Reader Francois T highlighted a story at Washington Monthly that I recommend highly to readers. It illustrates how the intersection of corporate pursuit of profit and regulatory backfires can produce tidy oligopolies that pursue rent-seeking behavior with impunity. From his e-mail:
A well-intentioned move by Congress in 1986, followed by another one in 1996 converted Group Purchases Organizations (non-profit collectives formed by medical facilities that hoped to keep a lid on prices by banding together to make bulk purchases of supplies and devices at a discount) in for profit quasi-monopolies that now has a near total stranglehold on the medical device market in the USA.
Needless to say that all the negative consequences of such a state of affairs (stifling of innovation, reduced competition, impossibility to access the hospital markets for smaller players, excessive prices paid by…us!, avoidable pain and mortality) has happened and is still happening, despite congressional inquiries and court cases.
It is a long, but very illuminating article about the inner workings of an oligopoly that is out there to stick it to all of us, make health care costs even more egregious than they are now, and harm patients by choking life-saving innovations. Of course, the fuckheads in Congress cannot be bothered to reverse their mistakes, since there is money for them too, in the form of this legalized bribery called campaign contributions.
GPOs started to come under scrutiny. The New York Times ran an investigative series on their business practices in 2002, and Congress followed suit with a string of hearings. One of the first witnesses was California entrepreneur Joe Kiani, who had invented a machine to monitor blood-oxygen levels. Unlike other similar devices, Kiani’s worked even when patients moved around or had little blood flowing to their extremities, a crucial innovation for treating sickly, premature infants, who tend to squirm and need to be monitored constantly for oxygen saturation—too little and they suffocate, too much and they go blind. But most hospitals couldn’t buy Kiani’s product because his larger rival, Nellcor, had cut a deal with the GPOs.
You can find the story here.