Britain is proud of its National Health Service (NHS). In 1948, the National Hea

Question

Britain is proud of its National Health Service (NHS). In 1948, the National Health Service Act stipulated that the government would provide virtually free medical care for all citizens. Physicians receive a salary plus a per-patient payment from the government. The NHS embodies the socialist philosophy that profit-driven markets are not the appropriate mechanism for allocating health care. Markets serve two functions simultaneously: (1) allocation of existing goods and services among competing buyers, and (2) motivation for producers to bring new goods and services to the market. The NHS was established to replace market-determined prices with prioritized waiting lists as the allocation mechanism among competing buyers. Recently, however, the NHS has embraced the profit motive as a mechanism for performing the second function. The Economist reported that the government has introduced mechanisms to allow hospitals and individual inventors to profit from their innovations. Intellectual property rights will be assigned and protected, allowing the market to reward producers. The Economist predicts an enthusiastic reaction by producers. "In the first year of this new regime, the NHS has earned about £500,000 ($830,000) from about a dozen inventions or new techniques. There is, American experience suggests, plenty of scope for more. One American hospital alone–Massachusetts General in Boston– has an annual licensing income from its doctors' discoveries of $30m. In 2002, the hospital reckoned it made 213 discoveries, filed 104 patents, and spun out four companies." ("Healthy Profits." The Economist October 2, 2003) Imagine a doctor in Britain finds a way to treat stomach ulcers with common kitchen ingredients, replacing a costly prescription medication. The potential marginal social benefit of this discovery would be the amount saved by the NHS on all ulcer patients' prescriptions, which is tremendous. If there are no intellectual property rights, what is likely to occur. Why might your consumption of medical services confer some external benefits to the people around you?

Explanation / Answer

NHS does the job of market price regulator ,by large -scale procurements of medicines and redistribution at controlled prices. to the end-users.Prices are nominal at both places.Bulk procurement by NHS gives certainty of market at standard prices to the producers at less costs like advertising and selling- which might otherwise be phenominal to the producers- who ,in all probability, will pass on to the people-the consumers. As all these add-on costs are cut down by the procurement initiative of the NHS ,it is able to offer at cheaper rates-- ie. the amount saved by NHS , results in savings by society at all levels- transporters,retailers o medicines, druggists and pharmacists and finally the end-user-the people.

Without intellectual property rights, all discoveries may become cheap and duplicated . They may not be tested adequately -hence quality may suffer . Or, on the converse ,because of lack of incentives, in the form of recognitions,people may be disinterested in innovations and experimentations , to explore cost and product efficiency.There may not be any standardisation of both product and prices. Reliability and credibility of products may also suffer due to lack of certification by appropriate authority , while obtaining IP rights.

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