How Does It Do It? the Money Involved Here Is Tremendous

Introduction: In the following excerpt, former House Speaker Newt Gingrich says that “the drug industry … is designed to maximize prices …” and refers to a market failure. What kind of market failure does he have in mind?

SAM DONALDSON

OK. Heart device was installed in a middle-aged man this last week--we don't know his identity--that does not require a pump. It is all inside. That's an advance. But is it the kind of advance that will aid most Americans?

NEWT GINGRICH

Look--look...

SAM DONALDSON

How does it do it? The money involved here is tremendous.

NEWT GINGRICH

I--I--I--I feel so strongly about this. The American health care system, like the American defense system, are so messed up in term of how we price things that it is crazy. In every other aspect of our lives--cars, microwaves, cell phones, televisions--when you can build something, its price declines rapidly. Only in health and defense do we artificially maintain high prices. This ought to be seen as an enormous opportunity. It allows us to move, within 10 or

15 years, to relatively affordable heart devices unless the government artificially res--constrains the price. And by the way, drugs is the same problem. I mean, you--you--you look at the—the drug industry is an industry designed to maximize prices, so we're now going to invent a bureaucratic government response to what is a market failure.

SAM DONALDSON

But, of course--artificially reduce the price to what level--there's still 43 million Americans at the moment who have no health insurance. You take it down to just a thousand dollars, they may not be able to afford it.

LINDA DOUGLASS

His artificial heart has worked in this case, though, is that this company is to be commended, at least, for how they've treated the patient because it protected his privacy. If you remember, with Barney Clark, the first recipient of the artificial heart, he was like a circus creature, dying before our eyes, miserably. So at least, you know, this has been carried on in a more ethical way.

COKIE ROBERTS

And--and--and, in fact, you know, it's one of those things that we never talk about out loud, but we do experiment on human beings in order to try to promote life. And it is at the end of life. And it is--sometimes people's deaths are prolonged in an--in an attempt to make other people's lives better. It's very unlikely that this person will live very long with this artificial heart, but does it mean that the next person down lives longer and that it keeps people going until a transplant can be found? And all of those things are--are very worthy things.

(End of excerpt from "This Week")