Perverse Incentives

Two events cause sick people to stop taking medicine: they die, or they’re cured. The incentive for the medical industry is to prevent both of those events.

A little gedankenexperiment: Imagine you are an executive in the medical industry, say a pharmaceutical research company. You probably believe that, given time and a whole lot of money your company could solve any medical problem. If you didn’t, you probably wouldn’t have that job. But you know that time and money are not infinitely available, and you take seriously the responsibility to “get the most bang for the buck”.

One of the medical problems you’re looking at is something like the flu or pneumonia. It’s a serious medical problem, e.g., top 10 leading cause of death. In any given year, say 5 or 10% of the population get at least a mild case, 5 or 10% of those cases are severe, and 5 or 10% of severe cases are fatal. Some people get at least a mild case say 20 or 30 times in a lifetime, but many people get it once, twice, or never in their lives.

If you can create a cure with acceptable side effects you can sell it to about 5 or 10% of the population every year. If you can create a “once and done” vaccine, you can sell it to nearly 100% of the population just once each. If you can only create a vaccine that needs a booster every year, you can probably sell it to about 50% of the population every year.

Do you see the problem?