Written by Ansh Patel
If there is one commodity whose value never seems to fade, it is one’s health and well-being. It is the key to human society’s ability to function and thrive unobstructed. When people are sick or hurt, they are unable to work, travel, communicate, or socialize as well as they normally would. Their productivity falls, as does their population. In effect, an unhealthy society is a dysfunctional one, economically and otherwise. This is why drugs and other medical supplies and equipment have such immense value, as they keep our society healthy and thus maximize its overall activity and productivity, saving countless lives along the way.
Most of the vital drugs and medical equipment that we and our healthcare providers use for that exact purpose here in the US are made by a very select bunch of large mega-corporations. These firms pump out huge quantities of these products, selling them for gargantuan profits. A grand majority of the US healthcare industry, be it drug manufacturing, medical equipment and supply manufacturing, or general hospital health systems, has fallen under a small conglomerate of monopolistic firms. This has happened through a variety of factors. One of these is vertical integration, where larger healthcare providers and supply firms supplant, absorb, or buy out their competition, enriching themselves in the process with the assets and business of their victims. Extensive political lobbying and several loopholes in DOJ antitrust laws have given these companies the power to do this (Pearl, 2023). Many healthcare companies, namely drug and medical equipment supply firms, have used patents as a method to corner the market on the products they sell. Patents grant these companies the exclusive right to produce and distribute the lifesaving drugs or supplies they develop, essentially eliminating any competition and guaranteeing companies all of the profits from their sale. To protect and expand the length and scope of their product patents, companies have engaged in everything from litigation, political warfare, and the exaggeration of the unique properties or effectiveness of their products to the downplaying of any safety risks or side effects their goods bring (Baker, 2023).
The market supply for the drugs, supplies, equipment, and healthcare facilities upon which we depend so sorely for relief in times of ailment is, in short, controlled by an oligarchy of firms and individuals. This, in its construction and existence, has both its benefits and drawbacks.
For starters, monopolies in healthcare have had a devastating financial impact on everyday Americans who depend on the healthcare system so heavily, especially the elderly, infirm, or especially ill or immunocompromised. Monopolies in a market allow a single firm or a colluding group of firms to dictate the price of a good, as they possess the entire means of production for that good. Consumers have no choice but to pay, be it for drugs, medical supplies, or anything else. So, predictably, healthcare costs have skyrocketed. The average American family of four now pays nearly $30,000 per year directly or indirectly for healthcare. Worker health insurance premiums in the past 26 years have risen by over 240%, as opposed to just a 60% rise in wages. The average cost of a hospital stay in the US is about double what it is in other peer nations (Hospitals & Monopoly, n.d.).
The quality of healthcare in the US has also declined significantly. With fewer healthcare suppliers, the US now deploys fewer health resources (medicines, equipment, doctors, etc.) per capita than peer nations in Europe and elsewhere while charging more for them. Simultaneously, the average life expectancy of Americans has fallen behind that of other industrialized nations, such as Chile, Slovenia, and most countries in the EU (Hospitals & Monopoly, n.d.).
Access to healthcare, drugs, and medical supplies has declined as well. In many areas of the US, local hospitals or dispensers of medical supplies are subsumed by larger corporations focused on big cities, leaving rural or even some suburban areas high and dry. Some of these huge corporations have used their financial and legal resources they derived from their widespread control of markets to prevent the creation of new healthcare supply firms or hospitals for populations and areas that need them the most, pressuring Americans from seeking a cheaper alternative to what they sell. More competition means less profit for these companies. To date, the DOJ and FTC have not yet succeeded in bringing legitimate antitrust cases against these corporations, mainly due to legal doctrines that hamstring such efforts or even encourage the formation of monopolistic market conditions, especially in the healthcare industry (Hospitals & Monopoly, n.d.).
Monopolies in healthcare do have some benefits. Normally, entering the healthcare or healthcare supply market involves exceptionally high start-up costs, which are simply impossible to cover for the vast majority of prospective suppliers (Doris, 2021). For hospitals, it’s everything from building rent, dialysis machines, and ambulances to initial labor and supply costs. For medical suppliers, it means the costs of acquiring the inputs and capital for production. Larger, more consolidated companies have the resources and reach to absorb these costs, establish an effective supply chain, and bring a product to a market in amounts that can satisfy society’s needs. Consolidation and monopoly also mean the goods and services that hospitals and medical suppliers provide are more uniform and coordinated in purpose, things that can positively impact consumers and patients (Garber, 2019). Overall, when there is consolidation and monopoly in the healthcare industry, companies can make goods at a lower cost. When there is one or a few huge companies in a market, companies can scale up and optimize production methods, inheriting and learning from the companies and markets they have subsumed. Superior access to R&D plays a role here as well. Both factors can put downward pressure on prices, which directly affects consumers in a positive way (Doris, 2021).
So what’s the verdict on monopolies in the healthcare world? It depends. Monopoly and consolidation mean costs of production and service are driven down, and things are done more quickly, efficiently, and in a more coordinated and substantive manner. They also mean that the medical supplies and healthcare provisions we desperately need are in stable supply. This can’t be achieved via a more open market with a collection of smaller firms making non-uniform and non-standard products in more scant quantities due to their natural deficiencies in both scale and ability to lower or absorb high production and R&D costs. On the other hand, monopolistic firms in healthcare, without sufficient regulation, armed with weapons such as litigation and patent law, become juggernauts. They can expand freely, come to dominate markets, and thus set unfairly high prices, crushing consumers and patients under huge bills that they can’t pay, destroying fair access to their products while resulting in a decline in quality. In short, monopolies can be a blessing and a curse to the healthcare industry, but a balance is needed. Monopolies restrained with the proper antitrust laws, patent limits, price ceilings, and other forms of economic or public health regulation allow superior firms to rise to the top while ensuring a healthy supply of products. It also promotes a market whose firms, while larger and fewer in number, have more efficient investment, development, and production processes, allowing them to make healthy profits. Such a balance can simultaneously ensure that consumers aren’t being price gouged, products are accessible, and that the quality of goods or services (drugs, medical supplies, etc) isn’t at all compromised. Overall, monopolies or oligopolies in healthcare are a double-edged sword, and it is in our interest as a society, for the sake of both our economy and our collective health, to hold our governments and big businesses accountable to make sure that if they do arise, they do a lot more good than harm.
References
Advantage, M. (n.d.). In MedWorks. https://medworksadvantage.com/
Baker, D. (2023, February 5). Ending the Cesspool in Pharmaceuticals by Taking Away Patent Monopolies. CEPR. https://cepr.net/publications/ending-the-cesspool-in-pharmaceuticals-by-taking-away-patent-monopolies/
Doris, Á. (2021, October 13). Do Monopolies Actually Benefit Consumers? The University of Chicago Booth School of Business. https://www.chicagobooth.edu/review/do-monopolies-actually-benefit-consumers
Garber, J. (2019, June 12). The monopolization of health care goes beyond hospitals. Lown Institute. https://lowninstitute.org/the-monopolization-of-health-care-goes-beyond-hospitals/
Hospitals & Monopoly. (n.d.). Open Markets Institute. https://www.openmarketsinstitute.org/learn/hospitals-monopolyM.D, R. P. (2023, January 16). U.S. Healthcare: a Conglomerate of Monopolies. Forbes. https://www.forbes.com/sites/robertpearl/2023/01/16/us-healthcare-a-conglomerate-of-monopolies/