is to punish these companies for their behavior so that the evil choice is not the most profitable one.
If corporations don't have an obligation to maximize profits for shareholders, then you'd better try and take that argument to shareholders rather than believe someone's opinion piece on the matter.
I didn't say corporations are legally required to seek profits, but they do have profit-seeking obligations in most cases. Without investors' expectations of future profits, those companies wouldn't exist in the first place.
And last I checked, murder is illegal, so no, I can't expect the government to do anything beyond that (as long as that law is enforced).
There is no inherent obligation to maximize profits. Most companies have that as their goal because that's what their shareholders want. But then saying that the manufacturer is obligated to maximize profits is a really bizarre and rather disingenuous way of saying that the people who actually own the manufacturer prioritize profits over lives. They don't have to do that, they just do. There's no "obligation" anywhere in there, just people's preferences. Saying that companies are obligated to maximize profits is just a way of saying that it's OK for people to value money above all else, even the well-being of their fellow humans, as long as there's enough indirection in the process.
If not for laws and government-mandated standards, how would you go about making sure companies put the "correct" value on lives vs profits?
I can hope my neighbor is a decent human being and that he'll be a good neighbor when people around him are in need, but I personally won't blame him if he doesn't. Similarly, if he's being a nuisance - without breaking any laws - I still can't really expect him to stop (just because I value my peace more than he does) unless I do something to change the law. I can whine about it all day long and tell him it's "not OK", but if I don't do something to change the law (or move), then the only person I can really blame is myself. Blame is only useful so far as it actually has any "teeth" to improve the situation.
It comes down to this: we all want the world to be a better place. We can hope and expect everyone else to live up to our ideals (and complain when they don't), or just do our best to live that ideal ourselves. Anything serious enough to warrant restrictions or mandates on the behavior of others is probably within the realm of legislation.
Making a company's customers upset tends to have teeth. There's a reason companies spend money on PR instead of just keeping that money as additional profit, after all.
If your neighbor is being a nuisance, it may be more effective to gather up some of the other neighbors and all go over to the fellow and tell him to knock it off.
I don't have any actual solutions to propose here. Maybe it merits legislation, maybe it merits consumer action, maybe it's just an opportunity for some other business to create a competing product. I just don't like criticism of people trying to work around a life threatening problem without also acknowledging the source of the problem, and I especially don't like justifying bad corporate behavior on the mistaken principle that corporations must prioritize profits above all else.
Fiduciary obligation is complicated and jacking up prices in the short term result in lower profit than keeping prices lower -- if this company wanted to keep the price of the product low, they could easily justify it by arguing that indiscriminately raising the price would invite government regulation and price control (or invite more competition), which would reduce profits in the long run.
Shareholders already know that companies don't have an obligation to maximize profits. Tim Cook among others has made this point forcefully fairly recently.
Shareholders make investment decisions based on their own opinions of which companies are most likely to generate the highest return over their preferred time span. That is not the same thing as believing in an obligation.
Company misbehaves, government nationalizes them. It's a perfectly valid approach often used in the US, which places the blame on the company not the government as it should be.
Sure, we mostly stopped doing this for various stupid reasons, but legally it's sill an option.
It's surprisingly frequent, though generally short lived.
Legal and profitable mob run businesses are taken over vs shut down then resold once the books are clean. During World War II, Washington seized dozens of companies including railroads, coal mines and, briefly, the Montgomery Ward department store chain.http://www.nytimes.com/2008/10/13/business/worldbusiness/13i... Banks are probably the most common but it can also happen in bankruptcy.
You misread the WWII example which was considered completely ok. In different war: "In 1952, President Harry Truman seized 88 steel mills across the country, asserting that unyielding owners were determined to provoke an industry-wide strike that would cripple the Korean War effort. That forced nationalization did not last long, since the Supreme Court ruled 6-2 the action an unconstitutional abuse of presidential power." (You might want to read it vs skim.)
Also of note, their are thousands of examples in history, this is just referencing a few hundred to make a point.
PS: It's also worth noting that the mob example was taking control not just ownership. These companies where money laundering for example so they needed to remove people from the payroll who did not work there.
Companies have those obligations, and others too. We all have many obligations, including to our communities/society. If most businesses didn't meet those other obligations for the last several hundred years, there would be no community, no market, no technology, and nobody rich enough to buy epipens. You'll notice that most companies are responsible members of their communities to some extent, but there are a few leaches of course who live off everyone else's contributions.