Is the healthcare market competitive?
By Mike Wokasch

Share this article:  
INDUSTRY PULSE

Which of the following most hinders competition?
  • 1. Patent monopolies
  • 2. Location limitations
  • 3. Few insurance options
  • 4. Lack of price transparency

Consumers benefit from competition that provides incentives for continuous product improvements and encourages a higher level of service performance. More importantly, competition can help keep prices in check. Competitive markets exist when consumers have multiple purchasing options and choices with transparent pricing. Limiting the number of products or service options — or being vague about relative pricing — diminishes the consumer benefits of competition.

The healthcare market has constrained competition, providing a platform for mediocre quality of care and unsustainable, rising healthcare costs. These constraints are multifaceted and co-dependent:
  1. Patent monopolies: Drug and device patents legitimately provide monopolies for novel treatment options. However, even where options exist, physicians — often influenced (financially or otherwise) by manufacturers — make the choice for consumers, frequently without regard to price.

  2. Location limitations: Geography constrains competition by essentially granting exclusivity to healthcare providers in that geographic locale. This is especially true for hospitals where options are very limited within a reasonable travel distance for consumers.

  3. Few insurance options: Consumer choice for insurance providers is often constrained by employer choice and state law, which again provides a geographic constraint to competition. The limited number of insurers, often with near identical plans and pricing, are constrained themselves when, on behalf of their clients, they vie for geographically constrained healthcare resources.

  4. Lack of price transparency: Add to these constraints the total lack of healthcare provider pricing transparency. The inability to choose healthcare providers and services based on comparative pricing (as most consumers do today for other goods and services) all but guarantees unabated increasing healthcare costs and mediocre healthcare quality.
As a patient, I should be able to choose where I want to be treated and by whom. I should have information about physicians and hospitals in my area in terms of their expertise, quality of care and pricing. If I choose to go to the most expensive healthcare providers, I should expect that my insurance premiums or co-pays will be higher than if I were to go to less expensive but equally good healthcare providers. I should be able to purchase insurance that provides the coverage I feel is the best value for me and my medical situation. State boundaries should not limit my insurance options.

In the end, healthcare providers should have to compete for my business based on expertise, quality of care and price. Insurers should have to compete for my business based on coverage and price. If the healthcare providers and insurers really had to compete for consumer business, we would get better care at a lower price.

Unfortunately, the Affordable Care Act doesn't address any of these constraints to competition. I'm betting there will be little difference in coverage or price on the state exchanges. I also don't think healthcare providers will feel a need to compete for my business because they are going to have more patients than they can handle, regardless of my choice.

Mike Wokasch, a pharmacist by training, is a 30-year pharmaceutical industry veteran, having held a number of positions of increasing responsibility at several large pharmaceutical companies including Merck, Abbott, Chiron, Bayer and Covance. Wokasch was also an executive at several technology-based companies including Promega, PanVera and Aurora Biosciences. He is the author of the book, "Pharmaplasia," which explores the changes needed in the pharmaceutical industry as it adapts to healthcare reform.