How Healthcare Stays Expensive

How Healthcare Stays Expensive
The PRECISION1® family of daily disposable contact lenses (Photo: Business Wire)
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Americans spend on average, 1,200 dollars a year on their prescriptions. For comparison, that is double the amount the United Kingdom spends and almost three times the amount Denmark does. Americans consistently pay higher prices for these necessities despite American companies’ investment in and creation of these drugs.

Any entry level economics class would tell you that when prices are artificially too high, a hole is created in the market leading to more competition as new business springs up to challenge old business. That is exactly what happened with eye care. As the internet emerged in as a retailer in the 1990s, Lens.com came about as a more convenient and cheaper retailer to challenge what are called ECPs, or Eye Care Practitioners. Eye Care Practitioners have given large producers and themselves an advantage by being the only place where one could purchase contact lenses from and, as result, were able to charge higher prices for them.

Surviving the ‘.com bubble’ and the financial crisis, they have been successfully reaching around 15 percent of the market and appear to be growing. Rather than competing fairly with their market rival, eye contact producer, Alcon, has attempted to sue them for minutiae involving regulatory ploys (despite having already been approved by the FDA) and a minor trademark infringement that stretches the law to such a ridiculous extent it could only be taken seriously by corporate lawyers. 

Currently, the only type of direct consumer-based market competition exists between retailers. This is largely caused by its prescription system. While necessary, the prescription system works by having doctors use their expertise in which products consumers should purchase; but, as a result, the market exists with no substitutions of product because customers cannot change their prescription after it has been provided. Rather, the substitution comes from individual’s ability to choose where they buy that product from.

If Alcon wins their lawsuit against Lens.com, there will be a marked increase in price at these discount retailers. This will hurt the American consumer and cause a continuation of the trend that already is so prevalent in American healthcare prices.

According to The Commonwealth Fund, 14 percent of insured Americans and 33 percent of uninsured Americans have skipped dosages of their prescriptions based on cost alone. With contacts, this will most likely continue in the form of reuse past the viability date. Overuse of an individual or pair of contacts can cause infection and pink eye as well as permanent damage to your eye as overused contacts prevent blood flow to the eyes. All of these would require consumers to purchase more prescriptions that face similar problems.

This is why the American healthcare system remains unnecessarily expensive. Medical progress requires that consumer health-products get to patients at an affordable price point. When entrepreneurs notice gaps in the market, they seize upon them and provide either a much-needed service or a cheaper price (sometimes both). But if businesses are able to crush them using legal challenges and engaging in monopolistic practices, then the system doesn’t work. If America truly wants to see a market-driven prices in healthcare goods and services, and an overall increase in the affordability of healthcare in this country; it should begin by throwing out frivolous and absurd lawsuits and regulatory machinations that crush American entrepreneurs and prevent new businesses from emerging and challenging the old.

Jack Rowing is a politics major at the Catholic University of America and an assistant editor at RealClearHealth.

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