The Economics of Alternative Medicine

Posted on 4/20/2015 by Dr. den Boer
Categories: supplements



Tim Minchin is a clever man. In the pictured quote, he’s trying to shed some clarity on the notoriously controversial world of alternative medicine. It all seems very obvious; what works, works. What doesn’t work, doesn’t work. 

However, I would argue that Mr. Minchin is laboring under a false assumption about medicine.  He imagines that all medical practices are competing against each other on a fair playing field, and, over time, we will see which ones ‘win’ and which ones ‘lose,’ and naturally pick the winners. 

Once anything becomes as large and institutionalized as medicine and medical research, though, things aren’t nearly so simple. 

Medical Science as Economics

In economics, there’s an idea called ‘barriers to entry.’  Basically, this measures how hard it is to start a competitive business or service in a certain field.  If I want to start, say, a lawn mowing business, all I need to get going is a lawnmower, a person to push it, and a way to move it from house to house.  Almost anyone can compete in this field of business; the barriers to entry are very low.  In contrast, if I wanted to start my own power company to compete with the very well-known General Electric, I would need millions of dollars and tons of know-how in order to build power plants, lay wires, make sure the wires are maintained, etc., all before trying to get people to switch to using my power company.  The barriers to entry in the power business are very high.  Because of this, there is little to no competition for power companies, and even if someone has an idea about how to make our electricity more ecologically friendly or cheaper or more reliable, it’s highly unlikely that he or she will be able to start a company that can survive and compete with the existing power companies.

Mainstream medicine is very similar to this example; there are gigantic barriers to entry for any new medical idea.  Before any new therapy or medicine can enter general medical practice or be prescribed by a doctor, it is subjected to a massive battery of tests, trials, and bureaucratic hurdles. 

Before a drug can be approved by the FDA to treat a specific illness, it must first go through an incredibly expensive approval process. The price varies depending on the application - i.e, crisis-type medicines require less expensive trials - but the average drug cost nearly five hundred million dollars to bring from inception to approval. 

Allow that to sink in for a moment.  Then realize that, if it’s later discovered that the drug can also be used to treat another condition as well….

It will have to undergo another series of multimillion dollar trials to approve its use for that. 

As a result, companies that develop drugs and other new medical therapies can only afford to go through the process to approve something if that “something” is likely to make them a lot of money.  If it can’t, they simply can’t afford to do so - no matter how useful that therapy might be for patients.

For example, people ask us why our Acoustic Compression therapy isn’t more widely used by doctors around the country.  When people see or hear about the incredible results, they often say, “Why don’t more doctors use this therapy?” In spite of a great deal of evidence demonstrating its efficacy at treating other conditions, the FDA has only approved its use for one condition so far - plantar fasciitis. So, the technology goes largely unused, since no companies are able or willing to spend the prodigious amount of money it would take to fund the necessary studies and regulatory processes to approve just one more condition. Keep in mind this is with a technology that is patentable and easy for a single company to profit from.

Many natural remedies aren’t patentable. Even if a medical company were to discover and prove via studies and clinical trials that a specific plant(s) had the ability to treat some disease or condition, they wouldn’t be able to patent it. This is because it’s not possible to patent a plant that already exists in nature; one can only patent new inventions. It makes sense to structure laws this way - it would be silly if, for instance, some company patented potatoes and then people could only grow or eat potatoes with the company’s permission - but it does raise a unique obstacle for natural medicine.

If a company can’t patent a new, natural medicine-based therapy, then it’s difficult to be able to make a profit. Competitors can easily spring up and simply offer the same or similar natural medicines for lower prices, piggybacking on the already-funded research. Because it’s so hard for any company to justify going through such an expensive process for little gain, most plant-based, natural medicines are considered ‘alternative’ medicine – and stay that way.  And it’s not easy to see a straightforward solution out of this conundrum.  In my next post, we’ll explore possible solutions for legitimizing natural, holistic medicines – ways we might be able to move the bar in a way that keeps science at the center of medical practice, while still allowing more flexibility of choice for doctors and patients.

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