Writing for the June 8th Los Angeles, Times, David Lazarus addresses the stranglehold that medical device manufactures use to gouge consumers with necessary medical devices, like “hearing aids cost as little as $100 to make but sell for thousands,” that often aren’t even covered by healthcare insurance (including Medicare): “Defenders of the healthcare status quo will be quick to play the innovation card. They’ll argue that the high cost of medical devices encourages businesses to continue seeking technological advances, which in turn can help save lives.
“There’s something to this. Look at the billions invested in developing COVID-19 vaccines in record time. No drug company or research lab got into that race without an expectation of a massive payday down the road… But, as with all questions of healthcare costs, the key issue is how much profit is enough… No one begrudges device makers or drug companies earning a reasonable profit or recouping multimillion-dollar R&D expenses. That’s only fair.
“The problem with the status quo is that prices never seem to go down. Even after R&D and marketing costs have been amortized many times over, even after economies of scale have been realized, list prices keep rising… All other cutting-edge consumer goods — TVs, laptops, cellphones — get cheaper over time, reflecting how competitive their markets are.
“Most medical devices and prescription drugs just get more expensive as time passes. In large part, this is because these markets have costly barriers to entry (R&D, patents, etc.). The products also require strict regulatory approval… Less competition almost always means higher prices… But let’s call this what it is: taking advantage of sick people.
“‘Taking advantage of sick people is wrong,’ acknowledged Matthew Grennan, an assistant professor of healthcare management at the University of Pennsylvania. ‘But I’m not sure where the line is… Medical devices are this weird class of goods where the manufacturing cost is relatively low but the value they create is high…”
Likewise – noting that 70% of American adults require some form of vision correction and where very few healthcare plans offer any real coverage – the manufacture and sale of eyeglasses are predominantly controlled by two huge merged European-based companies (Essilor and Luxottica, a $58 billion deal approved by the FTC in 2018) that even offer a modified vision insurance plan:
“[What] we see masks the underlying structure of the global eyewear business. Over the last generation, just two companies have risen above all the rest to dominate the industry. The lenses in my glasses – and yours too, most likely – are made by Essilor, a French multinational that controls almost half of the world’s prescription lens business and has acquired more than 250 other companies in the past 20 years.
“There is a good chance, meanwhile, that your frames are made by Luxottica, an Italian company with an unparalleled combination of factories, designer labels and retail outlets. Luxottica pioneered the use of luxury brands in the optical business, and one of the many powerful functions of names such as Ray-Ban (which is owned by Luxottica) or Vogue (which is owned by Luxottica) or Prada (whose glasses are made by Luxottica) or Oliver Peoples (which is owned by Luxottica) or high-street outlets such as LensCrafters, the largest optical retailer in the US (which is owned by Luxottica), or John Lewis Opticians in the UK (which is run by Luxottica), or Sunglass Hut (which is owned by Luxottica) is to make the marketplace feel more varied than it actually is.
“Between them, Essilor and Luxottica play a central, intimate role in the lives of a remarkable number of people. Around 1.4 billion of us rely on their products to drive to work, read on the beach, follow the whiteboard in biology lessons, type text messages to our grandchildren, land aircraft, watch old movies, write dissertations and glance across restaurants, hoping to look slightly more intelligent and interesting than we actually are. Last year, the two companies had a combined customer base that is somewhere between Apple’s and Facebook’s, but with none of the hassle and scrutiny of being as well known.” Sam Knight writing for the May 10, 2018 Guardian UK.
Sure a few smaller brands have entered the marketplace, like Warby-Parker, but for most American consumers, the litany of brands controlled by Essilor/Luxottica are their likely go-to sources for eyewear. In March of 2018, Women’s Wear Daily noted: “By supplying the two main elements of the final product [Luxottica manufactures eyeglass frames, and Essilor produces lenses], Luxottica/Essilor will essentially control the entire supply chain in the eyewear market. This will also likely give them leverage over the booming global eyewear market, which is expected to reach a value of $130 billion by the end of 2018.” It did.
Lazarus continues with his analysis of what increasingly appears to be a clear example of price gouging, sustain by a callous lack of cost-controlling universal healthcare, making the United States the only developed nation on earth without this otherwise universal benefit: “Larry Hicks was diagnosed with significant hearing loss about six months ago. He blames it, with a bit of embarrassment, on blasting music at crazy-high levels in the car… The Burbank resident is now shopping for hearing aids and is stunned by the cost, which can run as much as $6,000 for a pair. Medicare and most private plans don’t cover hearing aids… ‘It feels like price gouging,’ Hicks, 51, told [Lazarus]. ‘They’re taking advantage of the disabled and the elderly.’
“It’s hard to disagree. Medical devices are a prime example of a relative handful of manufacturers exploiting a captive market with excessively high list prices. Whether we’re talking hearing aids, insulin pumps, pacemakers or other life-altering technologies, patients almost always are forced to pay far more than the cost of developing and making the devices… ‘The medical device industry is largely an oligopoly, with some of the companies holding effectively a monopoly position,’ said Roberta N. Clarke, an adjunct professor of social policy and management at Brandeis University, specializing in healthcare marketing… Limited competition, she told [Lazarus], ‘allows the medical device companies to charge higher prices because of a lower threat of a competitor entering the market at a lower price… This effect is exacerbated by the tight relationships that the medical device companies form with physicians…”
In short, the lack of a universal, price sensitive healthcare system, where Americans pay on average double for prescriptions than taxpayers in other developed nations (who are covered by their nation’s plans anyway), can be traced to deep business-funded conservatives in the United States caring so much more about the richest of the rich in the land than about the overwhelming majority of “the rest of us.” Costly congressional campaigns offer the opportunity for suppliers to grease the palms of those who might otherwise actually represent consumers.
I’m Peter Dekom, and between the gridlock in Congress and a newly configured conservative Supreme Court, Americans are likely to be treated as second class healthcare citizens for the foreseeable future.
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