Hepatitis C case shows why health care is so expensive

If there is one thing we should all be able to agree about health care it's this - health care is an enormously complicated issue. (One of many reasons that I think the government needs to stay far away from health care, by the way).

Rising health care costs is also a complicated issue, but that doesn't mean you can't identify some of the main drivers of increased health care costs.

Right now in Las Vegas, you can see for yourself one of those drivers - out of control liability lawsuits.

A lawyer for a Henderson man infected with hepatitis C suggested Thursday that two drug companies should pay more than $1 billion for failing to take steps that could have prevented Southern Nevada's hepatitis C outbreak.

During the punitive damages stage of the first outbreak-related civil trial, Robert Eglet told the jury that Teva Parenteral Medicine and Baxter Healthcare Services should pay for continuing to make and sell large vials of the sedative propofol to endoscopy centers despite previous outbreaks being linked to the drug.
And where would that $1 billion come from? Anyone who would ever buy one of Teva's or Baxter's (the drug companies being sued) future products. Also from Teva's and Baxter's employees and investors.

This verdict and the scores of similiar ones over the past few decades have also increase health care costs. Insurance costs will increase for everyone. Companies will have to jump through additional hurdles to try and shield themselves from future lawsuits. (Not necessarily a bad thing if Teva or Baxter had done something wrong, but that's not the case here as I'll discuss below.)

Also verdicts like this will lead to less investment in current and new drugs. Here's why: In the free market system profits and costs send important signals to investors and companies. If profits are high, both will move some of their limited resources into the profitable areas. This spurs innovation and competition, which in the long run lowers drug prices for the consumer. Investors and businesses will then move into more profitable areas, but the lower drug prices will remain.

What's happening here is exactly the opposite. These companies will be losing money, which will lower their profits. Lower profits send the signal that demand is already being met and discourage investment from investors and businesses. But in this case the signal is distorted. Profits are lowered, not because that's not demand, but by lawsuits that arbitrarily take away profits. The end result is the same though - decreased investment.

Now everyone feels terrible for the hepatitis victims, but you shouldn't help the victims by punishing someone or something successful who didn't harm the victims.

In case you haven't been following the details of this case, the drug companies' crime was to not know that doctor they sold their medicine to was grossly negligent. Chuck Muth sums it up well.
A licensed, highly-trained professional doctor in Las Vegas reportedly told his licensed, highly-trained professional nurses to reuse syringes to save money, ultimately and not surprisingly resulting in patients who were injected with the dirty needles becoming infected with Hepatitis C.

The victims, naturally and rightfully, sued. And as per the industry's standard operating procedure, the lawyers involved decided to include in their lawsuit two of the manufacturers of the drug which was injected into the patients using the dirty needles by the dirty nurses doing the bidding of the dirty doctor because....well, for the same reason Willie Sutton robbed banks:

That's where the money is.

The mind-boggling claim by the victims' lawyers is that the drug companies failed to sufficiently warn highly-trained professional doctors and highly-trained professional nurses that they shouldn't inject drugs into patients using syringes which had previously been used. Duh.

Even more amazingly, the Las Vegas Review-Journal reports that the judge in the case, Jessie Walsh, ruled at the start of the trial "that the drug companies were not allowed to use the 'dirty doctor' defense and blame the infection on doctors and nurses misusing the drug."

What the....? This is like suing General Motors because someone drove their Chevy to the levy drunk and hit someone.
Exit question: Using this standard couldn't someone sue the public school system (aka the taxpayers), the next time someone commits accounting fraud? After all if they hadn't learned math...

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