The importance of efficiency

One of my hobbies at work is developing "quick wins" and process improvements. Lately, I've been thinking this is critical not only to business sucess, but to the stability of our healthcare system. Health science has been rapidly developing new miracle treatments such that people live longer, babies can survive when born younger, and as a result, quality of life improves. But this is not without added cost. Health care costs are increasing, and they should, as we are paying for more amazing results. But, this cannot continue for ever because there is only so much cost our economy can support. The way to fix this is through efficiency, by making older drugs cheaper or creating new, less expensive versions of current drugs. The savings in the older drugs can offset the new cost of the newer treatments.

However, efficiency in pharmaceuticals does not necessarily mean cheaper treatments or less expensive health insurance. When a company has a monopoly on the treatment, they have no incentive to reduce cost. Any saving through efficiency will only lead to greater profits. This is not entirely without benefit to patients, as greater profits may lead to greater investment in R&D, but lower costs are needed as well.