Rewriting the Rules of the American Economy – Making Markets Work
Fifteen years ago Joseph Stiglitz won the Nobel Prize for his research on information asymmetries and their impacts on free markets. In his report for the Roosevelt Institute entitled “Rewriting the Rules of the American Economy” he recommends a fresh look at anti-trust, at intellectual property rights, at global trade agreements and at government roles in negotiating health prices. http://rooseveltinstitute.org/rewriting-rules-report.
He points out that we have moved quite drastically from a manufacturing economy to a service and knowledge economy and that the 100 year old anti-trust rules from the turn of the 19th century into the 20th need to be updated to reflect a very different economy.
Health care is a classic case of market failure for several reasons: the asymmetric information about health care effectiveness between the patient and the providers, the third party payer role of the insurer or government, and the natural plan and provider monopolies in rural America and the oligopolies created by hospital system and health plan mergers.
Consider just a few headlines from the last few years. “Greed is Good” disciple, Martin Shkreli buys up the life-saving 63-year-old drug Daraprim and increases its price from $1,130 to $63,000. Myriad Genetics patents the human BRCA genes – a patent that is finally overturned by the Supreme Court saying you cannot patent the human body. Gilead charges $1,000 a pill for its new drug Sovaldi, the best available treatment for Hepatitis C; prices in other OECD countries which negotiate drug prices are 33% lower. Four of the five largest health plans, Anthem and Cigna, Aetna and Humana seek mergers.
Now imagine that America had free trade agreements on health care and cross-border health coverage such that Americans could purchase their prescriptions on the global market, could go to Canada for their elective surgeries or to Mexico for their dental care. High priced American health care needing to compete in global markets could be subject to market discipline.
In reforming intellectual property rights and market dominance, Stiglitz recommends new approaches building on past successes such as the Hatch Waxman Act, which gave a boost to generics, and the VA’s cost effective negotiations and purchase of pharmaceutical products used to treat America’s veterans. He suggests that the public option (Medicare) would bring price stability to the price gyrations of the private plans in the Exchanges. In California, we have public Medi-Cal managed care plans that may be well positioned to play this role. The Obama Administration is becoming more aggressive in challenging health plan mergers.