Do Consumers Want $1000 Stoppers?
Last week I came across the following article in the Wall Street Journal Online.
It describes a manufacturer of stoppers for vaccines. The company had viewed it's product as a commodity which could only compete on price. But when they decided to "add value" and market the product in that matter, they were able to improve their revenue and profit by establishing a price range of $5 each for chicken vaccine stoppers to more than $1,000 each for stoppers designed for anti-cancer drugs.
How much value do you have to add to a stopper to sell it for $1,000? According to the company, the anti-cancer stoppers are made to tighter tolerances. The company's stoppers are also color coded to help medical personal avoid errors.
Well, color-coding is fine, but $1000? In a suburban supermarket you'll find hundreds of types of lids and stoppers, most of which are nearly 100 percent effective at protecting the container's contents, and I'm sure none of them cost even $5, not even corks in $200 bottles of wine.
Why does this matter? After all, in a free market the correct price is the one the consumer is willing to pay. Just as a Lamborghini is worth $200,000 if buyers are willing to pay that much for one, the pharmaceutical companies and hospitals buying the vaccines were apparently convinced that $1,000 was a fair price for a stopper.
But the WSJ article fails to mention the real ultimate consumers of this product: families of cancer victims who sometimes have to drain their retirement accounts or sell their homes to pay for treatment, or ordinary people who have to go without raises for another year because the company they work for has to find the funds to cover the 20 percent increase in health care premiums for their employees. I'm sure the $1,000 stoppers are not the only example of price gouging in the medical industry. Yes, the manufacturers of medical supplies deserve to earn a living, but will innovation in medicine really stop if the finances of the middle class weren't being drained so that CEO's, salesmen and shareholders in the medical industry can buy vacation homes in Hawaii?
People shopping for cars can decide for themselves if a $80,000 Mercedes Benz has enough added-value to justify a price $60,000 more than a $20,000 Mazda. For the free market solutions to health care to work, people need to be able to choose which stoppers they want on their anti-cancer drugs.
It describes a manufacturer of stoppers for vaccines. The company had viewed it's product as a commodity which could only compete on price. But when they decided to "add value" and market the product in that matter, they were able to improve their revenue and profit by establishing a price range of $5 each for chicken vaccine stoppers to more than $1,000 each for stoppers designed for anti-cancer drugs.
How much value do you have to add to a stopper to sell it for $1,000? According to the company, the anti-cancer stoppers are made to tighter tolerances. The company's stoppers are also color coded to help medical personal avoid errors.
Well, color-coding is fine, but $1000? In a suburban supermarket you'll find hundreds of types of lids and stoppers, most of which are nearly 100 percent effective at protecting the container's contents, and I'm sure none of them cost even $5, not even corks in $200 bottles of wine.
Why does this matter? After all, in a free market the correct price is the one the consumer is willing to pay. Just as a Lamborghini is worth $200,000 if buyers are willing to pay that much for one, the pharmaceutical companies and hospitals buying the vaccines were apparently convinced that $1,000 was a fair price for a stopper.
But the WSJ article fails to mention the real ultimate consumers of this product: families of cancer victims who sometimes have to drain their retirement accounts or sell their homes to pay for treatment, or ordinary people who have to go without raises for another year because the company they work for has to find the funds to cover the 20 percent increase in health care premiums for their employees. I'm sure the $1,000 stoppers are not the only example of price gouging in the medical industry. Yes, the manufacturers of medical supplies deserve to earn a living, but will innovation in medicine really stop if the finances of the middle class weren't being drained so that CEO's, salesmen and shareholders in the medical industry can buy vacation homes in Hawaii?
People shopping for cars can decide for themselves if a $80,000 Mercedes Benz has enough added-value to justify a price $60,000 more than a $20,000 Mazda. For the free market solutions to health care to work, people need to be able to choose which stoppers they want on their anti-cancer drugs.
posted by Dancar | 7:58 AM
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