When Boston Scientific received recent federal approval to sell a new drug-coated stent, the Twin Cities news media uniformly portrayed the act as good news.
While based in Massachusetts, the firm has plants here that may add 2,000 jobs because of this approval. These news stories, however, overlooked outrageous acts that Boston Scientific likely will perpetrate now that it has a near-monopoly on this particular device.
Specifically, the company probably will:
• Charge a price for the new device that is several times the actual cost of manufacturing it.
• Price the product based on “what the market will bear” rather than on production costs.
• Sell the new stent at a lower cost in countries such as Germany, Sweden and even Canada than here in the United States.
• Spend much of the cash gained through its overpricing on administration and advertising rather than on developing new devices.
One thing is clear. If Boston Scientific uses such practices, it will do what every other medical device manufacturer does, including such darlings of the Minnesota business community as Guidant, Medtronic and St. Jude Medical.
The same pricing practices apply to pacemakers, heart valves, catheters, defibrillators, catheters and insulin pumps. Virtually no medical device manufacturer has the ethical fiber to actually price their products based on manufacturing costs plus a reasonable markup. Virtually all charge different prices in different markets based on what each will bear.
Fortunately, our elected officials know how to solve this abuse of consumers. The state can identify other countries where medical device manufacturers sell their products cheaply. Minnesota can then facilitate the purchase and re-importation of such products from these low-cost countries.
Consumers or their health insurers would realize significant cost savings. Manufacturers would learn a thing or two about fair pricing.
We could realize even greater savings by extending this model. The incomes of U.S. surgeons are substantially higher than those in any other country in the world.
U.S. hospitals could save consumers tons of money by flying in rotating squads of Brazilian and German surgeons to operate on U.S. patients at half or less of what U.S. surgeons charge.
By now it is obvious that my arguments are serious but not sincere. Obviously, we would not use resources more efficiently if we shipped stents and pacemakers to Stockholm and Hamburg, then shipped them back to St. Paul. The point is that pricing disparities between the United States and the rest of the world are endemic to the system and are not limited to prescription pharmaceuticals.
If drug companies are heartless profiteers, why do device manufacturers — which have nearly identical cost structures and follow nearly identical pricing practices — still rank with the angels in the minds of Minnesotans?
If Lilly and Wyeth were based in the Twin Cities while Medtronic and St. Jude were elsewhere, would Minnesota politicians tout re-importation as they do now?
© 2003 Edward Lotterman
Chanarambie Consulting, Inc.