“We are all faced with a series of great opportunities—brilliantly disguised as insoluble problems.” – John W. Gardner
Rich people are the most important buyers in the world. That’s why it’s unfortunate that President Trump is actively leaning on U.S. pharmaceutical corporations to lower drug prices. What a shame, most of all for the poorest Americans.
The clue for why can be found in this opinion piece’s opening sentence. It’s all about the rich. As the rare buyers for whom price is an afterthought, they take the risks with obscure and expensive goods and services that make plentiful goods and services possible.
The bet here is that Trump knows all that’s been said so far, but is ignoring what’s true for political reasons. That’s too bad, and on the matter of health, it’s tragic.
That’s because the sole path to low prices is high prices.
There’s quite simply no way of knowing what will and will not sell with the buying public, which means the initial rollout of all-new market goods must be geared toward the very few and very well-to-do. The rich are the proverbial venture buyers who, through their purchases, signal to producers what market goods to mass produce.
This is of utmost importance with pharmaceutical drugs.
The rich of theoretically unlimited means are willing to act as guinea pigs for new drugs. Explicit in their high-end right to try is essential knowledge they produce about what delivers us from pain, improves our health, and most of all, saves our lives.
It’s worth thinking about right now given the still barbaric nature of surgery. Pharmaceutical drugs are already substituting for traditional surgery, but the unseen here is truly profound. And arguably the only limit to oral drug intake over surgery is expensively produced knowledge that will reach us most quickly through the buying habits of the rich.
Or consider something as awful but also seemingly basic as a broken femur. In the 19th century those so unlucky had 33% chance of dying, and the other 67% faced amputation…
What’s important is that we’ve moved well past how things were formerly done medically, and with copious investment it’s evident that we’ll continue to move beyond. Hopefully this will reveal itself in ways beyond traditional surgery. And it’s not just surgery.
What about the agony that is a kidney stone? The great Canadian economist Reuven Brenner has described the passing of one as the pain equivalent of childbirth, but arguably worse. Stop and contemplate future pharmaceutical advances that might mitigate, and perhaps erase the pain of what’s so dreaded.
Without pharmaceutical companies taking great leaps, and doing so knowing they can charge what the market will bear without political risk, there are fewer resources necessary to pursue what’s transformative. Let’s celebrate the possibility that the rich, by virtue of being rich, will create the future by showing us in the present what a growing frontier for drug development entails.
In producing an expensive present, the rich will set the stage for a cheaper future. It’s always this way, and it is because investors reward the mass production of everything, particularly that which improves our health and elongates our lives.
Here’s hoping the Trump administration not only publicly recognizes the genius of venture buyers, but has the courage to vivify their importance by ending political attempts to “bend” the proverbial pharma cost curve downward. Most of the population not rich requires these nosebleed prices so that the obscure can become commonplace.
Originally posted to Real Clear Markets.
