For the third and final part of my Oregon Trail story, I decided to write an ending that’s almost completely educational and non-rally related. The Oregon Trail game, after all, was meant to be an educational tool, so I will painstakingly boringly be educational as well. If you’re a geek like me and enjoy science, economics, politics, and sociology, then enjoy! If not, sorry!
Anyway, after drugging myself to sleep for the 11 hour flight from San Francisco to London, I head straight to work for one last day to sort this big mess (aka my life) before treatment begins. I am surprisingly alert and awake. To be fair, over the past 30 hours I had probably been asleep 15 of those hours. As I get closer to treatment, I get more anxious. The more anxiety I get, the more I work. It’s odd, but I generally figure that if I’m not going to be able to relax anyway, I might as well do something productive until I can relax. Work books me on excused leave for the month; I say two weeks is reasonable if everything goes according to plan. I am told not to come back before two weeks. It’s a nice change of pace from corporate America, where you do often feel that everyone is just trying to squeeze as much as they can out of you. +1 to the UK for giving reasonable work/life balance.
Although two weeks? How could anyone ever come back from leukemia in two weeks?
As I said way back in Part 1, I was diagnosed with chronic myeloid leukaemia (CML), which before 2001, was an incurable form of cancer. In the past, traditional, hair-losing, daily-vomiting chemotherapy would be used to try to kill off the cancerous cells; however, the underlying condition that caused the creation of the cancerous cells wasn’t being addressed; therefore, most patients died within 5 years’ time.
This is because CML is caused by two chromosomes within the bone marrow, where white blood cells are produced, randomly swapping DNA for no known reason. Basically, a piece of chromosome 9 (the ABL1 gene) breaks off and attaches to chromosome 22 at the BCR gene as shown below.
The result is something called the Philadelphia chromosome, which carries the BCR-ABL gene. The BCR-ABL gene produces a protein tyrosine kinase, which speeds up cell division. Unregulated cell division of white blood cells = cancer, so no matter how much you kill off the cancerous cells, the cancer would keep coming back.
In 2001, a fairly famous drug called Gleevec (Imatinib) came onto the market. It works to inhibit the tyrosine kinase protein, which stops the cancerous cells from reproducing and effectively, kills off the cancerous cells through natural cell death. While it doesn’t resolve the chromosomal mutation and you must take the drug forever, it’s still quite revolutionary as it’s the first cancer drug to inhibit or kill off cancerous cells, while leaving healthy cells relatively intact. As such, it made the cover of TIME magazine when it was released, and the scientists who created the drug have received all sorts of awards for turning a previously fatal form of cancer into a treatable condition.
Unfortunately, Gleevec is also (in)famous for something else, its cost.
As a bit of a geeky joke, I thought it would be fun to try to actually use my Economics degree for once to show visually how pricing a drug like this in a free market, as in the United States, would work (not like those silly Euro commies that tinker with everything).
I started out drawing a supply and demand curve to demonstrate the pricing point of the drug. If you have CML, you can live a long, happy, healthy life if you purchase the drug. If you don’t purchase the drug, you will have a slow, painful death; therefore, we can think of the drug as the closest real-world example to a perfectly inelastic demand curve, which is represented as a vertical line. This means that, for any change in price, quantity demanded remains the same. Basically, we can assume that any rational person would pay any price when given the option of living versus dying. A textbook example of an inelastic demand curve, expressed in price (Y-axis) and quantity sold (X-axis) is below.
But where’s the supply curve? Since Gleevec is patented, Novartis has what’s called a pure monopoly over the market. There is no supply curve in a pure monopoly, since well, Novartis determines the supply. How do they determine the supply then? By moving along the demand curve until marginal revenue (the revenue obtained by producing one additional pill) equals marginal cost (the cost of producing one additional pill). This would maximize profit for the firm. I don’t really know what marginal cost looks like for producing Gleevec, but I can assume that R&D (which translates to the cost of making one unit) was extremely high in comparison to making additional units, which should be relatively low in comparison. Since I don’t know, I’m going to go with something reasonable, like at what price point is revenue maximized?
Since perfectly inelastic demand curves don’t actually exist in the real-world due to the income effect (i.e. I wouldn’t be able to spend a million dollars on the drug simply because I don’t have a million dollars), it gets a bit more tricky. As a starting point to build in the income effect to my inelastic demand curve, I took a look at US income distribution by percentile. This gives me a good idea at the percentage of people willing to pay at any given price point because it represents all the money the individual would have to spend on something that would save their life (i.e. perfectly inelastic demand).
Now, this is a bit tricky, but bear with me. If I rotate this income distribution and change “income percentile” to “quantity sold” (with the 99th percentile, or top 1%, being a quantity of 1 sold, and the 1st percentile, or bottom 99%, being a quantity of 99 sold) I can create a demand curve expressed in price and quantity, based on income, that looks like this.
Basically, the graph is showing that at the pricing point of over $1 million, I could probably only sell one or two one-year prescriptions of the drug. At $1,000, I could sell pretty much all 100 one-year prescriptions of the drug. However, I can only pick one price point for the drug, so I need to pick the point where I can create the most revenue by selling the most units at the highest price people afford. To figure out this revenue maximizing point, I went to the US Census Bureau to grab the data so that I could work it out myself. Feel free to do the same. You can check my work at the link below.
What I did (shown below) was take the combined male/female mean income for each income bracket. Then, I multiplied that mean income by the number of people within that income bracket or higher. The number of people within any specified income bracket or higher would be the number of people that could afford the drug (i.e. the quantity) at that given price point. Price (mean income) times quantity (# of people that can afford it) = revenue.
What this shows is that, if you’re a heartless, profit maximizing monopolist with no conscience, you wouldn’t charge $1 billion for your life-saving product because you wouldn’t be able to generate enough volume at that price. The revenue maximizing price is actually greatly below that, around $35,000 per year. This is actually around the point where the drug is accessible to the average American because, due to the inelastic nature of the demand, one would be willing to spend all of his or her money on it without being able to afford anything else. Keep in mind, however, that Gleevec was released in 2001, when incomes would, presumably, be slightly lower. Also the $30,000 pricing point was the second highest as far as overall revenue generation. With any small change in income distribution, the $30,000 price would be the revenue maximizing point.
So what was the initial market price in 2001 for Gleevec per year, you might ask? $30,000 per year.
Ok, I have to admit; my pricing point is actually a bit inaccurate since most people in America have health insurance to help cover at least some of the cost of these drugs, but don’t worry, management recognized this oversight as well. After the drug became a hit, AND research and development costs were already fully recouped (a price of $30k per year for two years covered R&D), the price was of the drug was increased to three times its original cost, to a price of about $92,000 per year. Even with insurance, Americans often times have to pay up to 20% of the cost of brand-name drugs, which in this case, would only be $18,000 per year. Oh, and did I mention that if you have CML, you’re on this drug FOREVER?
With that price-break, average CML patients could now afford luxuries like cat food for themselves. While I’m sure Novartis, like any rational profit-maximizing firm, would have preferred to maximize profits by increasing it to a cost of $150k per year, there’s some additional hassles once your drug crosses the $100k per year mark, as approval for treatment then becomes more difficult, no longer allowing the free market to set prices naturally. How sad.
Fortunately, for UK taxpayers, the drug only costs £21k GBP ($30k USD) per year. More fortunately for me, oncology prescriptions are free in the UK and not even subject for the fixed £8 prescription charge I would normally pay, which to me, seems more than reasonable.
Now, can I get a consensus that this is clearly wrong? That a highly unregulated, free market model has extremely disastrous effects when it comes to matters that involve human life? I mean, it works great for figuring out how much to charge for pants, but..
These are the types of things that governments are for – when the outcome of the free market is seriously fucked up. Regardless of how libertarian you are, any decent economist knows there are areas where the free market fails and must be regulated. Classical economics, which generally quantifies “utility” (units of satisfaction) as “money” is not going to yield the best result for society when you’re dealing with human life. If you do, you might also believe those 6 year olds should get back to that 19th century textile factory with their profitably dainty fingers and stop burdening the economy with their recess and soccer games.
But oh, don’t all these extraordinary profits for pharmaceutical companies just mean they can reinvest the money in R&D/scientists’ salaries to find more life-saving drugs? Well, sort of. It also means they have a ton of money to lobby the government to make sure they can get away with things that common sense would say is wrong. As such, pharmaceutical companies have topped the chart for lobbying expenditures every year since 1998, as far back as the statistics I could find go, totaling $3.1 billion in total lobbying expenditures with insurance companies nicely slotting into 2nd place (more on insurance later).
It basically makes the Oil & Gas lobby look like a bitch at a measly $1.6 billion, about half of what the pharmaceutical industry spends. And that comparatively minuscule amount is still enough to alter foreign policy, overthrow governments, and cover up some fracking debacles. Where do you think the $3 billion pharmaceutical one goes? I wish that was rhetorical, I really have no idea what it’s used for..
Anyway, since I’ve gone through both the US and UK healthcare systems more than any consenting person would dare to do (I was diagnosed with Crohn’s disease as a teenager and paid for my treatment in the US as an adult with my own insurance), I thought it would be a good idea to compare the two. We’re two similar countries and two similar economies with similar life expectancy and health concerns, so you would think that the medical costs per person are about the same. Actually, you would expect costs to be more in the UK because there’s no disincentive to consume medical services when nearly everything is free. Plus, they’ve given into the horrifying evils of socialist medicine.
They’re not even close.
In the US, total healthcare expenditure (by both the government and the individual) is $9,146 per person per year versus $3,598 per person in the UK. That’s $5,598 MORE per American than Brit. While you might say, “well, that’s because we get better care in the US.” That’s also not true. In the US you won’t live quite as long but you’ll still pay 3 times more.
You also might say, “that’s because Europeans are healthier.” Well, I wouldn’t exactly call the UK the most healthy country either. They smoke a bit more than the US (20% in the UK vs 18% in the US), they drink A LOT more than the US (775 pints in the UK per year versus 470 pints in the US), and while they’re not as fat, the overweight/obesity rate is surprisingly similar (62% in the UK versus 66% in the US, although I suspect the US has more in the “obese” category). However, overall life expectancy is still slightly higher in the UK than the USA at 81 years in the UK versus 79.8 years in the USA.
Also, the arguments I’ve heard that free medical care increases consumption of medical services is pure bullshit. Wait, prostate exams are free?! I’M GOING TO GET ONE EVERY DAY NOW FOREVER said (almost) no one, ever. If anything, it makes people more preventative. In the US, I would push back on routine blood tests for my Crohn’s because it cost me a lot of money. Here, I don’t like it, but I do it anyway. That routine blood test is what caught the cancer early. Early detection meant I wasn’t even hospitalized. Hospitalization costs way more than blood tests.
My situation is probably the easiest example to demonstrate how there’s such a dramatic difference in cost. For CML, it costs $30k per year to treat my condition in the UK with Gleevec, versus $92k in the U.S. FOR THE SAME FRIGGIN DRUG. This isn’t unique to my condition either; it’s consistent across the board (and has gotten worse since 2007).
If the US was able to get healthcare costs down to UK levels, it would save us $1.7 trillion per year ($5,598 savings per person * 320 million people = $1.7 trillion). That’s almost 3 times the measly $600 billion defense budget. Imagine how many more countries we could invade with all that money?
In fact, US government healthcare spending is already at $1.35 trillion per year, or $4,200 per person per year. Basically, if the US had the NHS (the UK’s socialized medicine system), you wouldn’t need to pay any more taxes to get your healthcare free and everyone could get a free PS4 too. Of course, Brits still complain about how inefficient the NHS is, but even so, they trounce cost savings and significantly reduce stress, fear, tragedy, and administrative time for its citizens.
How is this the case? Well, it’s a lot of it has to do with negotiating power. In the US, where health insurance is privatized, you have a relatively small group at each hospital, insurance plan, etc. to negotiate the cost of drugs, doctor visits, hip replacements, etc. This is why insurance when you work at a relatively large firm is fairly cheap to buy while out-of-pocket expenses are fairly low (the large plans can negotiate with the insurance companies as well for a better rate) while, if you buy on your own and have no negotiating power, it’s extraordinarily expensive. This is the biggest annoyance of “ObamaCare” where, if you don’t work for a massive multinational corporation, you pay shitloads of money for insurance that you’re required to purchase then still have to fork out $20k a year on top of that if you get CML.
In a single payer system, governments effectively “bully” healthcare providers to provide a certain level of service at a reduced cost because if the healthcare provider loses its bid to the government, it will get no business. It sounds harsh, but when you realize the government, in this case, is more like the big brother who comes to lay a smack-down on the kid in the school yard trying to extort you to spare your own life, as often is the case with many of these miracle cancer drugs, it’s a bit more understandable. There’s also a lot of other factors, like doctors’ high salaries, that contribute to costs, but remember, if you’re in any other westernized country, you won’t come out of medical school with $200k in student loans to pay off...
The bigger economy you have, the bigger opportunity a government contract is worth, the more leveraging power you have. Because the UK is one of the largest economies of the world, it can drive down costs from suppliers substantially, down to that $3,598 figure per year. In a small Scandinavian country, like say, Finland, with only 5 million people, the negotiating power is less and costs are slightly more per person (around $4,500/year). However, your company insurance plan can’t really do shit in comparison to a government, so it gets pushed around and costs go up, not to mention all the excess overhead costs of multiple individual firms/policies negotiating prices every year, figuring out and negotiating bills for every visit, settling disputes, and sorting payments. You know what happens after I’m done at the doctor’s here? I go home, and that’s it.
Now, could you imagine what the collective bargaining power of the US economy, the biggest economy in the world with 320 million people, would be? If we stopped worrying about having to pay for those damn freeloaders that are being so irresponsible by contracting diseases that they couldn’t possibly afford, we might be able to find out. If we stopped the 50’s style commie fear-mongering and went for socialized medicine, everyone would pay less (btw, the only industrialized country other than the US without socialized medicine is China).
Why do we do shoot ourselves in the foot with this and raise fear about the horrors of socialized medicine? Why is it considered such a terrible thing? Well, if you’re an insurance company, I’m pretty sure you didn’t spend $2 billion to be made redundant..
And don’t tell me “Oh, it could never work in America because..America.” Of course it can work. Even the French can do it, and their doctors and healthcare workers go on strike because they MIGHT have to work UP TO 60 hours per week sometimes. How many doctors in the US do you know that get to work a less than 60 hours per week? What happened to patriotism, America?
The biggest issue is that our politicians have become comically horrible at making policies, which I think most people can agree on. The second biggest issue is that so much of the population seems so misinformed by our horrible media and purchased politicians that a reasonable, educated debate isn’t even possible anymore. In fact, a good chunk of people probably won’t even believe an experience like mine, as though I have no idea what I’m talking about with all my experiences and publicly available statistics, and Rush Limbaugh really knows better.
A perfect example currently is where you see the media and politicians focusing so much on whether or not overt racism (i.e. you’re black and therefore cannot be trusted) exists, particularly around police brutality. While that’s somewhat true, it seems that everyone fails to address the much bigger, much more obvious problem that the US has been overwhelmingly structurally/systemically racist - that is, previously racism occurred, impoverishing a group of people, then we put systems in place which keep any impoverished people (of any race) from moving out of poverty - which creates “thugs” and reinforces the overt racism symptom. Those systems currently in place are a result of, which I think is an even bigger problem/root cause that rarely anyone talks about, the manipulation of working class whites into voting against their own interests. You can see the steady marginalization of working class people through the past 30 years, yet somehow, they’re able to make the working class believe that they can no longer afford things like healthcare, decent education, and a living wage because of the people who are so poor that they actually qualify for benefits to keep them from starving.
Do you know who the working class votes for in the UK? Labour, aka the socialist party. The Democrats produce policies that are more pro-business and right-leaning than the Conservative party in the UK, and the Republicans, who should really be catering to the well-being of their working class stronghold, go completely the other way. They manipulate their voter base into believing in an American dream that’s not possible for most people working at Wal-Mart or laying bricks with the current structure, believing that they’re not American/patriotic if they do not believe in this dream, and believing that Christian morals are those of self-reliance and competition rather than kindness and generosity to those in need.
Add in a little scorn international travel, contempt for any development of ideas outside America as “un-American,” and no time off to learn about anything new, and you have yourselves a slave. Now, the problems that used to only plague people of color such as drugs, poverty, unemployment, poor health, violence, and destruction of the family, now plague the working class more and more as well. Then they’re told that they just need to work harder if they want to be successful, and their hardships would be solved by cutting the basic needs of the social class right below them. I can assure you, shit like this does not happen anywhere else in the world. If America can fix this, then you reduce the number of desperate people, aka “thugs”, and when you’re not so desperate, people tend to get along better and not act nearly as racist.
The problem isn’t the people without a job, the problem is the system that exploits people that work their assess off to make ends meet and pay taxes but are one small tragedy away, one cancer diagnosis, one car accident, one lay-off, one unexpected birth away from having everything they’ve ever worked for entirely ruined. When that happens, as happened to my own family back in 2003 when I was 16 and both my parents had to declare bankruptcy, no one will offer you a leg up. While I’m proud of my triumph, and the eventual triumph of the rest of my family, I am embarrassed that it took a 4.0 GPA in high school, an absolute tear through every scholarship and club membership available toward the end of high school, a 3.9 GPA and double major in college, and internships every summer just to make sure that I wasn’t in a legitimate “Breaking Bad” situation come my CML diagnosis.
What’s demonstrated from the health care example above is, even when it’s more cost-effective, efficient, and harmonious for everyone to work together, somehow forces in the US, government or otherwise, still try to block its progress while offering no viable solution. It’s gone beyond complete greed and allegiance to the dollar bill to irrationally malignant behavior. It’s behavior to marginalize groups of citizens even while you personally are made worse off as well. It’s putting in ridiculous levels of effort, every day, to destroy the well-being of our own citizens so that ordinary people pay three times as much to take care of themselves and bankrupt themselves to save their own lives.
With that rant over (whew!) I wanted to add that for me, personally, everything is going really well and according to plan. After treatment started, I was in a weird fog for a few days and completely exhausted, which was most likely my 8 hours of jet-lag, rally hangover, and stress as much as it was that cancer miracle drug going to work. I found out last week that my white blood counts are dropping, which means I should be back to work later this week. My bloods should also be back to normal by next month, so I should be back to rallying for next month’s Ypres Rally. Currently, I’m enjoying my little bit of time off. I really appreciate all the support my friends and family have given to me, and the extra time I’ve been given to appreciate all of them, as well as to write and reflect.
The biggest heartache for me, however, is not that I now have cancer. It’s the thought that there’s so many people with this disease, like me, in the US that have to make the decision between bankrupting themselves and their families to get better or to just give up and die. I really can’t think of a more horrible situation for someone and their family to be in, and that’s why I spent entirely too much of my free time writing this. I’m one very lucky boy, and I hope that one day, all Americans - and also, all people - can be as lucky as me to escape avoidable tragedy and suffering for perfectly treatable conditions like my own.