"The Price of Free Enterprise"

The Price of Free Enterprise

by Stephen H. Unger

http://www1.cs.columbia.edu/~unger/articles/freeEnterprise.html

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Let's look at how profit maximization affects people and our environment in a few important areas of the economy.

The health industry

How does the private enterprise approach work in providing medical and health services? Consider private practices of physicians (groups of physicians are often organized as corporations), hospitals, pharmaceutical corporations, insurance companies, and manufacturers of medical devices. How does the profit motive of such entities affect patients?

One fundamental difference between medical businesses and the hat business is that, while ordinary people are quite competent to determine whether a given hat fits them, looks OK, is likely to be warm enough, and whether the price is reasonable, very few people can effectively evaluate medical treatment. Furthermore, unlike most people who want to buy a hat, a person stricken with high fever and nausea is not in position to shop around.

Nor are there many patients capable of evaluating the likely efficacy and safety of a medication prescribed by a doctor. In fact, even the doctor writing the prescription rarely has the ability and information necessary for more than a rough evaluation. Often, nobody can do this properly, because the necessary data does not exist. The FDA (Food and Drug Administration) charged with regulating pharmaceutical products does not have the funding for evaluating their efficacy and safety. These tasks are contracted out by the pharmaceutical companies to private laboratories. They, in turn, report to the companies, who pass on the results to the FDA only if they are satisfied with them.

The profit motive does not usually inspire the companies involved to do conscientious jobs. A testing company turning out optimistic reports is far more likely to get repeat business than one that adheres to high standards and tends to find non-obvious problems with drugs. A pharmaceutical company that is reaping hundreds of millions of dollars in annual profit from the sale of a drug will go to great lengths to keep that drug on the market, regardless of strong indications that it may be far less effective or less safe than an alternative--or, sometimes, even no--medication [2].




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