Thursday, December 16, 2004

How to prevent vaccine shortages

The economics of vaccines are complex, but in the end differ little from other products. In this article from the New Yorker, James Surowiecki notes the difference between "push" and "pull" funding in science. He states

Instead of deciding in advance which vaccine candidates deserve funding, however, a government could commit itself to paying a reasonable price for whatever vaccine turns out to work, effectively guaranteeing a market for it. Drug companies would thus have an incentive to invest in promising candidates. Rather than pushing vaccines into existence, this approach pulls them.

However, this merely makes complex what is in actuality a fairly simple truism. When the government forces down the price of something in order to make it "cheaper", a shortage is likely (if not inevitable). Instead, if a reasonable price is obtained, the product becomes more available.

Government intervention, I would argue, cannot remedy scarcity (except briefly), but it can intensify it.


Egan said...

Any examples in healthcare of where Government intervention has intensified the shortage it aims to remedy?


Kevin C. Fleming said...

Examples of Government-caused shortages:

In addition to vaccines:

U.S. history is littered with the remains of price control failures. Although admirers of President Roosevelt credit him with restoring the American economy in the Great Depression, more recent analysis has shown that the strict wage and price controls of the New Deal instead delayed recovery and exacerbated unemployment. By restricting competition and enhancing the monopoly power of firms and labor unions, New Deal policies were significant factors in the weak recovery and the second stage of the Depression. [IMF] [Powell] Moreover, what made the Depression a global phenomenon rather than a regional stock market problem or simply hard times for commodity producers was “a chain of domino reactions that convinced policy-makers everywhere that the only acceptable solution lay in national policy and national planning. In this sense the depression was directly a product of the attempt to impose a new order on financial markets.” [James] In 1971, President Nixon ordered price controls that resulted in fewer produced goods, an energy crisis and a recession coupled with double-digit inflation. The gas station lines of the late 1970s appeared when President Carter pushed wage-price guidelines, which also resulted in double-digit inflation. More recently, the blackouts in California were caused in large part by price controls that were intended to make electricity more affordable for consumers.[Wells]

International Monetary Fund , Recessions and Recoveries; World Economic Outlook, International Monetary Fund; April 2002, pp. 111-12

James H. , The New Distributional Politics of Globalization and the Lessons of the Great Depression; CESifo Economic Studies, Vol. 50, Jan. 2004; pp. 33-6.

Powell J, FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, Crown Forum, 2003

Wells WC, Economist In An Uncertain World: Arthur F. Burns and the Federal Reserve, 1970-1978; Columbia University Press 1996

Egan said...

Nice examples OUTSIDE of healthcare. Again, I am wondering about examples WITHIN healthcare.


Kevin C. Fleming said...

Government-caused shortages in healthcare:

In 2002, the NHS was felt to be “critically short of doctors and nurses.” This was blamed on “failure in the past to plan far enough ahead.” [Moore] According to projections, it will be at least 2024 before the NHS reaches the European average for physician staffing. [New Statesman] Not surprisingly then, the remaining staff are “ludicrously overburdened.” [Hammond] Similarly, Canada has a shortage of physicians that has been blamed on an erroneous government prediction of oversupply in 1991. This estimate prompted mandatory reductions in medical school enrollment throughout the Provinces. These actions decreased physician supply while Canada’s population grew at approximately 300-350 thousand per year. As a result, some 18 percent of Canadians now have trouble finding a doctor. Shortages of radiation oncologists, anesthesiology, radiologists, psychiatrists and obstetricians have been reported. To reach sufficient physician supplies, Canada would need to train 500 more physicians per year (a 25 percent increase). This shortage is exacerbated by government limits on residency slots and physician immigration, as well as by the exodus of Canadian physicians to practice in other countries. From 1992 to 1998, Canada had an annual loss of approximately 411 Canadian physicians to the United States, but a loss of only 209 in 2002. [Tyrrell] [Canadian Inst Health]

For similar reasons, the recruitment and retention of general practitioners and specialists is considered chronic and widespread across the NHS. [Geldman] As a result, physician and other staff shortages have forced the NHS to recruit abroad. [Revill] [The Gaurdian, Consultant numbers]To make matters worse, new EU rules limiting doctor’s hours threaten to create massive physician shortages, and limit crucial emergency access. [Templeton] In the US, the debate over physician supply has careened from dire predictions of oversupply to more recent predictions of shortages. Where the market can manage supply and demand by prices, central planners find that the long lag time between policy interventions and the length of physician training makes even frequent assessments of the physician workforce “a critical, but elusive goal.” [Blumenthal]

Britain’s dental system is similarly burdened by the limitless demand that accompanies ‘free’ healthcare in the NHS. Their dentists are paid a fixed amount for each procedure, fees that have declined over time. To make a living, NHS dentists see an average of 30 to 40 patients a day, compared with the 12 a day that dentists see in the United States. As a result, “ever fewer British dentists are willing to endure the grueling, assembly-line work required to participate in the National Health Service.” Despite an enlarging and aging population, there are fewer dental schools in Britain than before, and fewer dentists are being trained. Patients are forgoing routine dental exams and cleaning, and are “waiting until the last possible minute to get their teeth fixed.” Shortages are so severe that, in August 2003, 600 people turned up outside a tiny Dental Surgery office in Wales to secure one of 300 appointments for the NHS dentist. Some had camped in tents overnight; half were turned away. Remarked a patient; “It was like a bread line." [Alvarez]

Moore W, Wanless report outlines “Rolls-Royce” health service for 2022, BMJ; Vol.324, 27 April 2002, p.998

New Statesman, A question of delivery; 19 May 2003, (132): p. 27

Hammond P, The Ex-GP’s tale (NHS in crisis); New Statesman, 4 Feb 2002 (131) p. 31

Tyrrell L. , Dauphinee D.; Task Force on Physician Supply in Canada, Canadian Medical Forum Task Force, Nov. 1999 pp. 1-25

Canadian Institute for Health Information; Supply, Distribution and Migration of Canadian Physicians 2002; ISBN 1-55392-228-X; p. 4.

Geldman A, NHS staff: the issue explained; The Guardian 26 Jun 2002

Revill J, Patients left as doctors push trolleys; The Observer 3 AUG 2003

Click hereThe Gaurdian, Consultant numbers fail to keep pace with demand; 11 Dec 2003

Templeton SK, New rules on doctors’ hours will shut half of Glasgow’s hospitals; Sunday Herald, 7 Dec 2003

Blumenthal D, New Steam from an Old Cauldron – The Physician-Supply Debate; NEJM April 22, 2004, pp. 1780-86.

Alvarez L, Britain's dental system taxed by high demand; The International Herald Tribune; Tuesday, August 12, 2003

Kevin C. Fleming said...

Sorry about the links; something was messed up in my typing no doubt.

Kevin C. Fleming said...

Shortages of Orthopedists in Canada:

Dear America…by Klaus Rohrich

"While on a recent visit to Toronto’s Orthopedic and Arthritic Hospital, a facility specializing in the treatment of bone and joint problems, I overheard the harried receptionist at the clinic explaining why the patient would have to wait four to five months to receive surgical treatment,

"There are only so many orthopedic surgeons to go around," she explained. The patient was fortunate to have seen a surgeon and was waiting for a date for his procedure. Prior to his appointment with the surgeon, the patient had to be referred in writing by his family doctor, which usually takes from four to six weeks. After the initial visit, the surgeon likely requested an MRI, or magnetic resonance imaging procedure to determine the severity of the problem. Getting an MRI in Canada can take up to six months, although many Canadians choose to cross the border into the U.S. where they can get it next day for about $450.

After the MRI, the results of which can take as long as six to eight weeks to get back to the doctor, the patient has to make another appointment with the surgeon to find out if the procedure is warranted. From there an appointment is made, which usually takes two to three months. So from the time that one is aware of a serious problem, such a herniated vertebral disc until the time, the problem is actually dealt with, as much as a whole year can pass.

Other procedures can take longer, as in the case of hip or knee replacements, which can take three to four years of waiting."