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NYT Says Doctors May Not Talk About Expensive Treatments, Doesn't Talk About Patent Monopolies That Make Them Expensive

Yet again the NYT has given us a piece talking about trade-offs between the cost and quality of health care. The piece reports that some doctors may not discuss certain treatments with patients because they consider these treatments too expensive. Unfortunately, the piece never discussed the role of patent monopolies in making these treatments expensive.

The point is simple but incredibly important. In some cases, for example open-heart surgery, a medical procedure may genuinely involve a substantial use of resources. In this case, it involves many hours of the time of highly-trained medical specialists. (The pay of these specialists is inflated by supply restrictions, but that is another question.) In such cases there can be an issue of whether some treatments are worth the economic cost. For example, should an otherwise healthy 90-year-old get open heart surgery when we know their life expectancy is just 2-3 years even assuming a successful operation.

However there is a very different story at issue in the cases discussed in this article. These cases all refer to the choice of drugs. The drugs that are very expensive do not necessarily involve a greater cost to the economy than the cheaper alternatives. They are expensive because the companies that sell them have patent monopolies or other protections that allow them to sell drugs at prices that are far above their free market price.

This distinction is important because if there are tough choices here it is only because government policy had created them. If all drugs were sold at their free market price, without patent protection, then the difference in costs would in almost all cases be trivial and doctors need not have any reservations about recommending the one they considered best based on their understanding of the evidence.

Of course patent monopolies serve a purpose in providing an incentive to drug companies to undertake research, but there are alternative mechanisms such as the $30 billion in annual direct public funding provided through the National Institutes of Health. Direct funding would not only eliminate the problems associated with figuring out how and whether to pay for expensive patent protected drugs, it would also likely lead to a much more efficient process and better medicine.

Dean Baker / April 18, 2014