Question:
I'm writing a book about a solution to high medical costs. The government makes it legal to disregard all copyright and patents for all things medical i.e., EpiPens, prescriptions, and pacers, until healthcare providers and health insurances make prices affordable. In my story, bootleg healthcare is already prevalent. Besides this being an extreme solution, does this solution seem plausible or is there something I don't know about that would make it impossible for this solution to work?Answer:
Interesting idea. As you note, the idea is extreme, but it addresses some of the underlying causes of high healthcare prices.
Your reasoning likely was that cost reduction for the healthcare providers would lead to price reduction for the consumers. That certainly makes sense economically – existing healthcare providers would have incentives to lower prices if they can capture the same margin as before while serving more consumers. Existing research also shows that high healthcare prices for consumers are likely explained by the lack of competition among hospitals; many markets are served by just one hospital, and hospital mergers have become more frequent. Your idea would partly address this problem – cost reduction for the healthcare providers would make it more profitable for new hospitals to enter, toughening the competition and lowering prices for the consumers.
These all sound good in theory, but there remain serious concerns. Without patents, pharmaceutical and healthcare equipment companies would have little incentive to innovate for the public. Instead, incentives may be distorted in a way that companies see more value in inventing technologies that cannot be easily adopted by others, limiting the complementarity in innovation across companies. Without rapid advances in medical technology, the quality variation across hospitals may be amplified, making high-quality healthcare less accessible to average consumers. But, of course, we would expect the biggest obstacle to implementing your idea to be the resistance from the existing companies in the healthcare sector. These companies have a powerful voice in shaping policies and would oppose potential threats to their market power.
