In my WSJ review of Al Roth’s excellent book Who Gets What—and Why I wrote about Roth’s proposal to extend the idea of kidney swaps globally:

It’s often the case that a living donor is willing to give a kidney to a loved one, but the loved one can’t accept it because of immunity mismatch. But if a pair of such mismatched donors could be found (call them A and A´ and B and B´), then perhaps a match could be found by a crisscross pairing: Donor A could give to recipient B´ and donor B could give to recipient A´, thus solving the mismatch problem and saving lives.

…Today such multi-way exchanges are becoming common….Mr. Roth, however, wants to go further….why not open U.S. transplants to the world? Imagine that A and A´ are Nigerian while B and B´ are American. Nigeria has virtually no transplant surgery or dialysis available, so in Nigeria patient A’ will die for certain. But if we offered a free transplant to him, and received a kidney for an American patient in return, two lives would be saved.

The plan sounds noble but expensive. Yet remember, Mr. Roth says, “removing an American patient from dialysis saves Medicare a quarter of a million dollars. That’s more than enough to finance two kidney transplants.” So offering a free transplant to the Nigerian patient can save money and lives.

It’s hard to think of a better example of gains from trade (or a better PR coup for the U.S. on the world stage).

Recently, Rees et al., (including Roth) announced the first such global kidney exchange:

We report the 1‐year experience of an initial Filipino pair, whose recipient was transplanted in the United states with an American donor’s kidney at no cost to him. The Filipino donor donated to an American in the United States through a kidney exchange chain. Follow‐up care and medications in the Philippines were supported by funds from the United States. We show that the logistical obstacles in this approach, although considerable, are surmountable.

Naturally, some people aren’t happy because of “ethical” objections. Minerva, Savulescu and Peter Singer write in defense of the program:

Lurking behind all the arguments against the GKE is the assumption that people who are poor are incapable of autonomous choices. So, if they appear to choose to act in ways that benefit not only themselves, but people in HICs, they must have been coerced, exploited, or commodified.

…Poverty does not necessarily make a person unable to choose to donate a kidney to a loved one, nor does it make someone incapable of weighing the pros and cons of an option like that offered by the GKE. Poverty does narrow down the options available to people, and often forces them to settle for an option that is not as good as a wealthy person would choose. That, however, is irrelevant to the ethics of the GKE if that programme provides a better option to patients in LMICs who need a kidney than any other option currently available to them.

…It would be tragic if such misguided objections were to prevent the GKE from realising its potential to reduce suffering and save the lives of rich and poor patients alike.

Hat tip: Frank McCormick.

Ask anyone and they will tell you that their prescription costs are rising. But generic drug prices are falling (also here) and generics are 80-90 percent of all prescriptions. Moreover, although branded drugs are expensive total out-of-pocket costs for the population as a whole are flat or even decreasing as Michael Mandel points out:

[A] May 2019 research report from the Agency for Healthcare Research and Quality reported that average out-of-pocket spending for prescribed medications, among persons who obtained at least one prescribed medication, declined from $327 in 2009 to $238 by 2016, a decrease of 27 percent. Data from the Bureau of Labor Statistics Consumer Expenditure Survey shows that average household spending on prescription drugs fell by 11% between 2013 and 2018.

Moreover, OECD data shows that average out- of-pocket spending on prescribed medicines in the United States ($143 per capita in 2017) is actually lower than countries such as Canada ($144), Korea ($156), Norway ($178), and Switzerland ($215).

So are people simply mistaken about what they are experiencing? Not quite. Mandel uses the metaphor of the prescription escalator to explain the apparent paradox:

It turns out that an escalator is the appropriate model for prescription drug costs for individuals. As people get older, they unwillingly ride the prescription escalator, with their average spending on prescription drugs rising by about 5-6% per year. This figure assumes no change in the underlying price of drugs. Rather, people fill more prescriptions as they age.

In other words, every individual experiences an increase in prescription costs as they age even though for the population as a whole prescription prices are flat or falling–a form of Simpson’s paradox. The driver of higher costs is usage not price. People aged 65-74 have on average 25 (!) prescriptions to fill, more than two and half times as many as people aged 25-34 (about 9 per year).

Understanding the prescription escalator is important because regulating drug prices–aside from being a bad idea–won’t solve the perceived problem.

…even if drug reform efforts were successful and there were no more increases in drug costs, every individual would still face a 5.6% increase each year in drug spending as they got older. That would total 30% after five years, and 70% after ten years, across the board.These are enormous increases.

Indeed, the prescription escalator is a sign of success. If drugs weren’t successful we wouldn’t buy more of them when we were older and sicker and costs wouldn’t rise.