The Cost of Medical Drugs is really “Free Market”


This blog is about the cost of medical drugs (pharmaceuticals) but first I want to say a few words about junior mining stocks.  Discovering a mineral deposit has changed; in the old days independent prospectors would go out on the land and look for mineralization or favourable kinds of rock.  If they found valuable minerals or a place where they may be they staked a claim and usually sold the claim to a junior mining development company.  If valuable ore was struck the company would sell the claim to a senior development company or a mining company for further development.  However more often than not there was insufficient ore to make a mine worthwhile.  The result was that good mining properties sold for high market values, representing the cost of failures as well as the ones that were successful.  Not infrequently holders of mining interests have to hold their assets pending more favourable commodity prices.

There is a rough parallel to the mining exploration and the medical drug industry.  There are roughly 484 million people in Canada USA and Mexico. There may be as many human illnesses as there are stars in the sky.  Sometimes someone may have a very rare medical problem that only one person in 10 million may have.  Finding a medical drug for the ailment may take a lot of research by one or more people who have pharmaceutical expertise to discover a combination of elements, compounds or bacteria and heaven knows what else to cure the rare element.  What is more the ailment may require just one treatment to cure the problem for life. That one treatment may cost one million dollars!

Medical drug companies are not just composed of those brainy experts who discover the cure,  they are just like the junior mining companies they have a board of directors, executive staff, shareholders, office staff, physical office buildings, a plant and everybody wants their just financial reward.  When a great medical drug is discovered it is payday for everyone.  However, a lot of people need to be paid even if the discovery is a dud which quite often happens.  So like a mining exploration company finding gold there are lots of paybacks to make up for the losses and it is the same with the medical drug industry.  The shares on the stock market skyrocket on the promise of earning money and drops in its absence.  The results of this system is that medical drugs can be very expensive, like one pill for a million dollars.

Medical drug companies may question “what is a human life worth” and maybe it boils down to what ever the traffic will bear. Sometimes researchers serendipitously, just by accident find a new use for an established pharmaceutical.  The price gouging for the new use can be nothing short of disgusting.  It seems unethical and even cruel to put a price on life but even with a single supplier of health services, the government, there are limitations.  If you live where medical services are sold as a for profit service it may happen that most people cannot afford the premiums for a comprehensive pharmaceutical plan that a health insurance company would have to charge.  Medical insurance companies also have to earn money have a difficult dilemma of paying these high priced exotic cures because it can reflect upon their client’s premiums and their bottom line. In Canada some Provinces the governments manage health care.  The pharmacies sell medical drugs under a provincial plan  and often payment for medical drugs are charged in accordance with your income, low income people do not pay anything.

Before the new kind of capitalism emerged universities, at least in Canada, were places where research took place preformed by tenured teaching professors whose duties were to teach and research.  Banting and Best conducted their research for insulin in Toronto hospitals and the University of Toronto.  The Discovery was patented and eventually given to the world at little or no cost for the benefit of mankind.  Some people in the pharmaceutical industry have it all wrong, they think that it is greed and money that drives researchers,  it really is dedication to science and the desire to help others.

I think a better system would be that the three governments of Mexico, United States and Canada form a publicly funded pharmaceutical institution.  The sole goal of the institution would be to produce new medical drugs, conduct research and pay for the cost of running the institution by selling medical drugs that their 484 million consumers can afford.  Just think if the cost of a very highly priced pharmaceutical  was averaged over 484 million buyers, it would be affordable to all of them. The plan would not upset the existing industry except the industry would be faced with the discipline of real competition.  This would create a single desk and that would do a lot to make things more efficient.  This scenario is probably quite over simplified.  But nobody should suffer hardship because they cannot afford medical drugs.  The present system is old style, antiquated, inefficient  and way overloaded with too many people who want to profit from doing very little, things have to change.



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