Monday, June 18, 2007

The Dangers of Advocating Pharmacy Reimbursement

Pharmacists' advocation of prescription filling reimbursement may cause what Kirzner writes as, "[ a failure] to understand that the market has not yet discovered all that it will surely soon tend to discover”. When government protects inefficiencies by creating price flooring, it blocks future innovations yet to be discovered by the entrepreneurial market process.

Many pharmacies through America advocate for government intervention to promote higher dispensing fees. The California Pharmacists Association reacted recently to the June 1st, 2007 California State Legislature Budget Conference Committee. They claim that independent pharmacies face the danger of closing their business. This advocacy is not new of America's pharmacies nor of America's businesses in general. The formula typically adopts the following format. "X price is not fair, so Y business will fail, leaving Z, the American Consumer, without a certain commodity." It follows a "we advocate for the best interest of the consumer" type of terminology that really is a mask for protecting the interest of their businesses.

Do patient's really suffer from these independent pharmacies going out of business? Possibly patients will then lack the special pharmacy services that independents allegedly provide. Realistically, pharmacists at chains or independents rarely spend the time performing the clinical services that raise patient outcomes. There is no randomized clinical trial in America illustrating the enhanced patient outcomes delivered by community pharmacists.

Why should we reward inefficiency in the market? When pharmacies such as CVS or Walmart can deliver patients economies of scale and lower costs prescriptions, why should we protect those pharmacies that fail to do so?

1 comment:

Unknown said...

We should protect these "inefficiencies" because there is more to quality of life than pure economic efficiency. I submit two arguments: First, apart from "low, low prices," people prefer shopping at smaller establishments where the owner is a DIRECT stakeholder, rather than a mere employee. This is because the owner is more responsive to community needs and desires. A large absentee shareholder-owned public corporation cannot be said to share the same fate that the local community faces. In other words, a locally owned business has to be directly accountable to the community it serves because negative impacts from its operations will be localized within the owner's own community. Not so for the absentee-owned corporation.
The second reason is that a society is more just, more equitable, more stable, and more democratic when small usable pieces of productive property are more widely distributed throughout the population, as would be the case in a nation of small merchants. Ask which situation is more desirable for economic, social, and political self-determination: 500 employee pharmacists working for one large corporation, or 500 owner pharmacists who individual own and operate their own store? From the standpoint of the local business community, which would be better for local bookkeepers, accountants, attorneys, printers, etc.?
Capitalism doesn't always have to be only one way. There are paradigms within capitalism that can tend to favor certain outcomes over others. If efficiency is the ultimate goal of capitalism, then you will see the situation we have today. However, if encouraging small private holdings is the goal of capitalism, then you would see that outcome as well, i.e. Switzerland.