A Clarification of Personal Beliefs

A Clarification of Personal Beliefs

I've been asked by a friend of mine to clarify some of my views of the world. After a lengthy discussion of the government, he approached me with a synopsis of how he sees my worldviews, and since his synopsis is common in those that believe in the benefits of bigger government I thought I'd respond. 

He has attacked me from five different angles, and to quote him directly his statements were;

1. You believe money is the highest form of motivation. 
2. You believe money determines passion and the pursuit of talent/happiness. 
3. You have a significant mistrust of the government.
4. You feel the government is best utilized as a militarized/police entity. 
5. Your version of a non-evil government is one in which the military and police protect those who have from those who don't, especially in cases where access to education, healthcare, and food and water are concerned. 

In these five attacks I can already sense the Marxism and the feeling of class warfare, along with the classic bullying attacks used by those who prescribe to cultural Marxist ideologies. The first attack from those who oppose the free market and the free market of ideas is always as such; "you only care about money and don't care about the less fortunate." Of course, this is a logical fallacy since at its core it is nothing more than an ad hominem attack. I do have to give credit to my friend's points, as they only vaguely allude to the typical response; he is more concerned with how much I value money, and my fear of the government and its ability to provide for citizens through social programs. Regardless, the desire for a government controlled market is clearly underlined in these arguments.

I'm going to go through each point one-by-one and try to clarify to my beliefs to my best ability. 

1. You believe money is the highest form of motivation.

The full quote for my friends first point;

"You believe money is the highest form of motivation. You also believe that a single-payer system implies equal pay regardless of job title."

To put this in context, he and I were discussing the role of the government and its involvement in the healthcare industry. His argument is a rebuttal to my argument;

"Higher profits lead to more jobs, better products, and better salaries. Lower profits lead to less jobs, worse products, and less salaries. Although we like to think that doctors do what they do out of the good of their heart, we can't deny the fact that there would be less neurosurgeons if they were paid the same as nurses."

As a quick note: I hate when people quote themselves, so I want to state I'm only doing this to help contextualize the discussion.

I think there may be a misunderstanding from my initial response. When I said that there would be less neurosurgeons if they were paid the same as nurses, I didn't intend to suggest that a single-payer healthcare system would pay healthcare employees a constant salary. My intention was to state that if there was a true single-payer healthcare system applied to the US's current healthcare system, the salaries of neurosurgeons would fall way below market value. If the salary for neurosurgeons falls below market value, then there would be less people interested in undergoing the lengthy, challenging, and incredibly expensive process of becoming a neurosurgeon.

Different careers require different levels of investment. The most common investment is the college degree or university education. If a person spends money on a college degree, they expect to be able to get a job that pays enough so that the person can get at least an equal return of investment for their degree.

I'm going to create a hypothetical scenario to explain how jobs are valued in the market. I'll periodically link to the sources used for data collection, and to calculators I used for estimated expenses.

Jane is an 18-year-old girl from Winston-Salem, North Carolina, and is interested in a career in plumbulignartistry. It's her absolute passion in life, and she can't imagine herself doing anything else. She wants to attend a local private school because plumbulignology (like neurosurgery) is a specialized field of study with few renowned university programs teaching such courses, and the school conveniently has a great program in plumbulignology. Her parents make a modest living, with both family members working as elementary school teachers with $44,015 annual salaries (the average salary for a teacher in Winston-Salem is $53,794).

Jane will really need to do some deep thinking in order to decide whether or not she should take this plunge into becoming a plumbulignartist.  First, how much does her university cost? In the 2016-2017 school year, private schools charged an average of $33,480 for both tuition and school fees, so let's assume that Jane's tuition and school fees will cost a total of $133,920 for her four years of schooling. In order to be able to do such a thing, Jane will have to apply for federal student loans.

Jane goes to a FAFSA calculator to get a proper estimate of how much she will receive in federal subsidized loans.

Parent wages: Each parent makes $44,015 ($88,030 in total)
Cost of attendance (including fees): $33,480
FAFSA Expected Family Contribution: $20,758
Expected Financial Need: $12,722 a year

As once can see, FAFSA will only grant Jane with $12,722, since the government assumes that Jane's parents will be able to afford $20,758.  Sadly for Jane, the government often overestimate the Expected Family Contribution for middle class families. After tax, her parents only make $72,859.48. If we factor in health insurance ($1117.53), car insurance ($2060 for two cars), mortgage ($860), and other expenses, that number quickly falls. According to Career Trends, the cost of living for a family of three in Winston-Salem is $55,217. So, in total, Jane's parents have an extra $17,642.48 to spare on Jane's schooling.
So, since the government expects Jane's parents to pay for $20,758 of Jane's yearly tuition and fees, Jane will have to begin looking elsewhere for loans. Next, Jane calculates in how much she will receive in Federal Direct Unsubsidized loans (here we will assume that Jane will receive the maximum amounts for the sake of the hypothetical, and as a better illustration for children of middle class families). Let's do a little math and see how much debt Jane will have after graduation.

Federal Direct Subsidized Total: 

$12,722 = FFDSL (F = Freshman Year Accumulation)
$25,444 = SFDSL (S = Sophomore Year Accumulation)
$38,166 = JFDSL (J = Junior Year Accumulation)
$50,888 = GFDSL (G = Graduating Year Accumulation) 

Federal Direct Unsubsidized total:  

.0376 = b (fixed annual interest rate)
.01068 = a (for the FDUL origination fee deducted from gross amount loaned)
5,500 - 5,500a  = FFDUL
(6,500 + (F+bF)) - (6,500 + (F+bF))a = SFDUL
(7,500 + (S + bS)) - (7,500 + (S + bS))a = JFDUL
(7,500 + (J+bJ)) - (7,500 + (J + bJ))a = GFDUL

FFDUL = $5,441.26
SFDUL = $11,941.81
JFDUL = $19,678.39
GFDUL = $27,620.13 

GFDSL + GFDUL = $78,508.13

Jane has a pretty nice chunk of money set up for herself here, but she's still a little shy of the $133,920 total that she needs in order to follow her dream of becoming the greatest plumbulignartist in modern history.  Luckily for her, the school she is applying to offers a Perkins loan! Now we'll add this loan to the mix (Perkins loans are only offered to students with extreme financial need, but to understand the overall investment of a college education in terms of student loans, I've added it as one of Jane's financial resources):

Perkins Loan Total:

$5,500 = FPL
$11,000 = SPL
$16,500 = JPL
$22,000 = GPL

GFDSL + GFDUL + PL =  $100,508.13

Things are looking great for Jane, but she still needs an extra $33,411.87 to afford her degree in plumbulingnartistry. Her luck hasn't run out yet, since the school she is applying to has offered to pay the rest of the tuition in scholarship as recognition for her excellent 3.7 high school academic GPA.

Jane is so close to making her decision, but there are a couple more things she needs to investigate before she decides to cave to her desires of studying plumbulignology and plumbulignocaphry. She continues her research by calculating a good estimate of how long it will take her to pay off her loans and how much per month she'll have to pay (I used a 20 year plan, since it takes an average of 21 years for students to pay off student loan debt for a bachelor's degree, but federal student loans are forgiven after 20 years):

Payment = Initial loan[(rate/12)((1 + rate/12)^month)]/[(1 + rate/12)^month - 1]20 year repayment planFLR (federal loan rate) = .0376PLR(Perkins loan rate) = .05m (months) = 240MP stands for Monthly Payment

FDULMP = GFDUL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDULMP = $163.90 per month for 20 years 

FDSLMP = GFDSL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDSLMP = $307.98 per month for 20 years 

PLMP = GPL[(PLR/12)((1 + PLR/12)^m)]/[(1 + (PLR/12))^m - 1]
PLMP = $145.19 per month for 20 years 

FDULMP + FDSLMP + PLMP = $617.07 per month for 20 years

$7,404 in repayments made per year
$148,096.80 in total repayments

Jane sees the number and her eyes widen. It costs a lot more to become a college educated plumbulignartist than she initially thought. She tells herself that the risk is worth the reward. She begins to estimate a salary needed to be able to pay off the loans after she graduates, especially since she'll only have nine months until her payments begin. In order to do so, she adds together her loans with the cost of living for a single adult with no children in Winston-Salem:

Annual Debt Collection = $7,404
Annual Cost of Living for Winston-Salem, North Carolina, as calculated for a single adult with no children = $29,144
$7,404 + $29,144 =  $36,548 

So this figure, $36,548, what does it mean? It means that if Jane wants the added value of a plumbulignartist's degree to at least cover the initial investment of her $148,096.80 worth of student debt, she needs to find a career that pays at least $36,548 a year. The student loans are Jane's initial investment and her cost of production, and her salary will be her marginal returns.

At this point Jane realizes that her choice is entirely dependent on what the average salary for a plumbulignartist is. As soon as she figures out what she could reasonable expect as payment for her specialized, college-educated skill, she can be confident in her choice to invest so much time and money into this career field. Jane rushes to her computer and quickly tacks away at her keyboard until she's left waiting for Google to giver her search results for the query "average plumbulignartist salary." To her dismay, Jane finds out that plumbulignartists don't make much, and in fact "plumbolignartist" is a word I made up to represent a low-paying career that requires an expensive college education (plumbum ligno is Latin for "wood pencil;" a plumbolignartist is a person that makes expensive, handmade yellow #2 wooden pencils; imagine this but it costs $400). After coming to this realization, Jane quickly sees her dreams crumble in front of her very eyes as she realizes how much it truly costs to have a specialized job with low market value. She has a choice; she can follow her dreams, even though she understands that she will live most of her life in poverty doing the work that she does, or she can pursue a degree in agriculture and do plumbulignartistry in her free time.

For generations Y, Z, and Alpha, this process of investing huge amounts of money into degrees with low market value is a major problem. For example, in 2013 bachelors' degrees in psychology were the fourth most commonly achieved by college graduates, but jobs that require psychology degrees as a prerequisite are infamously rare and underpaying. The reason for this (the over-saturation of the job market with college educated workers caused by federal financial aid) can be argued another time, but it's important to point out that while more and more students pay for a psychology degree every year, unemployment for psychology majors is on the rise. Eventually, there will come a point where students stop seeking out psychology degrees (but that depends on when our education system stops telling young kids that they won't ever be successful without a college degree regardless of what the degree's focus is).

To look at a real world example, the US is currently undergoing a severe nursing shortage. Across there country, nursing schools are having extreme difficulty motivating students to enroll in their programs, and enrollment rates having been following a general decline since 2008. The nursing industry also has an extremely high turnover rate. This study from SuccessFactors for Healthcare, Inc. states that many nurses feel overworked and under-rewarded. Since their are less nurses working in hospitals, nurses currently in the field have to pick up the slack. One of the clear defining factors that has driven the nursing shortage is the steady decline in the average salary for nurses since 2008.  Last year, the average salary earned by nurses was $61,875. If we take a look at the cost of becoming a nurse, schools that offer a Bachelor's of Science Degree in Nursing charge tuition prices anywhere from $40,000 a year to $100,000. Associate's degrees in nursing can cost even more per year ranging anywhere from $65,000 to $100,000 a year in tuition. There is an argument that there are cheaper alternatives for nurses who use community college programs to achieve their BSN's or ADN's, but the jobs available to a nurse with one of these degrees are still only worth a $66,774 annual salary. It's important to note that there are two basic types of nursing care; there's inpatient care and outpatient care. A job in outpatient care can be acquired with an ADN or a BSN, but inpatient care often requires expensive master's and even doctoral degrees in nursing that can cost even more hundreds of thousands of dollars. Nurse practitioners are generally the best paid workers in the nursing industry making around $100,000, but their job description includes attaining a BSN, gaining multiple years in the industry, pursuing a Master's of Science in Nursing, the gaining more experience, and now there is a growing push to require all nurse practitioners to achieve a doctoral degree in nursing science. Imagine having to do all of the work that a doctor or surgeon has to do, but getting paid half the price.

To wrap all of this up, I don't think that money is the highest form of motivation, but it would be ridiculous to not assume that money has some of the most powerful incentives in a person's life choices. I believe that the human race has a natural drive to succeed, and since assets and money can be measurable factors of success, it's natural for many to seek out achieving as much of it as possible.

2. You believe money determines passion and the pursuit of talent/happiness.

I believe that money helps fuel passion and the pursuit of talent/happiness. As a musician, I am constantly thinking about passive ways to make money so that I can spend more time making music. I like to think that this is how most musicians/people think. 

On the other hand, if I didn't have a passion, I wouldn't care about money. If I didn't wish to pursue talent or happiness, then I also wouldn't care about money. Even if my sole passion in this world was eating and sleeping, and my pursuit of happiness only consisted of surviving, I would have to make money in order to do so. Let's say my ideal happiness consisted of me living in the woods alone by myself surviving off of the land without the need for money; I would need money to finance the move from my home to the forest. 

3. You have a significant mistrust of the government.

My friend's complete quote; 

"You have a significant mistrust of the government, specifically the Democratic party."

Did you know that four year's before his death, the FBI tried to blackmail Martin Luther King, Jr. into killing himself?

Did you know that between 1953 and 1962, the CIA under project MK ULTRA performed illegal experiments with Lysergic acid diethylamide in an attempt to create a system of mind control? Did you know these experiments included forcing test subjects to unwillingly undergo the effects of LSD for days and weeks at a time? Did you know some experimentation included supplying doses of LSD to random subjects including fellow CIA operatives, politicians and military officials, and random American citizens? Did you know that the experiments only stopped because the CIA switched to a more powerful and more effective drug called 3-Quinuclidinyl benzilate (BZ)? Did you know that the US government denied testing BZ on US citizens, but in 2010 a group of veterans provided proof that the CIA experimented on them even after project MK ULTRA was reportedly closed down?

Did you know that in 2011, the U.S. Immigration and Customs Enforcement help a successful sting operation called Project Flicker that uncovered 5,600 names involved with buying and selling child porn, with many thousands of those names being connected to the Pentagon? Did you know that the list was handed over to the Defense Criminal Investigative Service, the investigative branch of the pentagon, who only cross-checked 3,500 names off the list and discovered 264 of the names were that of Pentagon employee and contractors and staffers for the secretary of defense? Did you know that nine people on that list of names had top level security clearances?  Did you know that out of those 264 names, only 70 were fully investigated, and only 2 were known to have been arrested? Did you know that the DCIS stopped the investigation due to "lack of resources," and then promised to open the investigation again without ever actually doing so?

Did you know that the National Security Agency, the agency that has the power to access every webcam in the United States, repeatedly has issues with child porn being bougth, stored, and disseminated on their work computers? Did you know that one of the two arrested during the Operation Flicker scandal and cover-up was a top-secret level contractor for the NSA?

Did you know that the United States has an extensive history of funding terrorist groups to overthrow governments for profit? Did you know that the US is directly responsible for the creation of the Islamic State of Iraq and Syria? Did you know that many ISIS fighters are actually American citizens that have been able to fly to and from Syria to fight in the Syrian civil war without consequence?

I do have a strong distrust for the government, and everyone should. It has grown so powerful that many agencies operate with virtually no oversight whatsoever. This is only a scratch of some of the real evil our government does every day. My fear of the government is no partisan. I'm assuming my friend is alluding to the fact that I was very wary of Hillary Clinton and President Obama during the previous election. Since this subject is so entirely complicated that it would literally require 9 months' worth of writing, I would implore my friend to look at some of the summaries of the past Wikileaks releases.

I would also implore my friend to look at the "media cheat sheet" section of this blog to see how few companies there are that really control our media, and how many of them donate heavily to the Democratic party. In regards to the election, every one of those corporations tried to push an agenda that Hillary Clinton had a 90+% chance of winning the election. This should be terrifying in and of itself.

I fear any politician that pushes for more governmental power, regardless of their political status. Fear the Bush dynasty, the Clinton dynasty, and the Obama administration equally. I hate inept congress members from a bipartisan standpoint as well. I don't consider myself a Republican or a Democrat, I am only a person that believes in the necessity to conserve the government and check its growing power.

4. You feel the government is best utilized as a militarized/police entity. 

This is a classic cultural Marxist attempt to try and reframe words and project ideologies upon someone else in an attempt to discredit them. I know that my friend is implying that my view of the government is fascist by nature, but I am also very confident that as soon as I publish this my friend will deny that it was his intention. His attack is left vague on purpose, and I'm honestly tempted to give a vague answer and leave it as that.

To start, the government is militarized. Every government has a military of some sort. The initial reason behind any government is protection of its citizens. All governments in history started as a group of people paying an entity for protection.

The government exists to uphold its constitution and protect its citizens' basic human rights. If its constitution states that humans have a right to string cheese, the government is obligated to supply its citizens with cream cheese.

The only reason for a government to act outside of its constitution is to gain power. When the government acts to gain power, it is for the best interest of the government as opposed to the people. When the government acts in its own best interest as opposed to the people, we see scenarios like Flint, Michigan's water crisis occur. You have a group of people giving upwards of 40% of their income away to a government that is supposed to protect them, and they still can't even get access to something so simple as clean, drinkable water.

5. Your version of a non-evil government is one in which the military and police protect those who have from those who don't, especially in cases where access to education, healthcare, and food and water are concerned. 

My version of a non-evil government protects its citizens from criminals and foreign invaders. It doesn't "protect those who have from those who don't" because it doesn't try to regulate outside of its constitutional ability. I don't really understand this sentence at all, but it seems that my friend is telling me my non-evil government is going to protect those with healthcare from those without healthcare. What does that even mean? Are people without healthcare going to attack people with healthcare? Are the uneducated going to rise up and seize the means of production from the educated? How is the military involved with the protection of healthcare? What do the police have to do with education?

What does any of this mean?

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Various Calculations and Sources used for this post (not all sources are shown below).


Perkins Loan: $5,500 a year (5% interest)

Direct Unsubsidized Loans: y1 5,500+1.068% fee, y2 6,500+1.068% fee, y3 $7,500+1.068%, y4 $7,500+1.068% fee, (3.76% annual interest)

Debt accumulated 9months after graduation----

Subsidized total: 12,722 x 4 = $50,888

Unsubsidized total:
.0376 = b (fixed annual interest rate)
.01068 = a (for the FDUL origination fee deducted from gross amount loaned)
5,500 - 5,500a  = FFDUL (for freshman)
(6,500 + (F+.bF)) - (6,500 + (F+bF))a = SFDUL (for sophomore)
(7,500 + (S + bS)) - (7,500 + (S + bS))a = JFDUL (for junior)
(7,500 + (J+bJ)) - (7,500 + (J + bJ))a = GFDUL (for graduating year)

FFDUL = $5,441.26
SFDUL = $11,941.81
JFDUL = $19,678.39
GFDUL = $27,620.13

Perkins Loan Total:

$5,500 = FPL (for freshman)
$11,000 = SPL (for sophomore)
$16,500 = JPL (for junior)
$22,000 = GPL (for graduating year)

Subsidized Total:
$12,722 = FFDSL
$25,444 = SFDSL
$38,166 = JFDSL
$50,888 = GFDSL

Total loans by graduating year:
GFSDUL + GP + GFDUL = $100,508.13

Monthly payment calculator:
Payment = Initial loan[(rate/12)((1 + rate/12)^month)]/[(1 + rate/12)^month - 1]
20 year repayment plan
FLR (federal loan rate) = .0376
PLR(Perkins loan rate) = .05
m (months) = 240

FDULMP = GFDUL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDULMP = $163.90 per month for 20 years

FDSLMP = GFDSL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDSLMP = $307.98 per month for 20 years

PLMP = GPL[(PLR/12)((1 + PLR/12)^m)]/[(1 + (PLR/12))^m - 1]
PLMP = $145.19 per month for 20 years

FDULMP + FDSLMP + PLMP = $617.07 per month for 20 years, $148,096.80 total debt paid off

30 year loan
FLR = .0376
PLR = .05
m = 360

FDULMP = GFDUL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDULMP = $128.07 per month for 30 years

FDSLMP = GFDSL[(FLR/12)((1 + FLR/12)^m)]/[(1 + (FLR/12))^m - 1]
FDSLMP = $235.96 per month for 30 years

PLMP = GPL[(PLR/12)((1 + PLR/12)^m)]/[(1 + (PLR/12))^m - 1]
PLMP = $118.10 per month for 30 years

FDULMP + FDSLMP + PLMP = $482.13 per month for 30 years, $173,566.80 total debt paid off.

Mortgage Estimate after graduation:
Home value: $157,300
Credit Score: 630.23
Down Payment: $31,460 (20%)
Average cost of 1 bedroom apartment in Winston-Salem: $799 per month

Options with projected salary of $101,800 w/ 30 year student loan plan--
30 Year fixed: $860 per month including property taxes
20 Year fixed: $963 per month including property taxes
Options with projected salary of $101,800 w/ 20 year student loan plan--
30 Year fixed: $860 per month including property taxes
20 Year fixed: $963 per month including property taxes

Options with projected salary of $44,015 w/ 20 year student loan plan---
30 Year fixed: $860 per month including property taxes
20 Year fixed: $963 per month including property taxes
Options with projected salary of $44,015 w/ 30 year student loan plan---
30 Year fixed: $860 per month
20 Year Fixed: $963 per month including property taxes

Options with projected salary of $12,331 w/ 30 year student loan plan---
30 Year Fixed: $821 per month including property taxes
20 Year fixed: $963 per month including property taxes

http://taxfoundation.org/article/summary-latest-federal-income-tax-data-0

https://www.rentjungle.com/average-rent-in-winston-salem-rent-trends/

https://www.bls.gov/oes/CURRENT/oes193093.htm

http://poverty.ucdavis.edu/faq/what-are-annual-earnings-full-time-minimum-wage-worker

https://www.zillow.com/mortgage-rates/nc/#purpose=Purchase&filters=372712&request=ZR-VZMNXBLR&quote=ZQ-NZJZHZRM

https://www.creditkarma.com/trends/age

http://www.zillow.com/nc/home-values/

https://www.drew.edu/financialassistance/loans/direct-subsidized-and-direct-unsubsidized-loans

http://www.investopedia.com/articles/personal-finance/101414/perkins-loan-vs-stafford-loan.asp

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#bankruptcy

http://www.huffingtonpost.com/2014/03/13/median-home-price-2014_n_4957604.html

http://www.collegedata.com/cs/content/content_payarticle_tmpl.jhtml?articleId=10064

http://www.tax-rates.org/income-tax-calculator/?action=preload&ref=embed_refer_taxbrackets

https://www.tax-brackets.org/northcarolinataxtable

http://www.tax-rates.org/income-tax-calculator/?action=preload&ref=embed_refer_taxbrackets

http://www.tamingthehighcostofcollege.com/expected-family-contribution-efc-calculator/#

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation#bankruptcy

https://www.cfnc.org/pay/info_stafford.jsp

Multiple Response Post

It sounds like you want to get rid of the FDA and it's regulations. How do you feel about this?

"In any society, in any group of men, there will also be some who will try to help themselves at the expense of others. There will be some who wish to steal, or mis­represent, or resort to force. To protect peaceful productive citi­zens against those who resort to such antisocial actions, govern­ments are necessary, and very necessary."

I don't want to get rid of the FDA, but it is corrupt to the core. The FDA is necessary, but these are the people that are allowing the food industry to sell food with chemicals that cause heart disease, hair loss (be on the lookout for aspartame), and cancer (sodium nitrite). They operate with very little oversight, and they've allowed biotech companies and pharma companies to drain hospitals and health insurance companies of money, which ultimately devastates the average American citizen's chance of receiving affordable healthcare.

In all honesty I don't feel one way or another about a CEO's salary. A CEO's salary is decided by the shareholders, and the shareholders aren't going to pay a CEO that doesn't return on investment. 

If the question is "why are pharma CEO's paid much more than a normal CEO?" then we should also ask "why does a neurosurgeon make more money than a primary care physician?" The simple answer is that the personal cost of becoming a neurosurgeon makes his or her job that much more valuable. Neurosurgery is one of the hardest forms of surgery, it requires very strict testing at a university level, the fees for attending medical school for the time needed to be licensed to practice neurosurgery are in the several hundreds of thousands of dollars, and it's a highly specialized form of medicinal practice in the healthcare industry that requires annual re-training to adjust for new technology and surgical practices. There are only about 3,500 neurosurgeons in the US, as opposed to over 240,000 primary care physicians. 

To quote Percy L. Greaves, Jr. from this speech-turned-article from the Foundation for Economic Education; 

"No businessman in a free mar­ket society can long pay a worker a dollar an hour and sell his prod­uct for five dollars an hour. Why not? Because you and I and thou­sands of others like us would be very happy to go into that busi­ness, pay those men two dollars and sell their product for five dollars if we could. Others would soon offer to pay them three dollars, four dollars, or even four-fifty. In fact, large corporations would be very happy to make profits of just two cents an hour for every worker they employ. They are just not able to pay them much less than the market value of their product. The last one employed would not yield them any profit, particularly in a free society where anyone who thinks he sees a chance to make a profit can come in and bid away any employee who is paid less than the market value of his contribution."

Of course, there comes a point where the employer can't compensate the worker any more than his or her current salary due to the product value of the worker's labor being too low to sustain any more of an increase. This is called the "marginal point."

"Wage rates are ultimately set by the marginal productivity of labor, that is the market value added to the product produced by the marginal em­ployee, the last man hired."

To bring all of this back to pharmaceutical companies, I want to state that the economics and business knowledge required to successfully run a pharma or biotech company far outweighs that of most large corporations. A CEO of a drug company has to be well-versed in physics, chemistry (both organic and inorganic), and general medicine, while also having the ability to understand the ever changing and incredibly complex economics of the drug industry. The Pharma CEO is the neurosurgeon of the CEO business.

The CEO also doesn't set his or her own salary. Being a CEO is a job, and just like any other, the CEO first had to apply for the position. If the shareholders then vote to hire the applicant CEO, then the CEO will negotiate his or her salary with the shareholders, and then the shareholders will vote to approve or deny the compensation. So, if an event occurs where a pharmaceutical company does decide to hike prices in a malicious attempt to steal money from citizens, the CEO would not benefit as much as some would like to think. The shareholders would initially make the most profit, and the CEO's salary raise would depend on how the shareholders vote.

When it comes to the demand of Pharma CEO's, I would argue that there is a huge demand in the market for good drug businessman, especially if we consider the rare-disease market where it can sometimes be impossible for a company to make a profit.

Basically what's going on is that there is a huge demand for drug CEO's, but a smaller supply of people who are knowledgeable enough to do the job.

It is actually quite common for individuals to evade taxes through offshore accounts-remember the huge fuss last year about the "Panama Papers?" The IRS estimates that the federal government loses $458 billion per year due to tax evasion.

Only 36 Americans out of 260,000 people were mentioned in the Panama Papers, and generally most news media outlets have questioned why there weren't more Americans pointed out in the documents. 

To answer a question with a question: Why would a wealthy individual or a large corporation set up an illegal shell company in Panama to hide legally-made dollars when it is cheaper, easier, and legal under US law and tax code to set up a shell company in the US? The US is already considered a tax haven for law-abiding citizens and corporations. When politicians talk about tax loopholes, this is one of the many that are brought up since it's almost common practice for a company to have a shell to evade taxes, form mergers, transfer large amounts of money, and etc. 

The way to solve the issue here is to close tax loopholes for corporations. One could also argue that taxes for corporations should be lowered so that they are less likely to try and evade and hide their taxes. If the corporations are less likely to hide their profits and evade taxes, they'll be more likely to invest the money back into the economy. A lot of people think that if an individual or a corporation has a lot of money, they'll lock it away and never touch it. The reality of the situation is that individuals with large amounts of money become investors, and corporations with large amounts of money grow and hire more workers while reducing prices. Regardless, only a foolish businessman would hoard his money away instead of investing it back into the market. When money is hoarded, it loses value due to inflation. If a businessman or a business wants to continue to profit, they have to invest that money somehow back into the market so they can make profitable returns on their investments.

I would argue that the US's economy is not at the point where it can support a tax cut for corporations, but that's because I'm interested to see how many taxes the federal government will bring in after tax loopholes are eliminated. 

In regards to pharmaceutical companies leaving the country: where would they go? Any country with a population that MIGHT be able to afford these prices already has a free healthcare system in place. Where is this mythical second America that could be their new profit frontier? I think prices are high because we allow them to be high. If we begin buying in bulk from countries that charge less for the same conceptual prescriptions, we can drive down ridiculous American-exclusive prices, therby changing the functionality of lobbyists and the pharmaceutical industries' influence in congress. 

I'm going to have to respond to this one in two parts;

Part 1: In regards to pharmaceutical companies leaving the country: where would they go? Any country with a population that MIGHT be able to afford these prices already has a free healthcare system in place. 

I don't think I said the Pharma giants were going to leave the country. Most pharma companies already sell their drugs on the global market, the only problem is they have to undergo a separate approval process that's similar to the FDA. The difference between the FDA's and every other country's approval process is that the FDA's regulations are the most expensive to uphold in the world. That's why the US has the highest drug prices. 

To give a perspective, this is a list of all of the countries that Pfizer operates in;

• Argentina
• Australia
• Austria
• Belgium
• Brazil
• Canada
• China
• Colombia
• Czech Republic
• Denmark
• Finland
• France
• Germany 
• Greece
• Honk Kong
• Hungary
• India
• Indonesia
• Ireland
• Israel
• Italy
• Japan
• Korea
• Malaysia
• Mexico
• Netherlands
• New Zealand
• Norway
• Pakistan
• Philippines
• Poland
• Portugal
• Romania
• Russia
• Singapore
• Slovakia
• South Africa
• Spain 
• Sweden
• Switzerland
• Taiwan
• Thailand
• Turkey
• United Kingdom
• United States
• Venezuela

In regards to free healthcare systems, those countries also have lower restrictions, and usually the drug has to pass through a review board which helps lower prices. For example in Canada, the Canadian health ministry, Health Canada, requires each experimental drug seeking to be placed on the market to pass through a drug review board to test its efficacy and it's relationship to other drugs already out on the market. After this process, the doctors that work for Canada's free healthcare system are allowed to choose which drugs to prescribe based off of the results from the board's review. 

To compare this system to the FDA's approval process, I'll quote Dr. Aaron Kesselheim from this CNN article/interview;

"...we [the US] don't have a central agency, governmental or NGO (non-governmental organization) that engages in comparative research that comes up with clear statements of drugs efficacies"

So to bring this quote into perspective, all of the regulations that the FDA places on experimental drug research and development still don't guarantee the US public that they are getting an effective product. The regulations are for the research and post-approval studies, but the overall efficiency could be entirely secretive if the company wanted it so. What can make matters worse is the patent system; since a new drug on the market is protected under patent laws for the next 20 years, doctors may have no other choice but to prescribe this new drug, and they'll have no way of knowing if this new drug is the most efficient that technology can offer, or if it's just the only molecule that managed to get past the FDA's incompetent and inconsistent approval process. 

Unfortunately, some pharma companies have actually lied about research results, and since there is no review process for an INDA approval, sometimes nothing will happen to the company or the drug for many years. Just like how it takes several years for the FDA to review and approve INDA's, it can take even longer to pass legislation to ban dangerous pharmaceuticals from the market. The FDA's initial, and most of the time singular, response to drugs on the market that are reporting severe side effects is to add a warning label. That's why we see TV ads for antidepressants that say, "Warning, may cause thoughts of suicide." 

Accutane is a famous example of what can go wrong when there is no consumer review process for a new product on the market. Accutane was a medicine designed to treat severe acne, and it was created by Roche and approved by the FDA in 1982. From the introduction of Accutane to the year 2002, over 23,000 sever side effects were reported which include but are not limited to: inflammatory bowel disease; ulcerative colitis; crohn's disease; hair loss; depression; birth defects; induced abortion; and more. By 2002, there were 172 suicides attributed to Accutane; additionally, there were 172 children born with anomalies or congenital defects where the mother had been prescribed Accutane while pregnant. The glorious FDA began to help protect citizens by forcing the company to place over 3,000 words of warning labels on the product, but Accutane wasn't removed from the market until 2007 after a number of public lawsuits granted victims of Accutane's side effects dozens of millions of dollars. Just to clarify, Accutane wasn't removed from the market by the FDA; it was removed by Roche as a reaction to public backlash. It was on the market for twenty-five years. 

To see more results of a government organization that has removed the power to review a product from the consumer, this article from DrugWatch goes into detail on other infamous drugs that had to be pulled from the market. 

Part 2: I think prices are high because we allow them to be high. If we begin buying in bulk from countries that charge less for the same conceptual prescriptions, we can drive down ridiculous American-exclusive prices, thereby changing the functionality of lobbyists and the pharmaceutical industries influence in congress.

So for this, I'm going to break it down sentence-by-sentence, because for some of it I agree with you and for some of it I don't agree with you.

"I think prices are high because we allow them to be high"
Yes you are absolutely right. Even though drug companies heavily lobby the government, we are the people that vote in congressman that pass laws that have allowed us to get where we are. At the end of the day the blame of expensive healthcare can ultimately be placed upon every person that voted for a political candidate that promised lower healthcare costs through heavier regulations; furthermore, the blame should also be placed upon every person that voted again for one of these candidates or continues to vote for these candidates, even while healthcare costs continue to skyrocket.

"If we begin buying in bulk from countries that charge less for the same conceptual prescriptions, we can drive down ridiculous American-exclusive prices..."
The FDA will not allow this. I'm assuming that the term "same conceptual prescription" refers to drugs that are made of the same chemical but are branded under a different name. If this were the case, the FDA would not allow imported drugs due to their patent laws. Just as a reminder, a drug patent doesn't just cover the chemical compound of the drug; it also covers the intended use of the drug and its expected treatment regimen. To bring up a past example, the Viagra patent covers the use of Sildenafil to treat erectile dysfunction, and the Revatio patent covers the use of Sildenafil to treat pulmonary arterial hypertension. As a hypothetical, if a drug company in Canada had successfully developed a form of Sildenafil for treatment of cardiovascular disease, it won't be able to sell their drug in the US until the Revatio patent expires.

Another problem would be the issue of exclusivity. Exclusivity can be granted to drugs by the FDA to delay and prohibit competing ANDA's from being developed, approved, or sold on the market for a certain period of time. The FDA grants exclusivity to drug companies to reduce competition and keep prices high so that Pharmaceutical companies can turn a profit off of the expensive process of either developing a successful INDA or ANDA. This is absolutely nuts. If you really are looking for a headache, a foreign company won't be able to sell its drug in the US until it is approved as an INDA or ANDA and the standard regulatory post-approval studies are set in place, which as a reminder can cost several billion dollars and take several years. And even if a foreign company is prepared to do this, they could be stopped by a period of exclusivity granted by a corrupt FDA member. I want to reflect back on one of the earlier blog posts I made where I said the FDA has allowed pharmaceutical companies to create a drug monopoly.

"...thereby changing the functionality of lobbyists and the pharmaceutical industries influence in congress."
This is both bad and good. Pfizer was ranked 23rd in major political lobbying, and during the recent election cycle it was ranked 161st in campaign contributions (top recipient being Hillary Clinton) with an amount of $769 million, as reported by the Center for Responsive Politics. There are 67 lobbyists that are subsidiaries of Pfizer, and 48 of them have previously held government office. Obviously this is bad news. The best defense that I personally could come up with for Pfizer's lobbying practices is this; they would have to continue lobbying in order to be granted certain exclusivities and regulatory freedoms to cut costs. Of course, for Pfizer, this is not such a great argument since they are one of the most profitable businesses in the world. For smaller drug companies or companies that are working in the rare disease market, lobbying could be what makes or breaks a revolutionary cure for a rare disease's chance of getting to sick patients. 

To fix this, the US needs major reforms in FDA standards and regulations and a strict investigation/audit of the FDA and its employees along with a temporary (or permanent) congressional lobbying ban. A single payer healthcare system would only be throwing more money at the problem. 

How do you feel about studies like this?

This question is asking me to go into a long discussion about economics, and this post is already getting long enough. The shortest answer is that this study perfectly explains what is driving up health insurance costs. Private health insurance companies historically have negotiated prices for hospital services, but in the case of Medicare the federal government has pre-set their own prices for services. Medicare is bound to these prices, and it is illegal for Medicare to try and negotiate a price with a hospital. As the study shows, the prices that Medicare pays is much lower than what the average American pays, while private insurances vary on prices for something like an MRI scan by a factor of three. 

If there is a group of people purchasing a product from a company at a reduced price, the company will lose profit. In order to keep profit margins on track, the company will have to adjust prices for the average consumer to make up for the expected revenue loss. Medicare pays less per service, and therefore the private insurance companies pay more. 

Could laws prohibit people and corporations from taking advantage of citizens?

Could laws prohibit people and corporations from taking advantage of citizens? 

In Regards to Healthcare and Health Insurance

There are already a number of laws that are designed to protect citizens from being extorted by corporations. The Food and Drug Administration was set up for this exact reason, and it's chock full of laws that are designed to stop pharmaceutical companies from selling snake oil to citizens. The best way to describe what the effects of laws designed to help protect citizens do to the healthcare industry is to describe the process in which a new drug is created and put on the market. For the sake of this post I'll play with a hypothetical that the pharma company, Pfizer Inc. is looking to develop a new drug (which they most likely are). As you read, understand that Pfizer is definitely not my favorite company in the world, but using them for this hypothetical can help place the drug market in a more popular mindset since they're one of the most successful drug companies out there.

So, in 2010 Pfizer sued another company called Teva Pharmaceuticals over a case where Teva had announced that they were going to introduce a generic version of Viagra to the market. This is illegal, since Pfizer owns a patent, and therefore any molecule that could be related to the molecular construction of Viagra can't be sold until Pfizer's patent expires. Luckily for Teva, Pfizer decided to sell the company an early royalty license to make and sell Viagra after the lawsuit for an undisclosed amount of money. Although the patent for Viagra doesn't expire until April of 2020, Teva's generic version of Viagra is expected to hit the market on the 11th of December, 2017. 

When a patent expires for a drug company, this is great news to the consumer market. When a drug company owns a patent for a drug, the company owns a monopoly over that disease that the drug treats, especially if the drug that the company is selling is the best drug available or if it's the only drug available for its particular disease or treatment. When the patent expires, other pharma companies are now able to create legal alternatives of said drug for much less and therefore market the drug for much less.

This patent system was created so that when a drug company invents a new molecule for medical treatment, they will have intellectual property rights on their invention. The idea is that the company deserves to profit off of it's hard work after spending the time and money to research and develop a successful, new drug (which I'll explain later). The problem with this system is that the pharmaceutical company will have a static market of that disease for the next twenty years due to the patent's protection. Unfortunately, there will always be erectile dysfunction, and because of that there will always be a demand for a good drug to treat the dysfunction. When a company holds control over a static market without competition from other companies, the price set for the drug is entirely in the hands of the pharma company, and when that happens a company like Pfizer will slowly increase the price of their patented drug until they notice a drop off of sales.

Here are two graphs from a Bloomberg article where list prices and negotiable prices (prices that pharmacies and other pharma distributors can negotiate for; estimates by SSR Health, a pharmaceutical advisory company) from 2015 were compared with their prices from 2009;

For Viagra and Cialis, which is manufactured by Eli Lilly and Co., it's clear that there was an unnecessary increase of price.

When one company controls a market, it is allowed to price-gouge to its heart's content. Although the market for erectile dysfunction is ultimately static, it is still a little more flexible than other drug markets. There would have eventually been a price set where men looking for help would have turned to alternate treatments. This form of price-gouging is much more sinister when a consumer literally cannot live without their treatment. 

This is a graph from the same Bloomberg article that outlines the price increase for Avonex, which is a medicine that treats relapsing multiple sclerosis through an injection method similar to the Epipen;

From an amoral business standpoint, there isn't a market more profitable than the sick and dying. 

So it seems like drug companies raise the price of their drugs exponentially towards the end of their patent protection. Does this mean that they are trying to extort and take advantage of the American people? Not exactly. There's actually a very clear and morally confusing reason as to why drug companies try and get the most out of their drug while the patent is still under federal protection. To go back to Pfizer, now that generic Viagra will soon be on the market, the pharma company is expecting an incredible loss of profit, like for example when Pfizer lost patent protection of Lipitor, a cholesterol drug, and lost over $4 billion in revenue.

In order for Pfizer to keep growing as a company, they'll need to make another successful drug and get it on the market quick. The process here begins by in Pfizer's research and development labs.

First, Pfizer needs to start inventing as many molecules as they can. The potentiality of malignant side effects at this stage doesn't matter, since testing won't begin until later. The problem here is that most molecules made at this stage have an incredibly poor chance of ever making it to testing. If the molecules do get to undergo clinical trials, they are still plagued by an incredibly low chance of getting on the market since "95% of the experimental medicines that are studied in humans fail to be both effective and safe." By the time that a molecule does prove to be safe and effective, a drug company could have already spent $350 million out of pocket according to Forbes, but this 2014 study from the Tufts Center for the Study of Drug Development, the average amount of money paid by a pharmaceutical or biotech company for research and development of a new drug or treatment was $1.395 billion (about $1.43 billion in 2016 when including inflation). To make matters worse, all of this money could be spent on multiple molecules undergoing testing which will increase the research and development cost, and this doesn't always guarantee that the drug will approve FDA post-approval testing, or if the drug will even be approved by the FDA at all. 

At this point, Pfizer could be spending billions of dollars on research for drugs that will be shot down immediately by the FDA with only the hope that at some point something will pass through. Although Pfizer is one of the most successful pharma companies on the market, this cost is still unsustainable, and the company will have to seek out the help of investors to continue its research. Looking again at the Tufts study, the average cost of expected returns on investments for a pharma or biotech company's research and development for one drug is about $1.163 billion (about $1.192 billion in 2016 when including inflation). Just to keep track of costs, Pfizer, in accordance to the data from the Tufts study and the estimated inflation (here is the calculator I am using), would be spending around $2.622 billion for the research and development of only one drug. In regards to the ultimate goal of getting a new, profitable drug on the market, Pfizer will be spending this amount of money on multiple experimental drugs at a time, which makes everything even more expensive.

What's incredibly maddening is that these tests are necessary for the increasing expectations of the FDA pre-approval process. The guidelines are continuously becoming stricter, and although one could argue that the rules are necessary, they are directly impacting the extreme cost of developing new drugs. As soon as a drug undergoes the testing that meets these guidelines, a drug company will have to submit an Investigational New Drug (IND) application and wait for approval to continue clinical testing under the guidance of the FDA. There are three different types of IND's that vary in their level of emergency, for example a life saving cancer treatment might apply for an Emergency IND which can approve the drug for immediate use, but in Pfizer's case they most likely will apply for a research IND, which can take months. For example, generic drugs seeking approval will most likely apply for an Abbreviated ND application (ANDA), which in 2014 had a median wait time of 48 months for processing. In 2015, the FDA had a backlog of over 3,000 ANDA's to process, and they only approved 75 ANDA's in 2015 and 85 in 2014. The idea that a Pharma company has to spend $2.622 billion with such a slim chance of FDA approval is astounding, especially since the companies are required by law to follow these guidelines in order to get their drugs on the market. 

Fortunately for Pfizer, getting investors to contribute to their research to pay these costs will be very easy. They are a majorly successful corporation that makes prescription medicine for illnesses that are generally more common than others, which means if and when they put another drug on the market, there will be profit. For smaller companies that are only researching one drug, its common that investors won't be interested until that drug has a successful IND application. What this means is that if a small start-up drug company discovers a molecule that could be a revolutionary cure for cancer, investors might not be interested in the cure and the company will have to prepare to spend hundreds of millions of dollars before they're granted any kind of profitable recognition; however, even if the small company gets investors to contribute, the drug could still be denied by the FDA. For small companies that are researching treatment for rare diseases, investors probably won't invest at all unless the price of the drug is incredibly high. If a company is trying to make a drug to treat a disease that only 50,000 people have, the price of the drug needs to be set so that the revenue can at least match the $2.622 billion price tag. Then the company needs to factor in manufacturing costs, administrative costs, and a reasonable amount of profit so that the company doesn't go under and cease the manufacturing of the drug. 

Hopefully at this point Pfizer has gotten to the point where it has received an INDA for it's new drug. They're so close to getting the drugs in the hands of those who need it! The only issue is that Pfizer now must put the new drug through additional "studies to test new indications, new formulations, new dosage strengths and regimens, and to monitor safety and long-term side effects in patients required by the U.S. Food and Drug Administration as a condition of approval." The Tufts study states that these additional studies will add on another $312 million (about $320 million in 2016 when accounting for inflation) to the cost of post-approved production of the drug. Keeping track of long-term side effects is definitely something that will benefit the average American citizen, but required study for new dosage strengths and regimens, new indications, and new formulations is absolutely unnecessary. At this point in the production of the drug, it has undergone at least two years worth of testing, and the company should already be held responsible for accurate dosage strengths and appropriate treatment regimens. To continue, monitoring long-term side effects is not something that should cost millions of dollars, as it's nothing more than data collection. 

If all of the costs are added up together, Pfizer at this point should have paid $2.942 billion for the research and development of their new drug, but that number would only be believable if Pfizer had been incredibly successful with their initial research and only had to account for a few molecules to undergo testing. In reality, Pfizer paid $7.779 billion per drug in 2013 with a total research and development cost of $77.786 billion over a ten year period (meaning at least one drug was produced for $7.779 billion each year), according to this data analysis from Forbes. 

Now Pfizer is at the point where their drug is on the market, and the sales are coming in steadily as more and more people buy their drug. To see how well this works, let's look at a real world example. In 2005, Pfizer introduced Macugen, Revatio, Zmax and Lyrica to the market. In 2004, Pfizer paid $7.684 billion in research and development along with $7.442 billion in 2004. In 2004 and 2005, Pfizer made a profit of $304 million for Lyrica, $1.786 billion for Macugen (a figure which also includes their other medicines used for treatment of Alzheimer), $3.876 billion for Zmax. In total, Pfizer made $5.966 billion off of their three new drugs, but spent an approximated $8 billion leading up to their release to the market. 

While analyzing a report of the revenues of Pfizer's major health products, we can see that they rely on certain products to fund the production of other products. 

I deliberately left out the revenue for Revatio, since it isn't stated in this report. Revatio is a drug used to treat Pulmonary Arterial Hypertension, which affects less than 200,000 people a year, meaning that Pfizer wouldn't consider it a "major human health product."

Another thing I'd like to point out is that Revatio is the brand name of Sildenafil. This is important to point out because Viagra is also a brand name of Sildenafil, but Pfizer sells them with two different names. This is because in order for Pfizer to sell a drug that has the potential to treat multiple ailments or diseases, they have to submit a different INDA for the separate areas of treatment to the FDA for approval, and then follow the similar post-approval studies guidelines for the different brand names of the drug. For a brief side history of Viagra, Sildenafil was first patented by Pfizer in 1992 to treat cardiovascular diseases, and later patented again in 1998 for the treatment of erectile dysfunction. Pfizer started selling Viagra before Revatio hit the market, but by now the patent for Revatio has already expired. This means that generic Sildenafil (and in essence generic Viagra) has been on the market already for four years, but in doses appropriate for treating Pulmonary Arterial Hypertension instead of Viagra (meaning one would have to take more pills to get the same effect of Viagra). If this sounds confusing, that's because it is, and it's ridiculous. Just to make myself clear, if a company wants to make a generic of Sildenafil, they have to go back through this entire development process by conducting research, submitting an ANDA, wait 48 months for approval or denial of the FDA, and then only sell it for treatment of cardiovascular diseases, because selling generic Sildenafil for erectile dysfunction would be in violation of patent laws. The crazy thing is that there are companies who already sell generic Sildenafil for cardiovascular treatment, but now there are eleven other pharmaceutical companies that have to also go through this entire process to release their generic versions of Sildenafil for erectile dysfunction treatment.

Obviously, Pfizer is not in any economic trouble since they are one of the "pharma giants" that will most likely never go bankrupt until every disease is cured; however, there are other economic factors that influence their ability to research new drugs that I have yet to bring up. These things include; 24% corporate income tax, government filing fees, payroll tax, expiring patents, merger fees, counterfeit drug sales, legal fees for protection of patents and etc. I also haven't mentioned that this process of FDA approval only approves the company to sell its drug in the United States. If Pfizer wants to sell any of its drugs in the European Union, it would have to go through a similar system of clinical trials and government approval, and the same thing would be applied to any country that Pfizer plans to expand it's market.  All of this helps take a 2015 revenue of $49-$50 billion and reduces it to $9.5-$10.3 billion net profit for the company. 

$10.3 billion may seem like a lot of money, but a lot of these profits will go right back into research and development for new drugs, and other profits will be re-invested into other projects. Regardless, the company has to make a yearly profit, and if it doesn't then it will go bankrupt. It would be devastating to allow a drug company that supplies many important pharmaceuticals to go out of business, since unless they decide to sell off their patents or royalty licenses (like they did with Teva and Viagra), production of their drugs will virtually cease to exist until the patent expires. If this event were to occur, they would either refuse to sell their patents, since it would end their monopoly on that method of treatment and the price of their drug would drop in order to compete with whatever new generic that would be made (meaning much much less revenue), or they would sell a patent for an outrageous price to try and make some kind of profit. Another option would be to liquidate their assets completely, but that could place the patents in the hands of companies that would feel fine jacking prices of drugs. Regardless, when a drug company sells a patent, the price of the drug increases (whether to price-gouge the consumers, or to pay back investors that contributed to buying the patent in the first place). 

So now, if we think about this system of creating a new drug, one can imagine how impossible it must be for a new company to create a drug, and one can see how a company that specializes in treatments of rare diseases can be driven into bankruptcy by over-regulation. The FDA is a government-run bureaucracy that was created solely for the protection of the American citizen, but it has ruined the drug market. It's almost entirely responsible for the outrageous price increases seen over the past 20 years by making it so expensive just to create a drug, and by destroying competition between pharmaceutical companies. The argument that it is the pharmaceutical companies that are taking advantage of American citizens is rendered mute by the slow, incompetent, and increasingly expensive FDA. A good comparison of how the FDA is run would be to imagine one's local DMV, whether or not it is the best DMV in the world or the worst DMV in the world, and then imagining that same system of management controlling the entire drug market. The FDA may have started out with great intentions during its first couple of years, but just like any form of government it has grown so powerful and taken away so many freedoms of the market that drug prices will forever remain as high as they are until something incredibly significant happens. 

Some would ask whether or not the FDA is needed at all. If there were no FDA, then most of the cost of research and development would be slashed, drugs could be made quicker; furthermore, the governments power to decide which drug is acceptable or unacceptable to be sold on the market would be left up to doctors, pediatricians, surgeons, and other healthcare practitioners. 

Another quick point; the FDA also regulates anything that they would consider a "medical device" in a similar approval process to pharmaceuticals and biotech. Because of this, the cost of taking a device such as a stretcher from concept to the market can be around $24 million. With this outright diabolical price to get approval for medical devices, stretchers can end up costing $7,618, hospital beds costing $15,981, and operating tables costing $65,263. Even something as simple as a light or lamp can cost $27,306. Since hospitals also need to abide by FDA standards, that means that they will have to purchase many of these $27,306 lamps. Since they have to buy so many lamps they need to raise their prices, which means hospitals will charge you $93.50 for using a lamp during surgery.

The FDA has drastically increased the price of production for healthcare supplies and treatments, and when the cost of production goes up, the price of the product goes up. Normally, in a free market, this can be fixed since the company will naturally look for a cheaper alternative so that it can lower its price, or the market will naturally shift towards a different company that is selling a similar product at a cheaper price. The problem with the healthcare industry is that the FDA has made all of that illegal. Its allowed pharma companies to hold monopolies over drugs and biotech, forced the companies to raise their prices so that they can survive, and now it's trying to create a single payer healthcare system to supply these programs with what it believes would be an unlimited amount of money. If there were to be a single payer healthcare system, what would eventually happen is that the FDA would continue to increase restrictions on drug research and development and medical device development, those companies would continue to increase the prices of their products, hospitals will continue to price-gouge so that they too can afford the incredibly expensive equipment that they're required by law to use, and the single-payer healthcare system would have to keep giving more and more money to hospitals and pharmacies for treatments. The system would spin around and eventually implode in on itself. 

The fact of the matter is that at the end of the day, any amount of government regulation in any market will naturally raise prices, whether for better or for worse. The ultimate joke of the entire situation is that the Affordable Care Act took away the freedom that the consumer has to remove himself from this vicious cycle by forcing all Americans to pay for healthcare coverage. In the past 20 years, most of the competition from the market has been removed, and ultimately the power that the consumer has to regulate the market has been stolen away by a socialist ideology. Socialist healthcare systems will ruin American healthcare in the exact same way that it either has or is currently everything else it is applied to. 

Sources in order of Appearance:

• http://www.cbsnews.com/news/viagra-to-go-generic-in-2017-according-to-pfizer-agreement/
• http://www.fda.gov/Drugs/DevelopmentApprovalProcess/ucm079031.htm#What_is_the_difference_between_patents_a
• https://www.bloomberg.com/graphics/2016-drug-prices/
• http://www.forbes.com/sites/matthewherper/2013/08/11/how-the-staggering-cost-of-inventing-new-drugs-is-shaping-the-future-of-medicine/#3e18864d6bfc
• http://csdd.tufts.edu/news/complete_story/pr_tufts_csdd_2014_cost_study
• http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/InvestigationalNewDrugINDApplication/default.htm
• http://www.raps.org/Regulatory-Focus/News/2015/11/18/23635/What-FDA-Can-and-Can%E2%80%99t-Do-to-Help-Lower-Rising-Drug-Prices/
• http://www.forbes.com/sites/matthewherper/2013/08/11/the-cost-of-inventing-a-new-drug-98-companies-ranked/#72fdb1a51628
• https://www.pfizer.com/files/annualreport/2005/financial/financial2005.pdf
• https://www.gstatic.com/healthricherkp/pdf/pulmonary_hypertension.pdf
• https://www.google.com/patents/US5250534
• https://www.google.com/patents/US20090246298?dq=viagra+patent&hl=en&sa=X&ved=0ahUKEwi7oKLHic3RAhWFQiYKHcs4BuoQ6AEIHDAA
• http://www.raps.org/Regulatory-Focus/News/2016/03/10/24515/Teva-Wins-FDA-Approval-for-First-Viagra-Generic-Will-Not-Launch-Until-2017/
• http://www.pfizer.com/system/files/presentation/2015_Pfizer_Financial_Report.pdf
• http://medcitynews.com/2010/11/medical-device-makers-spend-millions-to-meet-fda-rules-study-finds/?rf=1
• http://www.modernhealthcare.com/section/technology-price-index
• http://www.rd.com/health/wellness/wildly-overinflated-hospital-costs/

"I'm interested in hearing arguments against single payer healthcare systems. All comments are welcome." Response

"I'm interested in hearing arguments against single payer healthcare systems. All comments are welcome."

1) Our country can't support a single payer healthcare system. If we were to put a %100 federal income tax on every person in the top 1% of wealth in the US (which is about $1.98 trillion when looking at IRS figures from 2014 ) and used it to pay for Medicare and Medicaid, there would only be enough to pay just short of two year's worth of their budget (The total expected budget for Medicare from 2014 to 2016 is $1.592 trillion, and for Medicaid I multiplied the total spending of FY 2015's budget, which is about $1.596 trillion). If we take this and then add in the ACA, then we're talking crazy amounts of spending. So single payer healthcare sounds great on paper, but the real question is how are we going to pay for it all, especially when (last time I checked) the National Debt is at $19.96 trillion?

2) Single payer healthcare will do nothing but raise health costs. If every US citizen is using a government health insurance program, then the medical industry will essentially be offered an unlimited amount of money. A good comparison would be federal student loans. If you give an entire generation to what is essentially considered an unlimited amount of money, the universities (being the businesses that they are) will raise prices. To quote an article on a Federal Reserve report from 2015, "The report’s findings show that of all three programs the Federal Direct Subsidized Loans generated a 65 cent-on-the-dollar increase on college tuition, while Pell Grants generated a 50 cent-on-the-dollar increase on college tuition." Hospitals already extort healthcare companies by setting extreme prices for their services (for example charging $100 for an IV bag) since they know that the healthcare plan will pay for it as opposed to the actual patient. One of the jobs of a health insurance company is to negotiate prices (just like how a car insurance company would negotiate reparations in an accident) with hospitals and other practitioners, but more often than not the hospitals retain the power in these negotiations (instead of one car insurance company negotiating reparations with another car insurance company, the health insurance is negotiating prices with a business, which is basically a more sophisticated form of haggling). Pharmaceutical companies extort healthcare companies to an outright extreme. If you're interested, this is an article I wrote for a class that discusses how Martin Shkreli raised the price of Daraprim to extort health insurance companies (more healthcare related sources sited there).

3) It's not the government's job to offer healthcare or health insurance to its citizens. The government is not a business and shouldn't seek to profit off of its citizens. It shouldn't be giving out student loans, it shouldn't be selling auto insurance or forcing it by law, it shouldn't be putting tolls on roads that were built with tax dollars, it shouldn't be running/funding universities with million dollar football stadiums and tons of frivolous spending, it shouldn't be bailing out companies that are failing, etc. etc. The fact that we are willing to let the government force us to spend money on something that not everyone necessarily wants is beyond outrageous to me. I've never seen a section of the constitution discuss government healthcare, federal student loans, or government bailouts; it really shouldn't be allowed but somehow it's all slipped by through congress's ambiguous clause.

Is it even morally right for someone to walk up to another person, point a gun at their head, and say "you are going to help pay for everyone's health insurance or else I will lock you up?" Keeping this in mind, the top 10% of earners already pay for 70% of the US's total income tax revenue, and they generally get 0% of the benefits. A lot of people think that we can afford things like a single payer healthcare system or free college tuition by raising taxes on this tax bracket, but what will eventually happen is these people will straight up leave the country. The only other way is to promise to raise taxes on whatever we consider "the wealthy," and then raise taxes on every tax bracket above 50%, which is essentially those who earn $40,000 to $100,000 a year.

To wrap it all up, a single payer healthcare system would be a socialist program, and socialism only works until you run out of other people's money to spend.