Winning Ways

What do these three practices have in common?

  • Selling exorbitantly-priced drugs that provide no relative health benefits, but one cannot buy particular patented drugs and devices from other suppliers
  • Producing very expensive weapon systems that may no longer be needed, but one cannot buy these weapon systems and spare parts from other suppliers
  • One cannot access public services (education, health, energy, security) from other federal, state or local governments

All three provide economic returns to the providers of products and services, but not to the consumers of these offerings.  The value propositions are one sided.  How, then, are they sustained?  Armies of lobbyists assure these cash flows are not disrupted.

Market-based competition does not work when providers hold monopolies, either literally or effectively. When performance information is lacking, or at least hidden, consumers have no way of assessing value. They also may or may not have any insights into or influence on pricing.

These three ecosystems are laced with rice bowls in terms of revenues, profits, executive salaries and bonuses, jobs and paychecks. Any attempts to change the status quo will meet fierce resistance, facilitated by lobbying, gifts, and campaign contributions.

This is not an indictment of all industry. Auto manufacturers, for example, compete with each other to sell cars and trucks. Appliance manufacturers do as well. Competition among digital devices providers gives consumers choices, as does competition among entertainment providers. Almost everything in grocery stores involves competing offerings.

Competition leads to more choices, with better benefits and lower prices — at least relative to the benefits received. Monopolies, legal or effective, lead to less choice, poorer performance, and higher prices.  Yet, an overarching goal of many businesses to achieve monopoly positions.

Why would consumers put up with such situations? Why would consumers seek Adulheim, an Alzheimer’s drug with no proven benefits and an annual cost of $56,000? First of all, Medicare is paying, not consumers. Yet, everyone’s Medicare premium will substantially increase to cover these costs for a relatively small population of patients.

More significant, families of those suffering from Alzheimer’s are desperate for anything that might help. They believe pharma’s claims because they want these claims to be true. So, perceived positive impacts at zero cost trump any other logic.

It can easily be argued that health can be dramatically improved by lifestyle changes in terms of diet, exercise, etc. This is a lot of work compared to taking very expensive drugs for which you pay nearly zero. The fact that these drugs provide minimal, if any, health benefits is not apparent until it is too late.

Of course, buying healthcare and education, and perhaps even weapon systems, are seldom prone to calm, rational analyses.  Behavioral and social values, concerns, and perceptions dominate.  Worries and fears play central roles.  Hidden persuaders, vis-a-vis Vance Packard, take advantage of these forces.

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