Paul Krugman accuses Barack Obama of being a tad bit wet behind the ears:
Over the last few days Mr. Obama and Mr. Edwards have been conducting a long-range argument over health care that gets right to this issue. And I have to say that Mr. Obama comes off looking, well, naïve.The argument began during the Democratic debate, when the moderator — Carolyn Washburn, the editor of The Des Moines Register — suggested that Mr. Edwards shouldn’t be so harsh on the wealthy and special interests, because “the same groups are often responsible for getting things done in Washington.”
Mr. Edwards replied, “Some people argue that we’re going to sit at a table with these people and they’re going to voluntarily give their power away. I think it is a complete fantasy; it will never happen.”
This was pretty clearly a swipe at Mr. Obama, who has repeatedly said that health reform should be negotiated at a “big table” that would include insurance companies and drug companies.
On Saturday Mr. Obama responded, this time criticizing Mr. Edwards by name. He declared that “We want to reduce the power of drug companies and insurance companies and so forth, but the notion that they will have no say-so at all in anything is just not realistic.”
Hmm. Do Obama supporters who celebrate his hoped-for ability to bring us together realize that “us” includes the insurance and drug lobbies?
O.K., more seriously, it’s actually Mr. Obama who’s being unrealistic here, believing that the insurance and drug industries — which are, in large part, the cause of our health care problems — will be willing to play a constructive role in health reform. The fact is that there’s no way to reduce the gross wastefulness of our health system without also reducing the profits of the industries that generate the waste.
As a result, drug and insurance companies — backed by the conservative movement as a whole — will be implacably opposed to any significant reforms. And what would Mr. Obama do then? “I’ll get on television and say Harry and Louise are lying,” he says. I’m sure the lobbyists are terrified.
As health care goes, so goes the rest of the progressive agenda. Anyone who thinks that the next president can achieve real change without bitter confrontation is living in a fantasy world.
To me, Paul Krugman is the one who comes off sounding, well, like a guy who has a rather spotty grasp of how actual politics works. It's the old joke about economists:
Castaway: We are stranded on a desert island with a bunch of cans and no equipment with which to open them. Whatever shall we do?Second Castaway, who happens to be an economist: That's easy! First, we assume a can opener . . .
When designing a policy program, you cannot just assume away the interest groups--nor, except in Paul Krugman's imagination, can you simply overcome them through your steely-eyed willingness to engage in "bitter confrontation". Drug companies make lifesaving drugs that people need, which of course tends to breed resentment when they charge what the market will bear, but also gives them a rather powerful weapon to deploy in the PR war. Similarly, most people are quite content with their current insurance; if you attempt to destroy the insurance companies outright, they will do their best to get all those people worried about what will happen under your new program. These industries are also very important to several highly populous states with powerful senators and congressmen; threaten them and you threaten your coalition.
I mean, these tactics are fine by me; I don't want national healthcare. But is Paul Krugman interested in making policy, or just making an expressive statement about his youthful ideals?
You know, just about every health care industry lobby supported expanding S-CHIP. Bitter confrontation, indeed.
As Megan has pointed out, prescription drugs account for 8% of health-care spending. Additionally, while the pharma industry has for a long time now been pictured as money-grubbing evil corporate blah blah . . . when push comes to shove they've never been seriously threatened by any legislation. I imagine this is because (a) there's not really that much savings to be had by doing so, (b) special interest lobbying, political pressure, etc, and (c) even our elected representatives understand that the industry CREATES WEALTH, and that spending more on health care is just great if you're, you know, getting better health care. People don't know or care what their hospital rooms cost, or what that stent Uncle Joe had put in cost, because they mostly don't pay those bills. When some (evil) pharma rep points out that say, 30 years of high-blood pressure medication costs less than a nice few-day stay in a hospital for a heart attack, not to mention it has a bigger impact, what is Senator X going to say?
"Yes, but there's an angry mob outside, and another one at the NY Times, and they want your head!" I don't think so. It's a non-starter.
Krugman (and Edwards) are just doing some populist posturing, and while I think if Edwards did gain office, he would make some effort to punish the drug industry, he wouldn't be able to severely impact big pharma, because the political price to be paid isn't worth the - small - savings, and long-term loss of new medicines.
But oh yeah, they're evil. Weird how 'bad' people gravitate to private industry while 'good' people inexorably move toward government serivce.
I find it very interesting how the health care left (e.g. Ezra Klein, etc) finds the destruction of health insurance companies to be so central to their plans. I'm no fan, but are they really that evil?
Uh-oh, MM has once again poked Krugman, the inverse voodoo doll. I predict at least 70 painful howls in the 100+ posts that will follow.
Why should the US government force the US consumer to subsidize the rest of the world when it comes to prescription drugs?
A drug company spends a ton of money to create a drug and then spends very little to actually make each little pill. They need to sell the pills for a huge profit because they need to recover the costs of this drug and the drugs that never made it to market. If you don't let the drug companies make a profit then you don't get new drugs.
Am I missing anything?
So the drug company sells the drug to countries like France who force the drug company to sell it a price below the price in the US. The drug company can afford a huge discount because the marginal cost of production is virtually $0.
Then the drug company goes to the US market and figures out what the proper price is that maximizes profits.
The US is the only country in the world where the price is based on a free market. Well, actually that is not quite true because the insurance companies get massive discounts too. It is the market for uninsured people who pay more than anyone else in the world.
However, you slice it, the price for durgs in the US is higher than anywhere else in the world.
If the US passed a law that said that rich foreign countries can't buy the drug any cheaper than it is sold in the US then the US would end up paying slightly less and places like western Europe and Canada would end up paying significantly more.
What is wrong with actually having a free market all over the world???
Umm, Megan. I'm not sure if you're allowed to use the word monkey and Obama in the same sentence. Look what happened to Howard Cosell.
I just can't stop laughing at Krugman's attribution of blame to industry rather than the state. Truly a comic genius.
Neil Wilsom has a point. There is a free rider problem, where Canadians and Europeans are able to get the drugs at much lower prices than Americans, so they can benefit from the research that we pay for. So, it's not clear to me that drug reimportation is such a bad idea...
Concerning Krugman, though, his article is very silly. He's just upset that Obama is not offering a sufficiently socialist medical plan for his taste. He wants to claim that Edwards' angry populism is really more popular than Obama's reconciliation. If so then why is Edwards running third in every poll? And why has every populist candidate gone down in defeat, from George Wallace, Ross Perot and Pat Buchanan to Ralph Nader and John Edwards?
"We're for the people. They're for the powerful." That message has been weighed in the balance and found wanting many times. This is not Venezuela. Americans just don't fall for that stuff.
Perhaps I should add that, evidently, even Venezuelan's are becoming disenchanted with it.
"Perhaps I should add that, evidently, even Venezuelan's are becoming disenchanted with it."
rwe, don't be complacent.
The referendum lost by a squeaker, 49-51 if I remember correctly. If Chavez had only shuttered another couple of television stations that didn't like his brand of socialism, he probably would have won a squeaker. He won't make the same mistake twice.
-dk
Greg Mankiw on Paul Krugman:
So there you have it. Paul Krugman: the Jerry Springer of economics. They're each "populists" of a sort.
I’m not sure that’s entirely correct. While it’s true that Americans probably pay more for name brand drugs than most other countries, we generally pay less for generic drugs. The reason for that as you correctly pointed out is that we’re the market from which pharmaceutical companies recoup that majority of their investment but because we haven’t killed the golden goose of new drug and device development with price controls, when the drugs are available in generic form, there is more competition from a more robust pharmaceutical industry which keeps the prices of generics pretty low.
I tend to like that idea but I’m not sure how such a law would be set up much less enforced particularly if you want to continue having other goods and services flow across borders and have mutual protection of intellectual property rights. Anyone have any suggestions on how to get other nations to drop their price controls?
I tend to like that idea but I’m not sure how such a law would be set up much less enforced.
It couldn't be enforced. Canada, Europe, et al are not short industrial R&D chemists or industrial facilities capable of mass-producing chemical products. If the US were to make such an ultimatum to Canada, Canada would respond "that's nice," then break the Canadian patent on the drug and allow it to be bulk manufactured domestically. If the US market produced a useful new drug and the formula were not shared with non-compliant nations, it would quickly be reverse-engineered.
Moreover it wouldn't be enforced. It would violate all sorts of existing trade agreements, hinder the path to any new ones being formed, and probably ignite a viscious trade war in healthcare products. Europe, in particular, does have several large healthcare products vendors who also operate in the US (e.g. Philips).
the formula were not shared with non-compliant nations, it would quickly be reverse-engineered.
Reverse engineering drugs is lot harder and more dangerous than it sounds. Of course, the patent is a public document available on the Web, and it has the formula right in it.
Reverse engineering a typical small molecule drug on paper should take no longer than 1 day for a competent team of chemists. Getting it to plant-scale, of course, is a different story. However, US patent terms are long enough that they (reverse-engineers) have plenty of time.
The Indian pharmaceutical industry is essentially built off of breaking worldwide patents, it seems. It helps they're awfully good at chemistry, too.
Reverse engineering a typical small molecule drug on paper should take no longer than 1 day for a competent team of chemists.
Do you mean, hand a guy a gelatin-coated lactose pill with the unknown active ingredient in it, and expect him to get not only the formula but the isomers and chirality exactly right in one day? Maybe, but that would surprise me. And getting it wrong could be dangerous.
"If the US were to make such an ultimatum to Canada, Canada would respond 'that's nice,' then break the Canadian patent on the drug and allow it to be bulk manufactured domestically."-anonymouse
That seems a little naive to me. Canada's economy is enormously dependent on the United States. I doubt very much that the Canadians would risk a trade war with us. We should take a tougher line on drugs because they are free-riders. And we should give on lumber, because our policy on it is indefensible.
I am not sure I would trust chemists who have not been able to duplicate the secret formula for Coca-Cola to duplicate the formula for a drug on which my life or health depended. But that's just me.
I would trust them to duplicate the formula for drugs being reverse engineered for sale in other countries, as long as the drugs could not be imported into the US. I would also trust them to reverse engineer drugs for purchase under the congressional health plan.
Take away intellectual property rights and you take away the incentive to invest in the development and commercialization of intellectual property.
Communism failed without intellectual property rights, even with a well developed spy network. Socialism also failed without intellectual property rights. I'd bet big money village-ism would also fail without intellectual property rights.
Rob Lyman,
getting the chirality right would not that difficult as most(if not all) active ingredients are L- type.
If you remember the problem with thalidomide was the D-type isomer (right hand spiral) present in the drug as delivered.
Derek Lowe would be the best one to ask about how easy it would be to duplicate drugs. My understanding is that even the drug companies have trouble moving from the drug manufactured in a small batch and clinically tested to the full production of the commercially prepared drug. For one thing, they have to do testing on the comercially prepared drugs to ensure they behave clinically the same as the drug which passed the FDA testing requirments. As I understand it, they do not have to have full-blown clinical trials all over again, but rather use particularized testing to ensure proper absorption, etc.
Neil Wilson makes a great point. I wonder if part of the reason Big Pharma doesn't charge more overseas is that they think being (more) hated is going to be bad for what real business they have. They figure folks really just wouldn't understand if they, for example Abbott, cf. WSJ, don't let Thailand abscond with their AIDS drug patent. In a broader context though, this puts the health care debate somewhat in the perspective of, 'Why is steak so much cheaper when you deal cattle rustlers.' Well, duh, they steal the product which requires a rather different 'investment strategy' from producing it.
Rob:
I thought you meant look up a structure on the web and start coming up with a synthesis right there. By the way, I said "team", not a guy.
hand a guy a gelatin-coated lactose pill with the unknown active ingredient in it, and expect him to get not only the formula but the isomers and chirality exactly right in one day?
No, it wouldn't take a day for this, but it wouldn't take a year, either. I estimate that getting the structure would take less than a month. If you gave a team of structural chemists a bottle of the pills (i.e. enough material), they'd run MS and 2D NMR to get the relevant structure in a week or three. If it's a typical drug, it (or its salt form) would be crystalline and X-ray crystallography would confirm your structure and possibly get your (absolute?) chirality as well. It's basically your standard sophomore organic chemistry lab problem, just a little more complex.
All of the above, of course, is predicated on a "secret drug structure". That sort of thing doesn't happen much.
Krugman's argument is that American politics suffers from collective cowardice on issues where corporations are asserting their interests in ways that harm the country as a whole. A generation of fear of corporate ability to mobilize lobbying and advertising and to shape the political landscape through donations and press manipulation have made American politicians overly, and harmfully, reluctant to even point out the plain truth about how corporate interests diverge from those of the nation at large, and how important it is to curtail corporate power.
While appeasing the corporate beast may be the better part of valor on any particular political confrontation, in the long run it renders the body politic too weak to defend itself, as voters become gradually complicit in their own brainwashing. The actual refusal of many Americans to understand that the interests of Kaiser Permanente do not coincide with their own is an instance of such brainwashing. Krugman feels that politicians ought to confront this problem, rather than staging a never-ending strategic retreat in the face of corporate might which ultimately becomes simply an endless defeat.
Obama has a different understanding of how to play this game. I hope Obama is right, and I'm voting for him in the primaries. But I certainly agree with Krugman that when Obama actually adopts and disseminates the talking points which will be distributed at some point by the anti-universal-health-care right, he is simply damaging his own party.
Incidentally, I think you are within about two years of the day when the statement "I don't want national healthcare" is going to put you on the universally recognized wrong side of a major historical social struggle, like being opposed to federally mandated school integration in the early 1960s.
"A generation of fear of corporate ability to mobilize lobbying and advertising and to shape the political landscape through donations and press manipulation have made American politicians overly, and harmfully, reluctant to even point out the plain truth about how corporate interests diverge from those of the nation at large, and how important it is to curtail corporate power."-brooksfoe
That sounds like an excerpt from an old Black Panthers pamphlet, or maybe a speech by Eugene Debs.
Incidentally, I think you are within about two years of the day when the statement 'I don't want national healthcare' is going to put you on the universally recognized wrong side of a major historical social struggle, like being opposed to federally mandated school integration in the early 1960s.-brooksfoe
Lenin too thought his way was the way of the future, but it turned out that his faith in government control was misplaced.
Brooksfoe must not have realized the Soviet system collapsesd. Otherwise, presumably, he wouldn't want to bring Soviet medical care here.
I'm encouraged to see that the best rwe can do in response is to share with us his memories of the Soviet Union. Perhaps next he will recount his memories of the Battle of the Somme.
I think you are within about two years of the day when the statement "I don't want national healthcare" is going to put you on the universally recognized wrong side of a major historical social struggle, like being opposed to federally mandated school integration in the early 1960s.
Well, if that's true, I'd say we're about 40 years from the day when the statement "I want national healthcare" will look naive and fiscally irresponsible in the extreme, like supporting Medicare and federal welfare payments in the early 1960's.
the statement "I don't want national healthcare" is going to put you on the universally recognized wrong side of a major historical social struggle
Here comes another forceful reminder why I should not vote for Hillary even if she manages to look more competent than all Republican contenders put together...
Mm hm. So, the point remains:
nor, except in Paul Krugman's imagination, can you simply overcome them through your steely-eyed willingness to engage in "bitter confrontation".
The question is whether you can overcome "them" (health insurance companies who profit by charging Americans far more than the cost of the care they receive, and then trying as hard as they can to deny their clients coverage when claims are made) by playing nice with them, and refraining from leveling with the American public about the fact that the interests of private health insurers are diametrically opposed to those of Americans, whether sick or healthy.
The history of other confrontations between the public interest and interested, powerful corporations (the tobacco industry, the automobile industry, the fast food industry, the oil companies wrt global warming) suggests that companies tend to respond to credible political threats, not to blandishments.
The actual refusal of many Americans to understand that the interests of Kaiser Permanente do not coincide with their own is an instance of such brainwashing.
Or perhaps voters are grown-up enough to realize it's possible for Kaiser Permanente's interests to be legitimate without being the same as their own. By the bye, these whiny excuses for defeat rather spoil the effect of the triumphalism in which you indulge yourself later on.
"I find it very interesting how the health care left (e.g. Ezra Klein, etc) finds the destruction of health insurance companies to be so central to their plans. I'm no fan, but are they really that evil?
Posted by Klug"
Definitely - the health care left, that is. Insurance company policies are generally just the result of idealistic government regulation meeting economic realities.
I'm no fan, but are they really that evil?'
No, of course not. Insurance companies are no more sinsiter that candy makers or clothing maufacturers. The are all private enterprises trying to make a profit. No doubt there are small fly by night operations that try to cheat their policy holders, but generally businesses make money by satisfying their customers not by swindling them. I've never had a problem with my insurer.
So, this populist attack on the insurers (and pharma compmanies) is without intellectual merit. It might appeal to illiterates who don't understand private enterprise, but it doesn't hold much appeal for the rest of us.
Interesting that Krugman is charged here with exactly the "assume a can-opener" mentality that Asymmetrical Information can sometimes indulge in.
Ironically, a few posts down, we have a defense of a stringent framing of the Efficient Market Hypothesis. Yet, if one believes markets to be rational, this theory is nothing more than the assumption of a fleet of precision information discounting "can-openers".
It seems to me that there is something a bit odd about a hard market libertarian criticizing other people for their naiveté regarding the how institutions actually work.
I can understand the criticism with regard to the drug companies, but not the insurance companies. Krugman does want them eliminated. Sitting down at the table with them makes no sense if you accept that assumption. You can argue that it is not a wise policy to desire the elimination of the private health insurance industry, but given that as one's policy, bitter confrontation is sensible.
Krugman can desire the elimination of the private health insurance industry all he likes, in the same sense that I can desire Salma Hayek all I like-- it only becomes an unwise policy at the point where I spurn that cutie over in Human Resources because I think I'm going to land Salma Hayek. Krugman needs to review the history of how Harry and Louise actually came to be.
Mickey Kaus had a good post about this type of thing about two weeks ago, entitled something like "The virtues of triangulation".
The arguement is that if there are interest groups who rationally oppose reform because reform would threaten their raison d'etre, these groups can not be negotiated with only defeated if reform is to be accomplished. The example he gives is teacher's union and education reform.
If Krugman and Edwards are correct that the drug companies and insurance companies' profits are what is wrong with health care, it is naive to think that they are willingly going to negotiate those profits away. They are going to oppose any reforms that take those profits away, and if a Krugman friendly reform is to be achieved, the companies will need to be defeated, not negotiated with.
Lumping the "drug companies" and "insurance companies" together while ignoring hospitals, medical supply companies, etc... tells me that this is all just posturing.
Drug companies are large companies that engage in massive R&D projects to develop drugs that treat various conditions. We are going to have drug companies of some sort or another.
Insurance companies are financial companies that sell policies to people (usually through their employer) and then pay out for medical expenses according to various policies. Insurance companies in their current form (essentially medical cost pooling systems) may or may not exist in the future and are not necessary to health care.
If the government is going to meddle in how drug companies operate, they should sit down with the drug companies and work with them.
If the government is going to change the policies and regulations of medical insurance, it doesn't necessarily need to sit down with the insurance companies, especially if it plans on radically changing how insurance works.
Personally, I don't want the drug companies punished or their activites curtailed. I want them encouraged to create new and wonderful drugs. Hopefully any new government policies will result in more drug R&D and more wonderful new drugs. Regulation should be limited to keeping prices from getting totally out of hand.
I don't care about insurance companies, per se. I want to at least be able to get catastrophic medical insurance at a reasonable cost and want to be able to manage my routine medical costs somehow.
I see two different problems with entirely different solutions.
EI
"I see two different problems with entirely different solutions."-EI
To a great extent, that is true. There is overlap.
If the insurance industry disappeared, replaced by a single payer system, the disparity of price with foreign countries of similar wealth would also disappear. France pays less for drugs than an individual American or even an American insurance company because it is France - a large scale purchaser and a sovereign entity to boot. If the US formed a state health insurance company that was the single payer for drug purchases, drug prices would fall. No doubt, reinvestment in drug research would also fall, but not proportionately.
Labor exploitation in the chocolate industry
Article on the Northern Marianas Islands sweatshop scandals
brooksfoe:
"Krugman's argument is that American politics suffers from collective cowardice on issues where corporations are asserting their interests in ways that harm the country as a whole. A generation of fear of corporate ability to mobilize lobbying and advertising and to shape the political landscape through donations and press manipulation have made American politicians overly, and harmfully, reluctant to even point out the plain truth about how corporate interests diverge from those of the nation at large, and how important it is to curtail corporate power."
I quote that at length because it is representative of a strain of argument from the left that really annoys and dismays me. How exactly are corporations any different from other interest groups that lobby the government in support of their own intersts even when those interests diverge from what is "best" for the nation as a whole (see, e.g. teachers unions, labor unions, AARP, etc)? Leave aside the fact that what constitutes the "best interests of the nation" is almost always arguable. Why exactly should we single out and restrict access (in your words, "curtail corporate power") to the political process by corporations (and by extension their shareholders and employees) when we don't do so for other narrow interest groups?
Look, I loathe the way the teachers' unions have captured and controlled the debate over school choice to protect their personal interests, but I don't question their right to join the fray. Democratic pandering to teachers unions meets any rational definition of "collective cowardice" but you don't often see arguments in favor of entirely cutting teachers out of the political debate over schools.
Democracy is messy and demands that every interest group, including those that you disagree with, gets a chance to make their argument. It often leads to gridlock. But the alternative is much much worse. Whatever your thoughts on health care, setting a precedent that the party in power is free to make the road to reform easier by ignoring and or restricting the rights of the opposition would do far more long-term damage to our country than the maintenance of the health care status quo.
How exactly are corporations any different from other interest groups that lobby the government in support of their own intersts even when those interests diverge from what is "best" for the nation as a whole (see, e.g. teachers unions, labor unions, AARP, etc)?
First, corporations have no human members. Corporations are legal constructions. They are not constituency organizations, like AARP or labor unions (or the Sierra Club or Amnesty International or Christian groups like Focus on the Family, for that matter).
Second, corporations' only interest is their own profit. This is selfish in a way that the Sierra Club's desire to protect the environment, or Focus on the Family's desire for a more Christian America, is not. While labor unions are also purely self-interested, their desire is for higher salaries and benefits for their millions of members, not higher profits which accrue almost entirely to a small group of wealthy executive officers and shareholders. Corporate profits are certainly important to the public interest: corporations and their profits drive capitalism, the most productive economic system in the world. But corporate profits are extremely narrowly distributed, compared to wages. Whether for this reason or for others, corporations seem to consistently fight for extremely narrow but profitable measures that are transparently opposed to broader public interests.
Third, corporations have astronomically more money at their disposal, per interested entity, than constituency groups do. And in the past 30 years, roughly since the beginning of the neo-conservative political revolution, they have gained a completely disproportionate level of power in the political system. They have done so in part through their own adeptness at manipulating the political system - labor and environmental advocates, and even Christian lobbies, are badly outmatched - and in part because ideological trends left Americans without much of an intellectual vocabulary for thinking about how to restrain or channel capitalism to serve national interests.
And that is the context in which I read your remark "But the alternative is much much worse." I was discussing the Paul Krugman vs. Barack Obama approaches to the issue of health care politics, and the question of whether America needs a John Edwards-style populist political rhetoric which reminds people that what is good for GM can be bad for America. (Though as it happens, universal health insurance would be good for both.) Yet even to raise the issue of anti-corporate rhetoric invites accusations of totalitarianism. rwe seems not to understand the difference between legislating community rating for health insurance and Communism. This is an impoverished intellectual landscape bred of 30 years of neo-conservatism. I don't understand what you mean by "the alternative". We are not in a discussion about ending free-speech rights for anyone. Why would you think, when I say that maybe we need more anti-corporate rhetoric from presidential candidates, that what's being contemplated is authoritarian measures to shut someone up?
Neil Wilsom has a point. There is a free rider problem, where Canadians and Europeans are able to get the drugs at much lower prices than Americans, so they can benefit from the research that we pay for. So, it's not clear to me that drug reimportation is such a bad idea...
I know this crowd isn't going to like this, but your fantasy about the U.S. pharmaceutical companies making all these life saving pills with it's ZOMG free market, miracle, research and the rest of the world leeching is absolutely bonkers.
European pharmacueticals research costs are highly subsized by governments, this allows them to mandate research areas that wouldn't be cost effective in a market world so that treatment of more rare ailments is researched. By contrast, the number of U.S. patent released every year, give you viagra, a billion flavors of pain meds, propecia, etc..
Market forces just absolutely do not deliver magical results in the health care field.
Krugman says:
"The fact is that there’s no way to reduce the gross wastefulness of our health system without also reducing the profits of the industries that generate the waste."
This is SPECTACULARLY stupid. Anyone who writes such a thing should not be allowed to speak on the topic any more.
I think we all know the real problem with health care is that you can't pay your doctor in notes backed by dried codfish. Obama is to cowardly to do anything about that.