How Free Markets Pave the Road for Medical Breakthroughs

The U.S. health care industry is vast, accounting for 17 percent of U.S. gross domestic product. That’s a lot of money. Sadly, the Affordable Care Act — or Obamacare, as it’s known more colloquially — has done little to make the industry work better. In fact, the law has sent premiums skyrocketing, reduced access and quality of care and has fostered new inefficiencies.

And the political Left is now unified in the belief that improving the health care system requires more government influence, not less. Although that position is mistaken, it’s a debate worth having.

And one major reason we welcome the debate is that we believe the private sector delivers more services, at higher quality and at lower costs. Take medical research. The vast majority of medical advances in the world today come from U.S.-based researchers. That is no accident. Instead, it is a reflection of America’s unique synergy of profit incentives with research outcomes.

In the field of pharmaceutical research, for example, the United States incentivizes companies into high-cost and high risk research in return for potentially high profits. Most importantly, unlike in much of the world, U.S. pharmaceutical products are priced by the market rather than by government agencies.

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In Europe, by contrast, government-run medical authorities do not purchase a drug for use unless it is negotiated at a lower price point. Correspondingly, the U.S. market offers exponentially higher value for U.S. researchers. Put another way, the U.S. offers the best scientists and technicians the best possible compensation, and corporations the best long-term investment prospects. Thus, they come to America.

Our system isn’t perfect though. Because the U.S. government allows pharmaceutical firms to export their drugs at prices significantly below U.S. market levels (as in Europe), Americans are unduly subsidizing the costs of researching those drugs in the first place. As I’ve argued, stronger patent protections for U.S. manufacturers and a tougher U.S. export licensing system would help to reduce U.S. domestic drug prices. Regardless however, if we want the super drugs of the future — whether it is a cancer killer or an Alzheimer’s buster — we must ensure that the private sector retains its incentives for investment.

Unlike in much of the world, U.S. pharmaceutical products are priced by the market rather than by government agencies
American firms are also leading the way in developing new medical devices, not to mention device research. Qualcomm’s medical scanner X-Prize is a great case in point. Inspired by the tricorder in “Star Trek,” the X-Prize will award $10 million to the team that produces the best handheld medical scanning device. A number of teams are competing, and the results will be announced in early 2017. The focus of the prize is to spur entrepreneurial development in pursuit of a high-need practical tool. The utility of such a tool should be obvious. Instead of requiring many separate tools to detect and measure different ailments, the tricorder will deliver an all-measurements-in-one device. The winning device will have to detect at least 10 key health conditions (including urinary tract infections and diabetes), three elective conditions (from a selection including food poisoning and hypertension), and five vital signs (such as blood-oxygen levels and respiratory rate). Regardless, the prize’s key virtue is its incentivizing of critical research in return for profit. This is capitalism at its best.

BiVACOR’s artificial heart program is another example of profit incentives serving human interests, Designed to last up to 10 years, BiVACOR’s artificial heart offers the potential of life to those 5.1 million Americans — and many millions more worldwide — who suffer from heart failure. Because heart donors are limited in number, too many around the world suffer and die before they can receive a transplant. The beauty of BiVACOR’s artificial heart is that it blends immense power (high flow rates that adapt to human activity) and flexibility (the machine will have a small external control system), with a wide user base (the device could be used by children and adults alike). What’s the catch? Well, BiVACOR’s research is costly and high-risk. The company needed a profit incentive that would allow it to bring together engineers, doctors and business professionals in pursuit of profit. Only the U.S. economy offered that potential.

How about cancer research? Contemplate this February breakthrough at the Fred Hutch Cancer Research Center in Seattle: “27 out of 29 patients with an advanced blood cancer who received an experimental, ‘living’ immunotherapy as part of a clinical trial experienced sustained remissions.” The project involves the re-programming of patient T-cells with “chimeric antigen receptors” in order to help them target and destroy tumors. The work shows great promise in new treatment options for those in need. Indeed, it saved some test patients who were given only months to live. But what makes Fred Hutch Cancer Center different from many nonprofits is its open business side. The Hutch Center dedicates an entire webpage to business options for collaboration in the pursuit of profit.

Yes, the U.S. health care system is far from perfect. And yes, U.S. conservatives must offer replacements to Obamacare instead of generic calls for its repeal. Ultimately however, the functional power of the U.S. health care industry in serving human interests is clear. Offering profit incentives to justify high-cost, high-risk research, American researchers lead the world in medical advancements. And that, in the end, profits us all.

Tom Rogan is a foreign policy columnist for National Review, a domestic policy columnist for Opportunity Lives, a panelist on The McLaughlin Group and a senior fellow at the Steamboat Institute. Follow him on Twitter @TomRtweets.