COMPETITION IN U.S. HEALTHCARE

Competition in U.S. Healthcare

Competition in U.S. Healthcare

Introduction

Medical services and products cost significant sums of money no matter where medicine is practiced. The costs are real even in charity hospitals. To reduce costs, medicine has increasingly been subjected to competition, so that patients are customers who are sold medical services and products.

The pharmaceutical business incurs tremendous costs in bringing a new drug or medical device from concept to market. These costs generally fall into four areas: Research & Development (R & D), the Food and Drug Administration (FDA) approval process, manufacturing, and advertising. Research and development is by far the most costly of the four and an area that is most open for fraud (Wolpert, 2007).

Discussion

In a capitalist free-enterprise economy, price competition is an important factor in regulating growth, prosperity, the number of surviving entrants, and competitive behavior. Lower prices lead to higher demand and often to increased share of markets. Conversely, higher prices lead to lower demand, opening the market to new entrants or lower-priced competitors—all other things being equal.

However, when the same entity or parts of closely related entities can specify what is to be purchased, deliver the products or services, and establish the price, normal market factors no longer control competitive conditions. In the absence of competition, this might be called a monopoly. Occasionally normal competition is impaired by interference of outside agencies, a condition that affects the health care delivery systems in the United States. If competition is mitigated by a low availability or non-availability of the particular product or service within a reasonable time or distance, a nearly monopolistic situation can exist and price competition is stifled, if not eliminated (Steven, 2007).

Where a prospective purchaser has a desperate need for a product or service, normal market controls also fail to operate normally. For people ...