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How the medical supply industry blocks device startups from selling to hospitals

washingtonmonthly.com

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Re: How the medical supply industry blocks device startups from selling to hospitals

#91

Post by DanielBMarkham »

paul wrote: post #67

When people complain about entrepreneurs building social networks instead of curing cancer, they need to understand that this is a big part of the reason. The internet attracts so much innovation in large part because it's very open to innovation. In more regulated/corrupt (the two are closely related) fields, such as health care, there are many barriers to competition that kill innovative new companies. Mobile was a…

Wish I could double-upvote you, Paul. Health care has been regulatory-captured for a long time now. (Obligatory blog link to relevant anecdote: http://www.whattofix.com/blog/archives/2010/06/if-we-told-yo... )

I don't know if anybody has read Thomas Kuhn, but this has a parallel in how science works. Science gets "stuck" in one way of thinking. During this time, people work on small details and innovate in tiny ways around the edges. After enough pressure builds up for a change, there's a paradigm shift (he was the guy who coined the phrase) and people start working in the new world.

Complex, rule-based systems of people are mostly quantum by nature. Progress is never a straight line. Instead, it stays frustratingly far away, then it jumps. The stuff you read about in school where everything happened in a linear, step-by-step fashion was just a bowdlerized version of things they tell kids.

Hopefully the system does not require an extreme amount of pressure and our next jump is not too far away. (Apologies to students of Kuhn if I butchered his thesis badly. This is what I got from his work)

Re: How the medical supply industry blocks device startups from selling to hospitals

#92

Post by anigbrowl »

robomartin wrote: post #85
luser001 wrote: post #78

Earlier quoted context omitted.

What you generically call "government meddling", I call (more precisely, imho) "corporation-funded, lobbyist-enabled legislative corruption".

What you generically call "government meddling", I call (more precisely, imho) "corporation-funded, lobbyist-enabled legislative corruption". This is a very popular view generally promoted in the more liberal corners of the political ecosystem. Not being in either the liberal or conservative extremes I tend to see things differently. You have to ask a few questions to get to the bottom of it: Q: What are lobbyists? A…

Q: Why are corporations able to fund lobbyist? A: Because it is legal

It would be more accurate to say that there are no laws limiting the practice. You are reasoning as if governments set up the lobbying mechanism and then invited people to form organizations to engage in the practice. Historically speaking, this is not the case. There's a constitutional right to petition the government in the first amendment, and people are simply exercising it.

If, as a result of this more people are getting hurt because the design isn't very sound, you don't turn around and blame the businesses using it. The design was at fault. Bad engineering. People will use what they are given to work with.

Like the employees of the businesses that bought the defective chainsaws in order to gain a commercial advantage? The companies in your example weren't given a defective chainsaw, they elected to purchase them because the devices promised a commercial advantage. If they're injuring the employees, then maybe the employers should be compensating them and recovering their losses from the product manufacturer...which is quite similar what happens with workman's comp, funnily enough.

Re: How the medical supply industry blocks device startups from selling to hospitals

#93

Post by anigbrowl »

[deleted] wrote: post #65
gamble wrote: post #60

Earlier quoted context omitted.

I'm not seeing how the government was an issue in this case. The article is about how private companies use kickbacks and cartel behaviour to restrict what products are available to hospitals. It seems like a lack of government action is the problem here.

[deleted]

Without patents, you would just get people signing even longer term exclusive contracts. The whole point of the patent system is that it's less bad than the previous situation, where either inventors were ripped off wholesale or they forced buyers into perpetually exclusive agreements.

Hospitals have no choice but to bend to BD's will.

Well, they could pay more in the short term and hope for innovation to undermine the monopoly over the long term, by buying cheaper and more effective products from disruptive competitors.

Re: How the medical supply industry blocks device startups from selling to hospitals

#94

Post by Tycho »

rosser wrote: post #88
robomartin wrote: post #66

Earlier quoted context omitted.

No,no. Read it again. The government setup the rules that enabled exactly that behavior. If they (government) didn't try to play entrepreneur or investor we'd be far better off. There are cases where government involvement is warranted. I'm with Ron Paul on this one: Get them off our backs, we do and did just fine when they had less hooks into us. This is particularly true with the existence of the Internet. It's pre…

The government setup the rules that enabled exactly that behavior. I see you making this argument over and over in this discussion, but you seem to be ignoring the flip-side of that fact: People exploited those government rules. Any calculus of culpability for the current state of affairs that ignores that fact, pointing fingers solely at the government, is myopic to the point of absurdity. No-one forced these medica…

The point is that it's entirely predictable that unscrupulous business men would swoop in and exploit a weakness in the legislation/system.

Re: How the medical supply industry blocks device startups from selling to hospitals

#96

Post by anamax »

praptak wrote: post #84
robomartin wrote: post #40

As an entrepreneur I have dedicated most of the last 25 years to doing hardware (read: manufacturing) ventures. Manufacturing in the US is hard, if not impossible, save cases where the ecosystem or nature of the market can support it. Problems one could face include: ip (patents) mine field, government regulations, liability issues, lack of localized supply chains, high labor costs, high insurance costs, high taxes a…

> The article in question highlights something that we should all understand very well at this point: Government rule-making is, more often than not, fraught with unintended consequences that, ultimately, end-up costing us in terms of money, freedom and choice. This is how I see it: 1. Government makes an anti-kickback rule. 2. It relaxes the rule. 3. Corporations take advantage of the opportunity using kickbacks to…

> 4. Your conclusion: government rule making is bad.

Feel free to provide 3 examples where there's significant regulation AND little/no regulatory capture.

Re: How the medical supply industry blocks device startups from selling to hospitals

#97

Post by excuse-me »

gscott wrote: post #74
excuse-me wrote: post #4

Almost exactly the same with military equipment. Design a product that saves the lives of front line troops, demo it to the troops and they love it. Then try and sell it to the government and you are told that you have to form a consortium with an established supplier - Boeing/Lockheed-Martin/General Dynamics in the US, Thales/BAe/EADS in europe. Now imagine the sort of deal you are offered as a startup negotiating w…

And if you try to export it the Government can block the sale of any military use equipment. I know a person who developed an external coating for submarines but the US Military didn't want to use it, so he found a (friendly) country that did but was denied the license to sell it.

But not if you simply manufacture it abroad.

We found a nice friendly country in the middle east who were more interested in their troops have good equipment than keeping lobbyists in business. They took the idea, made it for us and buy them from us.

(don't worry - it was the one full of beard wearing, no-pork eating, religious fundamentalists that like us)

Re: How the medical supply industry blocks device startups from selling to hospitals

#98

Post by chernevik »

rosser wrote: post #88
robomartin wrote: post #66

Earlier quoted context omitted.

No,no. Read it again. The government setup the rules that enabled exactly that behavior. If they (government) didn't try to play entrepreneur or investor we'd be far better off. There are cases where government involvement is warranted. I'm with Ron Paul on this one: Get them off our backs, we do and did just fine when they had less hooks into us. This is particularly true with the existence of the Internet. It's pre…

The government setup the rules that enabled exactly that behavior. I see you making this argument over and over in this discussion, but you seem to be ignoring the flip-side of that fact: People exploited those government rules. Any calculus of culpability for the current state of affairs that ignores that fact, pointing fingers solely at the government, is myopic to the point of absurdity. No-one forced these medica…

First, I'm very sorry for your loss.

Second, there is no more predictable rule of human behavior than the conscious, rational pursuit of self-interest. Adam Smith was very clear on this, businesses will seek to form cartels at every opportunity. We can legislate against explicit collusion, but these laws are very tough to enforce. It's very possible that the executives in these companies are deviating from legal standard, but enforcement of laws governing intent is even harder. As a policy matter, better / stricter law is unlikely to solve the problem.

The stronger solution is discouraging barriers to entry. Competitive entry of new players is the best discipline against cartel behavior.

Commenters elsewhere in this sub-thread are arguing that one bad regulation isn't an argument against regulation generally. But the problem is distinguishing the bad regulations from the good. It's very likely that at some point there was some policy argument for these stupid rules, sufficiently plausible at the distance held from all but the most expert. The formulation of such arguments to justify known-bad policy is a constant component of our governance. It's possible that the intelligence of the rules depended on some other rule or aspect long since departed.

That's the beauty of markets: The players' incentives lead them to constantly monitoring and adapting to conditions. And those incentives provide discipline that forces analysis from "sounds good enough to me" to more exacting standards. Congress here has suspended a large chunk of market operation, in a medical market where many other chunks have been suspended. It is not the least bit surprising that this has lead to grotesqueries.

Re: How the medical supply industry blocks device startups from selling to hospitals

#99

Post by zevyoura »

byandyphillips wrote: post #35

Wow, I love reading a book on the web. Either cut your copy down by 1/2 (no one is going to read the whole thing) or place a disclaimer at the top on the average it will take to read the whole article.

The indicator you're looking for is the size of the scroll bar. Not perfect, but I think it's pretty silly to ask authors of long articles to write a disclaimer about the article's length when it's right in front of you. Also, this is not exceptionally long for an article, I think the lack of pagination contributes to your perception.
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