Peter Singer, the famous Princeton professor of bioethics, has an essay in the NY Times magazine explaining why healthcare should be allocated according to quality-adjusted life-years:

Health care does more than save lives: it also reduces pain and suffering. How can we compare saving a person’s life with, say, making it possible for someone who was confined to bed to return to an active life? We can elicit people’s values on that too. One common method is to describe medical conditions to people — let’s say being a quadriplegic — and tell them that they can choose between 10 years in that condition or some smaller number of years without it. If most would prefer, say, 10 years as a quadriplegic to 4 years of nondisabled life, but would choose 6 years of nondisabled life over 10 with quadriplegia, but have difficulty deciding between 5 years of nondisabled life or 10 years with quadriplegia, then they are, in effect, assessing life with quadriplegia as half as good as nondisabled life. (These are hypothetical figures, chosen to keep the math simple, and not based on any actual surveys.) If that judgment represents a rough average across the population, we might conclude that restoring to nondisabled life two people who would otherwise be quadriplegics is equivalent in value to saving the life of one person, provided the life expectancies of all involved are similar.

This is the basis of the quality-adjusted life-year, or QALY, a unit designed to enable us to compare the benefits achieved by different forms of health care. The QALY has been used by economists working in health care for more than 30 years to compare the cost-effectiveness of a wide variety of medical procedures and, in some countries, as part of the process of deciding which medical treatments will be paid for with public money. If a reformed U.S. health care system explicitly accepted rationing, as I have argued it should, QALYs could play a similar role in the U.S.

He gives the example of a drug called Sutent that slows the spread of kidney cancer and may give victims an extra six months of life, but at a cost of $54,000. He argues that the rest of society should not be burdened with that cost when the same money, spent elsewhere would do more good. In making this argument, Singer ignores the role of innovation in a free market.

It certainly doesn’t cost $54,000 to manufacture enough Sutent to treat one patient for six months. The $54,000 has to cover the development cost of the drug, which could be tens or hundreds of millions of dollars, and the loss of profit when the patent on the drug expires and cheap, generic versions flood the market. Now, obviously, the cheap generics do not pose the same ethical quandary as the expensive proprietary version. It benefits society to have cheap generic drugs instead of hugely expensive proprietary drugs developed by the pharmaceutical industry. But the point the Singers and Ezekiel Emanuals of this world don’t understand is that you can’t get cheap generic drugs without first developing the expensive proprietary drugs. Pfizer would not develop Sutent unless it could recoup its R&D costs, FDA approval costs, etc. etc. and make a profit. And if Pfizer did not develop Sutent, there could be no generic version to follow. Moreover, developing Sutent likely opened other research avenues for developing even better drugs.

One could make the moral argument that is is better for society to invest in expensive drugs today so that it can get cheap drugs tomorrow. The US does that today, as this chart shows:
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The rest of the world benefits, as US drugs are sold at marginal cost to socialist systems that fix prices, and as US drug patents expire.

The same argument applies to other areas of medicine. The initial costs of developing new treatments are high, but costs come down as the treatments become routine. The moral universe of Professor Singer ignores the beneficial impact of profit and innovation in a free market.

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