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Blessings of Liberty

Friday, November 1, 1996

The critics of corporate America would have us believe that it has poorly served the health-care needs of the American people. Labor Secretary Robert Reich, for one, claims that corporations have a moral duty to provide "health-care protections" to their employees. Perhaps that is because the debate in recent years has focused almost exclusively on gaps in our employment-based system of health insurance.

          Most of us, it is true, have at least part of our medical bills paid by health plans provided by our employers. While the debate about employee health insurance is an important one, it doesn't account for the greatest contributions of free enterprise to U.S. medical care. When corporations create wealth and address human needs through innovation and productivity, they contribute to the health of Americans in ways at least as important as providing health insurance.

          Within the health-care industry, profit-seeking companies have generated tremendous innovations in recent years in such areas as cancer treatment, disease prevention, and computer-assisted diagnostic tools. In cases such as heart surgery, knee surgery, and the removal of gall bladders and hernias, devices and techniques pioneered by American firms and researchers have reduced or eliminated hospital stays and reduced invasiveness, pain, and recovery time. From 1985 to 1989 alone, the percentage of surgeries performed outside hospitals increased from 37 percent to more than 50 percent.

Corporate America improves our health through effective drugs, technological innovation, and a high standard of living

          America's competitive impulse generates medical innovation not only for American consumers but for the entire world. About half the world's output of medical devices occurs in the United States, and private research and development spending by U.S. pharmaceutical and device manufacturers dwarfs that of other nations. And despite the fact that other countries with less market-oriented economies benefit from U.S. medical innovations, Americans still enjoy more access to quality health care than virtually any other nation, according to studies by the journal Health Affairs and others.

          Medical research in the United States, whether in private laboratories or universities, is predominantly funded by corporations with an interest in developing products and studying diseases. Nine of every 10 useful new drugs come from private pharmaceutical firms, not the government. In the area of biotechnology alone, private investors have spent more than $10 billion in the past decade bankrolling hundreds of new companies. "No other nation on Earth could have generated so much capital to launch biotechnology companies," James Vincent, the chairman and CEO of Biogen, has said. "It's because no other nation has the free-market system of risk and reward that America does."

          Here's one typical example: Genentech, one of the nation's leading biotechnology companies, is currently seeking government approval for a drug that treats acute stroke by dissolving blood clots. This single drug, called TPA, will help reduce the debilitating effects of a condition that affects 400,000 Americans each year and is the leading cause of adult disability, often leading to paralysis and loss of vision or speech. No other treatment exists. TPA is already administered to some 135,000 heart patients because of its benefits for that condition. Yes, Genentech makes a lot of money from TPA -- $300 million in 1995. Marketing the drug to treat strokes will probably add another $100 million in annual sales. But many who suffer from heart disease and stroke no doubt view the drug's $2,200 yearly cost to be worth it.

          More importantly, Genentech's success exemplifies the payoff for addressing a critical human health need. Its example makes it all the more likely that other profit-seeking individuals or firms will ameliorate or cure other major medical conditions in the future. It's the profit motive, not native intelligence or the existence of government programs, that has made the United States the world leader in inventions, patents, and discoveries.

          Perhaps the most persuasive case for deploying free enterprise to meet America's health-care needs can be found in routine eye care, which is typically not covered by insurance. Eyeglasses, contact lenses, and eye examinations cost less today in real terms than ever before, particularly when the increased quality of eye care is factored into the equation.

          In a 50-year career in optometry, entrepreneur Bob Morrison has contributed significantly to this development. In 1963, while working in a basement lab, Morrison helped fashion the first soft contact lenses, then patented them with two other scientists. At one time, Morrison's firm was making every soft lens sold in the U.S. His rights to the technology were later sold to Bausch & Lomb, but Morrison went on to develop and make other lenses.

          In 1991, Morrison's trip to the Middle East inspired yet another venture. At a bazaar, reports Business Week, Morrison saw a rugmaker arguing with his children. The kids wanted their father to retire, Morrison's interpreter explained, because he was making so many mistakes on the rugs. Morrison realized that the man, only 42, was gaffe-prone because he could hardly see. He needed glasses but couldn't afford them.

          To meet the universal need for low-cost optical care, Morrison and his son created Instant Eyeglasses -- prescription glasses that can be assembled in minutes and sold for about $20 a pair, compared to the average retail cost of $135. Instead of custom-made lenses for each set of frames, Morrison uses prefabricated lenses that fit into frames that can be snapped together and adjusted to fit any face. With only 152 lenses, rotated to various positions within the standard frames, Instant Eyeglasses can fill 26,000 prescriptions.

          But contributions to health don't come only from the health-care industry. Oil companies, for example, have vastly improved the health status of people around the world. Innovation in plastics and other petrochemicals have made possible mass inoculations (with hypodermic needles), surgical devices, life-support systems, artificial limbs and organs, and treatments of various diseases. Thanks to innovations in a range of industries, healthful fruits and vegetables are cheap and plentiful, and workplaces, homes, and transportation are safer. All of these pleasant developments have improved our health and longevity.

          Free enterprise in America's medical marketplace promises more of these tremendous medical benefits, particularly in the information and telecommunications industries. Electronic mail, or e-mail, has already become commonplace in doctor's offices. The automation of medical records leads many analysts to speculate that we are not far away from personal "health ID cards." These will provide doctors with an up-to-date record of previous medical conditions and procedures, making diagnoses more accurate and treatment safer and more effective.

          Furthermore, commercial on-line services such as CompuServe and America Online offer health reference databases and the opportunity to discuss health issues with fellow patients or health professionals. Jeff Newman, a commodities trader at the Chicago Board of Trade, used a CompuServe forum to request information after he developed recurring polyps in his throat. His doctor said that the only treatment was to keep having them removed by surgery. But Newman, whose job requires him to shout, wanted an alternative. A CompuServe user in Seattle suggested that a compound in cabbage juice might slow the growth of polyps. It worked. "If it were not for e-mail and CompuServe, I believe my life would have regressed along with my hope," Newman told USA Today.

          Information services and e-mail will play an increasingly important role in health care, according to Jerome Kassirer, the editor of the New England Journal of Medicine. "On-line computer-assisted communication between patients and medical databases -- and between patients and physicians," he wrote in the Journal, "promises to replace a substantial amount of the care now delivered in person." That will not only save money but also, he argued, improve the quality of care. "The interaction with an on-line computer system can be quite comfortable," he said. "Studies show that many patients feel even less discomfort 'talking' to a computer about personal matters than to a physician."

          Even more futuristic technologies may one day dramatically reduce the cost and improve the quality of medical services. A hospital in Asheboro, North Carolina, recently brought a new worker on board that can deliver medications and other items much more cheaply than the hospital could previously manage. The worker costs only $6 an hour, carries as much as 200 pounds at a time, and will work 365 days a year. It is the HelpMate, a robot that navigates the hospital using a computer and sophisticated sensors.

          Health economists predict that devices and techniques for self-diagnosis and treatment will play an increasingly important role in providing good care while controlling costs. Indeed, self-medication with over-the-counter products such as aspirin and ibuprofen already helps control health-care expenditures. The National Center for Policy Analysis estimates that if only 2 percent of nonprescription drug customers sought professional care instead of self-medicating, the number of primary-care physicians would have to rise 50 percent to meet the increased demand. The extent of self-medication owes much to private-sector innovations in pharmaceuticals, packaging, marketing, and transportation.

          Software companies like Microsoft, computer makers like IBM and Dell, even manufacturers of robotics, plastics, and fiber optics are investing billions of dollars in the development of computer and information technologies. Do these firms consciously set out to improve health care? Probably not. But their profit-seeking actions have demonstrably done so.

          Private enterprise contributes to our health in an even more basic way than advancing drug research or promoting technological change. Because the U.S. economy provides basic goods and services at relatively low cost, families can afford to spend more to improve their lives. From 1960 to 1992, real spending on food as a share of GDP fell by nearly a third, as technological innovations helped farmers increase their productivity and reduce spoilage. Spending on clothes stayed constant during the same period. These trends freed up household income for services such as discretionary medical care and recreation. By generating unprecedented economic production, our economy has given families the financial wherewithal to purchase medical services and otherwise improve their health in a way that our grandparents and great-grandparents would find truly mind-boggling.